Stand-alone studio still a success

As stand-alone studios fall like cards this year — first MGM, then Miramax and now possibly DreamWorks, which may be purchased by NBC Universal in a deal that could happen as soon as September — Regency Enterprises is suddenly looking like the last man standing.

But the company, which has risen in value from $1.2 billion to $3 billion in about a decade, is doing anything but standing still.

Goosed by the boffo perf of “Mr. & Mrs. Smith” (which, despite claims that action didn’t work this summer, has grossed $375 million worldwide and is on track to make $500 million), the company is looking to boost its slate of about nine movies a year to 12. Included in that growth will be more big-budget pics a la “Smith.” Regency fully financed that $110 million pic.

Part of the rationale to take more risks is that at 25 years old, Regency is starting to see substantial returns from its 100-title library and its TV division. Regency TV has six shows on the air, two of which — “Malcolm in the Middle” and “The Bernie Mac Show” — are in syndication. Those two alone generate $180 million annually.

This is good news for a company whose film division had a lackluster 2004, characterized by pics like “First Daughter” and “The Girl Next Door.”

Regency also is broadening its sights beyond film. Next week, Regency founder Arnon Milchan is meeting with execs from News Corp. — including chief operating officer Peter Chernin — and Daimler-Chrysler about a co-venture.

News Corp.’s Fox owns a 20% stake in Regency and distributes the company’s pics worldwide. (Fox also co-finances a third to half of Regency pics annually.) Australian media mogul Kerry Packer has a 25% stake, leaving Milchan with 55%.

Regency TV is 50-50 owned by Fox TV and Regency. Although the company has a good, if not amazing, track record in development, Regency recently struck out with the CBS laffer “Listen Up,” starring “Seinfeld” alum Jason Alexander. (Skein was a co-production with CBS.)

On the plus side, Regency kept dramedy “Windfall” alive, setting up the show at NBC after Fox passed. And “Living With Fran” was renewed on the WB.

Regency’s deal at Fox expires in 2012, but News Corp. chief Rupert Murdoch may want to increase his stake before then, particularly considering that Fox’s two biggest summer hits — “Mr. & Mrs. Smith” and “Star Wars: Episode III — Revenge of the Sith” — weren’t financed by the studio, so Fox will receive only distribution fees.

On Tuesday night, Murdoch and Milchan were seen huddled at Spago.

Regency was previously based at Warner Bros., though the studio had no equity stake in the company.

Of the upcoming talks with Daimler-Chrysler, Milchan said he is looking “to increase our bargaining chips by associating ourselves with bigger groups outside the box.”

Although details of the deal have yet to be hammered out, the idea is for the three companies to work together to create lines of products and rebrand Daimler-Chrysler properties such as Jeep, Mercedes and Dodge.

Milchan has experience in this field. A decade ago, Regency paid more than $60 million for a 12.5% stake in Puma, the German sporting goods company. That eventually grew to a 42% stake, which Milchan cashed out in 2003 for $676 million.

Regency teamed with Fox Sports Net and Fox Kids programming block to market and promote Puma goods. Then, in1998, Milchan, an avid tennis player, paid $120 million in a nine-year deal for worldwide TV rights to the Women’s Tennis Assn. tour. That same year, Serena Williams signed a five-year deal with Puma.

That deal looks to be worth $200 million by 2007, since Regency and the WTA sold off rights to Eurosport, a pan-European sports channel, and News Corp. satellite net Sky TV.

Milchan said he’s looking for the same kind of synergy in the Daimler-Chrysler deal.

“It’s not about product placement,” he said, though he admitted that Mercedes-Benz cars and other Daimler-Chrysler products will likely make their way into Regency films and TV shows.

“It’s about coming up with new products and repositioning the perception of old products. We have people here who already had the experience with Puma. We’re very geared as a company to work with a brand.”

The Daimler-Chrysler talks come on the heels of another out-of-the-box deal among Regency, Yahoo! and newly formed Fox Interactive to create product exclusively for the Internet.

Milchan said that on top of having a strategic partner like Fox — which comes to the bargaining table on every deal due to its equity share in Regency — investing in a range of industries has been the key to Regency’s success, and is partly why the company has managed to survive in an era when stand-alone movie companies have become an endangered species.

Beyond bigger players such as MGM and Miramax, even more modest co-financing shingles such as Mutual Film and Bel-Air have folded in recent years.

With 150 employees, Regency also has relatively low overhead.

“Movies alone are a terrible business,” Milchan said. “TV alone is a terrible business. Movies and TV is a better combination. TV, movies and a brand is an even better business — along with small overhead, a very comfortable financial cushion and strategic partners.”

To this end, Regency recently bought a 25% stake in Israel’s Channel 10.

But mostly, Regency is about movies. The company’s library now boasts 100 titles, including “L.A. Confidential,” “J.F.K.” and “Free Willy.” Many of the titles are co-owned by Fox and Warners.

With the success of “Mr. & Mrs. Smith,” Regency’s biggest bet to date, the company is looking for other big-budget projects. Milchan said there are two or three about to be greenlit.

“Our strategy is to step up into bigger movies,” Milchan added. “We have a library of 100 ‘locomotives’ that is now starting to generate a lot of income for the company. We realize we need to live up to the past. But to live up to the past, we need to be a little more than the past.”

(Josef Adalian contributed to this report.)

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