According to Barry Sonnenfeld in an episode of Hollywood's Best Film Directors, the reason why the film failed was because Kevin Kline refused to play it straight.
I can't really see how a more serious performance by Kline would have improved the film without a whole lot of script rewrites. Like how was he supposed to handle the "touch my breast" scene? Or the scene where he starts doing some goofy "kung fu" poses only to use his foot to hit a button that knocks Jim West onto a pool table that turns upside down leaving West hanging beneath the train?
This isn't to say his actual performance was glorious or anything, but he had so little to work with.
Was that because of Kline's performance though? It's been a while since I saw the film, but I don't recall his performance being a big problem. His character comes across as calm and rational compared to Will Smith's character (with one obvious exception when both of them are stranded in the desert and he loses his temper.)
This is what Kline claimed in a 2013 interview:
. . . the director of that film, Barry Sonnenfeld, told me one of the funniest stories about studio executives. Someone said to somebody that the budget of this movie is way too high for characters this "complex." And there you go. So, the higher the budget, usually in order to break even -- or, God forbid, actually make money -- the movie better not be too terribly complicated. Do you know what I mean? There are notable exceptions, but I thought that was one of the funnier ones. Another studio executive said, "Could you take out the nuances?"
This sounds more believable than the entire tone of the movie shifting because Kline wasn't a bit more serious with his role. Wouldn't Will Smith be more responsible for the end product, given he was clearly the star? What about Kenneth Branagh's incredibly hammy (and entertaining) performance?
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According to the below article about Barry's memoir:
Things really kicked off when Smith’s slated co-star George Clooney dropped out of the project as he believed Smith ‘had more funny lines than he did.’ Kevin Kline was duly drafted in, an actor who Sonnenfeld argues was a “lovely, talented guy” but allegedly there was some kind of rivalry between him and Branagh. That in turn (says Sonnenfeld) led to Kline overcooking his performance to outdo Branagh. This process is also known as ‘doing a Tommy Lee Jones in Batman Forever.'
The story continues that Sonnenfeld chose to ask Smith to play the film’s straight man as “we don’t want two funny people in our comedy and we’ll never get Kevin to be the ‘not funny’ one.”
Casting one of the late 90s’ red hot stars and then plucking away one of the key elements in their arsenal? Well, you can see why Sonnenfield believes the direction things took had a detrimental impact on the film’s impact upon audiences.
It doesn't add up IMO. Kline's performance is nothing to write home about, but Smith did not come across as playing his role straight (aside from the very few scenes that required him to behave seriously) and it's hard to argue that between Smith, Kline, and Branagh, it was Kline who had the most goofy and over-the-top performance.