The Paramount Pictures shake-up -- The inside story of Frank Mancuso, Martin Davis, and Stanley Jaffe

The familiar logo of Paramount Pictures — a regal mountaintop blanketed with a cover of pristine snow — couldn’t, at the moment, be more deceptive. Inside, the studio is more like Kuwait City, with nervous executives treading cautiously as if through a field of unexploded land mines. In a surprise attack that rocked Hollywood, Paramount Communications’ mercurial CEO, Martin S. Davis, named producer Stanley Jaffe president of Paramount Communications on March 18, forcing the departure of the entertainment division’s chairman, Frank Mancuso. While much has been reported about the event, little has been written about its causes. Here, based on interviews with Paramount insiders and other industry sources, is an attempt to uncover what led to the Davis-Jaffe-Mancuso shake-up.

In a town prone to self-dramatization, Mancuso has been cast as a kindly don stabbed in the back by a betrayer — almost as if Mancuso were the title character in The Godfather Part III, a movie he insisted on making despite the problems it entailed. Actually, the comparison isn’t so farfetched. The courtly, congenial Mancuso, 57, made his mark by cultivating what he called the ”Paramount family,” a tight-knit group of people who worked closely together.

In 1984, when Davis first handed the reins over to Mancuso, Hollywood was skeptical. A 25-year veteran of Paramount, Mancuso had spent his whole career selling movies, but he’d never been in charge of making one. Within two years, however, the skeptics were silent: Paramount was paramount indeed. In addition to creating a family feeling on the studio’s Melrose Avenue lot, Mancuso vigorously promoted his ”tent-pole philosophy”: Spend heavily on two or three big movies a year and the grosses will hold up a cover for smaller, quirkier films. From 1986 through 1989, Paramount had the biggest tent poles in town, with such record-setting hits as Top Gun, Beverly Hills Cop II, Indiana Jones and the Last Crusade, and Fatal Attraction (the latter produced by Stanley Jaffe and his partner, Sherry Lansing).

In 1990, however, Mancuso’s machine began to fall apart. The primary culprit was time. The defections of a few key executives to other studios, inevitable after six years, were breaking up that old gang of his. The rising cost of movie-making — a rise created, in part, by his own big-spending approach — was coming back to haunt Mancuso. Reportedly under pressure from Davis to keep budgets down, Mancuso suddenly found himself in a position where his early successes — big-budget movies — were becoming his biggest liability.

A case in point: Days of Thunder. The idea for a movie about stock-car racing came from Tom Cruise. True, the subject had limited cinematic appeal, but after Cruise’s Top Gun grossed roughly $400 million worldwide for Paramount, the studio was interested in anything he had to say. Needing a summer hit, Mancuso penciled Thunder in as the linchpin of his 1990 warm- weather schedule. There was one problem: The movie had no finished script, and thus no way to accurately gauge its budget. Paramount decided to budget the film at $48 million — a figure at least $12 million shy of the final cost.

Meanwhile, Cruise’s success in 1988’s Rain Man, which was released between the time he signed to make Thunder and the time production started, had substantially boosted his clout. He was demanding more money. He wanted to renegotiate, but when Paramount refused, Cruise threatened to quit. Finally, Mancuso stepped in and made peace. He gave Cruise what he wanted (nearly $10 million), but egos were bruised in the process.

Soon after Thunder began filming in North Carolina, it became apparent that $48 million would not be enough. The producers fought with the studio and Cruise got angry. Again, Mancuso had to intercede. Going against his own bottom-line dictum, Mancuso told the producers to spend more money as long as the movie made it to the screen on time. Days of Thunder was released last June without the usual preview testing and recutting. That haste took its toll: The film was a critical and commercial disappointment.

Back on the Melrose Avenue lot, Eddie Murphy was making demands of his own. From 48 HRS. to Beverly Hills Cop to Coming to America, Murphy had become a huge asset for the studio. Now he was feeling neglected. As the June 8 opening of Murphy’s Another 48 HRS. approached (a $38 million film that was also rushed through production), Paramount — feeling the fiscal pinch — drastically cut the the film’s promo budget. Another 48 HRS. failed to break records, and Murphy demanded the studio step up its marketing campaign. Words were exchanged. So were memos. Their tone, volatile; their contents, unprintable. Although Mancuso held a chill-out meeting with Murphy, the actor has nursed a grudge. It appears virtually inevitable that Murphy will leave once he completes the remaining two pictures in his contract.

Mancuso’s last hurrah for 1990 was The Godfather Part III, and for many in Hollywood that film symbolizes the end of his era — a sprawling epic that closes the book on a family’s saga; a sprawling budget that went spinning out of control. Mancuso pushed to have Godfather ready for a Thanksgiving release, but settled for an anticlimactic Christmas opening. With about $66 million in ticket sales so far, the $60 million movie will be lucky to break even. Godfather III, says one industry source, ”is Mancuso’s real corporate obituary.”

Last month, trying to apply a tourniquet to the studio’s hemorrhaging revenues (and perhaps to make the company more attractive to a potential buyer), Martin Davis, age 64, did what he does best — he rattled heads. A man ( prone to pushing out his seconds in command (including Barry Diller, who helms Fox, Inc. and Michael Eisner, now chairman and CEO of Walt Disney Co.), Davis brought in producer Jaffe, 50, and installed him over Mancuso. Whether Davis intended to drive Mancuso out is an issue for courts to decide (Mancuso has filed a $45 million breach-of-contract suit). What is known is that Davis, in effect, was making Mancuso report to a man who had once reported to him. Mancuso left Paramount less than two days later. ”Frank Mancuso is an honorable man,” insists one Paramount executive, ”but Paramount is becoming a cauldron.”

Opinion in Hollywood is divided over Davis’ script for Mancuso. ”I think Marty really miscalculated,” says one Paramount executive. ”He thought he could just clip Frank’s wings, [and] he wouldn’t walk off. But you can’t take two slaps in the face.” Others feel the scenario played out just as Davis had planned. But in a rare show of accord, there is a consensus in Hollywood on Mancuso — whatever his faults, the don of Paramount was shabbily treated. ”The industry was shocked,” says Robert Daly, chairman of Warner Bros. ”It has to be a very emotional time for him. I know he can’t feel great. Frank is a strong family man — and Paramount was his other family.” — Additional reporting by Anne Thompson, Alex Ben Block, and Neal Koch