Co. rounding up suitors as rift with Mouse House widens
NEW YORK — Miramax power duo Bob and Harvey Weinstein’s fractious negotiations to renew their contracts at Disney beyond 2005 have hit a Pixar-like impasse.
Should the two sides fail to extend their deal in the next few weeks, a private investor team — backed by financier Steven Rattner and Comcast CEO Brian Roberts along with several Wall Street lenders — is apparently prepared to back a new shingle for the Miramax founders.
Current talks to extend the Weinsteins’ deal for another four years after it expires in 2005 have no doubt been exacerbated by the current fracas surrounding Disney’s refusal to distribute the Michael Moore documentary “Fahrenheit 911.”
Disney this week apparently rejected Miramax’s proposal to buy Moore’s controversial film back for $6 million plus costs in order to find a new distributor.
Disney evidently preferred to keep any share of the upside with a third-party distributor. In the past, Miramax has been able to buy back similar “too-hot-to-handle” titles, as it did with “Kids” and “Dogma.”
Miramax meanwhile is prepping for a legal battle on the pic and has retained high-profile attorney David Boies in an effort to resolve the doc’s distribution fate. Case could go to arbitration in coming days.
But the stalemate with Disney CEO Michael Eisner over future terms for the Miramax team dates back long before the Moore controversy.
At the heart of the tussle with the Mouse House are differing philosophical views as to the right size and scope for Miramax: The unit’s budget, for example, is currently capped at $700 million a year, an amount Eisner apparently is looking to scale back but the Weinsteins would like to see at least maintained.
Disney brass last fall rejected a Miramax proposal to bring in $450 million in outside financing from Goldman Sachs (effectively setting up an equity fund with a revolving credit line) in a bid to both reduce Disney’s capital exposure to Miramax’s film slate while supplementing the company’s budget beyond the level Disney was willing to commit to.
If the two sides fail to agree, Miramax could theoretically try to buy back the company and its 500-title library from Disney (something Disney has repeatedly rejected) or indeed actively seek indie financing and distribution for future production.
People close to Miramax insist the Weinsteins are looking only for the same terms in a new deal that they have under the current arrangement. Disney made the terms an issue by trying to negotiate down key production terms and compensation.
Banking sources said Tuesday that the two brothers would have no trouble drumming up financing to support a new shingle.
Creatives would follow
Key to a new partnership’s ability to raise financing for a new Weinstein shop is the pair’s track record and the loyalty of regular filmmakers like Quentin Tarantino and Robert Rodriguez, who might be expected to follow.
Disney historically has minimized Miramax’s relative contribution to its film profits when guiding Wall Street securities analysts, but lending sources believe Miramax has been one of the most profitable of Disney film units over the past five to 10 years.
Miramax is believed to have generated a return of $5 billion out of $6.2 billion invested in its film slate, and last year, is believed to have generated as much as $200 million in profit to the Mouse. Bob Weinstein’s Dimension is thought to be the big cash cow, delivering 20% returns over the past eight years. Miramax overall currently supplies around 40% of Disney’s live-action releases.
“Bob and Harvey have done a great job, and they would be an asset to any company,” said Terry Semel, CEO of Yahoo! and former Warner Bros. topper.
“Surely if Joe Roth (at Revolution) can raise $1.5 billion from Wall Street, Harvey and Bob with their reputation should have no trouble. All they need is a distribution deal,” one film financier said.
Disney would certainly feel heat from Wall Street if it lost another key creative contributor after Pixar slammed the door on its negotiations.
Sources suggest the Weinstein brothers are willing to accept reduced salaries in exchange for more flexible production terms based on the success of released films and reduced Disney veto power (Mouse currently approves all projects over $30 million-$35 million).
An already embattled Eisner apparently has refused to budge so far, but like the Pixar negotiations, he could be in a no-win situation.
Wall Streeters say losing the creative contribution of the Miramax duo would be another headline blow to Disney’s stock, indicating again that the company was unable to come to terms with its creative contributors.
However, accepting a deal with Miramax that the Street perceives as overly generous could also smell foul to shareholders.