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Split personalities get shrink

Trio of foreign-funded hybrids face crossroads

Hollywood’s predilection for other people’s money may be turning into an addiction: Almost all big-budget studio titles are now backed by companies that in turn get their coin from foreign distributors hungry for top product.

These outside companies — ranging from Revolution and Spyglass to Bel Air and Beacon — have clearly brought money, energy and sometimes artistic surprise to the process of making movies. Led often by top-notch former studio execs or by creative mavens, these hybrids have managed to hold on to control of the process more adroitly than many earlier breeds of indies.

Still, these quasi-independents find themselves perched precariously — listing between the differing demands of the Hollywood studios with whom they are allied and the foreign distribbers that funnel their finished product to the world.

The companies are frequently last in line behind studios, foreign partners and gross players in the battle to wring profits from a pic. Many also face a foreign marketplace believed to be rapidly maturing.

Variety takes a look below at three of these newfangled shingles. Phoenix Pictures and Mutual Film are each at a crossroads — the former beset by exec exits, the latter reinventing its financing possibilities after a flaccid “The Sixth Day.” Spyglass, meanwhile, must come up with an encore to “The Sixth Sense.”

PHOENIX PICTURES

From Columbia’s standpoint, Phoenix was created to feed incremental product to the studio for far less that it would cost to make movies inhouse.

Founded through a consortium of equity investors that included Canada’s Onex Corp., Showtime and Altamira; and Pearson Television, Phoenix’s plan was to supply Col with eight pics a year by 1998.

This not-outlandish belief was based on Medavoy’s excellent talent relationships. After all, he had collected a slew of Oscars and forged tight bonds with talent while running TriStar and, before that, Orion.

But that premise didn’t work out over time. The company now produces only a couple of movies a year and is limited to making exactly the sort of mid-budget pictures that Col doesn’t need help financing.

When Col needed help chewing and swallowing the massive $106 million budget on Michael Mann’s “Ali,” it had to turn to Initial Entertainment Group to sell off foreign territories.

Messer has been frustrated both with the amount of time it takes for cash to cycle through and for Phoenix to actually get its hands on profits (usually two to three years). More vexing is the fact that, under current financing arrangements with the studio and other financial partners, Phoenix can make just one big-budget, $85 million-plus pic every two or three years.

“What we are trying to do is get much more aggressive with financing,” Messer says. “When you see a picture that you wanted to make getting made elsewhere, what can I say? It’s painful. We’ve limited ourselves and had to forgo a lot of opportunities.”Messer says Phoenix had to pass up “Vertical Limit,” the Martin Campbell-helmed action that’s been a moderate hit for Sony, due to an inability to finance the actioner’s hefty budget.

Some of these missed opportunities, to be fair, are due to the rapidly ballooning costs of marketing event pics, which has doubled in only five years.

But if the B.O. from Phoenix Pictures on its moderately budgeted pics has been lackluster — then it’s also fair to say that Phoenix’s venture into the big-budget tentpole arena was also decidedly tepid.

“The 6th Day,” at $105 million worldwide, may be the only Schwarzenegger pic on which Columbia never breaks even.

Still, after a slate of lukewarm performers including “The People Vs. Larry Flynt,” “Dick” and “Lake Placid,” it remains to be seen whether bigger budgets will translate to bigger hits.

And Phoenix’s situation may change this September. People familiar with Sony’s plans say Phoenix will likely leave the Sony lot unless it can find ways to finance bigger-budget pics.

“We may not be exclusive to Sony,” admits Messer, adding, “We want to create a separate deal structure, one that allows us to be in business with whomever best serves the picture. That’s sort of radical, but that way we expect we can go from three-to-five movies (a year) to six-to-eight.”

For his part, Messer says Phoenix is more committed than ever to development and production.

“You can’t afford to allow opportunity to slip by,” says Messer, adding, “Movies are like fruit: You’ve got to pick ’em while they’re ripe.”

— Claude Brodesser

MUTUAL FILM CO.

Producers Gary Levinsohn and Mark Gordon relaunched Cloud 9, their 18-month-old Paramount Pictures-based production and finance company, in June 1997.

The new outfit was much more powerful, driven by foreign equity and a foreign sales arm. Dubbed Mutual Film Co., the name was chosen to reflect the venture’s goal of allowing several investors to share risks as well as the profits — a key reason for most all split-rights deals.

Three years later, with an uncomfortably long pic list of disappointments Mutual seems like a label chosen with a dark sense of humor; the company has seen the exit of its French partner and infighting among those who remain. With no domestic participation, the four partners — Germany’s Tele Munchen, Britain’s BBC, Japan’s Toho-Towa/Marubeni and France’s UGC — shared 60% of the films’ budgets, with Mutual Intl. looking to other foreign territories to mitigate any risk.

Mutual’s investors found the company appealing for its promise of access to top-flight product from the studios as well as the guarantee that films would gain major theatrical release in the U.S.

However, topping the laundry list of Mutual problems was a string of flops that called for the sharing of a lot of risk and little reward.

While “The Jackal” made a strong showing, the underperformers included “Paulie: A Parrot’s Tale,” “A Simple Plan,” “Black Dog,” “Virus,” “The Relic” and “Hard Rain.”

Mutual’s partners also howled over how studios seemed to treat the company as a recycling bin for troubled movies such as “Man on the Moon” and “Isn’t She Great?”

Also troubling to the foreign partners was the fact that Levinsohn and Gordon received an executive producing fee on each film, paid according to the budgetary split between the studio and the partners.

On the bright side, the company has inked an output deal with Italy’s Eagle Pictures, while “Wonder Boys” received a late 2000 re-release amid Oscar buzz.

Ultimately, however, Levinsohn and Gordon announced last fall that Gordon would exit when Mutual’s latest contract expires in June. At that point, Par exec VP production Don Granger is expected to join Levinsohn under a new deal at the studio.

However, Mutual’s renewed pact will put the producers on a much shorter leash.

The company signed a $200 million revolving credit line with Union Bank that is tied to both Levinsohn and Gordon as well as their partners .

Gordon is in the process of assembling his own company, but it remains unclear which of the two original partners will retain the Mutual moniker.

— Dana Harris

SPYGLASS

“Spyglass made so much money with ‘The Sixth Sense,’ they should have shut down after its release,” says one wag. “Now they’re wisely being very careful about their deals.”

Established in October 1998 by Roger Birnbaum and Gary Barber, Disney-based Spyglass Entertainment quickly became a paradigm for a new breed of split-rights shingles. Such companies found equity partners in a studio and in foreign partners while retaining ownership of each pic’s negative.

With a $200 million credit line from Chase Manhattan Bank, Spyglassco-finances three to five pics a year with Disney, which handles domestic distribution as well as the U.K., Australia and Latin America.

Spyglass also struck a five-year arrangement with the Kirch Group’s Taurus Film and with Italy’s Mediaset for a guaranteed $250 million in financing. Kirch and Mediaset have theatrical rights to Spyglass films in Germany, Italy, Spain, Poland and all territories of the former U.S.S.R. There are other output deals as well.

Spyglass’s game plan is to supply its equity investors with roughly five pics a year. It remains to be seen, however, whether “Sixth Sense” will become a one-hit wonder.

While “Shanghai Noon,” was a critical darling, neither the Jackie Chan starrer, nor “Keeping the Faith,” helmed by Ed Norton, has been a B.O. breakout.

Current production sked includes the Kevin Costner-starrer, “Dragonfly” directed by Tom Shadyac (co-financed with Universal); “Reign of Fire,” directed by Rob Bowman; anda documentary on the history of basketball entitled “One Love.”

— Charles Lyons

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