When it comes to the movie business, John Malone, the Colorado billionaire who built his fortune in cable TV, for years lived by the mantra "Why build it when you can buy it?"
It took some convincing, but Liberty Media Corp.'s chairman is finally ready for his Hollywood close-up. With the help of entertainment veterans Chris McGurk and Danny Rosett, Liberty is launching Overture Films, which aims to produce eight to 12 live-action movies a year under the umbrella of its Starz cable channels.
Liberty will bankroll the new business to the tune of $500 million to cover production, marketing and overhead for a staff of about 70 people based in Beverly Hills.
Unlike other start-up film operations, Overture has the financial safety net of Liberty's deep pockets. More important, it has guaranteed outlets for its films in Starz, the Vongo broadband channel and home video distributor Anchor Bay Entertainment.
"There are a lot of ex-studio executives running around trying to raise money to set up a production fund," McGurk said. "And then they are forced to go out and try to find distribution. It's not the way we wanted to go about doing it."
Malone, who wasn't available to comment for this story, has for years circled the movie business without plunging in headfirst.
Liberty was one of the suitors looking to buy Vivendi Universal's entertainment assets, including its movie studio and theme parks, in 2003 before General Electric Co.'s NBC unit finally did. Liberty also has accumulated about 19% of 20th Century Fox parent News Corp., which it is considering swapping for a stake in DirecTV or other assets.
It took about three hours in early September for McGurk, Rosett and Starz Chief Executive Robert B. Clasen to convince Malone and his chief lieutenants to finance a feature film company, citing the advantages of having a supplier for Liberty's distribution operation. Without comment, Malone got up at the end of the meeting, seemingly unmoved.
But as he reached the door, Malone winked and said: "Well, I always thought we should be in the content business."
McGurk, who will run Overture as CEO, worked as a senior executive at Walt Disney Co., Universal Studios and, most recently, Metro-Goldwyn-Mayer Studios Inc. There, he was second in command as vice chairman before billionaire Kirk Kerkorian sold the studio in 2005 for about $4.9 billion to a group led by Sony Corp.
Rosett, who will serve as chief operating officer, is the former president of MGM's United Artists unit. Overseeing them will be Clasen.
McGurk is one of a number of studio executives establishing movie companies at a time when big media companies are retrenching because of soaring production and marketing costs.
As private money from outside investors pours into Hollywood, filmmakers and executives are increasingly looking outside the studio system to make their movies. The list includes Harvey and Bob Weinstein's Weinstein Co., and United Artists, which actor Tom Cruise and producer Paula Wagner will try to resuscitate in partnership with MGM.
"A major company like Liberty backing a successful executive like Chris McGurk bodes well for success," said S. Mark Young, who specializes in entertainment at the USC Marshall School of Business.
But he added, "A very small percentage of movies are successful theatrically. The challenge is, can Liberty and McGurk come up with content that will be appealing?"
Overture expects to model itself after Lions Gate Entertainment Corp., which has grown over the years into a Hollywood player by releasing mainly low-budget, niche films such as "Saw" and the Oscar-winning "Crash" that also generate healthy sales on DVD. Overture's films will be budgeted at less than $30 million.
"If you are operating in that budget range, you can afford to take different types of creative risk," said Rosett. "You can allow filmmakers to really execute their vision."
McGurk said he hoped Overture would make a mix of movies such as "Capote," "Hotel Rwanda" and "Bowling for Columbine" as well as "Barber Shop" and "Legally Blonde" that were released or launched while he was at MGM.
A former PepsiCo Inc. executive, McGurk is known less for his creative instincts than his business skills. McGurk oversaw some successes during his six years at MGM such as the "Barber Shop" and "Legally Blonde" franchises and he maintains the studio was profitable. But many of the films were box-office duds, including the Nicolas Cage war saga, "Windtalkers," and the "Get Shorty" sequel, "Be Cool."
But the business of making niche artistic movies is tough. Under McGurk and Rosett, United Artists released several well-reviewed independent films such as "Pieces of April," "Igby Goes Down," and "Personal Velocity" that were disappointments at the box office.
"Some didn't set the world on fire with their box-office returns," said McGurk. "You can't really look at the profitability of a movie but at the profitability of a slate."
McGurk and Rosett said they would also be focusing on making movies for underserved audiences such as African Americans, Latinos and older females that will complement Starz' niche channels such as Starz InBlack and Encore Love.
"We are always going to know who our movie is for," Rosett said.
The pair expects to line up their core group of production and marketing executives by January and begin releasing films by mid-2007.
"This was an opportunity to build something from the ground up and really try to do it the right way," McGurk said. "That is what turns me on and that is why I am here."