With “Poseidon” capsizing at the U.S. box office, the honeymoon cruise is over for Virtual Studios, the private equity fund that split the pricey production budget 50-50 with Warner Bros. Pictures.
The first apparent casualty: Virtual Studios topper Benjamin Waisbren, who is leaving at the end of the month after less than six months at the post.
Stark Investments, the Wisconsin-based hedge fund behind Virtual, denied through a source that Waisbren’s exit has anything to do with “Poseidon.” Rather, Stark and Waisbren couldn’t see eye to eye on the “pace” of investing, meaning that Waisbren likely wanted to move faster than Stark would have liked.
Disappointing performance of Warners’ first summer tentpole could serve as a bellwether for the parade of private equity firms coming to Hollywood in recent months and inking co-financing deals with all the majors. “Poseidon” is the first of these films to underperform to such a degree — causing plenty of buzz on Wall Street on Monday.
One Wall Street banker said Waisbren’s exit is certainly noteworthy. Waisbren worked at Stark Investments before taking the Virtual gig.
“He had a six-picture deal with Warners, and Virtual is only two pictures in,” the banker said.
Warners is doing the most business by far with these funds, with nearly every pic on its slate this year co-financed by Virtual, Legendary Pictures or longtime partner Village Roadshow. It means the studio can make more movies and mitigate its risk.
Virtual, along with the other funds, argues that one disappointment doesn’t hurt it because it’s investing in a slate of films that will show a steady return over time. But “Poseidon” is surely giving pause both in Hollywood and on Wall Street.
Remake, directed by Wolfgang Petersen, cost upward of $150 million-$160 million. It came in second behind “Mission: Impossible III” over the weekend, grossing only $22.2 million, according to numbers upwardly revised on Monday.
Warners and Virtual say they certainly aren’t giving up yet, pointing out that “Poseidon” has yet to bow in many foreign territories and that it did better than expected in the Asian countries where it did play. There are also ancillary revs down the road, such as DVD sales.
In recent days, Warners execs knew from tracking that the tentpole was in trouble.
Some Wall Streeters said Stark Investments grew disturbed as the buzz over “Poseidon” turned gloomy.
Waisbren introduced Stark Investments to Hollywood and, specifically, to Relativity Media’s Ryan Kavanaugh, who has served as the middleman between the studios and nearly all the new co-financing funds, save for Warners-based Legendary Pictures.
Virtual Studios was formed, inking a $528 million, six-pic deal with Warners. The first film, “V for Vendetta,” cost at least $60 million, grossing almost $130 million worldwide. Waisbren has an exec producing credit on both “V” and “Poseidon.”
The other four movies are George Clooney starrer “The Good German,” “300,” “Blood Diamond” and “The Assassination of Jesse James.”
One rumor making the rounds Monday on Wall Street and in Hollywood was that Virtual would be pulling out of its deal with Warners; both the studio and Virtual denied it. Some insiders suggest Virtual is already looking to co-finance additional Warners movies beyond the original six.
Wall Streeters said Virtual may be more exposed than the other funds by co-financing such a small slate.
Kavanaugh said Virtual Studios isn’t worried about its deal with Warners.
“Studios have been in business a long, long time. They are never happy when a tentpole movie doesn’t perform, but at the end of the day, they have a shot of breaking even, through foreign and DVD sales, among other revenues,” Kavanaugh said. “The hedge funds are just like the studios. They have a slate mentality.”
It’s not clear whether Stark Investments will replace Waisbren at Virtual Studios.