Nice notes for Overture

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JPMorgan will arrange $225 million in production and distribution funding for Chris McGurk's new Starz theatrical unit Overture Films, which plans an annual slate of eight or more titles.

Overture is aiming to get a first title to market no later than the first quarter and eventually hopes to ramp up to a dozen releases annually. Domestic distribution is in place, and a well-placed source said advanced talks are ongoing with one or more studios to secure agreements for international distribution and foreign sales.

The fledgling film shingle already has output deals for pay TV and home video with two sister companies operating under the Liberty Media umbrella, further bolstering its ambitious vision. Overture has struck a five-year arrangement with the Starz/Encore cable channels, and Starz Home Entertainment -- the acquired and rebranded former Anchor Bay -- will handle home video.

"We were always extremely confident that we were going to be able to raise the money," said McGurk, the former MGM and Universal exec who serves as Overture's CEO. "When you have companies like Liberty and Starz backing you up, it's very helpful."

Starz CFO Glenn Curtis and Overture CFO Erika Hindle worked with JPMorgan to secure the slate financing. The funding will drive slate plans aiming to pump out at least 40 films during the first five years.

JPMorgan, together with CIT Group, will provide a portion of the total sum to be arranged as senior debt for Overture, with the balance to be syndicated.

"The combination of a proven management team, backed by great sponsorship in Starz and Liberty, proved to be a perfect combination for us to finance this new venture," said Clark Hallren, managing director of JPMorgan Securities in Los Angeles. "We're doing this because it's Liberty and because it's Chris McGurk -- which is a winning combination."

Overture, which has offices in Beverly Hills and New York, serves at least two purposes for Starz. Not only will its theatrical income create a wholly new revenue stream for the company, but its slate also becomes ready programming fodder for the Starz and Encore channels at a time when pricey acquisitions are in decline among cablers.

"The whole pay television window has been changing dramatically, and I believe HBO and Starz/Encore and others are not going to be doing big output arrangements anymore," JPMorgan managing director John Miller said.

Fewer deals will be struck for entire studio slates, with cablers now tending to acquire individual films on the spot market, Miller added. "The windows aren't working as well anymore because people just have too much access to the (film) product," he said.

Overture's securing long-term pay TV distribution for its slates seems particularly notable in light of the number of recent new entrants to the difficult midbudget film market.

Just last week, former Paramount and Warner Bros. exec Rob Friedman announced a new venture with foreign sales vendor Summit Entertainment to produce and acquire midrange films for domestic distribution. The Weinstein Co. and others also continue to operate in the same film strata.

"That gives us a real competitive advantage," McGurk noted.

In tapping in-house cable and home entertainment entities for output arrangements, Overture essentially is following New Line's example within the Time Warner fold.

Meanwhile, McGurk and his team -- including COO Danny Rosett and marketing/distribution president Peter Adee -- aim to crank up theatrical distribution aggressively.

"We think that one release a month is really optimal because it will still allow us to give the proper care and feeding to all of our titles," McGurk said.

Overture plans to keep its production budgets less than $30 million each, with the average project costing about $20 million, McGurk estimated.

"We're not a specialty film company," he emphasized. "We're going to be releasing films wide and trying to build a robust film library as quickly as possible."

The startup recently made its first acquisition, snatching all domestic rights to the Charlize Theron-produced "Ferris Wheel." Overture also announced production on the drama "105 Degrees and Rising" and inked a two-year, first-look deal with Lawrence Bender Prods. that's expected to produce two to four pictures.

McGurk reports to Starz chairman and CEO Robert Clasen, who also oversees various Starz Media operations, including a substantial animation unit acquired along with the former IDT Entertainment. Together, the theatrical and programming ventures dovetail with Liberty topper John Malone's long-standing portfolio of cable distribution businesses.

"It's classic vertical integration," JPMorgan's Hallren said.
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