Ryan Kavanaugh's Theory of Relativity

4:34 PM PST 09/29/2010 by Alex Ben Block
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Mogul has loftier goals than even his fiercest critics imagine

His current deal at Sony is likely to end when their contract expires in 2012, but Kavanaugh doesn't seem to mind. Relativity, he says, wanted better terms. He says the two parties may still do one single-picture financings together.

Bob Osher, COO of Columbia Pictures Motion Picture Group, who brought Kavanaugh to Sony, confirms that talks stalled but says the studio remains open to doing other kinds of deals with Relativity.

"Quite frankly, our industry right now is seeing an upheaval in terms of new technologies, distribution, a changing audience and a rather large recession," he notes. "Ryan has shown an openness to trying new things, which is important. He is someone who's comfortable taking a different path."

That path has been helped by the kind of computer modeling his father first taught him.

The first stop when a project is brought to Relativity is a massive database Kavanaugh has created over the past decade, with information on the cost and performance of thousands of movies. The database, which requires four full-time people to operate it, helps Kavanaugh and his team analyze a movie's prospects against more than 10,000 variables, before the project is given a grade rating its financial potential. Movies the computer system believes have about a 75% chance of success then face a more traditional analysis centered on budget, cast and marketing.

But Kavanagh's thinking isn't all about computers.

He argues in favor of "incentive alignment," insisting that others must benefit as well. Veteran TV producer Tom Forman ("Extreme Makeover: Home Edition"), who joined with Kavanaugh two years ago to form RealityReal, the company's fast-growing TV division, says: "He doesn't want to close a deal unless it makes everybody happy. Even when we are in a position to squeeze a producer, he knows that will become someone we don't want to work with."

Michael Joe, now president of Relativity, was on the other side of the desk, negotiating for Universal in January 2009, when Kavanaugh closed another deal, the acquisition of Rogue Pictures. Universal president Ron Meyer says Rogue wasn't for sale until Kavanaugh came calling, when the studio decided the deal would deepen a valued relationship, as well as bring it money. (Universal continues to release the Rogue movies and distribute its 20-film library.)

"Ryan was looking for a library and a company, and frankly, we had assets that at the time made strategic sense for us to sell," Meyer says. "It turned out to be mutually beneficial."

What Universal didn't envision was that Kavanaugh would take Rogue well beyond movies, turning it into a lifestyle brand with a robust Internet presence and a growing line of products, including a whole new series of fashion and clothing items.

"When we launched IAmRogue.com, the idea was to give our audience a place [where] they could connect with our movies, talent and directors," Kavanaugh says. "We wanted them to get invested in our movies early on."

"Ryan is constantly reinventing, challenging us, but not in a negative way," Relativity president of production Tucker Tooley says. "He's challenging all of us to think outside the box. That's what he does on a daily basis. He finds new and innovative ways to do deals and address creative problems. That's the inspired thinking of the company."

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