Arnold Schwarzenegger's Last Contract

It's been nearly a decade since California Governor Arnold Schwarzenegger starred in Terminator 3. Author Edward Jay Epstein looks back at Schwarzenegger's final movie contract, the product of state-of-the-art deal-making and still the gold standard for Hollywood lawyers.

People outside of Hollywood never get to see details of the famed "big deal." But here is the genuine artifact: California Governor Arnold Schwarzenegger's contract for Terminator 3: The Rise of the Machines.

The contract was brilliantly put together by the Hollywood super-lawyer Jacob Bloom between June 2000 and December 2001, requiring no fewer than twenty-one drafts, and runs thirty-three pages with appendices. The eleven pages of the contract proper are reproduced here for the first time.

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I analyzed this document for Slate in 2005, but in the years since I've realized that no one outside of the film business has ever seen a big Hollywood contract: this may be the first one to be leaked.

For starters, Schwarzenegger got a $29.25 million "pay or play" fee, meaning he would be paid whether or not the movie was made. (At the time, that figure was a record for guaranteed compensation.) The first $3 million would be delivered on signing and the balance during the course of nineteen weeks of "principal photography." For every week the shooting ran over its nineteen-week schedule, Schwarzenegger would receive an additional $1.6 million in "overage." Then there was the "perk package"-a lump sum of $1.5 million for private jets, a fully equipped gym trailer, three-bedroom deluxe suites on locations, round-the-clock limousines, and personal bodyguards. But, as I explained in Slate, the producers Mario Kassar and Andrew Vajna did not agree to pay Schwarzenegger this record sum because he possessed unique acting skills-after all, the part he was to play (along with a digital double and many stuntmen) was that of a slow-speaking robot-or on the basis of his box office track record. Rather, Schwarzenegger's image had become so inexorably linked in video games and TV reruns to the deadly robot that he had become the crucial element of the deal and Kassar and Vajna needed him to raise money for the film.

Schwarzenegger's demands, however, did not stop with the guarantee of $29.25 million. He also insisted on and got 20 percent of the gross receipts made by the venture from every market in the world-including movie theaters, videos, DVDs, television licensing, in-flight entertainment, game licensing, and so forth-once the movie had reached its cash breakeven point. Schwarzenegger also could decide who worked with him. The contract "pre-approval" clause gave him choice of not only the director (Jonathan Mostow) and the principal cast, but also his hairdresser (Peter Toothbal), his makeup man (Jeff Dawn), his driver (Howard Valesco), his stand-in (Dieter Rauter), his stunt double (Billy Lucas), the unit publicist (Sheryl Merin), his personal physician (Dr. Graham Waring), and his cook (Steve Hunter). Finally, Schwarzenegger had the contract structured to give him every possible tax advantage. All the money was to be paid not to Schwarzenegger but to Oak Productions Inc., a corporate front he controlled. Oak Productions, in return, "lends" Schwarzenegger's services to the production. Since Schwarzenegger didn't get any money personally from the movie itself, he had more flexibility managing his exposure to taxes.

In return, Schwarzenegger agreed to make himself available for eighteen weeks of principal photography, one week (on a nonexclusive basis) for rehearsals-if any were required-and five days for re-shooting. In addition, he had to make himself available for at least ten days, seven of them abroad, for promotional activities in connection with the initial theatrical release of the movie. This media work included everything from television and radio appearances to appearances at premieres and Internet chat rooms. The negotiation of this contract did not come cheaply-the legal and accounting budget for the movie was $2 million.

Ironically, whereas Schwarzenegger was crucial to making the deal, once the Terminator franchise had been successfully resurrected, his acting services were no longer necessary for future sequels. In 2007, Kassar and Vajna sold the rights to the franchise to the game company Halycon for $25 million, which produced Terminator Salvation in 2009, the first of three planned sequels. Even without Schwarzenegger, who was by now fighting his own budget battles as governor of California, it did almost as well as Terminator 3 at the domestic box office, though not as well in the Asian markets.

Edward Jay Epstein is the author of 14 books, including two examining the movie business. The Hollywood Economist: The Hidden Financial Reality Behind The Movies is just out from Melville House and follows his 2005 book, The Big Picture: Money and Power in Hollywood.