Did Paramount Bungle ‘Titanic’ TV Deal?

As money continues to pour in from the smashing box-office success of “Titanic,” bad blood is building behind the scenes between the partners who financed the most expensive motion picture of all time.

Executives at News Corp.’s 20th Century Fox contend their partners at Paramount Pictures bungled the sale of television rights to “Titanic,” leaving as much as $30 million on the table.

Television sources say top executives at Fox and News Corp. are considering legal action against Paramount, which had responsibilities for selling the television rights under the partnership agreement. The company sold those rights for $30 million to NBC in December.

Neither Fox nor Paramount would comment. But industry sources say Fox executives believe that the NBC price was a sweet deal for “Titanic,” which is on the verge of becoming the biggest box-office success of all time.

Fox executives complain that Paramount did not open the bidding to other networks to drive up the price or build into the contract guaranteed increases based on box-office performance, as is customary when movies are sold to the networks early in the release cycle.

For instance, MGM sold the new Bond movie, “Tomorrow Never Dies,” to CBS for $20 million before its mid-December theatrical release, but will probably reap more than $25 million from the sale because of the “escalators” built into the deal to reward better-than-expected box-office performance.

With such escalators built in, network executives say the value of NBC’s rights to “Titanic” could be $60 million or more. Sources say ABC fired off a letter to top executives at Fox after learning of the sale to NBC, claiming that it would have been willing to start the bidding for “Titanic” at $40 million.

The price tag on “Titanic” fell well short of recent network paydays for successful films. While NBC gets five runs of “Titanic” over five years, it paid Sony Pictures Entertainment $50 million to televise “Men in Black” six times over five years. And Fox agreed to pay an eye-popping $80 million for 10-year rights to Steven Spielberg’s “The Lost World,” though Universal relinquished pay-television rights to raise the price.

Sources also say Fox was never consulted about the sale to NBC, as required under the partnership agreement.

Fox executives are particularly concerned because Paramount has enjoyed a close relationship with NBC since providing the network a hit in “Cheers” and is currently campaigning NBC to move its hit comedy “Frasier” from Tuesday to a more desirable Thursday night slot next fall. Paramount is also angling for a valuable time period from NBC for a new show for the fall starring Nathan Lane.

NBC executives were furious at the implication that “Titanic” came with strings attached. “There were no side agreements, no discussions about any, nothing,” said Don Ohlmeyer, president of NBC West Coast. “I find it distasteful that under the guise of unnamed sources, people would question the integrity of Paramount executives.”

He said the Nathan Lane deal, for one, had closed weeks earlier.

The tensions between Fox and Paramount underscore the risks of co-production partnerships that have become common as programming costs have risen. Often the partners are large companies with competing agendas.

Even before the television sale, Fox and Paramount had been at odds over “Titanic,” which went sharply over budget. Paramount Pictures, the studio arm of Viacom Inc., capped its investment at $65 million, forcing Fox to pony up the rest--at least $135 million, not counting the marketing and promotional costs borne by both.

In fact, some sources say the flap over television rights stems in part from Fox’s resentment over having to foot most of the bill while splitting box-office proceeds 50-50 with Paramount. “Titanic” is expected to edge out Universal’s top-ranked “Jurassic Park,” which grossed $914 million worldwide, to become the first movie ever to bring in more than $1 billion at the box office.

Sources close to Paramount say second-guessing by Fox is unfair because the studio’s own network passed up its opportunity to buy the television rights to “Titanic.” Under the partnership agreement, Fox Broadcasting Co. had a 10-day window to bid exclusively for those rights. The network made an offer in the neighborhood of $20 million that sources say Paramount deemed too low and reflected Fox’s uncertainty about how the film would do.

Sources at Fox say their prime-time schedule would not have easily accommodated a two-part movie--with each segment running more than two hours--without disturbing its top-rated Sunday schedule.

One source sympathetic to Paramount’s handling of the sale said the key issue is that NBC was willing to step up with a solid offer before it was clear how well the film would do. The source said that while NBC made the offer the Monday after the film’s strong opening weekend, nobody could have predicted the film would have eight more just like it, since ticket sales generally taper off quickly.

But sources at both CBS and ABC said they were eager to get a crack at the film. Both networks apparently made their interest known to Paramount before the film opened and ABC was told that the process would resume when executives returned from the holidays. CBS assumed Fox would snap up the rights.

Fox sources say the company has confronted Paramount about the disappointing sale and that there have been a series of nasty exchanges. While a lawsuit may result, as one executive said, “these things have a way of working themselves out.”