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It’s just their imagination

Imagine Films Entertainment renews life this week as a newly scaled-back development and moviemaking company that will be privately held by its founding fathers, Ron Howard and Brian Grazer.

In its new incarnation, Imagine is slashing its overhead by at least 50% and cutting personnel by two-thirds with the shuttering of its New York office and the elimination of its finance, business affairs and physical production divisions. Approximately 20 people will lose their jobs in the transition.

Imagine will look to its studio partner, Universal Pictures, to pick up the services it’s eliminating.

Imagine’s creative core on the development/production side will now consist of production prexy David Friendly, who just reupped for two more years, and his team of newly promoted exex: senior VP, production, Karen Kehela, production VP Michael Bostick and director of development Chris Harper.

Michael Rosenberg remains as Imagine’s senior VP of marketing, a post he’s held for the past five years. Rosenberg noted, “Brian and Ron have treated me like family from the day I joined them, involving me not only in marketing, but in all aspects of the company. I look forward to the time ahead.”

Executive VP Tova Laiter, who has worked at Imagine for 2 1/2 years, will be leaving the company, citing a desire to “move in another direction.” She will remain on board to usher in the March 12 release of “CB 4” (“Cell Block 4”) and the April 2 debut of “Cop and a Half,” both due out through Universal.

Another departing executive is production VP Devorah Moos, who may wind up playing a production role on one of Imagine’s forthcoming movies. She has been with the company since May 1989.

Howard’s and Grazers’ one-time plan to expand their 6-year-old, formerly publicly traded indie into a multibusiness operation have been supplanted by their desire to focus on what they believe they do best–making movies.

Since 1989, Imagine’s films, including such hits as “Parenthood, “”Kindergarten Cop,””Backdraft,””My Girl” and “Housesitter,” have amassed theatrical revenues of $ 1.2 billion worldwide. (see chart).

“It became a question of should we go ahead and maximize what we now know as filmmakers or should we try to learn how to run radio stations,” Howard mused as he and Grazer talked with Daily Variety on Wednesday–the day Imagine’s board approved the partner’s $ 9-a-share buyout offer for the company.

“We wanted to be able to spend more time making movies and as managers, the next step would have been to accrue and manage hard assets,” Howard said. “We learned … we don’t care about building a library.”

Grazer said Imagine will now have “all of the financial and creative assets, but it won’t have all the massive overhead that it once had and we won’t have all the distractions you have when you run a public company.”

The co-chief exec added, “We’ll be a bigger development company. Before we were an undercapitalized public company.”

As for what he sees for the new Imagine, he said, “We want to make the same amount of movies (four to five a year) in a smaller family environment–and of course we hope to make more money.”

According to Grazer and Howard, under their recently signed six-year financing/distribution deal with Universal, Imagine has been given a “substantial war chest” of development money to spend at their discretion.

The structure of their renegotiated deal with Universal essentially parallels Imagine’s former arrangement with the studio.

“We pitch the ideas to (Universal/MCA Motion Picture Group chairman) Tom Pollock and he either approves them or not as concepts Universal will make,” Grazer explained. “Once he approves them, we can make the movies. We have a budget number that is very liberal–it’s what mainstream studio pictures cost, the industry average (which, according to the latest MPAA figures, is $ 26.1 million).

“Up to that budget line, we have total (creative) control.”

If the movie exceeds the budget ceiling, as was the case with the $ 60 million “Far and Away,” then “it becomes a negotiation,” he noted.

Additionally, Howard has “put” movies up to $ 40 million on those projects he will direct. While he is free to accept directorial assignments from studios, Howard said, “My expectation is to do my next picture for Universal.” The director said his intention is to direct one picture every 18 months.

Howard noted that he is vigorously seeking a script to direct and is “looking for something that I can do a production polish on and go.” But, he added, “I don’t feel that way about any of the scripts” in Imagine’s development hopper, noting, “I think we have movies that are a production polish away from shooting, they are just not things that I think are right for me.”

Under Imagine’s previous production financing arrangements, Universal provided two-thirds of the film’s budgets, while Showtime (with which Imagine has an output deal) kicked in the other third.

Grazer explained that Universal will now finance virtually 100% of Imagine’s negative costs (as well as P&A), while Showtime, with whom Imagine’s deal runs another two years, has been reconfigured as “performance-oriented.”

Rather than giving Imagine a one-third advance of a film’s budget, Imagine’s back-end payment will be based on the success of a given picture.

As producers, Grazer said he and Howard will receive annual guaranteed salaries from Universal, plus a back-end percentage of the gross in all media, including theatrical, video and other ancillaries.

Under their former arrangements with Imagine, the producers drew yearly salaries of $ 1 million apiece. The partners’ financial compensation became the critical issue in Howard’s and Grazer’s decision to leave the company when their contracts expired last November.

In the last few years, Howard and Grazer said that they came to realize that their employment contracts with Imagine, which once seemed so reasonable, were now paying them far less than what they deemed their value to be, based on their movies’ success.

Another reason the partners gave for leaving was their reluctance to expand Imagine’s activities into other business ventures, as has been the case with some other independents.

“The first phase was to build a production company and learn how to do it and win at that,” said Howard.

The next step was “the contemplation of buying other assets,” Grazer added, noting, “We became hypercritical of the idea of using our money and personal energy and focus to be distracted onto something that could deplete all of the assets of phase one.”

Grazer and Howard said that with Imagine now being their private domain, they are anxious to concentrate solely on making movies.

“The one thing we learned is that our instincts have always been good and we’re getting better and better at being able to work on scripts and get movies that really work that we’re excited about,” Howard said.

Grazer said, “We want to focus on making movies that make money. That doesn’t mean we want to make cookie-cutter movies. … It all starts with how to make a movie that entertains an audience.”

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