The vanity that led to a $100m bonfire

"Matthew Modine is sweet but he was the wrong man for Cutthroat Island, especially starring alongside Geena Davis." A senior Hollywood agent told me this back in January.

I was curious to know why a movie which cost over $95m to make had been pulled from US cinemas after just two weeks. "That was a picture which desperately needed a big star," she said. "When Michael Douglas pulled out the movie was doomed."

Over $100m of losses are now buried in Cutthroat Island. The pirate movie starring Geena Davis and directed by her husband, Renny Harlin, is officially Hollywood's biggest stinker, the number one loss maker of all time. The film is out on video in the US next week but is not expected to take more than $15m from rentals.

What is puzzling to many is that Cutthroat Island always seemed destined to lose a fortune. Why, then, was it made? The answer lies in Hollywood's complicated web of finances and in the demise of Carolco Pictures, a company that raked in over $2bn during the Eighties and early Nineties from movies like Rocky, Terminator 2 and Basic Instinct.

These days nobody in Hollywood blinks when a movie is presented with a $60m budget, the original projected cost of Cutthroat Island. The average price tag for a Hollywood movie last year, including production and marketing, was $54m. If a film's producers have a money-making reputation, and Carolco's people had that from their red meat blockbusters, finance is usually forthcoming - even if the original script is dire, as was the case with Cutthroat Island.

When the film entered pre-production, Carolco was on a straight course towards the obituary pages. The company was already deep in debt when it began producing the pirate flick in 1994. Carolco executives needed at least one big hit for the summer of 1995 to stay solvent. As 1994 began the company had Cutthroat Island and Arnold Schwarzenegger in Crusade as potential saviours. But it is impossible to produce movies without cash-flow and Carolco had none. By the spring of 1994 it was clear Carolco could not afford to have both movies in production at the same time. Carolco had already been forced to sell its $20m interest in the dreadful Showgirls so the company abandoned Crusade and placed all its faith in Cutthroat Island, taking a $13m loss on pre-production and Schwarzenegger's contract.

"We knew from that point if we lost Cutthroat Island as well bankruptcy would be inevitable," says a senior executive close to the company. "If we made the film, there was at least some chance we could survive."

This is the kind of logic that governs many decisions in Hollywood, especially when greed is involved, as it almost always is, particularly with "star vehicles". Once Carolco and its investors concluded that Cutthroat Island was the company's only hope, people stopped asking if it was possible to produce a $90m ocean epic without a bankable male lead and with a weak script that required hundreds of crew members in both Malta and Thailand.

"They had to make this movie," Geena Davis told Premiere magazine last month. "The company was dead. Everybody knew that one way or another, this was their last movie."

That was not how Davis saw it during production when she was gung-ho about Carolco and the swashbuckling epic in which she never seems smart or athletic enough for the demanding role of Morgan, the pirate captain. "We have been shooting for five weeks and it's going fantastically well," she gushed to reporters in December 1994. "I'm thoroughly exhausted but we're doing the most amazing stuff I've ever seen."

Cutthroat Island only managed to start filming at its expensive foreign locations because of Carolco's brilliance in getting other people to pay its bills. The movie was aggressively pre-sold to overseas film distributors, mainly in Europe and Japan, who made up-front payments for advance rights to show the movie in their territories. By promising more whizz-bang action than a dozen Die-Hard movies, Carolco obtained more than $50m for Cutthroat Island before a frame of film was shot.

The same technique was used with Kevin Costner's Waterworld, a leaky boat that left the US with over $80m in debts and returned from overseas runs with a small profit. The same could have happened with Cutthroat Island and that supposedly made all the gambling worthwhile. While everybody told Carolco executives that the movie was an albatross they, including chairman Mario Kassar, kept hearing the siren song of foreign profits.

This may explain why the Carolco executives did so little to stop Cutthroat Island from running out of control financially and artistically. In times gone by a Jack Warner figure would have descended from the studio head office and told Renny Harlin and his demanding wife that they could take a hike.

These are gentler times. Cigar chewing studio-bosses with bad attitudes are few and far between, leaving the talent and their agents to get away with murder. The movie business has also been infiltrated by multi-nationals who scent profit or prestige but know little about the mind-bending economics of film-making. When Carolco needed new money to begin Cutthroat Island it found willing investors in Japan's Pioneer Electric Corporation, Canal Plus of France, Rizzoli Editore, of Italy, and the French bank Credit Lyonnais.

While Michael Douglas was still tentatively involved in the movie, Davis was pushing for an expansion of her role. Sources say Douglas quit when Harlin refused to restore the status quo and improve the profile of his male lead. Nobody at Carolco seems to have had sufficient control of the project to insist that Davis scale down her demands or that Harlin give the film all his attention.

In fact, Harlin, the director, was allowed to complete other commitments as pre-production on Cutthroat Island began. An escalation in costs was inevitable. Set designers and builders were sent to Malta weeks before Harlin arrived. They built entire streets knowing that the director would want to change almost everything when he finally arrived - he did.

The set changes in Malta and the increasingly desperate search for a male lead - which saw versions of the script go to Keanu Reeves, Liam Neeson and Ralph Fiennes - caused morale at Carolco to plummet. As the date apparoached for the cameras to roll, several senior people involved with the film decided to jump ship, including producer David Nichols and chief camera operator Nicola Pecorini.

In Thailand the crew, which was inexperienced with shooting on water, an especially treacherous medium for movie makers, suffered injuries, delays and sickness. Replacement star Matthew Modine (previously seen in Full Metal Jacket, Memphis Belle, `Married to the Mob and Short Cuts) wrote to friends from Krabi that Davis and her husband had been hit with heat exhaustion and food poisoning. "A lot of the crew were hit with stomach bugs as well," said Modine. "I've stayed well - I won't eat things from the sea here; the waters are so polluted." These were the same waters that many members of the crew had to work in every day.

Renny Harlin continued to justify the costs, arguing that they were necessary to convince foreign distributors that the movie would explode with the right kind of special effects, the type that made his Die Hard movie a multi-million dollar winner. Harlin flew in horses from Austria, carpenters from England, stunt men from Poland. In the interests of saving the movie and Carolco Harlin ordered 2,000 costumes, 309 firearms, 620 swords, 250 daggers and almost 100 custom-made axes.

A special tank in Malta was used for the fight scenes between two pirate ships. Harlin insisted on full-sized replicas of 17th-century sailing vessels with 20 cannon a side on two long decks. The ships cost over $1m to build and were able to fight full scale sea battles once the tank's hydraulic wave machine was activated. During filming one of these leviathans caught fire. A disaster was narrowly averted and production was suspended for three costly days.

The final tally from all these miscues was staggering. The cost of producing, financing, marketing and distributing Cutthroat Island totalled $121m. Carolco lost about $47m on the project but most of that was carried by the unfortunate investors who bought the company's bonds. Carolco's chairman, Mario Kassar, still received his $1m fee for ensuring that Cutthroat Island was finished.

Carolco went into bankruptcy last November, six weeks before Cutthroat Island reached theatres, and that is where it remains. The movie that held the "biggest bomb" title before, Michael Cimino's Heaven's Gate, lost over $40m in 1980. That movie was driven by an artistic obsession. The destructive force behind Cutthroat Island was financial. When production began, Carolco could either declare bankruptcy immediately or gamble that its last movie would turn the kind of $100m profits the company earned in the 1980s.

The movie business is full of people who want to believe and Carolco played on their gullibility, encouraging new investors to sink money into the marketing of Cutthroat Island, even after early reviews pronounced it dead on arrival.

Matthew Modine was an enthusiastic supporter of the film until it was pulled from US cinemas with just $10m of sales. Modine had seen the project as a breakout movie for his career and now he has begun to express some bitterness, especially towards Harlin and Davis. Modine claims that Harlin devoted himself to perfecting Davis's performance but never offered advice to his male star. "It's the first movie I've worked on where the director never really spoke to me," he says. "It was frustrating and Renny spent a lot of his time just finding new ways to blow things up. He likes to blow things up."

Critics of Carolco and chairman Kassar now say the company's demise is fitting, the end of an absurd process begun by Kassar himself. Hollywood was appalled when Kassar began paying stars multi-million dollar salaries in the 1980s. He set up a market in which, by 1994, his former star Arnold Schwarzenegger could command a $20m fee, a sum Carolco could no longer afford. Kassar created the economics which destroyed his company.

Does that mean Hollywood has been made wiser by Cutthroat Island? Harlin - who also pushed Die Hard 2 over budget by $23m - is now producing another movie, a female action piece called The Long Kiss Goodnight, which has a $65m budget. The star is one Geena Davis. The script, by Shane Black, cost a Hollywood record $4 and last month the hotel where the film had begun shooting burnt to the ground. A search is under way for a new location.

Meanwhile the films that have topped the box office list in the US since Cutthroat Island sank have had budgets well below $50m. Movies like Dead Man Walking, The Birdcage, Sense and Sensibility, 12 Monkeys and Mr Holland's Opus have all cleared their modest costs with ease making three times as much money between them as Cutthroat Island lost. Next time Hollywood goes looking for buried treasure it might remember that and leave the lavish special effects at home.