More money on tap from Intermedia

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Movie money: Hollywood may have problems, but money's really not one of them.

Wall Street hedge funds, private equity firms and global investors pumped hundreds of millions of dollars into film production this year through massive studio co-financing partnerships as well as through some smaller multi-million dollar deals with high profile producers. The strike-it-rich upside to moviemaking is similar to what can happen drilling for oil and that has tremendous appeal to investors who are accustomed to seeing much more limited upsides in other business sectors. As for the risks, Hollywood has done a damn good job of convincing the Street that it can manage those risks effectively, especially if investors are backing a portfolio of films rather than individual projects.

Not surprisingly, there's a lot more money on tap for Hollywood in 2007. And some of that is going to be flowing from Los Angeles based Intermedia, a subsidiary of Germany's IM Internationalmedia AG, which recently received a $150 million credit line for film production from the CapCo Group, LLC.

Intermedia's been a high profile player in film production and financing for years and has had such recent projects as "World Trade Center," "Alexander," The Life of David Gale," "Basic Instinct 2" and "RV." While it's had its ups (like "Terminator 3: Rise of the Machines") and downs (like "Basic Instinct 2") over the years, Intermedia is now primed for recovery in 2007 thanks to its new credit line and a new overall plan for conducting its business. To focus on how the company is moving forward, I spoke recently to Martin Schuermann, CEO of Intermedia and chairman of the board of IM Internationalmedia AG.

"These are fully financing deals," Schuermann told me. "This is basically a line of credit that has green lighting criteria that are in line with our internal way of green lighting films. So this fits a hundred% into our new Intermedia strategy."

Asked how the new Intermedia differs from the old one, he replied, "Well, the new Intermedia now has clearly defined product lines. In our (Wall Street) analyst presentation we're speaking about Intermedia Films, which is basically the old Intermedia as you know it (with) bigger budgets, event movies and some art house movies that are filmmaker driven. Those films we have spent a lot of money on in development. We still have a lot of those in active development and when the time comes we will either co-finance or just basically produce them for hire for studios and other financiers.

"Our new brand, Intermedia Cinema, is basically movies that are budgeted between $10 million and $30 million. Those are mostly genre films. Examples for that would be the (action adventure) we just finished with Richard Gere and Terrence Howard, 'Spring Break in Bosnia,' the (horror thriller) 'One Missed Call' that we finished principal photography on (starring Edward Burns). Those are the kind of films that would fit under the label Intermedia Cinema. Those we intend to finance in-house and basically act as producer and financier."

A third line, he added, "is Intermedia Television, which we're hopefully rolling out by the beginning of next year with some exciting product (including) a half-hour show, a one-hour show and some made-for-television movies. Our plan is to make these more international shows. These shows traditionally have fit more into the cable network range than the traditional over-the-air big networks."

How is Hollywood responding to Intermedia being back in action? "I think it's kind of now sinking in with the agents, who are starting to understand our new business model and our approach to what we are concentrating on right now in terms of in-house development and financing," Schuermann said. "So we're starting to get good responses. It also helps that we have done four films this year and people see that Intermedia is back in the sunlight." Those four films include "Bosnia," directed by Richard Shephard, to be released domestically by The Weinstein Company; "Call," produced for Alcon Entertainment and Kadakowa Pictures; the comedy "Magicians," shot in London for Universal Pictures International; and the crime thriller "Breach," directed by Billy Ray ("Shattered Glass"), which Universal is releasing domestically Feb. 16.

As for what the dream project for the new Intermedia would be, Schuermann explained, "The ideal project is a genre film in the $10 million to $30 million range. We're looking at filmmakers that we like and we like to develop long-term relationships with these. In terms of (what we'd like to do), look at the original Miramax-Dimension product mix. They had probably one-third Miramax films that were strictly filmmaker driven, not always 100% commercially oriented films, but something to be proud of. And then they had the Bob Weinstein-headed Dimension label that was more commercially driven. But it fit the taste of a wide audience and was commercially quite successful. I think if you look at that model, that's very close to the product mix that we're looking at here at Intermedia.

"Now that we've shown we can actually make these films and (agents) are seeing the first results in terms of directors' cuts and some dailies, they have confidence that Intermedia can deliver product that they can be proud of and that their clients can stand behind and say, 'This is something I was involved in.'"

Clearly, if Intermedia is looking to invest many millions of dollars in making movies it must be bullish on the future of the film business. "The movie business, if you look back, has always been a moving target," he observed. "Sometimes you adjust in terms of what kind of product you bring out as a theatrical film and how you market it. But I believe that if the movie you make is a good piece of entertainment, it finds its audience. You have to adjust in terms of how you market it and be realistic (about) who the audience is for each film. You have movies like horror films where you have a very defined target audience. Companies like Lionsgate, for example, know very well how to go after that (audience and they) prudently spend their money on advertising for these films.

"I think you have to have a good idea who you're making those films for and what the viewing patterns of these consumers are. If you make dramas that will attract an older audience, then you might want to consider cutting back on your theatrical release and spend more on your DVD release because that audience has their flat-screen TVs at home and nice audio systems and they don't need to see the movie the day it comes out in theaters. They can wait a few months for it to be sent home by Netflix or to be bought at their retailer. (On the other hand, I know), having kids myself, that they still need to be (able) to talk about the movie when it comes out the next day in school."

Financing deals vary in terms of whether they're tied to a single distributor or cover a range of deals around town. "I think right now Intermedia is still in the position where we have to prove to the outside world what we are producing and what we're capable of releasing," Schuermann noted. "So probably in a 12 month time period when the product of the new strategy is out and people can see what the new Intermedia is about and they can see it on the screen, then we might consider doing a deal with a single studio. But until then, really, for the mix of product that we have right now different distributors are more suitable than others."

When it comes to marketing their films domestically, he said, "We stay involved, but obviously when we distribute (them they'll be marketed by their studios). For example, 'Spring Break in Bosnia' is going to be done through The Weinstein Company. In coordination with the Weinsteins, we'll stay involved with them, but we also rely a lot on their expertise in terms of how they have advertised their product in the past."

On the international side, he continued, "with our new arrangement the foreign rights will be distributed through Capital Films in the U.K. We work very closely with Capital in trying to achieve the best exploitation in these territories (around the world)."

With domestic grosses for the year up by seven or eight%, Schuermann agreed 2006 has seen a decent recovery over the very sluggish '05, "but quite honestly those swings in the boxoffice numbers have a lower effect on what we're doing than what the studios do in terms of their big tentpole films. (A mega-blockbuster like) 'Spider Man' can throw off a boxoffice quarter immensely. If you look at movies in the category of $10 million to $30 million in the genre area, I don't think they're that much affected by the overall (marketplace) numbers."

Bottom line, Schuermann concluded, "We're out there. We are making movies again and we have a very clear business plan. Hopefully a year from now when more of our product is released we can have this conversation again and I can say, 'And by the way, this is the new plan on top of that.' But right now we're out to prove that what we set as our goals we can reach and then go from there as the new platform."

Awards analysis: The National Board of Review may not be recognized as a precursor to the Oscars, but the group's awards Wednesday are still likely to impact on how other awards givers perceive the field of contenders.

There's no question that Clint Eastwood's Japanese language and point of view World War II drama "Letters From Iwo Jima" received an important boost from its best picture NBR victory, establishing it as a serious candidate for consideration in other races. Prior to this, some Hollywood handicappers were calling "Dreamgirls" an automatic best picture Oscar winner and some observers were anticipating that Eastwood's other World War II drama, "Flags of Our Fathers," would be a stronger best picture contender than "Letters" because "Flags" is in English and tells its story from the American point of view. It helped that they'd already seen "Flags," but hadn't yet had an opportunity to view "Letters." If nothing else, "Letters'" NBR victory will prompt other awards voters to take the time to see and consider the film carefully, which is always a tremendous help to any well-made movie's prospects.

At the same time, the NBR reinforced the widely held perception that Helen Mirren is an extremely strong best actress Oscar candidate for "The Queen" and that Forest Whitaker is a likely best actor nominee for "The Last King of Scotland." The group's directing award to Martin Scorsese certainly advances his prospects for an Oscar nod for "The Departed." And the NBR's best foreign film award to "Volver" and its best documentary award to "An Inconvenient Truth" also serve to put those films in the frontrunner spotlight.

Certainly, there are many more awards still to come over the next few weeks from high profile critics groups and the awards landscape could be altered. "Dreamgirls" and "Flags," for instance, could emerge as big winners. So, for that matter, could "The Queen." What we're unlikely to see is a repeat of last year when "Brokeback Mountain" swept most of the critics' awards, becoming the Oscar race favorite right up until the SAG Awards when "Crash" won the best ensemble cast award and pressed ahead to its Oscar victory.

When the Hollywood Foreign Press Association's Golden Globe nominations are announced Dec. 14 they'll receive major media coverage worldwide and will have their customary impact on other awards races. Given the Globes best picture category split between dramas and musicals-comedies, there's room for "Dreamgirls" or "The Devil Wears Prada" or "The Holiday" or "Little Miss Sunshine" or something else as well as "Letters" or "Flags" or "The Queen" or "The Departed" or something else to be honored. That, too, will help define the likely Oscar race a bit more prior to Academy members receiving their nominating ballots.

But for openers the NBR's vote is helpful in starting to narrow this year's wide open awards race and to encourage the marketing teams handling the NBR winners to campaign as hard as they possibly can for Globes and Oscars.

Filmmaker flashbacks: From Aug. 1, 1988's column: "They say there's never a dull moment in Hollywood and, most likely, there won't ever be one as long as Kirk Kerkorian is in the film business. Perhaps that's why the news late last week that Kerkorian's deal fell through to sell 25% of MGM to Burt Sugarman, Jon Peters and Peter Guber left me in a whimsical mood.

"Leave it to Kerkorian, I thought, to enliven the dog days of summer for all of us by reviving his 'MGM For Sale' show. What kind of show is it? Well, it's tough to describe. It's not really a musical, although when it plays a lot of people typically wind up facing the music. If there were a title song, which there isn't, it might well be Cole Porter's 'Anything Goes.'

"There are those who call it a magic show. I'm not sure that's accurate, but there is a lot of magic in it, since whenever it opens Kerkorian manages to make more of MGM disappear. It's been about two years since the show's last performance, which co-starred Ted Turner in a role some observers said was the villain. That show is still well remembered by local audiences. Indeed, there are those who recall it as having been considerably more exciting than many movies MGM was making under its management at the time.

"The current edition of 'MGM For Sale' boasted a bigger cast. Co-starring with Kerkorian this time around were Burt Sugarman, Jon Peters and Peter Guber. To Kerkorian's credit, there also was a completely new plot. Gone was the old junk bonds storyline on which the last show's plot hinged and nearly failed. In its place was a new and different $100 million payment that would have given the Sugarman Group 25% of MGM and the right to control the company even though Kerkorian retained top billing as its principal shareholder.

"It was a plot, in fact, that might have spawned a sequel if Sugarman and partners came up with $300 million more to buy Kerkorian out completely. There was another potential spin-off in the sale of MGM's sister studio, United Artists. There already was talk that the cast of players in a UA show might include such big names as Marvin Davis or Jerry Weintraub."

Martin Grove hosts movie coverage on the broadband television channel www.updatehollywood.com.
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