How 'Hugo's' Massive Losses Are Straining Producer Graham King's Partnerships

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Martin Scorsese tables a planned collaboration amid questions about King’s financial backer and staff departures.

This story originally appeared in the May 4 issue of The Hollywood Reporter.

Martin Scorsese’s Hugo might have earned the most Oscar nominations this year (11, winning five), but that did not bump the box office nearly enough to cover its considerable cost.

Having topped out at $181 million worldwide, the film — which reportedly cost $180 million to produce — is said to have inflicted a staggering loss on Graham King’s GK Films and, according to sources, has led to strain between the prolific British film producer and two of his longtime professional partners.

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King, 50, has been a producer on Scorsese films for a decade, but a source connected to both men says that in the wake of Hugo, “Graham feels unappreciated, and Marty believes that he should not have any budget issues and should not have to be grateful to anybody.” This well-placed source says the strain explains why Scorsese is not moving forward — as he said he would in December — on Silence, his adaptation of Shusaku Endo’s novel about two Jesuit priests in 17th century Japan. King owns the rights. Instead, Scorsese next will direct Red Granite’s Wolf of Wall Street, starring Leonardo DiCaprio.

Asked about the relationship, Scorsese said in a statement to THR: “Since the late ’90s, I’ve had a great working relationship with Graham. I’m very proud of the films we’ve worked on together, including Gangs of New York, The Aviator, The Departed and Hugo. I look forward to working with him again in the future, and I’ll always consider him a friend.”

Says GK’s spokesperson: “King continues to enjoy collaborating with Scorsese. Scorsese is currently focused on Wolf of Wall Street. When he completes that project, King will regroup with him to try to get together.”

Industry sources estimate that Hugo, distributed by Paramount but fully financed by GK Films, inflicted a loss north of $80 million. Combined with other recent GK projects that have disappointed — such as The Rum Diary with Johnny Depp and Angelina Jolie’s In the Land of Blood and Honey — the number goes up significantly.

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Sources in the finance community believe the red ink has caused King’s backer, 61-year-old oil billionaire Tim Headington, to re-evaluate his commitment to the partnership. (Certainly the departure in early April of some key GK Films executives, including COO Bahman Naraghi and creative executive Grey Rembert, suggests King might be trimming costs.) All in, Headington “has to have taken about a $200 million to $250 million hit last year,” estimates a veteran independent film executive. “He’ll get some of it back, but no matter how rich you are, that’s a lot of cash.”

A Headington spokesman says only that the oilman will remain involved with King’s company, though he declined to elaborate on the degree. “Our intent and certainly our desire is to stay connected with GK Films in a meaningful way,” he says. Meanwhile, GK’s rep says the company and its 20 employees are on track to launch three films in 2012: Little White Corvette, with Emma Stone attached; an untitled Freddie Mercury project; and a big-screen version of Jersey Boys.