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Relativity Media is at a crossroads

CEO Ryan Kavanaugh is trying to build Relativity into an innovative, full-service media company — an 'anti-studio' — even as the firm loses its principal backer.

November 12, 2011|By Ben Fritz and Steven Zeitchik, Los Angeles Times
  • Relativity Media CEO Ryan Kavanaugh, left, and co-President Tucker Tooley make a splashy entrance at the premiere of "Immortals."
Relativity Media CEO Ryan Kavanaugh, left, and co-President Tucker Tooley… (Alberto E. Rodriguez, Getty…)

As production on the comedy "21 and Over" was getting underway in Seattle this summer, the cast and filmmakers received surprising news from producer Ryan Kavanaugh.

Although the movie is about a group of students out for a night of partying in a U.S. college town, additional scenes would have to be shot, and set, in China.

Why? Kavanaugh's Relativity Media could grab significant new money by making "21 and Over" a Chinese co-production, said a person close to the movie who requested anonymity because the discussions were private.

The move was classic Kavanaugh: plucky, opportunistic and maybe a little shameless.

Kavanaugh is one of the movie industry's most colorful and controversial executives. The red-haired 36-year-old UCLA dropout flies his own helicopter, began making stock market purchases at age 6, and married his ballerina fiancee in Italy this summer with Leonardo DiCaprio and Ryan Seacrest as guests.

After raising billions for other people's movies as an outside financier, he is building a full-service media company he describes as an "anti-studio" that can revolutionize the entertainment business.

Kavanaugh's combination of chutzpah and grandiosity — increasingly rare in today's buttoned-down corporate Hollywood culture — evokes the era of larger-than-life moguls. The boyish executive welcomes the comparison.

"When you look at every studio in the '20s or '30's, from Louis B. Mayer to Jack Warner, you see people who started with one plan and quickly shifted gears to adapt to a changing world," Kavanaugh said. "One of my favorite stories is that Walt Disney mortgaged his house to make 'Snow White.' He saw there was a real opportunity to change the world."

After a series of box-office disappointments, Kavanaugh finds his company at a crossroads. Tight on cash and losing his principal backer, he's seeking new financing and hoping for a hit film amid a small slate of upcoming releases, according to numerous people close to Relativity who were not authorized to discuss the matter publicly.

Much of his hopes rests on "Immortals," a 3-D, ultra-violent action movie set in ancient Greece and starring Henry Cavill and Mickey Rourke. The sword-and-sandal epic, which launched in theaters Friday, features stylized stabbings and beheadings and cost more than $130 million to make and market, a huge sum for an independent company.

Kavanaugh thinks it was worth every penny. At the "Immortals" premiere Monday night, he said the film "redefines the nature of filmmaking" and "will remain immortal in film history forever." Some 60% of critics panned the movie, however, according to the review aggregator Rotten Tomatoes.

To preserve his own mortality, Kavanaugh needs moviegoers to buy tickets — lots of them. His company's only investor, the hedge fund Elliott Management, is winding down its relationship with Relativity, leaving the studio to pay down the powerful New York hedge fund's remaining stake of approximately $150 million.

Since the spring, Kavanaugh has been trying to replenish his firm's resources by buying out Elliott with a new deal arranged by investment bank JPMorgan & Co. while also attempting to raise hundreds of millions to fund advertising for his movies, according to knowledgeable people who were not authorized to discuss the matter publicly. (An Elliott spokeswoman declined to comment.) Neither effort has succeeded.

In an interview, Kavanaugh denied that Relativity was having any financial problems or trying to raise additional money for advertising costs. "As far as our having any cash problems, that's not accurate," he said.

Kavanaugh, known for his sharp financial mind, started a venture capital firm in his mid-20s. After that company cratered, Kavanaugh reinvented himself as a high-end matchmaker between Wall Street institutions and film studios. He arranged multibillion-dollar deals to co-finance hundreds of motion pictures while also generating millions in producer fees for Relativity.

His studio is exiting the co-financing business, and instead is producing and releasing its own pictures. "I set out with a lot of aspirations to change the business and I feel like we've done that at a certain level," Kavanaugh said of his company's second act. "Now we're no longer talking about it but doing it. We're living by the results of our actions."

But building an independent studio in a conglomerate-driven movie industry — not to mention a difficult economic climate — is fraught with challenges. Even savvy superstars Steven Spielberg, Jeffrey Katzenberg and David Geffen couldn't sustain their DreamWorks Studios as an independent entity, first selling it to Paramount and then restarting it as a scaled-down production company.

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