Ryan Kavanaugh: Showman of the Year

Relativity chief intent on reinventing the biz

In Relativity’s thriller “Limitless,” the protagonist happens upon a magic pill that makes him significantly smarter than his rivals.

One might wonder if Relativity Media topper Ryan Kavanaugh found his own magic pill, since he has raised north of $10 billion in the span of eight years.

Now he’s reinventing a fledgling production company into what he’s touting as the new studio archetype — one that is leaner, more efficient and more profitable than the majors.

“The Hollywood system was created 100 years ago, and yet (the majors) still focus around theatrical even though we know theatrical has become a small piece of the pie,” says Kavanaugh, who gained entry into Hollywood via a series of slate-financing deals with Universal and Sony worth billions. “Our risk-reward profile is very different from the studios. Everyone is focused on, ‘Are we No. 1? Did we break $100 million in box office? What was my weekend?’ And it still, unfortunately, is how the press writes about it. But the fact is that it’s not really relevant. It’s all about profit, and people forget that.”

Still, as a producer and film financier, Kavanaugh was tethered to the studios that he viewed as antiquated. But all that changed last summer, when Relativity inked three colossal deals that transformed the company into a full-fledged mini-major. More importantly, it offered a glimpse of the future of Hollywood in the digital age.

First, the company signed an unprecedented pact with Netflix in early July that brings Relativity-owned films to Netflix’s growing subscriber base during the pay TV window. The arrangement adds roughly $500 million annually to Relativity’s balance sheet, according to a source familiar with deal. Though Kavanaugh won’t confirm the details, he insists the pact is more lucrative and less restrictive than any other studio’s pay TV deal.

Shortly thereafter, Relativity acquired Overture Films’ distribution and marketing divisions from Starz, which allowed Kavanaugh to “maximize our product and control our own destiny.” So far, Relativity films are holding screens better than when they were released by the studios and the company is paying a fraction of a typical major’s prints-and-advertising outlay.

Finally, Kavanaugh launched a joint venture with Virgin tycoon Richard Branson that sees Relativity’s genre label Rogue Pictures developing, producing and marketing two to three movies a year with Branson’s Virgin Produced. The deal also gives Relativity films access to the attractive Virgin Air and Virgin Mobile platforms.

“Ryan knows exactly what he is doing and continues to impress even the most cynical in our business,” says Universal president and chief operating officer Ron Meyer, who will continue to partner with Relativity as co-financiers on a majority of Universal’s films through 2014. “His strong instincts and iron gut have led Relativity in a great partnership with Universal since 2004. Ryan’s knowledge and resources have been invaluable to us.”

Kavanaugh’s biggest resource and sole investor is Gotham-based hedge fund Elliott Management, which has pumped roughly $1 billion into Relativity and provided a revolving line of credit. That coin, so hard to come by amid a global recession, helped Relativity orchestrate its major overhaul.

“No one in town in recent memory has been as successful in securing so much slate financing that affects so many motion pictures,” says Sony president of digital production Bob Osher, who ran point on the studio’s three consecutive slate-financing deals with Relativity, the last of which expires in 2012. “(He) was one of the few guys who was still able to put deals together during the height of the economic downturn. When everyone else was practically paralyzed and unable to move forward, Ryan was making deals happen to capitalize the growth of his own company.”

And like any good student of Hollywood, Kavanaugh parlayed his slate-financing experience into practical knowledge.

“Getting to executive produce, co-finance and be a production company on 30-40 movies a year for multiple years, you get to see up close how everybody does it,” says Kavanaugh, who, like the “Limitless” hero, eschews sleep, clocking a mere 90 minutes to two hours a night. “It was like a crash course or being a fly on the wall and learning from the best.”

In some ways, though, Kavanaugh managed to beat the best, as evidenced by the films he passed on from the two studios’ slates, including Sony’s “How Do You Know,” with its budget north of $120 million, and Universal’s “Your Highness.”

“If you take the slates of those two studios and then you (compare it) to the films in the slate we co-financed, we are more than 40% higher on a return basis,” says Kavanaugh, adding that the only profitable films that Relativity ever nixed were Universal’s “Inglourious Basterds” and Sony’s “Julie & Julia.”

Still, financial acumen only goes so far in Hollywood. Kavanaugh needed to prove his artistic sensibilities to the creative community. Oscar heavyweight “The Fighter,” which Relativity fully financed after Paramount bowed out, helped Kavanaugh do just that. The best picture nominee nabbed two Academy Awards and was wildly profitable to boot. The break-even on the drama, which earned $94 million Stateside at the box office, was $25 million.

“He understands and respects filmmaking, and he is incredibly supportive of the creative process,” says Ridley Scott, who worked with Kavanaugh on “Robin Hood.” “While at the same time, he is one of the savviest businessmen in the industry.”

Kavanaugh has ingratiated himself with actors and actresses, too, as the boss who is more likely to send a private jet to whisk a star off set during a personal crisis than rigidly enforce the terms of the actor’s contract, as is the Hollywood norm. He is also known for seeing a film through to the end and not abandoning ship on marketing when the pic tracks poorly.

“When my father fell (and was badly injured), I was filming in Mexico,” recalls “Limitless” star Bradley Cooper. “Ryan chartered a plane for me to get home immediately to Philadelphia, saving almost a day’s worth of travel time. I am eternally indebted and grateful to him. He is a great friend and boss.”

Tobey Maguire echoes that sentiment.

“He’s a guy I want in my corner,” says Maguire. “His commitment to the success of ‘Brothers’ was clear. He was rigorous in his effort to make the best movie and to give us the best shot at being successful.”

And though Relativity naysayers are quick to label the war-themed drama a bomb, the film that earned a mere $29 million domestically was actually profitable. The pic’s $25 million budget was covered by $24 million in foreign output deals and a $3 million tax credit. Relativity shelled out roughly $25 million on prints and advertising, $10 million on homevid costs including a $6 million distribution fee (which the company would not have paid had the film been released after the Overture deal). The company took in $51 million in revenues — $12 million in box office rentals, $20 million from home video, $16 million from TV (a figure that would be bigger today thanks to the Netflix deal) and $3 million from military, airlines and university usage.

In fact, the “Brothers” example provides a window into Kavanaugh’s game plan, which differs so dramatically from the majors. Unlike a typical studio, where 25%-30% of the films are profitable, Relativity aims for a 1.000 batting average.

“We don’t sit there and say, ‘We have a movie with Bradley Cooper and Robert De Niro in an action movie that’s cool and different, and it’s going to make $80 million,’ ” says Kavanaugh of the greenlighting process of “Limitless,” which is on track to earn nearly $80 million domestically. “We say, ‘What’s the worst it could do? $30 million? OK, will it make money at $30 million?’ We don’t even talk about $80 million.”

Ultimately, Kavanaugh’s success doesn’t come from a magic pill. Meyer says it’s actually something a little less fanciful.

“Ryan’s strength and creativity in structuring a deal that works for both sides is unmatched,” he says. “He’s incredibly smart, committed, and his success is no accident.”

Popular on Variety

More Film

  • Woody Allen

    Woody Allen's 'A Rainy Day in New York' to Open Deauville Film Festival

    After being shelved by Amazon Studios in the U.S., Woody Allen’s “A Rainy Day in New York” will be opening the 45th edition of the Deauville American Film Festival in France this fall. “A Rainy Day in New York,” which stars Timotheé Chalamet and Elle Fanning, will be the 8th film by Allen to play [...]

  • Phyllis Nagy

    Writers Guild Candidate Phyllis Nagy Warns of Risks to Residuals (EXCLUSIVE)

    Phyllis Nagy, who is challenging Writers Guild of America West President David Goodman, has warned that guild leaders are endangering future residuals. Nagy, in a message posted Wednesday on her Writers Forward Together site, said residual payments are the most important issue the WGA faces during upcoming negotiations on a successor deal to the current master [...]

  • Geneva Wasserman

    Condé Nast Taps Film Veteran Geneva Wasserman as SVP of Motion Pictures

    Condé Nast Entertainment hired Geneva Wasserman as senior vice president of motion pictures, overseeing development of the media company’s slate of feature film properties. Wasserman, a nearly 20-year veteran of the entertainment industry, most recently served as co-founder and executive producer of production firm Project Z Entertainment. She takes over the role at CNE after [...]

  • Annabelle Wallis'The Loudest Voice' TV show

    James Wan's New Horror Film Casts 'Loudest Voice' Star Annabelle Wallis (EXCLUSIVE)

    Annabelle Wallis, who most recently appeared in Showtime’s Roger Ailes miniseries “The Loudest Voice,” has been tapped to star in James Wan’s top secret horror project, sources tell Variety. Wan is tackling the movie this fall before he jumps into prep on the “Aquaman” sequel with Jason Momoa at the top of 2020. Plot details [...]

  • New York Festival Sets Documentaries on

    New York Film Festival Sets Documentaries on Merce Cunningham, Roy Cohn

    Films on Merce Cunningham, Roy Cohn and Oliver Sacks are among the notable titles set for the Spotlight on Documentary lineup at the 57th New York Film Festival. Alla Kovgan’s “Cunningham 3D” centers on dancer and choreographer Cunningham, who was at the forefront of American modern dance for half a century. The Cohn documentary “Bully. [...]

  • CineLink Work in Progress Provides Step

    CineLink Work in Progress Provides Step Onto International Stage

    The Sarajevo Film Festival’s CineLink Work in Progress section has become a major venue for filmmakers from Southeastern Europe, the Middle East and North Africa – this year it saw nearly 70 submissions, the most in the past decade. The competitive program boasts a large number of projects that have gone on to achieve major [...]

  • System Crasher

    Oscars: Germany Selects 'System Crasher' for International Feature Film Award

    Germany has chosen Nora Fingscheidt’s “System Crasher” as its entry for the newly re-branded International Feature Film award at the 92nd Academy Awards, it was announced Wednesday by promotional body German Films. Produced by Kineo Filmproduktion and Weydemann Bros, the film won a Silver Bear at the Berlin Film Festival, where it received its world premiere [...]

More From Our Brands

Access exclusive content