Expansion marked by caution, prudence

Relativity Media grows at home and abroad

Over the past several years, Relativity Media has expanded dramatically in size and scope, creating businesses, scooping up executives and inking deals in the U.S. and abroad. As the company and its intrepid chief Ryan Kavanaugh have thrived, the main question about the fast-growing mini-studio has changed from will it survive, to just how big will it get – at home and abroad.

Relativity has built up a team of 15 foreign output partners and is working closely with international agent FilmNation to finalize a multi-year sales and distribution deal that starts with their “Untitled Snow White” project

The output deals evolved in tandem with major moves on the domestic front, including the acquisition of Overture Films and ratcheting up the studio’s solo film production activity, a DVD distribution pact with 20th Century Fox and some innovative video-on-demand agreements.

Relativity recently received a new round of cash from its core investor Elliot Associates and will ultimately be able to release up to 15 movies a year between what it produces and acquires, along with the slate financing it pioneered.

The new funds aren’t a green light to bulk up by buying overseas assets, however. Relativity’s films, says president and CFO Steve Bertram, are what sustain its bottom line and burnish its reputation. That’s where the bulk of the company’s resources will go for the foreseeable future.

Which means that any big international forays may have to take a back seat – for now.

“We are always looking to the future,” Bertram says. “But for now we are very pleased with how light our infrastructure costs are. We want to focus on our slate, and make sure it’s solid.”

Bertram is rightly proud of the company’s low-cost foundation. Hollywood’s past is littered with examples of small studios, from Orion Pictures to Artisan Entertainment, that overreached, overspent or lost focus, as well as established independents like MGM with owners that failed to make sound strategic decisions.

The international market continues to grow. Relativity could still step up to the plate if it spied a great deal somewhere on the map. “I think if there were a great opportunity we might,” Bertram says, noting growth in China, India, Abu Dhabi and elsewhere.

But he stresses that the company is most comfortable for the time being basing its overseas business on deals with key foreign distribution partners.

“These are the guys who are the best at what they do, who have local expertise,” Bertram says. “It’s a risk-mitigation business decision, right? Because these output deals cover a good part of our production cost.”

“Limitless,” the company’s fourth solo release that topped the domestic box office in March, is a good example. It cost about $30 million, but with foreign pre-sales and tax rebates, Relativity is responsible for less than $1 million of the total production cost.

That movie was co-produced with Virgin Produced, the newly minted film and television arm of the Virgin Group led by Richard Branson, a media renegade on a much larger scale (billionaire versus millionaire). It was Virgin Produced’s first picture under a first look deal with Relativity.

“Besides the fact that Ryan has become a great friend, he is really a positive motivator of people and of change,” says Virgin Produced CEO Jason Felts. “In a fear-driven industry, he isn’t afraid to be unconventional, which is essential as the leader of Relativity, which I feel is really, the anti-studio studio.

“There is only one other person that I know who likes to rattle industries, take risks, all while seeking a few thrills along the way. That person is at home hanging with his spaceship I’m sure,” he adds, referring to Branson’s pet project, the Virgin Galactic Enterprise, the world’s first commercial spacecraft.

Relativity recently announced a new output deal in Spain with Tripictures and re-upped with Alliance Films in Canada and Momentum Pictures in the U.K.

Others partners include: Roadshow Films (Australia and New Zealand); Golden Village Pictures (Singapore); Village Roadshow Film Distributors (Greece); MGN Films (CIS and Eastern Europe); Nordisk Film (Scandinavia and Iceland); A-Film Distribution (Benelux); Gulf Film (the Middle East); Aqua Group/Pinema (Turkey); Imagem Filmes (Latin America); Studio Solutions Group (Taiwan); Entertainment in Motion (Global Airlines); Tripictures; and Euro TV (France).

The company sells films market by market in a few other territories like Germany, Italy and Japan. “We’ve done well with our pictures on a one-off basis. Germany is a great market to sell that way,” Bertram says.

The international team is based in Los Angeles and the company leverages new releases through the FilmNation staff, which handles the day-to-day work of negotiating deals.

“We try to be smart about our overhead costs. We can really use the benefit of scale Glen has,” Bertram adds, referring to FilmNation founder Glen Basner. “Lionsgate does it for themselves, Summit does it for themselves, but that requires infrastructure.”

FilmNation handled international sales on “The King’s Speech.” It is working on sales for Pedro Almodovar’s “The Skin I Live In,” Terrence Malick’s untitled love story with Ben Affleck and Rachel McAdams; “Under the Skin,” with Scarlett Johansson; “The Oranges” with Hugh Laurie and Catherine Keener; and “Midnight’s Children,” based on the Salman Rushdie novel.

FilmNation is also a producer. Relativity announced earlier this month it acquired U.S. distribution rights to FilmNation’s thriller “House at the End of the Street.”

Also Stateside, Relativity and Kavanaugh and the team have new television, music, sports and digital divisions to grow.

But mainly, the mantra is let the films perform.

And intergalactically, maybe get a ride on the Enterprise.