Relativity chief sez biz needs to look beyond theatrical in judging pic performance

Box office is no longer the single-most important factor in determining a film’s overall success, Relativity Media topper Ryan Kavanaugh told Variety’s Future of Film summit Tuesday.

“When studios were first created in the 1920s and ’30s, all you had was box office,” Kavanaugh said. “All you had to report on, and all you had to judge on was the box office. The practical reality is — box office is 20% of the pie and it’s somewhat irrelevant.”

Kavanaugh, who spoke to Variety’s Peter Caranicas in the keynote address at the confab held at Hollywood and Highland, pointed to a lack of transparency in the film financing world. Noting the decline in home video revenue, the economy, and the new models of film financing, Kavanaugh said that bizzers need to look beyond the box office to really gauge a film’s performance.

“It’s hard to say this without insulting the press a little bit,” Kavanaugh said cautiously, “but there’s a whole new world today of studios, ourselves being one of them, that look to cover most of our risk before we hit domestic box.”

Tax incentives and output deals — the latter of which Kavanaugh says Relativity has in all but three countries — help mitigate that risk.

Relativity tries to have three-quarters of a film’s risk covered before it goes into production, he said.

Kavanaugh also noted that paying creative talent scale — as opposed to gross participation — can help a lot. He noted that was the tack Relativity took with helmer Steven Soderbergh on the upcoming pic “Haywire.”

“Our motto from day one was always that the idea of gross participation don’t make sense,” Kavanaugh said. “And the reason they don’t make sense is that you’re basically saying, ‘Even if I lose money I’m going to pay you a bonus.’ And there’s really no other business that we could find that does that.”

Finances aside, Kavanaugh noted that sometimes one of the biggest challenges is making a film that will appeal to auds, even if it’s not in sync with his own taste.

“One of the hardest things, being involved with a film company, is you’re not always making a film for yourself,” he said.

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