Throughout his career, Kevin Spacey has shown an appetite for taking big risks — both on an off the screen.
The 56-year old who grew up in the San Fernando Valley turned a small-time hood with a limp and a suburban dad in the thrall of a high school cheerleader into unlikely anti-heroes in “The Usual Suspects” and “American Beauty.” Then he leveraged those Oscar-winning successes into a production company called Trigger Street that mixed digital experiments with prestige fare such as “The Social Network” before leaving Hollywood for London, where he spent a decade revitalizing the Old Vic theater.
But Spacey’s latest bold move has left many in Hollywood puzzled. The actor and his producing partner Dana Brunetti stunned the entertainment industry when news leaked out on Wednesday that that the pair had reached an agreement to sell Trigger Street to Relativity Media and to assume control of the bankrupt film and TV studio.
“They’re fearless, they’re tenacious, and they’re optimists,” said producer Michael De Luca, who is teaming with Brunetti on the “Fifty Shades of Grey” film series and with Spacey and Brunetti on “The Social Network” and “Captain Phillips.”
In the case of Relativity, Spacey will need to summon all of his powers of persuasion to get top talent to work with the beleagured studio. Founded by entrepreneur Ryan Kavanaugh in 2004 with the idea of applying algorithms to eliminate the volatility of the movie business and to better determine what films would hit and which would flop, something went fundamentally wrong with both the math and the company’s business plan. Weighed down by failures such as “The Best of Me” and “Out of the Furnace,” the company filed for Chapter 11 protection last summer, citing liabilities of $1.2 billion and assets of $560 million.
Though Kavanaugh and his new partners hailed the move to hire Spacey and Brunetti as a new day for the embattled studio, the fact remains that the company has a long road to travel before it puts its financial collapse firmly in the rearview mirror. It’s tough to run a studio, even in the best of times, and Relativity will re-emerge with its reputation dented from allegations of fraud leveled at it by one upset investor and a lot of ill will stemming from unpaid bills and unrealized promises.
An additional step toward cementing the new relationship with the dynamic duo will likely come in bankruptcy court. Two lawyers who have been active in the case said that any transactions that are not part of the “ordinary course of business” for a bankrupt firm must be approved by the U.S. judge overseeing the case. Though no objections have been raised, the move is likely to increase calls from creditors to receive additional information about how the change will affect Kavanaugh’s ownership stake in the new company.
That’s to say nothing of the financing hurdles Relativity still faces. It’s likely that Kavanaugh will use the presence of two respected industry veterans to persuade investors that Relativity is a safe bet. Helping him make the case is that the studio’s debt load will be dramatically reduced when it exits Chapter 11, presumably in February.
But production, promotion and distribution of an ambitious film slate will require millions of dollars in working capital as well as hiring top executives to help market and release the movies. In effect, Spacey and Brunetti will be charged with the difficult task of rebuilding a studio that has ground to a virtual standstill, as Kavanaugh slogged through bankruptcy and searched for new investors.
Kavanaugh’s plan suggests he will find $100 million in new equity investment and secure loans totaling $250 million more. Those goals remain very much a work in progress, with many skeptics remaining. A source familiar with the company said recently that Kavanaugh had to find a “unicorn” — the rare individual willing to overlook past performance and make a new bet on his company.
“Maybe it raises the profile of the company in the creative community,” said media analyst Hal Vogel. “But the company is not in creative distress as much as it is in financial distress.”
Vogel and others pointed out that there are precedents for turning to A-list talent to help rescue a studio on the ropes. In 2006, United Artists tapped Tom Cruise and his producing partner Paula Wagner to run the studio, giving them an ownership stake with the hopes that the “Mission:Impossible” star would be able to use the company to launch box office smashes. Their tenure was brief and unsuccessful, lasting roughly two years and producing films like “Lions for “Lambs” and “Valkyrie” that were commercial flame-outs.
There are striking similarities between Relativity’s new deal with Spacey and Brunetti and United Artists’s deal with Cruise/Wagner — one strong parallel being the financial straits that Relativity is in compared to those suffered by United Artists’s parent MGM at the time. Making and selling movies require huge capital investments.
The progression of performers like Spacey from the silver screen to the boardroom has a long history in Hollywood and stems from a natural impulse.
“The test of power in any business is whether you can become an owner,” said Jason Squire, a professor at USC’s School of Cinematic Arts.
The track record of amassing that kind of control is checkered. United Artists traces it origins back to 1919 when top talent such as D. W. Griffith, Charlie Chaplin, Mary Pickford and Douglas Fairbanks banded together to form their own studio. Their experiment was replicated by First Artists, a production company that brought together the likes of Barbra Streisand and Paul Newman, and DreamWorks, which was launched by Steven Spielberg, David Geffen, and Jeffrey Katzenberg with ambitions of being the next major Hollywood powerhouse before scaling down considerably.
By taking over Relativity, Spacey and Brunetti will move from hawking projects to buying them, armed with the power of the greenlight, experiencing the perils and profits that are intertwined that responsibility.
Great ambitions aside, success in these matters is usually only reserved for the people with the smartest business plan. In a statement accompanying news of the purchase, Brunetti predicted the studio could carve out a niche for itself. “While other studios are focusing on tentpoles and franchises, there is a void with an eager audience for films that are character driven with great storytelling that can be made at a reasonable budget,” he said.
That strategy isn’t unique to Relativity, however. Even as the company sunk into the financial morass, new studios such as STX Entertainment and Broad Green Pictures emerged, with deep pockets and designs on capturing the adult audience that is turned off by superhero movies and big screen versions of toy lines. It’s too early to tell if these players will succeed, but this fall was a particularly brutal period for films aimed at adult audiences, with pictures like “Steve Jobs,” “The Walk” and “Burnt” collapsing despite receiving solid reviews and having big stars attached to them.
Then there are questions about how hands-on Spacey will be in his new role as studio chairman. His work on the Netflix series “House of Cards” could take him away for several months, and those absences could stretch longer if he still wants to shoot movies and appear on stage. Likewise, Brunetti, who is being tapped to serve as president, has yet to resolve whether or not he will remain with the lucrative “Fifty Shades of Grey” franchise. Two sequels to the erotic drama go before cameras this year.
Despite the surprise that greeted the news, filmmakers who have worked with Spacey and Brunetti believe the two have the skills necessary to identify films that are artistically adventurous while having mainstream appeal.
“Dana and Kevin are the perfect producers because they have exquisite taste in material and excellent instincts about how to develop it and turn it into a movie,” said Billy Ray, the writer of “Captain Phillips.” “Significantly, they don’t feel ‘Hollywoodish’ at all. They’re just problem solvers.”
And Spacey has had experience turning a failing enterprise around. When he took over the Old Vic in 2003, the theater was in a perilous financial situation and lacked the creative cred of its West End brethren such as the National and the Donmar Warehouse. He faced skeptics too. Many in the tight-knit London theater scene viewed him as a Hollywood carpetbagger, and Spacey struggled initially to find his footing. His initial plays, such as an obscure Dutch drama entitled “Cloaca,” were not warmly received, and it was only after he began to raid the canon to revive works by Mamet and Shakespeare while offering up new initiatives designed to appeal to younger audience members that he was able to strike the right balance.
“He rescued a theater that was in deep trouble and might have been sold off,” said Michael Billington, a drama critic for the Guardian.
Beyond the demands of putting together a winning slate of theatrical productions, Spacey, who credits Bill Clinton as being a close friend, proved to be particularly adept at managing the political end of the job.
“He was enormously respected,” said Billington. “He became a very prominent figure on the London theater scene. He was always at all the major events. Like Judi Dench or Kenneth Branagh, he became part of the British theatrical establishment.”
The experience at Old Vic shows that Spacey has a willingness to take chances and the flexibility to shake up his approach on the fly. Those are important qualities in running any business, though at Relativity or any studio, for that matter, there may be a much smaller margin for error than there was overseeing a theater.
“At a smaller studio, capital is always a concern,” said De Luca, who urged Brunetti to take the Relativity job. “You are living and dying by each movie release. You have to make smart decisions, luck into a few hits in that first year and maybe create a low-budget franchise. Building a company is a high-wire act.”
Time to see if Brunetti and Spacey can maintain their balance.