Relativity's co-financing deals with Universal and Sony could end soon

Relativity Media has become known in Hollywood over the last few years for its huge co-financing deals at Sony Pictures and Universal Pictures. It covers half the budgets for 75% of the movies produced at both studios.

But Relativity is rapidly transforming into a company that produces and releases its own movies, a move enabled in part by its acquisition this summer of the distribution and marketing assets of Overture Films.

In an interview with The Times, Relativity Chief Executive Ryan Kavanaugh said that after his company's deals with Sony and Universal end in 2012 and 2015, respectively, they won't be renewed on similar terms. "I don't want to say we won't ever co-finance again," he said. "However, it will not be in the same manner that you've seen in the past."

But Relativity's deal with Universal might not even last that long. Asked whether Comcast Corp.'spending acquisition of the studio's parent company, NBC Universal, could alter or end that partnership, he admitted that it was still an open question: "No decisions as to our co-financing future with them have been made."

Read the entire interview with Kavanaugh here, including his explanation of why Relativity wants to become a fully functioning studio in these tough times for Hollywood.

--Ben Fritz

Photo: Ryan Kavanaugh. Credit: Alex J. Berliner / BEImages

Comments

[Dave]

Hey Ben, I would really appreciate it if you could explain to me how co-financing deals like this work in the industry...

What I mean by this is, does it mean that Relativity Media pays half a movie's budget and in return, they get 75% percent of the profit?

If yes, doesn't that sound like a bad deal for the distributors? Because not only the distributor pays half the remaining budget, they also have to pay the marketing budget, and that would roughly account for 70% of the total budget, so why would the distributor only take 25% of the profit? Also, does that 75/25 deal also account for home release distributions, TV rights, etc, or is it only for theater release?

I've read that Legendary Pictures pays half the budget with Warner Bros. but in return, they get 50% of the movie, which to me sounds much more fair than RM with Sony and Universal.

So I would really really appreciate it if you could briefly explain this me, thank you!