Relativity's Ryan Kavanaugh: No IPO yet
CEO tells Communacopia the firm's focus is on film profitsNEW YORK -- Privately held companies rarely get invited to speak at media and entertainment investor conferences -- unless maybe organizers feel they have made enough headlines and have an unusual perspective on the business.
That explains why Relativity Media CEO Ryan Kavanaugh made an appearance here Thursday on the closing day of the 19th annual Goldman Sachs Communacopia conference, according to a source. Among the news that has had the company in the headlines so far this year, Relativity acquired Overture Films from Liberty Media/Starz and struck a deal with Netflix that allows the latter to stream Relativity movies in the traditional pay TV window.
Like several other executive appearances at the Goldman gathering, Kavanaugh's session and following conversations with investors were off-limits to the press, but The Hollywood Reporter spoke to people who were present to piece together some of the points Kavanaugh made.
First of all, he was not there to announce an IPO -- something Wall Street observers have wondered about ever since Bloomberg this summer asked Kavanaugh if Relativity may list on the stock market, and he replied that could be an option down the line. "Down the road, we'll be looking at several options, one of which could be a public offering," Bloomberg quoted him as saying in July.
However, Relativity doesn't have any immediate plans to go public, Kavanaugh signaled at the Goldman conference on Thursday, according to sources. One Wall Street observer suggested that the Relativity boss' appearance may be good practice in case the firm does do an IPO later but added that the company can take as much or little time as it wants while it further builds a track record. The IPO market has been weak anyway in recent years due to the recession and financial crisis, meaning that waiting a bit will show whether the market can truly improve, that person added.
Changing business models for entertainment companies in the digital age were a key focus at the Goldman conference all week, and Kavanaugh on Thursday shared his approach to the business and tried to explain Relativity's place in Hollywood, according to sources.
One of the key messages from Kavanaugh to the Goldman crowd was that Relativity focuses on film profits over the traditional metric of box-office revenue. For example, Kavanaugh said that he doesn't care much where a film release ranks in the weekend box-office chart as long as it makes money, sources said.
And he highlighted that films that may not usually make a profit can do so as long as the deals behind them are structured smartly. For example, if foreign presales and output deals along with production tax credits cover 75% or more of a film's cost, even a weak performer can bring in a profit.
Kavanaugh also expressed hope that the structure of talent deals for films will continue to move away from upfront participations and the like so that they don't undermine films' ability to make a profit.