HOLLYWOOD — In just five years, business has grown so rapidly for the Imax Corp. that co-CEO Rich Gelfond is pinching himself.
When he and partner Brad Wechsler — both with long histories in investment banking and a business relationship forged in the ’80s while teamed at Drexel Burnham — took over what they affectionately call the “sleepy little company,” the plan was to spend about a quarter of their time on Imax and devote the rest to other acquisitions.
Known as the “flip guys,” the team was largely expected to quickly put Imax back on the block. But, Gelfond says , “it is safe to say that we fell in love with this company. What you get to do on a day-to-day basis is really fun. Seeing the vision come to reality is fun. And, we have a big challenge ahead.”
Wechsler, who handles the creative strategies and has a reputation for not losing money in the film business, says he was initially wary.
“In our experience when dealing with very small companies in the entertainment media business, such as Imax, you have to be very careful because the odds are much more likely that you will lose,” Wechsler says.
But three months after acquiring the company (as well as initial partner Doug Trumbull’s Ride Film corporation) in 1994 for $90 million, Gelfond and Wechsler took Imax public and beat the odds by raising approximately $20 million through the initial public offering, and, according to the Financial Post Magazine, boosted revenues by 1997 to over $158 million How did the partners, both voting members of the Academy of Motion Picture Arts & Sciences, manage such remarkable results in such a short time?
Wechsler, a former division CEO at HBO where he oversaw investments for TriStar’s launch and helped set up Silver Screen, targets several areas.
“Rich and I crafted a strategy that focused first on selling new Imax theaters,” he says. “If you have more screens you can amortize the cost of the film over a broader base. And if you can get people to build theaters on the feeling and belief of the inevitability of improved film product, you will be embarking on a very solid business model.
“The second area we both identified was the importance of the Imax brand. With all due deference to the Universals, Paramounts and Foxes, people don’t get into their cars because of the distributor. They go to a Tom Cruise movie or a Clint Eastwood movie. The star is the brand. And, there are only really two exceptions: Disney and Imax.”
Gelfond, who describes himself as an entrepreneur by birth, having published the 25,000 circulation New York Ball sports paper with such advertisers as Keds shoes and Philip Morris while still in high school, is responsible for the company’s overseas expansion and its introduction of the more economical IMAX-SR sound system format.
“The IMAX-SR was really the breakthrough that opened vast new markets for us,” Gelfond says. “Then we turned our attentions to upping the curve in terms of film production into more commercial entertainment without losing our niche in museums and science centers. We knew if we could accomplish this that we could build a much bigger and more successful company.”
Even before partnering at Drexel Burnham, Gelfond and Wechsler were well-versed in growing companies. After serving a prestigious clerkship for the U.S. Court of Appeals, Gelfond joined Cleary, Gottlieb, Steen and Hamilton to handle mergers and acquisitions. He raised venture capital and started a cleaning business that was later sold to Colgate.
After his tenure at HBO, Wechsler set up two film partnerships that financed projects released through Castle Rock and Warner Bros., including Tom Hanks in “Volunteers,” Jessica Lange in “Sweet Dreams,” and Blake Edwards’ “Switch.”
Upper management at Drexel foresaw a prosperous match and deliberately paired Gelfond with Wechsler. Together, the two handled a spinning out of United Artists from TCI, and worked on transactions for Paramount.
Wechsler recalls, “Drexel was the center of everything. One day you would get a call at 7 a.m. and have to put together a proposal with the assets of Time Inc. And the next day might bring a meeting with Steve Ross to figure out strategies between Paramount and Time Warner. It was a heady and interesting time.”
At Drexel’s demise, Gelfond and Wechsler, who describe their relationship as “like day wives,” started their own acquisitions venture while both kept private clients. Wechsler advised Credit Lyonnais through its foreclosure of MGM and worked with Trumbull’s Ride Film, by whom the “Back to the Future” attraction was developed using Imax projectors and technology.
When the opportunity to acquire Imax came up in 1993, the pair saw tremendous opportunity for future growth. And now, with 200 theaters in place and 50 more planned, as well as deals with Sony and Disney and talks with every other major studio, and a growing list of acquisitions that will help position Imax in the digital realm, the future looks brighter then ever.
Says Wechsler, “The industry has just come off of ‘Everest,’ which has grossed $100 million, and ‘T-Rex,’ now in the mid-30s. Then there is a whole new slate of product including ‘Siegfried & Roy,’ ‘Fantasia’ coming Jan. 1, a Michael Jordan film (from Giant Screen Sports) in April, a Cirque du Soleil film and (the 3-D, computer-graphic project) ‘Cyberworld.’ That is a million miles from where the business was five years ago.”
Gelfond adds, “I think we still have a million miles to go. But it is really challenging and rewarding and fun. And when you look at a career, what more could you want?”