Deep-pocketed financiers shoulder risk on studios' prestige projects
The winners have taken home their Oscars, but the party is still going for some of those involved.
Studios these days don’t make Oscar movies. They may co-finance and distribute them, but few “prestige” pics get made without a handful of mavericks. Fed up with the conglom mindset about what constitutes a good film, these people are willing to put their own money on the line.
Independent financiers took anywhere from 50% to 100% of the risk on some of the year’s biggest pics.
The big winner is Philip Anschutz. As the sole backer of “Ray,” he will get the bulk of the pic’s $102 million worldwide B.O. and ancillaries. It’s already sold 6 million DVD units.
“Million Dollar Baby” hasn’t finished its international rollout, but this year’s best picture was already showing several million in profit for Lakeshore Etnertainment and its chairman, Tom Rosenberg, before it was released.
Graham King, whose Initial Entertainment Group had the biggest stake of the group, will break even with “The Aviator.”
Andrew Lloyd Webber (“The Phantom of the Opera”) have seen minimal returns so far, but expects big bucks from ancillaries. In addition, he’s finding hidden benefits: Since the release of the film, the legit “Phantom” has seen B.O. jump by hundreds of thousands of dollars.
Film gambling is not all success stories. Michael Kuhn wrote checks for “Stage Beauty,” “Kinsey” and “I Heart Huckabee’s,” none of which caught fire at the B.O.; the prophetically titled “Wondrous Oblivion” wasn’t even released in the U.S.
But for those who stand in the winner’s circle, it’s a combination of gold and glory.
“Million Dollar Baby”
Rosenberg put up half the budget when Warners balked at fronting the full amount.
“We take risk,” Rosenberg says. “That’s what we do. It usually turns out well.”
That’s more than the Oscar talking. In the last 15 years, he produced or exec produced more than 30 titles; some were disasters and almost all were far from sure bets. “Baby” reps Lakeshore’s first Oscar win.
“I went slowly,” he says. “Many people who come from the outside, they don’t want to take the time.”
Rosenberg and others on the “Baby” team put the budget at $30 million; observers say thay can’t believe that it cost any more than $18 million. In any case, Warners split the budget 50-50 with Lakeshore in exchange for domestic rights. That turned out to be a great deal for the studio: Pic has earned $65 million to date and is expected to gross north of $100 million domestically — in the first few days after it won best pic on Feb. 27, the box office showed a 54% jump from the week before.
It will take longer for Lakeshore’s investment to pay off. “Million Dollar Baby” has earned $26 million to date in foreign territories, with Japan, France, Germany, Korea and Hong Kong still to go. However, the pic’s performance in the UK, Austalia and Spain suggest Lakeshore will see overages – and ultimately, profits between $5 million – $10 million.
Graham King, via his Initial Entertainment Group, grew close to Martin Scorsese and Leonardo DiCaprio while making “Gangs of New York.” They proposed “Aviator,” which was IEG’s kind of project. While King earned a full producing credit on the pic, he had to cover a $3 million shortfall out of his own pocket. Sources say he’s already been repaid, but it’s an experience he’d rather not repeat.
Miramax Films and Warners handled domestic distribution; Initial handled foreign sales. Final numbers have yet to roll in; “Aviator” hasn’t opened in Japan or Russia. The film likely won’t lose money for King, but it won’t make much, either.
Warners and Miramax can expect to make a few bucks after all the ancillary windows have been exhausted, but the film won’t contribute significantly to their bottom lines.
“Aviator” could wind up being the last film IEG finances under its current structure. King has spent the last few months talking with studios about setting up a production deal that would tap into his talent relationships with Johnny Depp, DiCaprio and Nicole Kidman. And, most of all, it would allow King to become a producer — the job he likes best — and give him a graceful exit from full-time work in the foreign sales business.
“Andrew Lloyd Webber’s The Phantom of the Opera”
Andrew Lloyd Webber financed virtually all of the musical, because if he didn’t do it, no one would. Back in 1990, it stalled in pre-production at Warner Bros. Pictures and became mired in development.
A few years ago, the composer’s Really Useful Picture Co. had to make a deal with Warners to buy it back; the original contract had no rights reversion clause and Warners spent $5 million in development.
Really Useful managing director Austin Shaw made another deal in which Warners agreed to handle the pic’s domestic distribution and P&A. However, that commitment covered less than 10% of the pic’s $80 million budget.
“We financed the film largely out of international,” Shaw says. “We were lucky. We pre-sold it in virtually all countries.” They also were able to take advantage of a U.K. tax scheme.
Several million also had to come out of Really Useful’s wallet.
“Phantom” is expected to gross more than $160 million worldwide and foreign sales shingle Odyssey Films likely will collect overages out of Japan, where the pic is still No. 1 after five weeks. However, Shaw doesn’t expect Really Useful to see a profit until the DVD release.
“Broadway and London (stage runs) have bumped up by a few hundred thousand pounds,” Shaw says. “And once we recoup, we expect to take the lion’s share of the profits.”
While “Phantom” is only a moderate success story, it’s good enough that Webber would like to do it again. Shaw is negotiating with Paramount Pictures to film the tuner “Sunset Boulevard.” And, once again, Lloyd Webber will hoist virtually all of the risk.
Even after six Oscar nominations and two wins (including actor Jamie Foxx), “Ray” still sounds like an act of madness.
Phil Anschutz’s Crusader Entertainment developed the Ray Charles biopic internally and fully backed its production with a $42 million budget. Louisiana’s tax incentive brought the budget to a net of $37 million, but Anschutz was the project’s sole investor.
“It was an incredibly courageous, ballsy move,” says “Ray” producer Howard Baldwin. “Everyone kept saying, ‘You sure this isn’t an HBO movie?’ ”
Even after director Taylor Hackford locked the pic, every studio turned it down except Universal. “They were the ones who believed in it,” Baldwin says.
However, according to sources, U agreed to a straight distribution deal. The studio did cover P&A and made an investment in the film in exchange for points.
“Ray” won’t see much of an Oscar bump, since it has all but completed its run. But Universal released the DVD Feb. 1 and it’s shipped nearly 6 million copies to date.
Crusader won’t see a profit. Baldwin ankled as chairman-CEO in January to take a production deal at the company, which Anschutz restructured and renamed Bristol Bay Entertainment.
“This movie will be profitable for everybody,” say Baldwin, whose Baldwin Entertainment Group now has a first-look at Paramount Pictures. “If it’s not, it’s like the weapons of mass destruction — you’ve got to send someone to look for the money.”