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Miramax's Indie Streak

Disney seeks to maintain financial control as its red-hot unit evolves into a mainstream studio

March 02, 2003|Richard Verrier and Claudia Eller | Times Staff Writers

Like a proud parent, Walt Disney Co. has been eager to tout the extraordinary 40 Oscar nominations garnered last month by its unit, Miramax Film Corp., the industry's leading distributor of independent movies.

But as Disney publicly crows about the achievements of Miramax, which received a remarkable three best-picture nods for "Chicago," "The Hours" and "Gangs of New York," the two companies are locked in a family feud over the fundamental terms of their business relationship.

Tensions between Disney Chief Executive Michael Eisner and Miramax Co-Chairmen Harvey and Bob Weinstein have escalated of late as Miramax has evolved into a more mainstream studio with big-budget films and ambitious new ventures. Conflicts about money and control are souring a partnership that for nearly a decade has been one of the most successful, albeit uneasy, alliances in Hollywood, according to sources close to both companies.

"There are just a whole panoply of issues between them," said a source close to the dispute. "There are some very serious problems."

Specifically, the two sides are at odds over how much Disney allocates each year to Miramax to finance its movies, how Miramax accounts for its profit and how much goes to the Weinsteins.

The fiercely autonomous Weinstein brothers also resent what they perceive as Disney's meddling in decisions that should be theirs to make, sources close to the Weinsteins say.

Adding to the friction is an audit of Miramax's books that Disney launched last year. The Burbank-based entertainment giant insists that it is just a routine review of the company, which it purchased in 1993.

But the Weinsteins view it as an attempt to intrude on their business and are said to be responding with their own audit of Disney, sources close to the brothers said.

To represent them in their fractious dealings with Disney, the Weinsteins have taken the provocative step of hiring Bert Fields, the Los Angeles attorney who has been a thorn in Disney's side for years. Fields, who declined to comment, is currently representing a family suing Disney for hundreds of millions of dollars in Winnie the Pooh royalties.

The Weinsteins declined to be interviewed for this report, but a Miramax spokesman said in a statement: "We've enjoyed a decade of profitability and success with Disney and look forward to continued success in the future."

Eisner also declined to comment. Disney Studios Chairman Dick Cook downplayed any conflict, saying every business relationship has its ups and downs.

"This is a classic case of somebody who's had his own business and becomes part of a corporation," Cook said. "They've become a much bigger player; they have growing pains." He also praised Harvey Weinstein: "Harvey is the consummate entrepreneur. He's an absolute original in a sea of mediocrity among a bunch of dull suits.... He's constantly pushing the envelope."

The deteriorating relationship comes at a delicate time for Disney, which also has been at odds with another key longtime partner, Pixar Animation Studios. In addition, Disney faces shareholder pressure to bolster its earnings amid a slowdown at its theme parks and struggles at its ABC television network.

The Weinsteins believe that Disney, because of these financial challenges, is seeking to change the terms of its deal with Miramax, sources said.

Disney currently allocates about $700 million a year for Miramax's production and marketing. The two sides, however, disagree over which expenses should be deducted from that allocation. Sources say, for example, that Disney recently began counting expenses that it previously had not, leaving Miramax with less money to finance its movies.

The Weinsteins also differ with Disney over how their annual compensation is calculated, those familiar with the matter say. The brothers currently receive about 20% of Miramax's overall profit, but they disagree with Disney on how to measure those earnings.

Tighter Reins

Disney historically has given the Weinsteins a wide berth to operate on their own. But in the last year, Miramax has come under greater scrutiny from its corporate parent as it has struggled with high overhead costs and -- its Academy Award success not withstanding -- fewer box-office hits.

Eisner, sources said, voiced objections last year about the escalating budget for Martin Scorsese's "Gangs of New York," which Miramax says cost $100 million and predicts will be profitable. He also complained about "Cold Mountain," an $84-million Civil War drama scheduled to open in December, sources familiar with the project say. Miramax has been searching for a partner to help cover the cost of "Cold Mountain" after MGM Inc. last fall withdrew its co-funding of the movie. Disney has declined to invest in it, citing other commitments.

What's more, sources said, Eisner for the most part has refused the Weinsteins' requests to pour money into projects that have been close to the brothers' hearts.

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