Relativity's International Fallout: "You Always Knew There Were Issues"

Jan Thijs

While Hollywood plays up the drama of the studio's collapse, international partners are shrugging off the inevitable, claiming the town is "littered with the corpses of many such indies who have fallen with the same problems."

This story first appeared in the Aug. 14 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

While the bankruptcy of Ryan Kavanaugh's Relativity Media sent shock waves through Hollywood, its partners worldwide are taking the collapse in stride.

"I don't think anyone was surprised, anyone who has had any dealings with Relativity always knew they had cash-flow problems," says Helge Sasse, the former head of German distributor Senator, which had a three-year output deal with the studio. "Ryan was always incredibly good at finding creative ways to refinance, but you always knew there were issues."

As a result, even though distributors from Canada to China to Germany and Spain were eager to ink output deals with Relativity, they learned not to count on its titles. Of the 22 films promised under Senator's three-year deal, Sasse says only two were delivered. A rep for Spain's Tripictures, which recently re-upped its output deal with Relativity, says Kavanaugh and his team "have been great partners. But it won't affect us at all since we have many other partners and we will continue distributing films as we always have."

Similarly, Markus Zimmer of Tele Munchen Group, which this year picked up Relativity's slate for Germany, said the studio was only one of "several suppliers." Even France's EuropaCorp, which is headed by Luc Besson and has a U.S. distribution and film marketing joint venture with Relativity, says it won't be hurt by Chapter 11, since the joint company, RED, is not part of the bankruptcy filing. RED is set up so that Relativity and EuropaCorp independently distribute their films, with each covering costs for its slates.

It is not known what will happen to Relativity's Beijing-based film distribution and financing outfit, SkyLand Entertainment. It originally was launched as a joint venture between Relativity, IDG China Media Fund and SAIF Partners but subsequently became a subsidiary of Relativity, which was able to leverage a relationship with the government-run distributor Huaxia. Relativity releases in China have included Immortals and Mirror Mirror.

Just as big a question is whether the bankruptcy will cause buyers to shy away from production and financing groups — like the new STX Entertainment — that package and bankroll midbudget features. Many say the opposite likely is the case. Demand for Relativity-style mainstream fare that can compete with studio titles is still high, says Zimmer of TMG: "There aren't enough big, indie-financed films out there. The market for them isn't going away."

So Relativity's pain could be its competitors' gain. "Relativity had a specific problem in generating sufficient cash flows to service relatively too much debt," says Harold Vogel, CEO of Vogel Capital Management. "The history of Hollywood is littered with the corpses of many such indies who have fallen with the same problems."

comments powered by Disqus