Tom Cruise's Movie Studio Imploding: Paula Wagner Is DOA At United Artists; But Was It Suicide or Murder By MGM?

(Keep refreshing for latest news on this breaking story… Updates at bottom)

EXCLUSIVE DETAILS: What I forecast Monday about Paula Wagner and her future at United Artists has come to pass. I’m told that it’s all over except for the final last bit of negotiating. Sources tell me that Wagner has been bargaining the terms of her exit as United Artists’s CEO. MGM can’t fire her even though they’d like to because she was, and will remain, a co-owner. I’ve also been told that Wagner’s leaving will not affect Tom Cruise’s relationship to UA where he, too, remains a co-owner. “He’s staying on, but he has never been day to day,” an insider explains to me. “This was very hard for Tom. Everyone recognized that Paula has been a disaster. But to his credit, he wanted her to have an exit with honor.”

The behind-the-scenes rupture of any reasonable relationship between UA and MGM really became evident this week. That’s because no one outside of those two companies knew that Wagner’s inability to pull the trigger on projects is now threatening to kill part of the $500 million financing from Merrill Lynch. I’m told specified start dates and release dates haven’t been met, so UA could lose a goodly portion of that credit line. The only solution is now for MGM to step in and immediately greenlight two UA motion pictures by the trigger dates. But Wagner’s camp is trying to spin this as MGM usurping UA’s independent authority so that MGM boss Harry Sloan can finally get his hands on UA’s money since he hasn’t been able to score financing of his own.

When I wrote that post highly critical of Wagner’s CEO performance at UA on Monday (“Will the last person to leave United Artists turn out the lights?”), sources within the UA camp blamed MGM for the badmouthing. (Not so!) And now insiders claim to me that pushing out Paula is part and parcel of Sloan’s doing. “Harry assumed UA would just rollover and let him have the $500 million. That’s what this is all about. But it didn’t work out that way. So MGM has made it impossible for UA. But once Paula steps aside, Harry will still need Tom’s cooperation.” Today, the Wall Street Journal fell hook, line and sinker for this explanation. But there’s much more to this money angle.

Look, the fact is that every financing deal works a little differently because of the bars set, but basic requirements need to be met: a certain number of movies must be in production by a certain time, etc. But UA under Wagner was way behind on the timetable dictated by its financing, I’m told. “Paula wasn’t greenlighting movies, so she was about to lose a lot of the money. Her camp is trying to say MGM screwed up. They didn’t, she did. Now MGM can get UA moving on at least two movies, and make sure they’re released by a certain date, to keep the financing intact,” an insider confided to me.

On Monday, veteran studio executive and film/TV producer Jeff Kleeman left his position as EVP of production at UA after only 11 months, joining the departure of prez of worldwide marketing and publicity Dennis Rice in mid-July. That meant UA was now populated by only Cruise, Wagner, Don Granger and a few junior execs. Tom and Paula together own about 30% of the studio; MGM owns the remainder. But UA never established itself as anything other than a vanity deal for Cruise with Wagner at the helm — which is exactly what I said this would be when it was announced back on November 2nd, 2006. Their UA made just two films, both starring Tom — Lions For Lambs, which bombed, and Valkyrie, whose release was delayed amid bad buzz.

So lately the studio was virtually moribund, heartbreaking considering that big fat credit line UA had in these impossibly tightfisted times. As a source told me, “There’s frustration inside and outside UA that, in an economy where it’s so difficult to come by money, what’s there is just not being spent. Do the UA people even know how to develop in an appropriate or effective manner?” MGM and even people inside UA certainly thought that answer was no.

But even UA sources told me the problem at the studio was Wagner, not Cruise. She wasn’t pulling the trigger on projects. As I suggested, just look at her history: Paula had unlimited ability to develop projects under C/W’s longterm deal at Paramount and still produced only half a dozen movies that didn’t involve Tom, most of them bombs. She squandered an incredible opportunity then and now. As one source explained to me, the only future for UA was if “Paula calls it a day, or the company implodes on its own, or a gun is put to Wagner’s head by financiers and she greenlights things and then trusts in luck…”

How true those predictions were. That said, I hear Wagner wants to go back to producing movies, but this time around she’ll do it on her own. Her longtime production company with Cruise, C/W, which had its heyday at Paramount, is dormant and there are no plans to start it up again. Especially since there’ve been a series of rifts between Wagner and Cruise. It looks clear that Paula will go do her thing, and Cruise will do his.

UPDATE #1: MGM came out with this press release: “Paula Wagner, Chief Executive Officer of UA, has decided to leave her day-to-day responsibilities and return to her first love, which is producing films. As such, MGM and UA confirmed today that Ms. Wagner will transition to the role of a producer under her own independent production shingle and be attached to UA’s most exciting film properties. In November 2006, United Artists was reborn under a partnership formed between Tom Cruise, Ms. Wagner and MGM.  Ms. Wagner will continue to be a part owner of UA and hold a significant stake in UA’s future success.  Nothing will change in regard to Mr. Cruise’s involvement with UA and he continues to have a substantial ownership interest in the company. Furthermore, Mr. Cruise and Ms. Wagner will continue to work on film projects together.

UPDATE #2: Paula Wagner’s statement through a publicist: “I’ve truly relished working with my longtime partner Tom Cruise to revitalize United Artists, and I am proud of all that we’ve accomplished in the past two years, reinvigorating the brand and developing such a strong slate of films. But I always tell my sons, ‘Follow your passion’ – and I’ve got to follow that advice myself. As much as I’ve enjoyed my time as an executive, I have longed to return to my true love, which is making movies, so that’s what I’ve decided to do. I still believe in our vision for UA, and I am confident that Harry Sloan and our colleagues at MGM will see that vision through to reality.”

UPDATE #3: UA announced today that the long delayed Valkyrie has a new release date. Originally scheduled for 2008, then pushed back to February 2009, it’s now back on for this December 26th.

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