Whither the Weinsteins?
Tight credit, few hits put pressure on 3-year-old companyAs far as Harvey Weinstein is concerned, he and his brother Bob have been battling naysayers for 25 years. They proved their critics wrong more than once during their long run at Miramax. But nearly three years since they set up shop under the banner of the Weinstein Co., they face a rising chorus of skeptics.
Like everyone else in the indie film sector, the Weinsteins face a tightening credit market and a glut of films that have made scoring a hit ever harder.
Insisted one Wall Street observer, "They are running relatively low on capital right now," though he quickly added that "their house is getting in order." Pointing to a precipitous drop in the stock of Genius Products — TWC has a 70% stake in Genius' home video company — Merriman Curhan Ford & Co. analyst Eric Wold said, "What's impacted the Genius stock since last November, when it started a freefall from $2.50 down to 20 cents a share, has been fear about the Weinsteins' financial situation."
"Nonsense" is Harvey Weinstein's rebuttal. If the company is under such financial pressure, how has it managed to ready a string of big-budget pictures, not to mention shepherding a new season of "Project Runway" onto the air, he said. "We're well financed, and every one of these new productions has been budgeted out," he said.
Trumpeting TWC's freshly inked pay TV deal with Showtime, Weinstein termed it "a game-changer." Finally, the fledgling multimedia company could claim it's got its building blocks in place: As its theatrical distribution deal with MGM draws to a close, it says it will begin releasing all its films itself; it now has a pay TV deal, home video distribution through Genius and Blockbuster, and free and pay TV deals throughout Europe.
"It took us two and a half years to build an infrastructure," Weinstein said. Added Bob, "It was a harder load than we thought it would be."
Since setting up their privately held company in 2005 with $490 million in equity and a $500 million debt facility, the Weinsteins haven't reached the same heights they enjoyed at Miramax. Boxoffice high points like 2006's "Scary Movie 4" and 2007's "1408" lacked the cultural sizzle and awards validation of "Pulp Fiction" or "Shakespeare in Love."
But while their theatrical track record has been decidedly mixed, the Weinsteins say they've been busy building a 600-title library and tending to those ancillaries. "The press only see the theatrical side of the business," Harvey said. "But you folks don't see a movie like 'The Reef,' selling three or four hundred thousand DVDs and doing big business at Blockbuster."
The Weinsteins are currently embarking on several deals where they've taken on partners, limiting their financial exposure.
They have found one ally in Ryan Kavanaugh's Relativity Media, which has taken a 25% stake in the all-star $80 million adaptation of the Broadway musical "Nine," and could well invest in further pics.
TWC also is looking for a studio to share the costs of producing Quentin Tarantino's World War II tale "Inglorious Bastards" in exchange for foreign rights.
Saying that it's just coincidental that the two high-profile films are designed as co-productions, Harvey added that "70%-80% of our slate has no partnerships."
TWC also has stepped away from a string of film acquisitions.
"Outlander," a $30 million sci-fi fantasy starring Jim Caviezel that has spent more than a year in post, is quietly being shopped to other distributors; "Virgin Territory," one of three films whose domestic release TWC was handling for producers Dino and Martha De Laurentiis and Weinstein Co. investor Tarak Ben Ammar, is going straight to video through Starz' Anchor Bay Entertainment.
Although not addressing those films specifically, Harvey Weinstein said, "We don't believe in spending the P&A on a movie that's just not going to work."
In fact, the Weinstein Co. has created a new distribution label, Third Rail Releasing, to handle films like the recent Catherine Zeta-Jones vehicle "Death Defying Acts," acquired primarily for the home video market and given just a token theatrical release. "We should have had Third Rail two years ago, because it's a good way of differentiating between what we really believe in, and what has been for ancillary value," Harvey said. ("Acts" grossed the deathly sum of just $5,665 at two theaters stateside.)
Ancillary value is also a reason the Weinsteins took a 70% stake in Genius, enabling them to distribute their DVDs for less than what it would have cost to pay a distribution fee to a major. "This has been a home run from the get-go," Bob Weinstein said. "No matter what their stock — Genius' price could be a penny — it wouldn't matter."
As for the Showtime deal, TWC's willingness to pay an advance fee of as much as $100 million against future payments from Showtime could be construed as a Hail Mary pass on the part of both TWC and Showtime. (TWC disputes that figure, but citing a confidentiality agreement, did not offer a counter-number.)
The Weinstein Co. needed an output deal; Showtime needed movies now that former suppliers Paramount, MGM and Lionsgate have banded together to set up their own pay cable service. But Harvey Weinstein said, "There are real incentives in the Showtime deal for us to produce more."
Still, even as TWC resolves its distribution issues, challenges remain.
One of the company's most consistently profitable areas has been international sales, but that division's president, Glen Basner, is departing once his contract expires this month. Production president Michael Cole will be leaving within a few months; his likely replacements are less experienced senior vps Kelly Carmichael and Eric Robinson. And exec VP business and legal affairs Eric Roth, whose contract extension just expired, is expected to leave as well.
According to the Weinsteins, though, the 240-strong staff isn't short on executive talent.
Earlier this year, Lee Solomon, an experienced hand at film financing, joined as its COO to run its day-to-day operations with an eye to making the business more efficient and controlling costs. Former New Line exec David Spiegelman has joined TWC as president of domestic TV distribution, while John Miller, previously with MTV, has come aboard as exec vp to develop programming as TWC ramps up TV operations.
With TWC's operations settling into place, could this then be the year Harvey Weinstein stages a major return to the Oscar battleground?
Several titles pose that possibility, among them Woody Allen's romantic comedy "Vicky Cristina Barcelona," which drew warm applause at Cannes, and Dimension's "The Road," starring Viggo Mortensen. Two others, however, may not be completed in time: Mikael Hafstrom's "Shanghai," starring John Cusack, from the Weinstein Co. Asian Film Fund, and Stephen Daldry's "The Reader," starring Kate Winslet.
"We'll just have to go ahead and do what we do," said Harvey Weinstein, "so we will be in the race."
Georg Szalai contributed to this report.