Relativity, EuropaCorp Form Joint Venture to Release U.S. Movies

Courtesy of Relativity Media

UPDATED: Europa is paying $130 million to create an unusual partnership that will release its movies through Relativity’s marketing and distribution operations, and expects to release up to eight movies a year.

Relativity Media has entered into an unusual deal with EuropaCorp. to put its U.S. marketing and distribution operations into a joint venture that will release movies from both companies.

In return, EuropaCorp will pay Relativity about $130 million over the next six years for 50 percent of the venture.

Each company will be able to use the service to distribute its own movies, and both companies will seek opportunities of produce, co-produce and co-finance movies together. Each company will pay for the cost of its movies and receive profits from its movies. 

Relativity is releasing the Europa movie 3 Days To Kill this weekend but that film is not part of the deal. Relativity will also release Europa's Brick Mansions later this year. The first movie under the joint venture is expected to come out in the U.S. at the end of this year.

When it is fully operational, Europa expects to release as many as eight movies a year, while Relativity is looking to release 10 to 15 movies a year. Relativity is on pace to release about nine movies this year and expects to release about 12 movies next year. 

The joint venture is being overseen by Relativity president Tucker Tooley and Europa CEO Christophe Lambert.

EuropaCorp, based in Paris, was founded by producer and director Luc Besson, who owns more than 40 percent of the equity in the publicly traded entity. Lambert owns 10 percent of the equity in EuropaCorp. 

"In partnership with EuropaCorp, we will be able to more fully utilize the strength of our distribution and marketing abilities, even as we continue to expand our own film production," said Relativity CEO Ryan Kavanaugh. "Together we share a vision focused on producing enthralling content in a profitable fashion."

"We didn't want our business to fundamentally change, but we wanted an entree to new opportunities and we wanted to maximize our distribution and marketing platform and really grow that side of the business," said Tooley. This will now happen a lot faster than it would have otherwise."

In 2010, Relativity acquired the distribution operations of Overture Films from Starz, and has since built that to handle a dozen or more movies a year. The vision now is that will increase to 20 movies a year or more. 

Lambert said: "We are delighted to create this joint venture with Relativity, having already experienced the team’s expertise and deep knowledge of the U.S. market. This strategic partnership is a major step forward for EuropaCorp that allows us to fully control our distribution in the U.S. and maximize the visibility for our films."

Lambert said that EuropaCorp has wanted to expand its production but was hampered because it did not have guaranteed U.S. distribution. Europa has held talks with other potential partners in recent months. It has movies coming out in the months ahead from Fox and Universal, but after that will do domestic releases through the joint venture.

"We now will fully control our distribution," Lambert said, "so we will be able to exploit 100 percent of our production capacity."

Lambert said EuropaCorp will have at least five movies in production this year. He said they have the capacity to finance and produce up to about eight English-language movies a year for international markets with budgets typically ranging from $30 million to $60 million each. 

The joint venture does not include the company's current international sales agreements and does not cover licensing, merchandising or home video, where both Relativity and EuropaCorp have separate deals with Fox for physical distribution. The joint venture will have a role in the marketing of the movies in home video.