'The Fighter' provides inspiration for studio's plan

Much industry attention (not all of it positive) has been given to Ryan Kavanaugh’s fast rise as slate financier and producer. But his Relativity Media has a lesser-known strength that underpins its production operation — an extensive international biz.

That overseas reach is patterned on New Line Cinema, which subsisted for years on foreign output deals (most famously with “The Lord of the Rings” trilogy).

Relativity has adopted and adapted that model, with its upcoming David O. Russell-helmed boxing drama “The Fighter” as a case in point: Nearly all of the pic’s $25 million budget was covered by foreign presales, greatly mitigating Relativity’s risk domestically.

Relativity puts most of its titles through an unprecedented number of output deals covering almost the entire globe, dealing directly with foreign distribs. (Kavanaugh will be meeting-and-greeting with his overseas partners at the American Film Market, which gets under way in Santa Monica this week.)

Output pacts are slate deals of sorts, whereby foreign distribs put up a certain percentage of a film’s production cost. Relativity’s model calls for 75% of pic’s budget to be covered by coin from overseas (though “Fighter” was more).

Relativity’s output deals in 110 countries include every major territory except (so far) Japan, Germany, Spain and Italy. Distribs include such established companies as Momentum in the U.K., Alliance Films in Canada, Village Roadshow Pictures in Australia, MGN/Paradise in Russia, Gulf Film Trading Co. in the Middle East, Nordisk in Scandinavia, Aqua in Turkey and Imagem in Brazil.

Most North America-based companies with thriving international divisions, such as Summit Entertainment and Lionsgate, sell their films individually. But there’s a degree of security that comes with having ongoing output deals. As Relativity moves into the volatile world of domestic distribution, the company’s international footprint is a buffer that allows it to increase the number of movies it fully finances and produces.

The upside is a steady flow of money; the downside is that if a movie breaks out, the company might make less than if it had sold off the film individually to foreign distribs.

“The Fighter” is being handled overseas by Weinstein Co.’s international sales staff. And domestically, it’s being released by Paramount. Both those facts are unusual in Relativity’s game plan. But in general, the pic is a perfect example of Relativity’s longterm plans, says Kavanaugh. Kavanaugh adds that there could be other cases like “The Fighter” where it makes sense to use a foreign sales agent. “Skyline,” for instance, was sold overseas for Relativity by IM Global. And Lionsgate’s international sales arm has worked on a number of Relativity titles, including “Dear John,” “MacGruber” and the upcoming 3D pic “Immortals” and “Dark Fields,” among others.

But for the most part, the company will rely on its output deals, some of which Lionsgate assisted in closing.

Kavanaugh and Relativity prexy of production Tucker Tooley brought “The Fighter” back from near-death at Paramount. Working with star Mark Wahlberg and producers David Hoberman and Todd Lieberman — all of whom were with the project since its early days — Relativity inked deals with director Russell and actors Christian Bale, Amy Adams and Melissa Leo.

Everyone agreed to take a reduced fee, including Wahlberg, who trained as a boxer for several years. The drama’s projected budget was slashed from as much as $60 million at Par, when Brad Pitt was attached, to $25 million. Within two months, Russell was shooting on an accelerated schedule in Lowell, Mass.

Now that Relativity has its own domestic distribution operation, it won’t have to put out its films through other studios and pay a distribution fee, such as it did with “Dear John” and will have to do with “Fighter.” (Par had first rights to distribute the film, and will pay for marketing.) Relativity retains TV rights to “Fighter,” as well as to “Skyline.” Further, Relativity is overseeing “Skyline’s” domestic marketing and distribution by U.

Kavanaugh and Tooley say they have close working relationships with foreign distribs, and even share production and casting notes. They say they want to be attuned to what works in a particular territory.

“The problem with output deals in the past is that producers would often focus almost exclusively on domestic,” says Kavanaugh.

When Bob Shaye and Michael Lynne’s New Line ended its status as a standalone studio and was folded into Warner Bros., Relativity seized the opportunity. It took over New Line’s output deals, with chief operating officer Andrew Marcus a key player in negotiations. In some territories, the change sparked bidding wars between distribs, upping the terms for Relativity. (As with “Fighter,” sometimes Relativity uses a third-party sales agent to sell foreign. Upcoming pic “Skyline,” for instance, was sold by IM Global.)

“There was a certain amount of luck involved, plus we were coming off a great slate, including ‘The Bank Job,’?” says Kavanaugh.

Past Relativity titles traveling overseas also include “Brothers,” “3:10 to Yuma,” “A Perfect Getaway” and “The Last House on the Left.”

Top-grossing Relativity films overseas include “Forbidden Kingdom,” which cumed $75.9 million, and “Dear John,” which earned $35 million at the foreign B.O. “Dear John” cumed $80 million in the U.S. to become the highest grossing Screen Gems title of all time.

Kavanaugh says his company is attractive to companies overseas because it makes movies with stars and commercial storylines, such as “The Forbidden Kingdom,” “The Bank Job,” “Dear John.”

Tooley says Relativity has proven its production clout.

Hoberman, a former studio exec, and Lieberman say it was refreshing to work with Relativity on “The Fighter” after producing almost exclusively for the majors. “The movie got made at the exact level it should have been made at. We had to think of creative solutions to expensive problems,” Hoberman says.Adds Lieberman: “It was unconventional, and you couldn’t do this at a studio. Yes, they grinded us on the budget, at the same time, they largely left us alone to make the movie. Then, they were very closely involved throughout post-production.”

Lieberman and Hoberman are already pitching another project to Relativity.

After taking over Overture’s domestic distribution operation in July, Relativity will release 10 films over the next 10 or 12 months domestically and overseas, including Nicolas Cage-Ron Perlman starrer “Season of the Witch” and Bradley Cooper-Robert De Niro starrer “Dark Fields.” Other Relativity titles going overseas include “Skyline” and Mickey Rourke topliner “Immortals,” both of which will be released by Universal domestically.

Foreign distribs have become much more picky about what they want these days, especially in the wake of the economic downturn. But Kavanaugh says with the right product, the business is there.

That means the “The Fighter” will mark a crucial bout in Relativity’s ongoing battle to be a player, both internationally and overseas.

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