Agencies go on treasure hunt

Can’t find the money to make your movie? Call your agent.

It’s a strategy that worked for Tom Cruise and Paula Wagner, who announced last week that they would take over United Artists in a deal brokered by CAA.

If nothing else, UA’s new ownership lays to rest the idea that agency film financing means hustling presales for vanity pics. Film funding is now a cottage industry, one that has agencies pushing the Lew Wasserman mandate the separates soliciting work from creating employment.

Of course, agencies still can’t produce movies; that would violate California’s Talent Agency Act, which forbids agencies from splitting profits with employers.

However, studios are trimming production funds for everything that isn’t a tentpole and talent still needs to work. If studios won’t put up the scratch, agencies say they will rally the funds themselves.

That was the case when Endeavor put financier Media Rights Capital into “Bruno,” Sacha Baron Cohen’s follow-up to “Borat.” With no script, MRC expected Endeavor’s Ari Emanuel and Modi Wiczyk to shop it at this week’s AFM with Cohen in tow.

Instead, the project inspired a four-studio bidding war, with Universal paying $42.5 million to license the film in English-speaking territories for 15 years.

“Bruno” was a best-case scenario for this new wave of agency-generated film finance. If MRC put up any money for “Bruno,” its capital was at risk for only a few days. In return, MRC gets a windfall; Endeavor gets a fee for putting MRC into the deal; and Endeavor client Cohen gets creative control, a superstar salary and 15% of the gross. And after 15 years, he owns the film.

This tidy ending also has rivals saying MRC is perceived as the agency’s financing arm. MRC is funded primarily by Wiczyk’s Harvard classmate, Asif Satchu; the MRC-Endeavor partnership also worked to finance “Babel” and a “Sleuth” remake, among other projects.

ICM has also been alive and well in this arena. Suhail Rizvi and Merrill Lynch’s Newbridge Film Capital provided financing for ICM’s recent recapitalization and its acquisition of Broder Webb Chervin Silbermann; the gap fund has also invested in ICM-generated packages such as the Charlize Theron vehicle “Ferris Wheel” and “Death Defying Acts” starring Catherine Zeta-Jones and Guy Pearce, which ICM put together with WMA.

The agencies say these funds aren’t exclusive to them and that they invest in other agencies’ packages. However, a rival financier says the MRC arrangement makes him skeptical of Endeavor-generated projects, presuming they’ve been rejected by MRC by the time he sees them.

Endeavor denies this, arguing that its MRC relationship is no different than those with David Bergstein’s Capitol Films or Hakuhodo DY Media Partners, the ad agency that bought Japanese rights to the upcoming Michael Moore docu “Sicko.”

Nonetheless, mid-budget film financing is now a core element of every major agency’s business. Aside from commissioning clients put to work in those films, agencies get paid by the moneymen. Some receive monthly five-figure consulting fees. Others take packaging fees that can reach 1%-3% of a film’s budget. And if an agency sells distribution rights, the commission is 5%-10%.

This may not represent the most effective distribution of production wealth; money that goes through so many hands creates fees that might not exist on studio-financed films. At this point, however, it doesn’t seem to bother studios or talent. Execs are happy to fill out slates with star-driven films that don’t deplete their production budgets. And while talent often works for lower upfront fees, it gets a much better cut of DVD revenues than the 20 cents on the dollar offered by studios.

“Artists are becoming much more open to working on indies because they are winning Oscars and actually making money,” says Hal Sadoff, a former investment banker who now runs ICM’s international and independent film department. “It’s natural for the representatives of that talent to be more involved in making those movies happen.”

However, SAG is steering clear of this cheerleading squad. Last month, when SAG’s national board unanimously appointed Doug Allen as its executive director, he promised that hammering out a new agency franchise agreement would be a high priority.

More than 100 agencies repped through the Assn. of Talent Agents have operated without SAG oversight since April 2002, when SAG members voted down a revamp of the franchise agreement. Opponents contend that the provision allowing agencies to own 20% of production companies (and vice versa) represent an unacceptable conflict of interest.

Meanwhile, the agencies are keeping busy.

CAA helped Bill Pohlad make a name for his River Road banner by covering 75% of the budget for “Brokeback Mountain” in return for 50% of worldwide revenues. The film brought Pohlad credibility and what sources say is as much as $50 million in profit.

Pohlad has since financed the upcoming “Fur” and “Into the Wild,” the Alaskan adventure film now being directed by CAA client Sean Penn. It also consults for a roster of moneymen who have been steered into films such as “Hostel,” “Michael Clayton” and “Charlie Wilson’s War.”

UTA client Steven Rales, board chairman of Craftsman Tools parent Danaher Corp., is backing Wes Anderson’s new film, “Darjeeling Limited,” as well as the untitled directing debut of “American Beauty” scribe Alan Ball. The agency also found an equity financier for “Synecdoche, N.Y.,” the directing debut of Oscar-winning scribe Charlie Kaufman. Those filmmakers are all repped by the agency.

“We’re finding that our highest-level filmmaker clients really want to have the widest range of options for making their films,” says Rich Klubek, who runs the department with Jeremy Barber. “In some cases, they’re most comfortable with studio financing. In other cases, they are now eager to explore the alternatives, for creative and financial reasons.”

The magic doesn’t always work. WMA Independent, run by Cassian Elwes and Rena Ronson, says it puts together as many as 25 films a year. They also arranged a partnership with financier Bob Yari in 2003 to create El Camino Pictures. Three years and seven tepid pictures later, El Camino has fallen apart, partly because of agency clashes with Yari.

Yari continues to make pictures; so does WMA. It is lining up a backer to create another picture financing partnership.

(Dave McNary contributed to this report.)

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