Medavoy Rises Atop Phoenix

Nearly two years after ankling the chairmanship of TriStar Pictures, Mike Medavoy has announced his return to Sony Pictures Entertainment with the formation of the aptly named Phoenix Pictures.

The production company, which Medavoy says has access to between $500 million and $600 million over the next few years, plans to produce eight pictures a year by 1998. Sources say the company has about $50 million in equity investment.

Medavoy and Arnold W. Messer said Phoenix will be a fully independent, creatively autonomous firm owned by its management and its principal investors, including SPE, Britain’s Pearson Television, Onex Corp., which specializes in distributing airline food, and two individual U.S. investors, who declined to be identified. According to insiders, the main principals will be putting up about $15 million each.

Medavoy will be chairman and CEO; Messer will become prexy and chief operating officer over a staff of 20 to 30 execs.

Medavoy said he will have full greenlight power for his pics, with the exception of big-budget projects that would be subject to approval by the Phoenix board of directors.

Messer likened the firm to a record label in the way Phoenix would work with Sony to release its product.

like record biz

“We think the movie business will go where the record business has already gone,” he says. “Labels have autonomy. They use larger systems for distribution. At Warner Bros., Morgan Creek and New Regency are similar to that.”

Medavoy and Messer were reluctant to break down the investor percentages or exact figures. It was equally unclear how much of that $500 million will be available at any one time with only $50 million in equity financing. But the pair insisted that the available financing- including separate output and distribution deals with companies such as Sony, Pearson, France’s Canal Plus and CBS, as well as a revolving credit line from Chemical Bank – will total more than $500 million.

“We could make $500 million worth of movies based on our own creative initiatives, ” Medavoy says.

Pearson invests $15 mil

Pearson TV, which includes the group’s TV production, distribution and broadcasting interests, will invest $15 million in Phoenix, for a stake of between 15% and 20%. In return, Pearson will get U.K. TV rights to all Phoenix features.

“It will be a learning experience, a relatively cheap, low-risk look at the film business, ” a Pearson TV spokesman says.” The view is that if you’re in the TV business, movie land is not far away, and it would be daft not to look at it.”

Pearson will invest a further $5 million over the next three years for a 50% stake in Phoenix TV, a joint venture to produce TV movies, to which Pearson will own the international rights. Pearson will not provide additional production finance for those telepics, which will be funded by Phoenix itself, partly through its U.S. output deal with CBS. The Pearson agreement showed faith in Medavoy and Messer to create a viable production company. Sources say MGM/UA had approached Pearson to back a planned management buyout bid of the Credit Lyonnais-owned studio, but the British media group rejected the invitation, opting for Phoenix instead as its entryway into Hollywood’s film business.

Medavoy said Phoenix will start production on four of its own pics in 1996, jumping to six by 1997 and eight by 1998. Budgets are expected to be in the $25 million range, he said.

The company also will have access to development lists of Columbia and TriStar, similar to the way Peter Guber’s Mandalay Entertainment has become involved with several pics at TriStar.

Sources said Phoenix is bartering for flat-out investments in Columbia’s “Larry Flynt, ” starring Woody Harrelson and directed by Milos Forman, as well as TriStar’s “The Mirror Has Two Faces, ” directed by and starring Barbra Streisand. Medavoy and Messer declined to confirm that scenario.

Medavoy did note that Phoenix has 15 pics currently in development.

Under the terms of the deal with SPE, Sony will distribute all Phoenix theatrical and homevideo product worldwide, except for in Japan.

Phoenix also has established:

* A domestic network TV licensing agreement with CBS.

* A distrib pact with Canal Plus for continental European TV rights to Phoenix Films. Canal Plus will provide 15% of the budgets on 20 pics to come from Phoenix.

* An insurance arrangement through international film insurers C.E. Heath Pic.

Phoenix will make separate deals for theatrical distribution in Japan, which will be a hybrid of pre-sale and low-fee distrib arrangements.

The Canal Plus deal will allow the French entertainment firm to control the Euro TV rights for 15 years. The contract calls for the pics from Phoenix to be budgeted in the $15 million to $30 million range, though Canal Plus will have an option to hook itself to projects outside that price range. For Sony, the overall arrangement will help fill a hole created by the departure of Castle Rock Entertainment in 1997.

Fred Bernstein, prexy of the Columbia TriStar Motion Picture Cos., called the pact “an efficient financial structure that enables us to augment our feature film releases schedules with quality motion pictures.”

Medavoy worked at Sony from 1990 to 1994 as chairman of TriStar, but he left after disputes with then chairman Guber. Before that, he was a partner and co-founder of Orion Pictures and a senior exec of United Artists Corp. from 1974 to 1978.

During his 20-year career, he has been associated with about 300 films, including commercial hits “One Flew Over the Cuckoo’s Nest, ” “Amadeus, ” “Platoon, ” “Rocky, ” “Annie Hall, ” “Silence of the Lambs, ” “Dances With Wolves, ” “Bull Durham, ” “Apocalypse Now, ” “Robocop” and “Philadelphia.”

Messer directed international theatrical and TV homevid businesses for SPE’s predecessor company, spearheading Columbia Pictures Entertainment’s TV operations and licensing of filmed entertainment product. Before that, he held several management positions at TriStar dating to the company’s formation in 1982.

Britain-based Pearson has international interests in TV production, distrib and broadcasting. It also owns Penguin Books, Mindscape, the Financial Times of London and Madame Tussaud’s Wax Museum. Onex is a $7 billion corporation that owns such U.S. companies as Sky Chefs Inc., Caterair Intl. Inc., ProSource Distribution Services and Dura Automotive Systems.

– Michael Williams in Paris and Adam Dawtrey in London contributed to this report.

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