The story behind Overture chiefs' exits
Sale process, funding cut frustrated McGurk, RosettThe resignation of Overture Films founders Chris McGurk and Danny Rosett late last week isn't just about the difficulties facing indie movie distributors: It's a direct result of a dramatically changed vision and turnover in management for all the Starz entertainment properties controlled by Liberty Media.
After Liberty/Starz put the film company up for sale, McGurk and Rosett had spent the past six months looking for buyers to acquire Overture and three other properties -- Anchor Bay Films, Film Roman and Starz Animation of Toronto -- under the Starz Media banner.
The asking price: $225 million plus assumption of $100 million in debt. There have been three bids for Starz Media since April, but Liberty has made no decision about whether to accept one of those offers, sell the companies individually or merge Starz Media back into Starz Entertainment, which operates 16 pay channels. Starz Entertainment itself is being split off as part of a larger reorganization by Liberty Media put in place last month.
As funding for Overture was cut, the sale process became a frustration for McGurk and Rosett, who had made commitments to filmmakers for three movies. All three were planned for a fall release: Philip Seymour Hoffman's directing debut "Jack Goes Boating," which was to get a limited opening, and two projects aimed for wider release -- the horror movie "Let Me In" and the Robert De Niro thriller "Stone."
To release in the fall, Overture needed to begin making commitments, so last month McGurk and Rosett took their case to Chris Albrecht, the former HBO executive who is now CEO of Starz. They asked for some $50 million to market the movies; Albrecht turned them down.
That didn't sit well with McGurk and Rosett. Their five-year contracts signed in 2006 not only cover employment through 2011 but also guarantee Overture a degree of autonomy and funds to distribute movies. In the November 2006 press release heralding the deal, then Starz CEO Robert Clasen promised Overture would have "creative autonomy" to distribute up to a dozen movies a year, with 60% of those original in-house productions. Clasen since has been replaced by Albrecht.
So when Albrecht declined to put up the release money, Starz was in technical breach of their contacts. As a result, though McGurk and Rosett resigned, they are in line for a settlement.
The two left the Overture offices immediately after they resigned and now wait not only for a contract settlement but also for a sale, so they can see if the buyer wants them to return and manage Overture again.
For now, Overture is being run by Peter Adee, who previously headed marketing and distribution. The fate of the three movies and 70 remaining employees in Beverly Hills remain unclear. Adee and Anchor Bay president Bill Clark, who previously reported to McGurk, now report to Albrecht.
Although Overture has only a 16-film library, it has an operational distribution company -- which in the past year has had success distributing other producers' movies, most notably "Law Abiding Citizen," Overture's top performer ever ( $73 million gross); "Righteous Kill" ($40 million); "The Crazies" ($39 million); and "The Men Who Stare at Goats" ($32 million). Its most recent release was "Brooklyn's Finest" in March, which grossed a modest $30 million.
Overture also comes with Starz pay TV slots, which makes it valuable to other indie producers.
In addition, Anchor Bay -- which has performed fairly well during a down DVD market by selling niche product such as exercise, children's and genre movies -- has a 2,500 title library and has had success with recent platform theatrical releases, most notably "City Island," which has grossed $6.1 million.
There also is value in Film Roman, which has three Marvel series in production, and Starz Animation, which showed last year what it could do when the CGI science fiction movie "9" grossed $42 million.
When Starz launched Overture and acquired IDT (Anchor Bay and the animation companies) in a deal worth $460 million in May 2006, it had different goals. The marketplace and economy were much different. The business plan counted on robust DVD sales (through Anchor Bay) and foreign presales to lessen risk. Making movies itself was seen as a hedge for Starz at a time its renewal of output deals with Sony and Disney was not a sure thing. Those deals were renewed this year.
When the economic crisis hit in 2008, DVD sales drooped and the foreign film presales all but dried up, meaning Overture's business plan was toast. Overture also had a hard time marketing its movies, in particular stumbling with Michael Moore's "Capitalism A Love Story," a controversial movie whose politics and poor performance both apparently offended Liberty chairman John Malone.
Almost a year ago, Overture was forced to stop investing in original movies and function solely as a distributor of acquisitions and as a rent-a-distributor for other producers. Although that produced some profits, since the sale process heated up, even that activity has been shut down.