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Warren Beatty Sought Wider ‘Rules Don’t Apply’ Release Despite Grim Test Screenings

Lots of films lose money, but relatively few result in lawsuits from disgruntled investors.

“Rules Don’t Apply,” however, is that special kind of flop. In December, financier Arnon Milchan filed suit against Warren Beatty and a high-profile cast of investors, seeking $18 million in unrecouped distribution costs.

Milchan — through his companies Regency Entertainment and Monarchy Enterprises — has now elaborated on his allegations in an amended complaint. The suit alleges that Beatty was obsessed with getting his long-planned Howard Hughes film on as many screens as possible, and was undeterred by contrary advice and bad preview screenings.

According to the suit, Beatty and his investors wanted the right to set the film’s distribution and marketing budget, with the cost borne by Milchan. Milchan objected to such a “one-sided deal,” and instead agreed to front the distribution costs if the investors would pledge to guarantee any losses. Beatty and the investors — who included Ron Burkle, Terry Semel, Steve Bing, Jeffrey Soros, and Brett Ratner — agreed to the deal.

According to the suit, two test screenings were unfavorable. Regency, in consultation with distribution executives at Fox, recommended a limited release, which could go wider if necessary. Beatty would not hear of it.

“Beatty and certain other investors refused to accept the results of the test screenings and insisted that the Picture be released widely on as many screens as possible,” the lawsuit states.

In an effort to satisfy Beatty, Regency came up with a release that would cost $12-14 million in P&A costs. But the investors rejected that proposal and insisted on increasing the budget to $20 million, according to the suit. The investors ultimately approved a $21 million plan, which included $250,000 for an awards campaign.

In September 2016, Bing, Ratner and Beatty insisted on increasing the budget for the awards campaign by $1.25 million, according to the suit.

Two months later, as the release approached, Bing, Ratner and Beatty insisted on expanding the opening from 1,800 screens to 2,300 screens. Regency advised that that would increase costs by $700,000, but the investors approved the additional expense. In the end, the film’s P&A budget topped out at $23.2 million. The production cost was $31.1 million, according to the suit.

The film opened on Thanksgiving weekend of 2016 on 2,382 screens, and grossed $3.9 million worldwide.

Regency now contends it is owed at least $19 million, and that Beatty and most of the other investors have refused to make good on their guarantees.

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