BackWeinsteins look to turn their awards factory into a hit maker
Investors are itching for more than Oscar-worthy entertainment; they want a payout
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Harvey Weinstein was in motion. It was 9.50 on a Friday morning, and he was agitated, frazzled, moving in two or three directions at once. He arrived at the tearoom of the Peninsula Beverly Hills hotel straight from a breakfast meeting on the hotel rooftop. Wearing a black T-shirt with black suspenders, he had not yet settled in behind a bright pink floral setting when, dispensing with pleasantries, he started talking.
“We renewed our contracts," Weinstein told me, hurling the news like Zeus tossing lightning bolts. His eyes darted. His close-cut, greying hair rose a bit. Was it static electricity? A force field?
Weinstein, 63, and his brother, Bob, 61, stand in a long line of film executives—Samuel Goldwyn, Jack Warner, Peter Guber, Michael D. Eisner come to mind—who appear as dramatic in real life as their characters do on screen, the plot of their lives in perpetual rising action. Just in the last weeks, The Hunting Ground, a new Weinstein-produced documentary about campus sexual assault, has been slammed by critics who question its accuracy even as it becomes an awards prospect. At the same time, police unions are threatening to boycott another Weinstein production, Quentin Tarantino’s The Hateful Eight, which will be released on Christmas, because they are upset by remarks Tarantino made about police violence.
Those external forces are not the half of it. At The Weinstein Co., plot twists abound, including one involving the contracts Harvey referred to as he sat down. Friction has been reported with the board of directors over the renewal of employment agreements for the brothers, co-chairmen of The Weinstein Co. But Harvey insisted that the only hitch was that the brothers wanted to link their contracts with that of David Glasser, Weinstein’s president and chief operating officer. The contracts were signed safely before the 31 December expiration date of the pacts.
However, resolving that matter did not address the main issue between the brothers and a newly assertive board. The fact is, investors who put their money in their venture 10 years ago are itching for more than Oscar-worthy entertainment; they want a payout.
Mere survival is a challenge for most independent film and TV companies. Dogged by a need for immediate cash to produce and market movies that will not return their investment for years, if ever, smaller studios are perennially capital-hungry.
When the borrow-and-build cycle gets ahead of itself, collapse or forced sale often follows. Relativity Media, a midsize Hollywood conglomerate, filed for bankruptcy in July when it could not make payments on roughly $675 million in secured debt. New Line Cinema, Picturehouse, ThinkFilm and FilmDistrict are among the indie distributors that were closed or merged into a better-heeled parent.
Weinstein is not in the precarious financial position of a Relativity and is not likely to be forced into a sale by the board. But a crucial moment of reckoning seems to have come for The Weinstein Co. as long-standing investors, including the WPP Group, the French broadcaster TF1 Group and Technicolor are looking for their payday.
“Quite frankly," Weinstein said, “we have to monetize."
For the Weinsteins, monetizing through a sale appears out of the question: They have little interest in repeating a mistake they made in 1993, when they sold their Miramax Films to Walt Disney for $60 million, only to see it resold to others in 2010 for more than 10 times that amount.
So, that means the brothers are trying to beat the odds. They are looking both for a large corporate transaction and for big-dollar film and TV hits. The renewed quest for commercial success means bending, if not quite breaking, their aesthetic, by scaling down the number of arty awards bets, like this year’s lesbian-themed romance Carol (which led the Golden Globe nominations this month, with five) from Harvey, while leaning into bigger, broader fare like the pending Paddington 2 from Bob’s Dimension Films unit.
While success in such a strategy is rare, some in the industry are loathe to bet against the brothers.
“The extraordinary nine lives of Harvey makes Houdini and Barnum look like sideshow acts," said Barry Avrich, who studied the Weinsteins for his 2011 documentary, Unauthorized: The Harvey Weinstein Project.
“He will use his pipeline of talent and projects to secure the next tranche of cash," Avrich predicted. “He always does."
The Weinstein Co., begun in 2005, after the brothers left Miramax, is perhaps best known for films that have won dozens of Academy Awards, including back-to-back best picture Oscars for The King’s Speech and The Artist, in 2011 and 2012.
The founders’ business skills, however, have not always matched their creative talents. The failure of an expansion into couture and video distribution led to a financial crisis in 2009. The company avoided bankruptcy with a painful debt and asset restructuring. Under that deal, Weinstein was able to retire its debt in exchange for giving a stake in 200 films to Goldman Sachs and Assured Guaranty Ltd, which were debt holders. Goldman’s interests in those films were later acquired by AMC Networks, which is controlled by the Dolan family and its Cablevision company.
Weinstein has enough money from cash flow and $500 million in credit from a consortium of 12 banks, led by Union Bank, to finance films. But that credit line remains in place for about three more years, said Anthony Beaudoin, a managing director for entertainment finance at Union Bank. In the meantime, Weinstein, a boutique studio, is getting even smaller. About 50 of roughly 250 jobs, many on the feature film side, are being cut. The company is also trimming its release schedule, to about 10 films a year from nearly double that level recently.
But trimming will not solve the big issue of finding a transaction or corporate transformation to reward investors whose cash has been tied up for a decade.
“The shareholders want a monetary event right now," said Harvey, who, with his brother, is working with the Allen & Co. investment banking firm to come up with a solution. Queries to the board members Tarak Ben Ammar, who is associated with TF1; Lance Maerov, who represents WPP; and Tim Sarnoff, of Technicolor, drew no response. (Weinstein later said the board had decided its members should not speak publicly.)
One former executive, speaking on the condition of anonymity, says this would be an “optimum time to sell" the company, because it is in fairly good financial shape. But Harvey dismissed that idea out of hand. “We are not going to do that," he said.
Neither he nor his brother have ever quite reconciled with the loss of Miramax, founded in 1979 and named for their parents, Max and Miriam, to Disney. Miramax grew under Disney, expanding its range beyond small, sophisticated films like Sex Lies and Videotape and Cinema Paradiso to more lucrative crowd-pleasers, like Tarantino’s Pulp Fiction and Rob Marshall’s Chicago.
But the Weinsteins fought repeatedly with Eisner, then Disney’s chief executive. Looking back, Harvey says he now believes that corporate structures are inherently hostile to his sort of verve—whether battling with Eisner over Disney’s refusal to distribute Michael Moore’s Fahrenheit 9/11 or picking public fights with the Motion Picture Association of America over the rating of Blue Valentine.
“Corporations believe every executive is replaceable," said Harvey, who clearly disagrees.
Close governance clearly galls him. Unbidden, he said that his Bradley Cooper movie, Burnt, would have worked better in January, but board-enforced rules that require a certain number of film releases each quarter boxed him into releasing it in October, a month crammed with awards hopefuls like Steve Jobs and Bridge of Spies. Burnt was a painful flop.
In more freewheeling days, Harvey lamented, “I didn’t know we had a board."
By his own assessment, Harvey lacks the sensibility to run a publicly traded institution, and he has ruled out the possibility of an initial public offering of all or part of Weinstein. “It’s never good to IPO movies," he said, citing the volatility of film performance, particularly as home viewing markets remain soft.
If the brothers’ strong objections rule out a sale of Weinstein—either to a larger company or the public—what opti-ons remain to satisfy investors?
One source of value is in backlists of movies. People briefed on Weinstein’s plans who spoke on the condition of anonymity say the company has explored buying back Miramax in part to get control of its library. A deal of that sort would expand Weinstein’s holdings to more than a thousand titles from 525, which were valued from $300 million to $600 million in a recent assessment done for the company, and pave the way for a potentially lucrative sale of a stake in the combined libraries.
The likeliest option, however, seems to be the formation of a partnership for Weinstein’s television unit, which is growing quickly, and generally provides more reliable returns than the hit-and-miss film business.
Weinstein had worked out a sale of the television unit to the British network ITV, but the deal fell apart after it was disclosed in April. (ITV representatives did not respond to queries, and earlier declined to comment on the deal.) Under the proposed sale, Harvey Weinstein and Glasser would have become managers of an ITV-owned unit, a complication that might be avoided in a yet-to-be-structured television alliance with yet-to-be-found partners.
Nancy Dubuc is the chief executive of A&E Networks, which has carried more than six shows in Weinstein’s Project Runway series, and has a Weinstein mini-series, War and Peace, scheduled for January. She says that Weinstein is strong enough in television to attract a buyer or investor who might pay for a stake in the unit.
The network has four Weinstein pilots in development, Dubuc said. “Television, like film, comes down to taste, and Harvey has it," she said.
Ted Sarandos, Netflix’s chief content officer, agreed with Dubuc’s vote of confidence. Weinstein, like other independent companies, he said, may be able to build financially robust operations around deals with video streaming companies, like Netflix, that were not a significant presence 10 years ago.
But Sarandos also sounded a note of caution.
“I’m not going to say yes or no, either way," he said when asked about a possible venture with Netflix. “But we don’t need to own other people" to acquire their films and shows.
Success in pursuing any of those options will depend heavily on Bob Weinstein.
He has been the less visible “other brother."
But internally, Bob is acknowledged as an equal (and equally loud) voice in large decisions, and as perhaps the larger contributor to the bottom line.
“We both took movies to the next level," Bob Weinstein said. “We turned art into commerce."
Before selling Miramax to Disney, Bob created the genre-oriented Dimension Films operation as a unit of Miramax. The Dimension brand, which the Weinsteins reacquired from Disney, has been a major cash generator with pop hits like Wes Craven’s Scream series.
Over time, much of Weinstein’s cash flow has been generated by Tarantino, with whom both brothers work.
“Quentin is where our sensibilities converge, we both handle him," Bob says of the filmmaker, with whom the Weinsteins have worked since the release of Reservoir Dogs in 1992.
This time around, The Hateful Eight, which Tarantino wrote and directed, brings opportunity and headaches. The film, about a bounty hunter and violent encounters in the Old West, may be a strong box-office prospect. But when police organizations called for a nationwide boycott after Tarantino said he regarded some shootings by the police as murder during a New York City protest against police violence in October, the Weinstein brothers, usually quick to embrace controversy in selling their films, were publicly silent.
“I think that’s his issue. He’s his own person," Bob said. Harvey later said the brothers had worked to defuse the controversy with the help of “off-the-record conversations and friends of the family."
Wearing a crisp blue shirt and blazer in Weinstein’s Beverly Hills offices, Harvey preferred to discuss the business at hand, his own role in a strategic shift to increase shareholder return.
He proposes spending more money, but cutting his output to two or three films each year from perhaps six. With fewer, more expensive films, the Weinsteins will face increased pressure to avoid marginal performers like Sin City: A Dame to Kill For, which took in only $39 million worldwide when it was released in 2014.
But he sees in bigger horror, fantasy or comedy films, and their television and merchandising spinoffs, the potential for enhanced cash flow.
“The company really needs me to step up and say what’s next," he said. By Harvey’s own assessment, the company needs to deliver at least one, and possibly two, hits a year on the order of “Paddington," a live-action and computer-animated comedy released in January that took in more than $76 million in North America.
One prospect is The Six Billion Dollar Man, to be directed by Peter Berg, with Mark Wahlberg in a lead role, based on the 1970s television series The Six Million Dollar Man.
“That’s ‘billion,’ with a ‘b,’" noted Weinstein, who said his movies would be getting bigger, to keep pace with aggressive competition from the likes of Lionsgate and its Hunger Games series.
“I want to up my game," he said.
©2015/The New York Times
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