These twin trends put slate deals under pressure, including one of Relativity Media's vehicles, Gun Hill Road I, a package of 17 movies.
Late last year, after the release of the final film in the package, investors got a picture of how the slate had fared, based on box-office returns and authoritative studio estimates, known as "ultimates," of the probable earnings from DVDs and television over the next seven to 10 years.
For The Record
Los Angeles Times Wednesday, March 19, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 63 words Type of Material: Correction
Studio financing: An article in Section A on Feb. 16 about hedge-fund financing of Hollywood movies said studio projections for films in an investment pool known as Gun Hill Road I indicated that "Doom," "The Holiday" and "Stranger Than Fiction" might lose a combined $100 million over seven to 10 years. The projected losses for those three films are actually about $84 million.
For The Record
Los Angeles Times Friday, March 21, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 45 words Type of Material: Correction
Studio financing: An article in Section A on Feb. 16 about hedge-fund financing of Hollywood movies incorrectly identified Och-Ziff Capital Management as an investor in a slate of films known as Gun Hill Road I. Och-Ziff was not an investor in Gun Hill Road I.
The Times examined a financial analysis based on the studio projections. It showed that eight of the films are likely to lose money. Despite successes such as "The Pursuit of Happyness," "Talladega Nights" and "Inside Man," the slate as a whole is unlikely to break even, the analysis indicated.
Three films -- "Doom," based on the popular video game; "The Holiday," a comedy starring Cameron Diaz; and "Stranger Than Fiction," a Will Ferrell drama -- may lose $100 million combined, according to the projections.
The financial analysis did not include definitive figures for the final film in the slate, Universal's big-budget thriller "The Kingdom," which had not yet opened.
But already, investors were sufficiently concerned to demand the restructuring in which Sony agreed to absorb some marketing costs.
"The Kingdom," released in September, performed poorly, barely breaking $85 million in worldwide box-office receipts. That could translate into a loss of $30 million or more for the film, according to studio projections and industry executives.
Singer, the lawyer for Kavanaugh, said in a letter to The Times that Gun Hill Road I "is clearly profitable," echoing his client's assertion in Variety that the slate would generate returns of as much as 25%.
Hedge funds that helped finance the slate, including Chicago-based Citadel Investment Group and New York's Och-Ziff Capital Management, declined to comment or did not respond to inquiries.
Another Relativity Media fund, Gun Hill Road II, was launched in 2006. Among its first four films were "Evan Almighty" and "Marie Antoinette," both flops. More recently, "American Gangster" brought in $245 million worldwide in its first three months. But its profitability is uncertain, in part because of its high cost.
"When you're only partially through [a slate], it's premature to project performance," said Laura Fazio, a managing director at Deutsche Bank.
