Image makers


It was the kind of news that sent shudders through the independent film business. Less than two years after financier Henry Winterstern took over First Look Studios with a brash new vision to transform the low-key distributor into a mini-major, the company was in trouble. Press reports at the beginning of 2007 were full of stories that First Look was buckling under the weight of $50 million in losses and that Winterstern was about to head out the door.

Just when First Look had seemed poised to enter the big leagues, it was now questionable in what shape the company would continue.

Nobody was more surprised by this turn of events than the executives at Nu Image, which First Look had been in talks to buy for a whopping $200 million only weeks before. The deal would have enabled Nu Image's executive team -- Avi Lerner, Trevor Short and Danny Dimbort -- to merge their 224-title library with First Look's own, and they had been planning to stay on with the new venture for a minimum of three years after the buyout.

But rather than sit back and watch the deal collapse, the executives sprang into action. Within weeks, they had raised enough money to buy First Look, and before insiders had even processed the fact that the first incarnation of First Look/Nu Image was dead, a second incarnation Nu Image/First Look came into being.

It was precisely the kind of move that could transform Nu Image from a solid performer into a major player on the domestic movie scene.

"Nu Image has never had a domestic distribution line at all; we have had to sell to the studios or anybody else," Short says. "The rationale for (First Look) acquiring us was the same rationale for us acquiring them -- there was a great deal of synergy between the people and the different things the businesses do. On one hand, you have a production entity that produces cheaply and efficiently and is very good in foreign sales (in Nu Image); and on the other, you have a distribution platform that is capable of releasing movies on television and theatrically (in First Look)."

For 15 years, the executives at Nu Image have worked to build a strong reputation making modest or midbudget movies and selling them at a profit -- pictures ranging from 1996's "Cyborg Cop III" to 2006's "The Black Dahlia." In the decade and a half since they teamed to form their production and sales company, moving from their initial base in South Africa to Los Angeles, they have become veterans of the markets and maestros at mastering the economics of independent filmmaking, each bringing his own unique experience to the boardroom.

As a longtime sales agent, Dimbort was unrivaled even in a harshly competitive field; as a financial, legal and administrative guru, Short had proved his worth during an impressive banking career in South Africa; and as a one-time drive-in theater owner-turned-producer, Lerner had shown he was second to none in choosing projects, then bringing them in at a fraction of the cost to a studio.

"What has allowed this to work is a complete lack of ego," says Short, who holds the title chief financial officer, with Lerner and Dimbort as co-chairmen. "That has allowed us to get along as people, and it has allowed us to succeed in this business, where egos tend to be a very destructive factor sometimes."

Lerner's own career in the movies started almost by accident. An Israeli whose strong accent still gets fondly parodied by those who work with him, Lerner, like Short, began his career in finance.

"I was working for Israeli Discount Bank, consulting to companies on how to invest in the stock exchange," he recalls. "Then one day, I went to South Africa, and while I was there, I met my wife. Her father used to have a drive-in. And when I came back to Israel, I decided to build the same drive-in."

Lerner immersed himself in the business -- he even functioned briefly as his father-in-law's projectionist while in South Africa -- getting to know the nuts and bolts of how the industry worked. In 1971, he turned Tel Aviv's first drive-in into a success, then quickly expanded, moving from one theater to a whole chain. At the same time, he effectively cornered the Israeli home video market, obtaining rights to 7,000 pictures for the territory. These businesses, in turn, led him into other aspects of moviemaking, including the creation of a distribution company, Seven Stars.

"When you have cinemas, you want a distribution company to supply the cinemas with movies," he explains. "Then once we had the distribution company, I needed product and decided to start to look into making movies."

At first, Lerner stuck to making ultralow-budget fare in Israel, pictures shot in Hebrew that cost a mere $200,000-$300,000. Soon, realizing that Hebrew-language movies had limited upside, he decided to make films in English instead.

Lerner's success brought him to the attention of Israel's best-known moviemakers in the 1970s and '80s: Yoram Globus and Menachem Golan, founders of the Cannon Group. They bought Lerner's cinema chain and hired him to manage their London-based theaters. He soon expanded into international production, and in 1984, Lerner returned to South Africa to make the Richard Chamberlain starrer "King Solomon's Mines."

"At that time," he recalls, "Cannon was looking for help to finance movies, and I knew a few people in South Africa and went there and to Zimbabwe and raised the money and managed to produce (the film)."

It was while putting "Mines" together that Lerner met Short, newly hired by the Hill Samuel Merchant Bank, where he helped finance the movie. Within a few years, the Zimbabwe-born Short had left banking in order to join the 30-theater chain run by Lerner and Dimbort, a fellow Israeli whom Lerner had met in his early drive-in days -- when Dimbort was the Israel representative for United International Pictures, the heavyweight distributor that handled several major studios' releases abroad.

Together, the three men transformed the operation into a 160-screen theater chain, production entity and video business that was the biggest entertainment company in South Africa. Nu Metro, as the company was called, also ended up controlling two-thirds of the country's video market, and between 1986-92 it made about 70 pictures. At the height of their success in 1992, mega corporation CNA Gallo offered to buy the partners out of the company.

"They gave us a huge offer," Lerner remembers. "I couldn't understand how they could come up with such a big number, though now I do. It was a lot of money."

Lerner and his colleagues accepted. It was the end of their run at Nu Metro as well as the end of their time in South Africa. But it also was the beginning of a whole new venture, the company they named Nu Image.

Relocating to Los Angeles, Lerner, Dimbort and Short started out simply with one picture they financed themselves: "Lethal Ninja" was made for less than $1 million and proved enormously profitable. The film's success allowed Nu Image to first double, then quadruple its output until the company reached its present level of about 15-20 movies per year -- an amount rivaled only by the major studios.

"Our idea is simple," Lerner says. "There are about five or six markets every year, and we want to come to every market with at least one or two new productions. That is how we came up with 15 pictures. Obviously, we are trying to go there with new product; that is what drives our buyers -- they see we are constantly giving them product and constantly giving them commercial pictures."

When video was creating a huge demand for product and when TV stations worldwide were clamoring for films to air, these pictures were largely low-budget actioners such as 1983's "Manimal" and 1999's "Shark Attack." But Lerner, Dimbort and Short were prescient in recognizing a shift in the market. As video peaked, higher-quality, star-driven material became the principal attraction, and the market for B titles waned. It was this fact that led the partners to create a new production entity that would make a classier kind of movie: Millennium Films.

"In 1996, we decided to bring up the level of production," Lerner says. "So, we decided to have two labels: one that would make the action films -- what the market called B movies, and what we called the commercial movies -- and Millennium was a label that would bring a bigger level of movie but still commercial movies."

Since then, Millennium has spawned a slew of titles of the star-heavy sort that now dominate the company's market appearances, 2006's "16 Blocks," "Black Dahlia" and "The Wicker Man" among them. Such pictures often are made for far less than they would cost in the U.S. thanks to a studio operation Nu Image has set up in Sofia, Bulgaria, where it also has established the special effects company World Wide FX.

"At the beginning, we used to make movies for $1 million or $2 million; now, we are making them for $30 million, $40 million, $50 million," Lerner says. "Obviously, we upgraded the quality."

Lerner never has pretended to make anything but commercial material; even the company's artier fare tends to be done with an eye very much on the bottom line. But there have been one or two genuine exceptions to this, proof that he still has a love of film that brings to mind some of the old Hollywood moguls he occasionally resembles.

"From time to time in Millennium, we would do a certain kind of product that really is not very commercial," he acknowledges, citing 2001's Holocaust drama "The Grey Zone."
"That was a movie we did because Danny and I felt it was something we needed to tell, a story that happened in the Holocaust. We lost money on it -- one of the few we lost money on."

Now, the question is: Will Nu Image lose money on First Look? Lerner himself seems bemused that he took on such a huge challenge, one that came about almost by accident.
"I met (Winterstern), and he proposed to buy us," Lerner recalls. "He was going to get control of Nu Image and merge the (two companies) and get 100% of our library. All of us agreed to stay with the company for at least three years and help him run it, making productions for First Look and helping on sales. That was in November. But they couldn't put it together with the bank."

Not long after the deal failed to come together, the hedge fund backing First Look inquired as to whether Lerner would be interested in purchasing that company should it arrange the financing, and he agreed -- though none of the parties involved will disclose the details of the transaction.

"We saw the potential of merging the best production company in Hollywood -- our own -- and the best foreign sales company in Hollywood -- our own -- with the potential of First Look for theatrical distribution in the U.S. and a solid video company," Lerner says.

The Nu Image partners now own 52% of First Look and have an option to buy another 10%. They are presently learning just what they have and how to make it work. When interviewed for this report, both Short and Lerner were shuttling back and forth between the First Look offices and their own.

Their first task, Short says, is "to manage the company differently. First Look is a series of acquisitions -- they have purchased a bunch of libraries and companies and meshed them together; there needs to be a significant consolidation of the business now, getting it to be more efficient on a day-to-day level. That is (priority) No. 1. No. 2, we have to ask, 'How do we exploit that library?' We are going to exploit it in foreign and also whatever is left domestically."

Despite the size of the joint venture's new library, however, this was a secondary factor in the deal, Short says. "The library is great, but if you are going to build a business, you need new product. That's why they needed us."

Nu Image, of course, needed the domestic distribution operation First Look afforded.
In the immediate future, Nu Image and First Look will remain separate companies, with Nu Image handling First Look's sales. Toward that end, the partners have shuttered First Look's own sales operation.

They also are looking to raise $150 million-$300 million in funding for prints and advertising so that First Look can handle studio-size releases, which at present it can't.

Eventually, Lerner says, "We will bring the two companies under the same (roof). The idea is to create some kind of mini-studio, some kind of mini-major, which will have the same capacity as a studio to make the movie, sell it in foreign markets and theaters and also to video and to TV. So, we can do everything in-house."

It is the logical next step for Nu Image, a step that might give rivals real cause for concern. "The studios have been cutting back on the number of pictures," Lerner says. "And that gives us a good opportunity to come and fill up the hole."   

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