A year ago, the company's epic meltdown ended in bankruptcy. Now, in an exclusive interview, Kavanaugh reveals his relaunch strategy — with funding from a new billionaire backer — along with his new Oscar-nominated man about town, who asks, "What the f— were they thinking?" as they take stock and promise this time (really!) things will be different.
On a balmy evening Sept. 9, Dana Brunetti was making the rounds at the Chase oyster bar in Toronto. Wearing a maroon blazer, jeans and Gucci low-top sneakers, the new Relativity Media president looked the picture of L.A. casual as he hosted the company's first event since it emerged from bankruptcy in April. Despite Brunetti's $500-plus footwear, it was a modest affair. No private helicopter idled on the roof, as one often did at the Relativity headquarters in Beverly Hills during its heyday just a few years ago. Aerosmith's Steven Tyler wasn't there to entertain, as he was at Relativity CEO Ryan Kavanaugh's Malibu wedding in 2015. In fact, Kavanaugh wasn't even at the party; he was back in Los Angeles that night due to the death of his uncle. But a respectable number of film executives and agents showed up, including UTA's Charles Ferraro and Voltage Pictures' Zev Foreman. Brunetti, 43, played the face man — "waving the flag and showing that we're here," he explains — making the case that the relaunched Relativity is a "lean and mean" version of its formerly bloated self and, yes, is ready to do business again.
Industry insiders could be forgiven for a measure of incredulity. After all, Relativity may be out of bankruptcy, but by no means is it out of the woods. Kavanaugh, 41, is still in triage mode, trying to secure the financing needed to make Relativity's debt payments to hedge fund Anchorage Capital. In July 2015, Relativity filed for bankruptcy protection in New York, listing assets of $560 million but liabilities of a staggering $1.18 billion. It marked one of the largest bankruptcies in Hollywood history and came just weeks after Kavanaugh had claimed repeatedly to his employees that he had pulled the company back from the brink. As the studio's embarrassing financials were laid bare, Kavanaugh feuded publicly with investors and board members as Relativity films, including Natalie Portman's Western Jane Got a Gun and Sundance hit The Bronze, sat unreleased. By the end of the summer, Kavanaugh had become an industry punch line.
But then, in an unanticipated twist, Kavanaugh held on to his company in the Chapter 11 proceeding (even though he says he personally lost $104 million in the bankruptcy and his investors lost more). At its height, Relativity boasted a staff of 350, spanning film, TV, fashion and sports. Today, just 75 work at the company, plus another 65 employed by Relativity Europa Distribution (RED), a joint venture that Relativity co-owns with EuropaCorp. On Sept. 30, Relativity will face its first test with the wide release of Masterminds, a comedy starring Zach Galifianakis, Owen Wilson and Kristen Wiig.
"We've hit a lot of important milestones with the company, we obviously have a big release coming out this week and we are in the process of closing a refinance on the company, which will be very important," says Kavanaugh in his first interview in more than a year.
But many are skeptical. There are plenty of burned bridges, many former staffers remain unemployed, and vendors who were stiffed are still fuming. Within Hollywood's tight-knit banking community, the prevailing wisdom is that Relativity, which burned through hundreds of millions of dollars since Kavanaugh transformed his movie slate financing company into a full-fledged distributor in 2010, still can be lent money for prints-and-advertising because P&A money is paid back quickly. But as a target for equity investment, it remains a roll of the dice.
Brunetti, photographed for THR in October 2014, says he was “very skeptical” about joining Relativity but was convinced because its “output deals weren’t affected by the bankruptcy.”
The presence of Brunetti — a successful producer with such credits as The Social Network, Fifty Shades of Grey and House of Cards and a man about town (recent red-carpet dates have included actress and El Chapo friend Kate Del Castillo) — may go a long way in repairing the reputation damage. But the question on the minds of many is why Brunetti would be willing to captain such a ship. Netflix's Ted Sarandos, whose company is feuding with Relativity in court, took a swipe at Brunetti (who once advised shorting Netflix stock) while congratulating him at Netflix's recent Emmy party. "Dana Brunetti is a great producer but not a great stock picker," Sarandos quipped to guests (Brunetti wasn't there).
Asked why he answered Kavanaugh's call, Brunetti is candid. "I went in very skeptical, like there's f—ing no way that I'm going to Relativity," he says. "What got my attention was that the distribution and output deals weren't affected or touched by the bankruptcy." Those lucrative output pacts guarantee distribution of Relativity films in some 110 countries. And after prevailing (for now) in the Netflix case, Kavanaugh can continue to count on guaranteed fees for upcoming films. "We cover between 80 and 100 percent of the budget of any movie we make before we say 'go,' without having to do anything," maintains Kavanaugh. (Of course, he once claimed to have an "algorithm" for determining box-office success.)
That, combined with a development fund of an undisclosed size, is allowing Brunetti to start building a slate, provided Kavanaugh can come up with a plan to pay for overhead and debts. Over the past few months, Brunetti, involved only in creative, has invited top agents to discuss Relativity 2.0 at the company's office. "What we're doing right now is showing people that it's not the old regime and the old mentality," he says. "We're bringing in the sensibilities I had at [his and Kevin Spacey's company] Trigger Street, both from how we do business to the type of material that we're looking for to how we handle talent."
So far, the film community has been cautiously receptive. "The industry needs as many healthy buyers as possible," says UTA's Ferraro. Initially, Spacey was on board to join Brunetti as Relativity's chairman, but he pulled out when he reassessed the time commitment. "Kevin goes, 'Look, I don't think I'm going to move forward with this, but you want to still continue to do it?' " recalls Brunetti. "Initially, I was like, 'Well, no. I was looking forward to doing this with you and just basically taking Trigger Street to another level.' But I came around. This is a great opportunity for me because it's scorched earth, and I can build this."
Relativity had five completed movies embroiled in the bankruptcy, but Kavanaugh saw only three as having potential: Masterminds, the Halle Berry starrer Kidnap (Dec. 2) and the Nicholas Hoult-Felicity Jones action thriller Collide (to be dated soon). The bankruptcy judge required Kavanaugh to raise $100 million to emerge from Chapter 11. He says he raised more than $200 million, with Chicago-based hedge fund billionaire Joseph Nicholas putting in $117 million of his own money. The funds to release the first three films will come from that pool, but the overhead for a staff of 75 is sizable, and Kavanaugh still needs to court new investors.
Even if Masterminds isn't a hit (it's tracking soft), he hopes getting the pre-bankruptcy movie into theaters will send a message to producers whose films were held in limbo. "There's no good in saying, 'Oh those bastards at Relativity.' I never felt that," says Kidnap producer Lorenzo di Bonaventura. "I just felt really frustrated because we knew it had real potential, and we kept trying to take it back, but [Relativity] kept holding on."
The first post-bankruptcy film to move into production likely will be Strangers 2, a low-budget horror movie (the 2008 original earned $82 million worldwide). The plan then is to make Act of Valor 2, chronicling an L.A. SWAT team, followed by a reboot of The Crow, starring Jason Momoa.
Brunetti hasn't exactly been impressed by the development slate left by former president Tucker Tooley. "You're just like, 'What the f— were they thinking?' " he says. One of his first moves as president was negotiating with Stanley Kramer's widow for a contemporary High Noon remake that will be set along the U.S.-Mexico border. He also has enlisted his Fifty Shades cohort Michael De Luca to produce a film about a Marine who takes his dog on one last epic road trip after the dog is diagnosed with cancer.
Given his success with House of Cards and the upcoming Manifesto at Discovery, Brunetti also plans to relaunch the company's TV division. The old Relativity TV, a cash-generating asset with such shows as MTV's Catfish and CBS' Limitless, was sold off to senior lenders for $125 million, paving the way for Kavanaugh's reorganization plan to be approved.
Kavanaugh now is attempting a personal rebranding as well. He and his second wife, model Jessica Roffey, have an 11-month-old son, Tommy (she went into premature labor at 20 weeks, in the middle of Relativity's financial chaos, but he was born healthy), so he's toned down the celebrity jet-setting with such pals as Leonardo DiCaprio and Bradley Cooper and the partying that led to a pair of DUIs. "Without naming names, I learned that I had a lot of true friends that I didn't know I have," he says of post-bankruptcy life. "And I learned that some of the friends that I thought were true friends really weren't. Both celebrity and noncelebrity. In some cases, it was actually the opposite of what you would expect."
At the same time, Kavanaugh has alienated some with his new Twitter persona. He called filmmaker Brett Ratner a "sleaze" in one rant, prompting an exchange of lawyer letters ("I took down quite a bit of it but not all of it," he says), and slammed Judd Apatow, who labeled Brunetti "an idiot" for saying he wouldn't vote for Hillary Clinton.
"Clearly I don't support Hillary, and I haven't given my support for Trump," says Kavanaugh, who still is undecided. "What really concerns me is not if people support Hillary. It's when people attack those that don't and they don't have any facts to attack with. They attack on emotion. They retaliate and they call people names and they call you idiots, like Judd Apatow did to Dana. It's just not acceptable. It's not right."
Ultimately, Kavanaugh and Brunetti will try to sell the Relativity reboot to an audience that didn't end up loving the original. But Hollywood loves a new buyer, and Brunetti says it's time to move forward.
"Relativity's been kicked enough," he says. "I mean, it's boring now. Who the f— wants to hear about another Relativity debt story? I don't even. My eyes glaze over. I don't even f—ing understand the stuff that they're talking about. And it's like, I don't care, and I'm in the middle of it."
This story first appeared in the Oct. 14 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.