By David Poland poland@moviecitynews.com
How Long Can Ryan Kavanaugh Last?
I’m not sure I have anything close to a realistic answer.
All I can say is that the question continues to be asked all over town… and the idea of offering to fund MGM’s production slate top the tune of $500 million – more than half of which, presumably, is meant to be Hobbit and Bond – is not making it any better. I guess his thinking is that if those two films return double his money, the rest of the money is risk-free… all profit possibility. Of course, Alan Horn isn’t a moron and the bid for the studio’s assets will drop significantly if the other half of Hobbit is no longer in the deal.
But back to the point… leadership at least one of the top agencies has told his agents NOT to do deals with Kavanaugh because the money train is about to crash into a wall.
And to be sure, Relativity Media’s brand on your film is more often than not – at least 2/3rds of the time – the sign of a fiscal car wreck. it’s breathtaking how many of the biggest bombs of recent years they have been in on funding. The Tale of Despereaux, The International, State of Play, Land of the Lost, Funny People, Nine, Did You Hear About the Morgans?, The Wolfman, Green Zone. And that’s just the last couple of years.
Now… they were in Paul Blart: Mall Cop, Couples Retreat, and biggest of all, Mamma Mia! So it’s not all been losses. But most of the bets… bad.
All that said… if I were in MGM financially, I would be all over this deal. It would be a gamble. The library price would drop to $1 billion – $1.2 billion. But the potential upside of the production package means that they could lose $100m more… or earn a couple hundred million more. And in the case of a miracle… more…as years pass.
It’s a good gamble for the MGM side. And all it requires is a lunatic with a loose check signing arm.
We all know who would be wearing the dress at this wedding, right?
Relativity was behind Duplicity as well right? When I see their logo now I immediately think “flop” or “disappointment.” I like some of those titles a lot but not too many hits there.
It’s kind of funny how “Did You Hear About the Morgans?” was quietly one of the worst movies of last year, but it just kind of slipped in and slipped by because no one gave a shit.
That said, I cannot wait for “Season of the Witch.”
And isn’t “Zombieland” in the win column for Kavanaugh?
Speaking of Nic Cage-flicks-that-look-awful-but-I-have-to-see, have you seen his new ‘do for Drive Angry?
http://justjared.buzznet.com/2010/04/04/nicolas-cage-blonde-hair/
Kavanaugh has access to more money than Legendary. The funds could stop because his approach has been scattershot with bad returns, but don’t think it’s an issue of dollars.
“Drive Angry” will be awesome.
MORSE POWER. BOW.
SJRubinstein, agreed. It somehow made $80mil worldwide though.
Rubinstein: Holy shit that sounds awesome– Cage, AMBER HEARD (BOW), FICHTNER, MORSE, Moxon, and TOM ATKINS AKA GOD.
DRIVE ANGRY POWER indeed!
Also, did Season of the Witch get bumped? That trailer was running before everything four months ago… Did they move it to fall to avoid the 65 other Nic Cage movies coming out soon?
I’m not sure if Relativity is that overly worried about the duds. I mean, sure, it’s gotta sting – especially Wolfman and Green Zone – but since they’re mainly focusing on co-financing it’s more of a risk diversification strategy than a “if we have more than 3 flops in a row we’re bankrupt, so we’d better make sure every last detail is perfect” strategy. No spreadsheet in the world is going to predict with any degree of accuracy which movie is going to be a hit and which isn’t, but you can get a reasonable feel that if audiences move away from this film then they’re likely to move towards that film instead – so you split your investments so if your one doesn’t pay off you minimize your losses with another. While Leap Year sank, Dear John soared, and Relativity had fingers in both pies.
Having said that, they’ve been cagey about releasing profitability numbers which is surprising given how vocal they’ve been in other areas. That usually doesn’t signal the greatest of bottom-line results. It really depends on how the deals are structured and what kind of paypack periods their hedge fund underwriters are looking at. No-one goes into a portfolio strategy with a short-term view, you’re looking for the numbers to balance out in a positive way over a 5-10 year period. If Kavanaugh’s being disciplined about it (which by some – not all – reports he has) then flops should only give him more information to better structure future investments. I’d be curious to find out what terms Relativity has for their co-financing deals compared to other sources.
There’s a lot of “if”s in there though, and given how Hollywood is such an ego driven business that’s a cause for concern.
Yeah, they bumped “Season of the Witch,” which really, really bummed me out as I pretty much see all Nic Cage movies in the theater on opening day and this one looked like one to enjoy. I think it’s in the fall now, perhaps banking on him having hits with “Kick-Ass” and “Sorcerer’s Apprentice.”
He doesn’t have a ten year lease. He’s not on the precipice Dave’s post alludes towards, but he’s far from smooth sailing. If he does the MGM deal and Bond doesn’t work, that’s the beginning of the end.
Look at what Relativity backs and look at what Legendary grabs. Tull’s group goes for the big splash that are high-risk, high-reward. What’s Kavanaugh’s focus? It’s such a stew of blah, I couldn’t tell you. Yet, he’s does have deeper pockets.
Dave’s right to say this is about funding Hobbit and Bond, because IMO, Kavanaugh hopefully now understands it’s a loss to back anything that’s not big game property. Studios try and offer crap sandwiches to outside investors and he’s eaten more than few. His best move would be to get out of all deals, saddle up with Fox and get behind the bigger projects that need the influx.
I don’t know that it’s true to say “it’s a loss to back anything that’s not big game property”. The best returns, both in terms of absolute dollars and % of budget,
seem to come from the sub-$100million budget bracket. The industry, as a whole, needs both the tent-poles the smaller fare to keep healthy – the larger films to keep the interest in movies as one of the best ways to spend your free hours, and the smaller films to supply the content to feed the behaviour so it’s habitual.
My sense is that Kavanaugh’s got a philosophy similar to Ed Catmull – that the concept isn’t important, it’s the execution. The reason I say that is because of the fact that Relativity’s portfolio is such a grab-bag of blah, they seem to be aware that at the time the financing deal is arranged there’s no real way to tell if it’ll turn out good or bad. Therefore, from a financing perspective, the only thing you can control is the beta (risk) of the portfolio by genre and scale so you deliberately spread yourself around.
The caveat to that would be that the execution is carried out by someone else, which for me suggests the reason behind the production bid – to establish control over the delivery of the investment, especially since Universal seems to be rather crap at it currently.
Of course, all this assumes that Kavanaugh’s acting as a rational animal. He’s shown a propensity to get greedy and overextend himself in his pre-Relativity days, and it may be that he’s drunk too much of the kool-aid and studios are delighting in passing their shit sandwiches of risk off to him.