By Bob Meyer

Here’s another example of how powerful, versatile and meaningful a tool barter can be in the right hands. It also shows the business acumen of Tom Cruise and his longtime associate Paula Wagner, who were dumped by Paramount Pictures last year, after a decade of success.

In November Cruise and Wagner stuck a deal with MGM’s chairman Harry Sloan to revive the long dormant United Artists (UA) movie unit. As part of the deal Cruise/Wagner will have the power to give the green light for production to any movie up to $50 million. (Which will be a major factor in the success of this new effort, as you will see.)

(For you history buffs, UA was started in 1919 by Charlie Chaplin, Douglas Fairbanks, Mary Pickford and director D.W. Griffith, as a way to give artists creative freedom and ownership in their films.)

MGM is raising $500 million in equity and debt and will own 65% of UA. (Cruise/Wagner own 35%.) As a separate unit of MGM, UA could someday be spun off to go public or they could sell the label to a much larger media company.

Barter Strategy Promises Big Payoff…

Cruise, as a large shareholder of UA, is aware of the potential huge payoff and is already working on a new business/barter model wherein he exerts control over the movies he’s involved in as long as they are under $50 million budget.

His strategy is direct and to the point…he’s convincing major star actors and directors to defer their usual upfront fees in exchange for a cut of the profits after MGM recoups its production and marketing costs. (Keep production costs down, lower the risk and reap big possible rewards.)

Consider his first production, “Lions for Lambs.” It will be directed by Robert Redford, with Cruise and Meryl Streep in starring roles. The film’s budget at $35 million is significantly lower than what similar high-profile moves cost when made by a major studio…thanks to the new barter model Cruise has embraced.

Question: Where in your business could you adopt this barter model, lowering your costs as well as increasing your financial security?

This entry was posted on Friday, March 2nd, 2007 at 5:56 pm and is filed under Best & Brightest Barter, Media & Travel. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.