Ryan Kavanaugh's secret to success

How the 'Holy Grail' helped build his Relativity Media empire

Ryan Kavanaugh's theory of Relativity

In a little more than five years, Ryan Kavanaugh has become a major player in the movie business -- and in the past two years, also in TV. Surrounded by the memorabilia, framed photos, collections, toys, posters and proclamations that fill his West Hollywood office, Kavanaugh recently spoke with The Hollywood Reporter's Alex Ben Block.

The Hollywood Reporter: You're like Houdini to much of Hollywood. Why do so many people think you either have some secret formula or it's all a trick?

Ryan Kavanaugh: It's funny. Because there's so many people that love to talk s*** about me. At first it used to really bother me. Like, why these rumors? There is always some "rumor of the month." People are like, "Why don't you just show everyone your business plan and numbers? And then nobody will talk s***." Why do I want to tell everybody what I'm going to do so that people go, "That's cool, I'm going to do it, too"?

THR: No aspect of your business is more discussed than the database you use to evaluate movies.

Kavanaugh: The studios have been around for 100 years; clearly they've made money. But nobody had access to the Holy Grail of Hollywood, which is its film data. Nobody knew what film profitability looked like. When we first started doing [movie financing], I didn't want to just do one-offs. I realized there was this real need by the studios for capital. I knew how to structure these things so that they made sense for the banks, because there is a way to make money in Hollywood. I started learning about this information and began to understand what film accounting looked like. I saw it because of Marvel [for which Kavanaugh raised money]. Most of the guys who ran studios were friends or investors. They had all been purchased by big, fiscally conservative corporations and were starting to face crunches; and the German tax market was drying up. So I went to all these guys and said, "You're going to need a lot of money and there is only one place to get it: Wall Street. I've already shown effectively that they will play, with Marvel. But the only way I can do that is to have pure access to your data. We got data from virtually every studio.

THR: So you built your own database?

Kavanaugh: Yes. It's a massive amount of data. It takes four guys to run it on every movie. We have more film data than anyone in this business. And information is power.

THR: Power also comes from your international sales deals. Is it true that many fell into place when New Line stopped being an independent?

Kavanaugh: We were lucky. That happened at a time when we had proven we could be a consistent supplier of good, studio-quality movies. We had done "3:10 to Yuma," "The Bank Job," "The Forbidden Kingdom" and others. We had built up a really nice slate of studio-sized, quality movies. Then New Line became part of Warner Bros. and all of a sudden all these output deals they had, in 20 countries I think, were available. Even more importantly, New Line had been the largest supplier of content to all these other territories that didn't have output deals. When they moved out, we were there to fill the void. So we have output deals in 110 countries now, about five times more than anybody ever.

THR: Not many people know that you have gotten very big in television in a short time.

Kavanaugh: We'd been looking and thinking about television for five years. Our business model really is to find the inefficiencies in media and try and fix them and make money on it. We were exploring TV and looking at co-financing models and sales models and co-financing slate models. When the economy collapsed, we started to see a lot of changes in both cable and network TV, where they really started pulling back. It was similar to when studios were facing budget constraints, which allowed us to bring in capital. We recognized they would have less advertising, so they would have less to spend, which means they have to go for cheaper programming. Cheaper programming is generally reality programming. In the past, an individual or group would come up with an idea, sell it to a network or cabler, then go to another individual to produce. We thought they did it backwards. There is no one place where this is all consolidated, where they can come and say, "I want to get quality reality television done at a price, developed, produced, made and linked to advertisers." So we built up and bought five or six different reality production companies and overnight became one of the biggest. We have 30 shows now in pilot or series, everywhere from Bravo to MTV to ABC.

THR: Tom Forman, who runs your TVā€ˆdivision Relativity Real, seems to have tremendous autonomy. His offices are physically separate from yours.

Kavanaugh: It is less about me managing him and more about, how can I help him? We might make a movie and then it would become a great show. How do we put the two together?

THR: You acquired movie rights to Nicholas Sparks' novel "Safe Haven" and began promoting the book way before the movie was made. Why?

Kavanaugh: We had done "Dear John," based on a book by Nicholas, and had a great experience. We made it for about $25 million and Screen Gems distributed, and it became the highest-grossing movie they ever had. Why did that movie connect so well? It's a good movie, obviously, but I wouldn't look at it and say, "Wow! We made an Oscar-worthy movie." What we realized is, there's this core audience that's just looking for great love stories, particularly about young people, and they are not being fulfilled. We sat and talked about what love stories had come out that were great, other than "Twilight," which really is a love story. We realized they were all Sparks movies: "Dear John," "The Notebook."

THR: So you were making it a brand.

Kavanaugh: That is it. It's all about the brand.

THR: Let's talk about your own brand. You've had some bad publicity because of the DUIs.

Kavanaugh: Yes. I was pulled over after having a few glasses of wine. I was not found guilty of a DUI, but driving with a .08. I can tell you this much, I will never get in a car again if I had so much as a Tynenol.

THR: Back to business: Will Relativity go public?

Kavanaugh: We are always looking at the best way to maximize value for the company in the future. An IPO is one potential route, as are many others; but no decision has been made, and [there's] no pending decision coming.

THR: You have many outside business interests, too, some of which involve your ex-girlfriends, which seems unusual.

Kavanaugh: That's true. Most of my ex-girlfriends are still close friends. I guess when you are with someone that long, unless they did something really terrible to you, you remain friends. My real estate business is run by my best friend, who is an ex-girlfriend. The girlfriend I had before my current girlfriend does a lot of production stuff with us.

THR: Does your future include marriage?

Kavanaugh: I have a great girlfriend, Britta Lazenga. But right now I'm building my business. I definitely do want a family. The idea of being a father and providing the type of love, guidance and support that my parents have given me is definitely down the road.

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