Los Angeles: The latest high-profile Hollywood breakup is between a movie star and a top studio.
Sumner Redstone, whose company owns Paramount Pictures, said the studio would sever its 14-year relationship with Cruise's film production company because "his recent conduct has not been acceptable to Paramount."
"As much as we like him personally," the Viacom Inc. chairman told The Wall Street Journal, "we thought it was wrong to renew his deal."
Cruise's partner, Paula Wagner, said negotiations on a new contract simply fizzled.
The deal in recent years paid Cruise and Wagner up to $10 million a year to develop films and operate an office on the Paramount lot, the Journal said on Wednesday. It was reported that Cruise and the studio had been discussing a less lucrative deal.
The studio had offered the pair $2 million a year, plus a $500,000 discretionary fund during each of the next two years, the Los Angeles Times reported on Wednesday. It cited sources with knowledge of the talks who didn't want to be named because of the sensitivity of the matter.
In the past year or so, the usually guarded actor came under intense scrutiny after he jumped up and down on Oprah Winfrey's couch while proclaiming his love for Katie Holmes, openly advocated Scientology, and criticised Brooke Shields for taking prescription drugs to treat postpartum depression.
Scientology, the religion founded by science-fiction writer L Ron Hubbard opposes psychiatry and its medication.
Redstone estimated that Cruise's off-screen behavior cost his latest movie, Mission: Impossible III, $100 million to $150 million in ticket sales, even as he praised the film as "the best of the three movies" in the action series.
"It's nothing to do with his acting ability, he's a terrific actor," Redstone said. "But we don't think that someone who effectuates creative suicide and costs the company revenue should be on the lot."
Wagner told said that agents for Cruise/Wagner Productions stopped negotiating with Paramount over a week ago and have since secured independent financing, effectively taking any contract-renewal deal off the table.
"For some reason, Paramount has chosen to negotiate in the press," Wagner said, calling Redstone's announcement "surprising."
"It's not really the most businesslike approach," she said. "We've had virtually no dealings with Mr Redstone."
Each of the actor's last seven films have generated more than $100 million.
And the collaboration between Paramount and Cruise/Wagner Productions, based on the Paramount lot since 1992, has produced $2.5 billion worth of business, Wagner said.
Wagner said she and Cruise had been considering independent financing for their company "for a long time." She said the company has already obtained commitments from two hedge funds, whose names would be announced soon.
"For us, this is a very new and exciting direction. We look forward to working with all the studios," she added.