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Inside the Fight Over Warren Beatty’s ‘Rules Don’t Apply’ Fiasco (EXCLUSIVE)

By April 2016, the warning lights were flashing red.

Warren Beatty had just finished “Rules Don’t Apply,” fulfilling a decades-long ambition of making a movie about Howard Hughes. He corralled the investors, wrote the screenplay, directed the film, and starred as Hughes. Now it was up to the distributors, Arnon Milchan’s Regency Entertainment and 20th Century Fox, to figure out how to sell it. Should it open wide, with a costly advertising campaign befitting its star’s pedigree? Or should it be treated like a niche independent film, with a limited release that could expand based on positive buzz?

To find out, Regency ordered two test screenings at the Arclight in Pasadena. The results were alarming. Moviegoers complained that the film dragged in the middle, and most of those under 40 had no idea who Hughes was. According to a report from the testing company, viewers described Hughes’ eccentric behavior as “frustrating,” “disturbing,” “distracting”, “repetitive,” “annoying” and “boring.”

But Beatty dismissed the feedback. According to Yariv Milchan, Arnon’s son and a top Regency executive, Beatty argued that the test audience — which was 25% Latino and 19% Asian — was “too ethnic.”

“Of course, Mr. Beatty was wrong about this, at least in my view and based on my experience, because the ethnic makeup of the test screening audience was entirely proper and standard,” Milchan said in a court declaration. (Beatty’s attorney, Bert Fields, disputed Milchan’s account. “That’s certainly not a quote from Warren,” Fields said. “Warren certainly wanted diversity from the audience.”)

According to Milchan, Beatty insisted on a wide release, ultimately prevailing on Regency and Fox to open the film on almost 2,400 screens. The prints and advertising budget ballooned from $12 million-$14 million to more than $20 million. Milchan said that Beatty also insisted on opening on Thanksgiving weekend, against significant competition including “Moana” and “Allied.” The result was one of the biggest flops in recent memory. The film cost $31.1 million to make, and grossed just $3.9 million worldwide.

It was also one of the most complex single-picture financing arrangements in recent Hollywood history, with more than 100 contracts governing investors’ various rights and obligations. The investors — who sealed their commitment to the project at a fateful dinner at Nobu in Malibu in 2013 — are a who’s-who of Hollywood’s playboy elite, including Steve Bing, Ron Burkle and Brett Ratner. Those players are now embroiled in litigation over the film’s commercial failure. Arnon Milchan sued the investors to recoup more than $15 million of marketing costs, and the investors sued Milchan, alleging that he abdicated his responsibility to market the film.

Milchan’s attorneys recently filed hundreds of pages of documents in the case, including excerpts from the investors’ depositions and emails from Beatty, in which he laments the film’s “disastrous” performance. In a March 2017 email to Fox studio boss Stacey Snider, he urged a “revolutionary” approach to marketing the home-video release, to make up for the poor theatrical campaign.

“I’m not looking for acclaim for the movie,” wrote Beatty, who is 81. “The movie will be recognized for what it is. It’s that I want money to come back to our investors to cover the P&A shortfall, in order to compensate them for the mistake of our finally gambling on a higher awareness for a movie starring two unknown young people and an old guy who hasn’t been on the theatrical screen for 15 years.”

In an email to Beatty, Snider had gently deflected his entreaties, saying she would have someone call him. But she also noted that the film was released wide and advertised and windowed in the traditional manner.

“I understand the tradition, but I’m talking about breaking tradition,” Beatty shot back, urging a more aggressive use of social media. “I will give Fox a substantial portion of my backend if a new approach is tried. If it works, it might provide a much needed example for the selling of non-tentpoles and non-sequels. Handled inventively and energetically, I think home viewing of non-tentpoles, non-sequels and original movies is on the brink of a major breakthrough.”

In his deposition, Beatty put the blame squarely on Arnon Milchan, the billionaire producer whom he once called “the Medici of the movies.”

“He assured me that he would be personally active and responsible for the — he called himself Mr. Marketing — and that he was … the best at it,” Beatty testified.

But as the release date neared, Beatty felt that Milchan was focused on other things, including two other films and Israeli politics. “I said to him all along, ‘can we talk about how we’re going to release this movie.’ I was unable to get him to do that. He talked about everything but. I talked to him endlessly at [Israeli Prime Minister Benjamin] Netanyahu’s speech at the Congress of the United States. I — he consulted me on many, many matters. Many of them were political.”

Beatty argued that a more concerted focus on the release plan — “studying where this audience is, the demographics involved, would have made a very profitable picture. Very profitable picture.” To prove his point, he brandished the film’s Rotten Tomatoes score, saying, “the top critics, the people that matter… were 63%.”

Yariv Milchan contended that Beatty refused to hold additional test screenings, preferring to show the film to “friends and family,” who tended to be more positive. The film was also screened extensively for magazine writers, who raved about it. Holly Millea, who would profile Beatty for Elle, “loved, loved, loved” the film “and thinks Warren will get an Oscar nomination,” according to a screening reaction memo drafted in July 2016. Devin Gordon, executive editor of GQ, said “it was WILD and I had so much fun watching it — especially Warren’s performance.” “It was great!” said Cara Buckley, who would later do a six-hour interview with Beatty for the New York Times. “I laughed out loud many times.”

But the numerous magazine covers and profiles that resulted did not translate to widespread awareness of the film. Yariv Milchan said in conversations with Fox over the poor tracking, “One possibility discussed was that the public was just not interested in the film, its stars, or its subject matter.”

The other investors have now lined up behind Beatty in blaming Arnon Milchan for the film’s failure.

“The issue is going to be, ‘Did Arnon do his job?'” Fields said, calling Milchan’s court filing a “one-sided presentation.” “A lot of the case is going to relate to Arnon’s performance.”

Ratner, in his testimony, was incensed that Milchan slept through the first screening of the film.

“It was disappointing to everyone who was there,” Ratner testified. “It showed Arnon’s disinterest.”

Ratner said he was also disappointed that Milchan cut his investment in the film to just $2.5 million, laying off a higher stake on others.

“Our money was at risk. A little bit of Arnon’s money was at risk. So we had a huge risk. Arnon had a little risk,” Ratner testified. “Somehow we ended up being the largest investor in the movie, OK?”

Ron Burkle testified about the investor meeting at the Nobu dinner, and explained why he chose to back the film in the first place. “There aren’t a lot of people who are independent who you would say are truly great at what they do,” Burkle said. “And if you look at Warren and look at him versus Orson Welles even, he’s — it’s pretty amazing what his track record is.”

Milchan’s attorney asked the investors what Milchan could have done to save the movie. Jeffrey Soros, one investor, said he wasn’t sure. But, he added, “It couldn’t have done worse.”

Yariv Milchan strongly defended his father’s handling of the film, saying he was actively engaged in it, and that Beatty simply failed to heed his advice.

Even months after the release, Beatty and his investors still trying to save the film.

“We feel that we have a very good and commercial film that audiences are not yet aware of,” the investors wrote to Snider on Feb. 10, 2017, in an email forwarded by Beatty. “We would like to meet with Fox and New Regency as soon as possible to discuss how we can come up with an innovative way to release the picture on its remaining platforms, taking advantage of Warren’s desire to aggressively publicize his film.”

Regency had already cut its losses, and refused to meet with Beatty.

“I am entitled to meaningful consultation rights,” Beatty wrote in an angry email to David Friedman, the distributor’s general counsel, in which he also cited the film’s 63% fresh rating on Rotten Tomatoes. “Meaningful consultation rights will require a meeting with me, representatives of my investors, New Regency, and Fox.”

Friedman replied that he had received Beatty’s email, “which is wrong and, in many respects, irrelevant.”

“There is no decision to be made at the present time for which further consultation is appropriate,” Friedman wrote. “Accordingly, there is no need to meet with you, Fox and the investor group as you demand.”

He directed Beatty to send further communications to attorney Patty Glaser, and signed off with, “All of our rights and remedies are expressly preserved.”

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