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Fear Factor at Universal: Why the Studio Keeps Pulling the Plug

The studio’s belt-tightening has left it euthanizing big-budget projects from the likes of Ron Howard, McG and Guillermo del Toro

Cancelling its third major project in a row, Universal is acting less like a Hollywood media giant these days than a pensioner on a budget.

The latest of victim of the studio’s newfound frugality: “Ouija,” was axed when, as one studio insider put it, "the numbers didn't add up."

But the studio has been cancelling massive projects for much of the past year. "Ouija," like at least one other, was cancelled just a couple of months before scheduled production, a decision that costs the studio millions in lost pre-production costs, not to mention the $5 million cancellation penalty paid to Hasbro.

The trend at the studio may reflect "the new normal" in town, with downward pressure on budgets meeting ongoing pressure from corporate suits to hit the bottom line.

Movies like "Ouija" have to make almost three times their production budget before they hit profitability, which with the ongoing decline in DVD sales is harder than ever to achieve, according to knowledgeable studio executives.

But the cancellations create friction with the studio's relationships with some of the biggest names in Hollywood, and leave its slate lighter on tentpoles.

Also read: Universal Ditches Another Big Movie: Hasbro's 'Ouija'

"Ouija," a co-production with Hasbro, was part of a seven-picture deal Universal signed with the toymaker in 2008. McG was set to direct, and Michael Bay was among the film’s producers.

It is already the second Hasbro film to be cut from the Universal slate; "Clue" was dropped last year. And over the past few months the studio has killed projects from Ron Howard (Stephen King's "The Dark Tower") and Guillermo del Toro ("Mountains of Madness," based on a story by H.P. Lovecraft).

With a budget of $140 million, “Ouija” was too rich for Universal’s blood —  even though not making the movie meant the studio had to shell out a $5 million penalty to Hasbro on top of pre-production costs. (Hasbro covers development costs under the deal.)

An individual close to the Hasbro deal said that the studio's relationship with the toy company was still good, but that Hasbro was keeping its options open. (Under the deal, the toy company has the right to end the alliance if Universal does not make the movies.)

"This budget is right for the movie, but the film isn't right for us and we're moving forward,” a Universal insider told TheWrap.

That said, it’s not as if Universal is the only one euthanizing mega-productions these days. Two weeks ago, Disney put the future of the more than $200 million budgeted “Lone Ranger” in limbo, even though Johnny Depp was attached to star and Jerry Bruckheimer was on board to produce. And Disney cancelled plans to make "Oblivion," a project with Tom Cruise that was picked up by Universal.

The reasons behind Universal's cost-cutting appear to be two-fold. On the one hand, Universal seems to be adjusting to life under its new corporate parent, Comcast.

The Philadelphia-based cable giant, which acquired NBC-Universal last January, has shown less interest in the movie studio than the TV network. But its penny-pinching culture seems to have already taken hold at Universal. 

Gone, it appears, are the days where Universal would gamble $100 million on adult dramas such as “The Green Zone” and “Public Enemies.”

Comcast has shown a greater willingness to spend on the television side, sinking big bucks into “The Voice” and bringing in Showtime programming guru Bob Greenblatt to prop up NBC.

Still, studio executives say their production budget under Comcast is significantly higher than under G.E.

Second, the studio has been in a costly rut in recent years, forced to shoulder expensive failures such as last month’s “Cowboys & Aliens,” which has so far grossed just $108 million worldwide on a $150 million budget. (Universal owned only 25 percent of the Dreamworks-made movie.) "The Change-Up" was another disappointment, a movie the studio was convinced would be a sleeper comedy hit.

"They’re in a state of shock after 'Cowboys & Aliens,'" said one former studio executive. "They had back-to-back misfires, which reinforced their most conservative instincts. But all of them are playing defensively."

Universal has some big projects on the horizon such as a sixth "Fast and Furious" film, a sequel to "Despicable Me," a new Bourne, a fresh "American Pie," "Snow White" and "The Lorax."

“With the exception of 'Bridesmaids,' it's been rough and it seems like a lot of the movies they're making are huge bets and they're all over-$200 million bets. And that's a terrifying place to be," a producer who has worked with Universal in the past told TheWrap.

As part of a larger effort to get costs under control, the studio had already pruned the initial deal with Hasbro back from seven films to four, after canceling plans to make a movie based on the board game “Clue.” “Battleship,” a big-budget, alien mashup from “Hancock” director Peter Berg hits theaters next summer.

Films based on Hasbro’s “Stretch Armstrong” and “Candyland” properties are still under consideration, but though Universal spent $7.5 million to sign up Taylor Lautner to star, it now seems possible that the studio will not move forward with “Stretch,” originally set for release in 2012 but now only "under consideration," a Universal insider told TheWrap.

The one Hasbro property that will definitely see the light of day, next summer’s “Battleship” does not appear to have been an entirely blissful experience. There have been rumors that the film is a runaway production with costs ballooning to north of $200 million. However, the studio claims it arrived on-time and on budget.

Hasbro projects are not the only big films to feel the pinch from Universal's new belt-tightening. Perhaps even more surprising than the "Ouija" move was the studio's decision last month to pull the plug on “Dark Tower,” a hugely ambitious adaptation of the King series that the studio deemed too risky.

Conceived as a three-film franchise, the movies also boasted a lineup that included director Ron Howard, producer Brian Grazer, screenwriter Akiva Goldsman and star Javier Bardem.

Goldsman, for one, is known as being seriously ticked off at the studio for killing “Dark Tower.”

The math it seems wasn’t working out in all of these cases, and the prospect of more costly misses on its balance sheet left Universal performing triage to its film slate. It’s risking serious blowback and a reputation as one of Hollywood’s most fickle greenlighters.

"What's going on there? They're making bets, but then they're pulling out. But they're spending money to make those bets and that money is being thrown away,” the producer told TheWrap.

“It’s perplexing that they continually get so pregnant before they decide to abort. That’s messy, bloody and unpleasant,” a former executive told TheWrap.

Despite the recent flurry of cancellations, the studio insists it hasn’t gotten cheap and has plenty of big movies in the pipeline.

“We're making 'Snow White' and 'Oblivion' and '47 Ronin' and all of these are big bets,” a Universal insider told TheWrap. 

It is also bullish on the Mark Wahlberg action film “Contraband” and the Oliver Stone drug thriller “Savages,” both of which bow next year.

But aside from the sequels to previous smash hits, like a possible fourth "Jurassic Park," Universal looks light on the kind of branded entertainment that rivals such as Warner Bros. and Disney churn out annually.

There may have a “Battleship,” but there’s nary a “Spider-Man” or “Batman” to be found in the batch, and that’s got to hurt — whatever the budget.

Sharon Waxman contributed to this article