TurnaroundThe price tag on a dead project

In Hollywood, turnaround is what happens when a studio stops developing a project and agrees to let the producer or writer take it somewhere else, on one condition: whoever picks it up has to repay the first studio what it spent developing it, usually with interest and an overhead charge, and often leaves the first studio a small piece of the profits.^[6][11]

The word is a small act of studio poetry. In management consulting, a turnaround is a rescue, the quarter when a failing company stops failing.^[6] In film development it describes the opposite event. The studio has decided it will not be the one to rescue this project, and it would like its money back from whoever is foolish enough, or right enough, to try. The industry picked a word that sounds like hope to describe a bill. That may be the most Hollywood thing about the whole mechanism.

Projects usually arrive in turnaround after a long stay in development hell, where they get rewritten, recast and rescheduled until the executive who loved them leaves, or the genre cools, or somebody runs the numbers again with a colder heart.^[6] Turnaround is the exit door. What matters is the price printed on it.

If you searched for this word, there is a fair chance you meant one of the other two. Film uses “turnaround” for three unrelated things, and only one of them costs millions of dollars.^[12]

This essay is about the first one, the expensive one.

A turnaround right usually lives inside the producer's or writer's original deal, which is why it matters far more on the day you sign than on the day you get rejected. If the deal has no turnaround provision, the studio can keep the project in a drawer it never opens, for as long as it likes.^[10][11] If the deal has one, the next buyer is typically on the hook for some version of the following:^[11]

• Acquisition costs. The option payments and purchase price for the underlying rights or the script.
• Writer fees. Every draft, polish and rewrite commissioned during development, including the ones that went nowhere.^[11]
• Other development spend. Directors, casting, early design work, budgets and schedules.^[11]
• An overhead charge. A percentage added on top for the studio's general cost of doing business, often 10 to 15 percent.^[11]
• Interest. Accrued on all of it, usually at the prime rate plus a margin.^[11]

The balance has to be repaid before the new buyer can start filming.^[11] Most turnaround rights also expire. The producer gets a fixed window, often 12 to 18 months, to find a new home, after which the rights snap back to the studio that gave up on them.^[11]

On top of the invoice, the departing studio often keeps something that outlives its interest in the movie: a passive share of profits, a credit, or a right to come back.^[1][10] The most consequential of these is the changed elements clause. If the producer materially changes the project, with a new director, a new star or a substantially new script, the original studio usually gets another look before anyone else can buy it.^[11] It is a fair rule with a comic side effect. The better you make the project after a studio passes on it, the more likely that studio gets to change its mind.

In April 1980, Columbia began developing a Steven Spielberg project called E.T. and Me, which had grown out of a darker alien picture called Night Skies.^[1][3] Ten months and roughly a million dollars later, in February 1981, Columbia put it into turnaround. Sid Sheinberg, president of Universal's parent company MCA and a longtime Spielberg ally, bought it out by repaying Columbia's development spend and agreeing that Columbia would keep 5 percent of the film's net profits.^[1]

That outcome is strange. Net profits are the participation everyone in this business jokes about, the points that never pay because the accounting rarely lets a movie officially make money. And yet a former Columbia executive later said the studio's small stake in E.T. earned more than any film Columbia actually released that year.^[2] The studio that said no outearned its own yeses.

Why Columbia said no is still argued. Columbia's version was that Spielberg owed Universal a picture anyway. Universal's version was that Columbia's executives simply did not believe in the script,^[3] and some accounts describe the marketing department deciding the movie had limited appeal.^[2] Both versions are useful, because together they describe how turnaround happens: a mix of contract logistics and somebody's confident read of the audience. Usually the read is wrong in a boring direction. Occasionally it is wrong in a way that becomes a teaching example for forty years.

Columbia is part of Sony Pictures today, which makes the most famous turnaround story in the business, technically, a Sony family story.^[4] I spent five years buying films for Sony. I have thought about that 5 percent more than is healthy.

Frank Price was running Columbia when Night Skies went into turnaround.^[4] He was also the executive who passed on Back to the Future. Robert Zemeckis and Bob Gale pitched it to him at Columbia. He liked them, asked for another draft, and then declined to greenlight it because it felt too tame next to the raunchy teen comedies that were working at the time. Columbia put it into turnaround, and the script was reportedly turned down dozens of times around town.^[13]

Then Price left. In November 1983, after a power struggle with Columbia's corporate parent, he became chairman of Universal's motion picture group,^[4] which is where Spielberg had set the project up.^[13] Columbia still held the rights. What freed them was a completely different movie. Columbia was making Big Trouble, a comedy close enough to Double Indemnity that it needed permission from whoever owned Double Indemnity. The owner of Double Indemnity, a 1944 Paramount picture, was Universal.^[6]

The reason Universal owned it goes back to 1958. In February of that year, Paramount sold its pre-1950 sound library to MCA for $10 million, through a shell company called EMKA, because Paramount saw very little value in its old movies.^[7][8] A quarter century later, a Billy Wilder picture that one studio had written off as inventory became the trade another studio used to get Back to the Future. Columbia got its Double Indemnity license. Universal got the DeLorean.^[6] Big Trouble was also the last film John Cassavetes directed, so the final movie by the patron saint of American independent cinema doubles as the down payment on one of the most studio movies ever made.^[14]

Price was an excellent executive. By the count of a later Columbia president, Price was responsible for nine of the ten highest-grossing films in Columbia's history at that point, and in 1990, after Sony bought the studio, he was brought back to run Columbia again.^[4][5] Passing is what great executives do all day, and most of the time they are right. Turnaround is simply where the rare wrong answers go to become somebody else's franchise.

The structural problem is that the turnaround balance grows every year a project sits, because interest keeps accruing and overhead sits on top of it.^[11] Meanwhile the project itself usually loses value. The attached director moves on, the star ages out of the part, the subject stops being timely, and the word “turnaround” becomes part of the script's reputation. The invoice rises while the asset decays. Any market where the price of an item goes up as its appeal goes down will leave most of its inventory on the shelf.

Compare what happened with Twilight. Paramount's MTV Films optioned Stephenie Meyer's novel in 2004, developed a screenplay that by most accounts wandered far from the book, and put the project into turnaround in January 2006. Nobody bought it out. In April 2007 Paramount let its rights lapse entirely, and Summit Entertainment, which was remaking itself as a full studio, acquired the book clean.^[9] A lapse generally carries no invoice. Summit did not need the version of Twilight Paramount had paid to build. To the people who made the hit, the screenplay Paramount financed was worth nothing.

That is the uncomfortable lesson of turnaround as a system. The development spend a studio is trying to recover is often the exact work the next buyer wants to throw away. It is why I keep arguing that dormant projects need a better exit than the one we have, something closer to a registry than a ransom. A studio deserves to recover what it really spent. It does not obviously deserve interest on a draft that will never be shot.

If you want to see how the money from a project like this moves once it does get made, my essays on most favored nations clauses and opportunity zone film funds pick up where development ends.

For writers, turnaround is both a trap and an escape hatch. A writer who sold an original script outright may have no contractual way to get it back, and the studio can sit on it indefinitely. The Writers Guild contract does give writers of original screenplays a right to buy back a script the studio has not exploited within five years, but the conditions are specific enough that anyone counting on it should read the current agreement with a lawyer.^[11]

My advice is practical. Negotiate turnaround rights at the moment of sale, when you have leverage, rather than at the moment of rejection, when you have none. The producer's version of the same rule is to make sure the right to produce travels with the project into turnaround.

For a financier, a project coming out of turnaround carries an obligation, and the obligation has to be paid before the cameras roll.^[11] Six questions are worth asking before you wire anything.

1. What is the turnaround balance today, itemized, and what interest rate is accruing on it?
2. When is it payable: on set-up, on greenlight, or before principal photography?
3. What does the original studio keep: a profit participation, a credit, or a right to come back in?
4. Does a changed elements clause give the original studio another shot at the project once we improve it?
5. When does the turnaround window close, and what happens to our spend if it does?
6. Is the chain of title clean, including every writer's work commissioned during development?

Columbia's 5 percent of E.T. usually gets told as a joke about a studio that missed. I read it the other way. Columbia lost the movie and kept a position in it, and keeping a position is a skill. The studios that understand turnaround treat it less like a breakup and more like a sale they have not finished closing.