Relativity CEO Ryan Kavanaugh's prospects to buy out financial backer uncertain

Relativity Media Chief Executive Ryan Kavanaugh has been in talks for months with investment bank JPMorgan Chase about buying out his company's sole investor, New York-based hedge fund Elliott Management, but it's far from certain that the effort will be successful, according to several people familiar with the matter.

Kavanaugh's ongoing attempts to line up new backers demonstrate the growing rift between him and Elliott, as evidenced last month when the hedge fund hired Relativity's former president Michael Joe to oversee its investment in the independent film studio.

Elliott has hundreds of millions of dollars at stake in Relativity, which has had a spotty track record at the box office over the last several years.

Joe, who previously was a top executive at Universal Pictures, was hired to exercise more control over Relativity than Elliott previously had. 

In response to the move, Kavanaugh is seeking to assert his authority at the company by bringing in new investors, industry observers suggest.

A spokeswoman for Elliott said the company was not looking to offload its minority stake in Relativity: "They are not shopping, they are not selling, they are not doing a single thing," she said. However, two knowledgeable people said Elliott would be happy to sever ties with Relativity at the right price.

Under the terms of their agreement, Kavanaugh has the option to buy out Elliott at a certain price. The current cost of such a purchase would be roughly $700 million, one person with knowledge of the situation said.

However, several people familiar with the matter said that JPMorgan Chase is not close to approving a deal to invest in Relativity and no potential arrangement has been presented to Elliott.

According to a report in The Wrap, Kavanaugh has been working with Greg O'Hara, a managing director at JPMorgan Chase's chief investment office, to potentially lead a buyout of Elliott's stake in Relativity. 

O'Hara previously worked at the JPMorgan Chase-controlled private equity firm One Equity Partners, which owns 49% of the Lions Gate-controlled TV Guide Network. In a recent profile done with Kavanaugh's participation, Variety described O'Hara as a "key day-to-day advisor" to the CEO.

The ultimate value and fate of Relativity in large part lies with its upcoming slate of self-financed and released pictures, including November's 3-D action film "Immortals," budgeted at more than $100 million. The studio co-financed a number of flops with Universal and several of the early movies it made over the last few years failed to find an audience.

Relativity has had better results lately with its successful thriller "Limitless" and Universal's hit comedy "Bridesmaids," which it co-financed.

A spokesman for Relativity declined to comment.

-- Ben Fritz

Related:

Relativity Media president Michael Joe exits to manage studio for its chief financier

Terry Curtin named head of marketing for Relativity

Copter fight kicks up dust in West Hollywood

Photo: Ryan Kavanaugh attends amfAR's Cinema Against AIDS Gala party during the Annual Cannes Film Festival at Hotel Du Cap on May 19, 2011 in Antibes, France. Credit: Andreas Rentz / Getty Images.

Relativity Media President Michael Joe exits to manage studio for its chief financier [Updated]

Relativity Media Chief Executive Ryan Kavanaugh's top lieutenant, Michael Joe, will now oversee the independent studio on behalf of its primary investor.

In the latest executive shake-up at the West Hollywood company in the last year, Joe has relinquished his role as president and will supervise Relativity on behalf of its sole investor, the New York hedge fund Elliott Management. Elliott has invested more than $1 billion in Relativity, which has lost several hundred million dollars over the last few years, according to a person familiar with the matter.

[Update, 7:40 p.m.: Another person close to the company said that in fact Relativity Media has not lost money and that Elliott' investment in it is less than $1 billion. Because Relativity is a private company its finances can not be independent verified.]

That was in large part because of the unsuccessful slate of films Relativity co-financed with Universal Pictures, including the costly box-office flop “Land of the Lost.” Over the last year, Relativity has attempted to transform itself by financing its own movies, such as the recently released thriller “Limitless,” and bringing in more experienced executives.

However, several executives have not lasted long. In April, Marketing and Distribution President Peter Adee left after eight months on the job. In January, Chief Financial Officer Bill Sutman exited after a two-year stint.

Joe joined Relativity from Universal Pictures last summer as a seasoned business executive to work alongside Kavanaugh, who had no previous experience running a film studio. Joe’s restrained management style stood in contrast to the outsized personality of Kavanaugh, and the two did not easily mesh, according to a person close to the company.

Jesse Cohn, a portfolio manager with no operational experience in Hollywood, had been overseeing Relativity on behalf of Elliott, which has no other entertainment assets.

With Joe’s departure, Chief Operating Officer Steve Bertram has been promoted to president of Relativity and Brian Edwards, former COO of Mark Burnett Productions, is succeeding him.

In a statement, Kavanaugh specifically praised Bertram and Edwards' experience working on the initial public offering of DreamWorks Animation and the sale of DreamWorks Studios to Viacom, hinting at his intention to eventually sell Relativity or offer shares on the stock market.

-- Ben Fritz

Related:

Terry Curtin named head of marketing for Relativity

Relativity Media marketing president Peter Adee out after eight months

Copter fight kicks up dust in West Hollywood

Relativity signs with Fox for DVD distribution

Photo: Michael Joe. Credit: Relativity Media.

Terry Curtin named head of marketing for Relativity

Former Revolution Studios marketing chief Terry Curtin has been named president of theatrical marketing at Relativity Media.

Curtin is the third person to hold the production company's top marketing position in less than a year. Former marketing and distribution president Peter Adee, who joined Relativity when it acquired the distribution operations of his former employer Overture Films last August, recently announced he would leave. He replaced Geoff Ammer, who was appointed as president of marketing last January.

Since leaving the film finance and production company Revolution in 2004, Curtin has worked at the advertising firms Intralink Graphic Design and Cimarron Group as chief executive and co-president of entertainment, respectively. Before joining Revolution in 2002, she worked in marketing jobs at Universal Pictures, Walt Disney Pictures and 20th Century Fox. She will report to Relativity Chief Executive Ryan Kavanaugh.

She joins Relativity as it is beefing up its slate of self-financed and released films after six years of primarily co-financing movies with Universal Pictures and Sony Pictures. Its next release is June's family film "Judy Moody and the Not Bummer Summer," and in November the studio releases its first big-budget tentpole, "Immortals."

Most of Relativity's movies that launched while Adee headed marketing have fared poorly at the box office. The studio recently had its first self-released hit, the Bradley Cooper thriller "Limitless."

Though Adee oversaw both marketing and distribution, Curtin's purview is only the former.

-- Ben Fritz

Photo: Terry Curtin. Credit: Relativity.

Related:

Relativity Media marketing president Peter Adee out after eight months

Relativity Media marketing president Peter Adee out after eight months

 
Peter Adee, Relativity Media's marketing and distribution president, is leaving the company after just eight months on the job. He will stay on in a transitional role until June 1.

The marketing veteran transitioned to Relativity in July after the studio took over the marketing and distribution operations of Overture Films and hired 43 of its employees. Overture's parent company, John Malone's Liberty Media, closed the movie unit amid a series of box-office duds.

Relativity, headed by Ryan Kavanaugh, has also had a disappointing track record as a distributor. While its most recent release, the Bradley Cooper thriller “Limitless," has been a modest success –- it has grossed $46 million since its debut March 18 -- other recent offerings were commercial disappointments. Those include the Nicolas Cage fantasy “Season of the Witch,” the East-meets-West action adventure “The Warrior’s Way" and the 1980s nostalgia piece “Take Me Home Tonight."

The job of marketing and distribution chief is central to Relativity as it ramps up its release slate. In the coming months the company will release grade-school comedy “Judy Moody & the Not Bummer Summer” and Tarsem Singh’s mythology-inflected “Immortals.”

The news was initially reported by The Wrap.

Adee, an outspoken marketing executive who has previously worked at a number of studios including MGM, Disney and Universal, did not return calls seeking comment about his departure.

Relativity said in a statement that "Adee has no immediate plans for employment."

RELATED:

Overture Films ends three-year run, hands off marketing and distribution to Relativity Media

-- Steven Zeitchik and Claudia Eller

twitter.com/ZeitchikLAT

Photo: Peter Adee, left, and Eric Kops at a Hollywood premiere in 2003. Credit:  Frazer Harrison /  Getty Images

 

Relativity signs with Fox for DVD distribution

Relativity Media has signed a four-year agreement with 20th Century Fox for the studio to release Relativity movies on DVD as the independent company attempts to transition from a film financier into a bona fide studio.

The first three movies to be distributed by Fox were all box-office flops, illustrating the challenges that Relativity, led by Chief Executive Ryan Kavanaugh, faces now that it is fully financing and releasing its own pictures.

After losing money from its co-financing partnerships with Universal Pictures and Sony Pictures over the past five years, Relativity and its backer, private equity fund Elliott Associates, are hoping to do better by developing and controlling their own films.

If the strategy is successful, Relativity would be in a stronger position to pursue its ambition to go public, enabling Elliott to recoup some of the $1 billion-plus it has invested in the company.

Last summer, Relativity signed with Netflix to stream its movies online during the period when films customarily air on pay-TV channels such as HBO. The company also has partnered with various foreign distributors to release its movies in theaters and on DVD overseas. Finding a studio to release its DVDs in the U.S. was one of the last remaining pieces for Relativity's strategy.

"Fox has great experience distributing DVDs for third parties like MGM and New Regency, which was very important to us," said Steve Bertram, Relativity's chief operating officer.

Though Fox will handle marketing and distribution for DVDs and Blu-ray, Relativity has retained the right to manage online distribution.

"Given that the business is still going through its transition to digital, we felt it was strategically important to retain control of that," said Relativity President Michael Joe.

In late spring or early summer, Fox will release the first two Relativity movies: the action film "The Warrior's Way" and the Nicolas Cage period picture "Season of the Witch." The films grossed $5.7 million and $24.8 million in the U.S., respectively. The studio's most recent release, "Take Me Home Tonight," sold $3.5 million in tickets in its debut.

Mike Dunn, president of home entertainment for 20th Century Fox, said he thought the pictures, because of their genres, could perform comparatively well on DVD despite their soft box-office performance.

Relativity is ramping up production, with such big-budget pictures in the works as the ancient Greek-era action movie "Immortals," due out in November. The company has seven movies scheduled for release this year and is aiming eventually to raise that number to 12 to 14 annually.

Relativity recently received about $100 million in fresh capital from Elliott, according to people familiar with the matter. The company hopes to use it as leverage to raise a new debt facility of several hundred million dollars to fund future productions and marketing costs, the people said.

Relativity's agreements to co-finance films with Sony and Universal expire in 2012 and 2015, respectively, and Kavanaugh has said he does not intend to renew them.

-- Ben Fritz

Related:

Relativity Media chief won't just share the risk with Hollywood studios anymore

Overture Films ends three-year run, hands off marketing and distribution to Relativity Media

Netflix challenging HBO and Showtime as it signs distribution deal with Relativity Media

Photo: Topher Grace in "Take Me Home Tonight." Credit: Ron Batzdorff / Relativity Media

Relativity Media hires new COO/CFO

Film financing and production company Relativity Media has brought in former Paramount Pictures executive Steve Bertram for the dual role of chief operating officer and chief financial officer.

He is partially replacing former Chief Financial Officer Bill Sutman, who is leaving the company. Former Chief Ooperating Officer Andrew Marcus, meanwhile, was recently named president of corporate development and strategy.

Bertram previously served as president of business operations for Paramount's home entertainment unit. Before that he was chief financial officer of DreamWorks, where he helped negotiate its sale to Paramount.

He is one of several senior executives who have recently joined Relativity, which continues to be led by Chief Executive Ryan Kavanaugh, as it transitions from exclusively co-financing movies at other studios to producing and releasing its own pictures.

In May, former Universal Executive Vice President Michael Joe joined Relativity as its president.

-- Ben Fritz

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

Geoffrey Ammer leaves marketing post at Relativity after Overture deal

Geoffrey Ammer resigned Tuesday as president of worldwide marketing at production company Relativity Media just three weeks after Relativity took over the marketing and distribution assets of defunct Overture Films. As part of that deal, Overture's top executive, Peter Adee, was named president of marketing and distribution for Relativity, making Ammer's position redundant.

Adee and Ammer are veterans of Hollywood marketing. Adee has held senior positions at Walt Disney Studios, DreamWorks, Universal Pictures and MGM, while Ammer previously oversaw marketing for Marvel Entertainment, Universal and Sony Pictures.

Ammer signed a one-year deal with Relativity in January to oversee marketing for its growing slate of self-financed movies, including February's "Dear John," May's "MacGruber," and the upcoming documentary "Catfish" and science-fiction film "Skyline."

He resigned his post Tuesday.

— Ben Fritz

Related:

Overture Films ends three-year runs, hands off marketing and distribution to Relativity Media

Relativity taps former Marvel, Sony executive Geoffrey Ammer for marketing post

Photo: Geoffrey Ammer. Credit: Relativity Media.

Overture Films ends three-year run, hands off marketing and distribution to Relativity Media

Overture Films, the 3-year-old independent movie studio owned by John Malone's Liberty Media, is shutting down after it failed to fetch an adequate price from interested buyers.

The company will no longer produce movies, and its marketing and distribution operations are being taken over by Relativity Media, putting Ryan Kavanaugh's production company in a segment of the business dominated by Hollywood's major studios.

Relativity is hiring 43 Overture employees, including marketing chief Peter Adee and distribution executive Kyle Davies. That team will for now remain in Overture's offices in Beverly Hills and market and release the studio's three remaining movies -- actor Philip Seymour Hoffman's directorial debut "Jack Goes Boating"; the thriller "Stone," starring Robert DeNiro; and horror picture "Let Me In" -- through the new distribution arrangement with Relativity.

Among Overture's remaining employees, 20 will be laid off with severance packages, and three will move over to parent company Starz, which also owns video distributor Anchor Bay Entertainment and animation company Film Roman.

Overture's library of less than 20 films will continue to be sold in the home entertainment and television windows by Anchor Bay and other Starz units.

"Starz channels and Anchor Bay will still be able to acquire the pay-TV rights to theatrical pictures," said Chris Albrecht, president and chief executive of Starz, which also owns the Starz pay cable channel. "But, we no longer needed to operate our own film production and distribution organization."

Albrecht, the former head of HBO who is focusing on building Starz into a bona fide competitor in original programming, also said that the ownership of Overture's three unreleased movies "remains with Overture and its partners and there is no transfer of ownership of Overture's library."

Like several other independent movie companies that have shut down after succumbing to difficult economics brought on by declining DVD sales and a glut of titles in the market, Overture has struggled to survive. The studio's mixed track record included the hit thriller "Law Abiding Citizen" and horror film flop "Pandorum."

Three weeks ago, Overture's CEO Chris McGurk and chief operating officer Danny Rosett were forced out. They tendered their resignations after reading an e-mail from Albrecht accidentally sent to them and other Starz executives that said they would be removed.

For the last six months, McGurk and Rosett had been trying to find a buyer for Overture after Malone made it clear he had lost his appetite for the movie business and wanted to sell the company. They attracted two bidders, brothers Alec and Tom Gores and Los Angeles-based private-equity firm Aurora Resurgence. But the offers weren't high enough to warrant a deal, according to a person familiar with the situation.

-- Claudia Eller

Netflix challenging HBO and Showtime as it signs distribution deal with Relativity Media

If you can't join 'em, compete against 'em.

With top pay-cable channels HBO and Showtime and upstart Epix largely refusing to let Netflix stream movies during the long periods that they control the rights, the DVD subscription service is going around them, starting with independent film financing and production company Relativity Media.

The two companies have signed a five-year-plus agreement through which Relativity's movies will be distributed via Netflix's Internet streaming service instead of traditional runs on pay-cable channels, which start four-to-seven months after a DVD release.

It's the first time Netflix, which is aggressively trying to increase the amount of content on its Internet service in order to attract and retain subscribers, has signed such a deal with a Hollywood movie maker. Earlier this year it negotiated with Walt Disney Pictures to land similar rights, according to people close to the situation, but lost out to pay channel Starz.

"It would be my preference that the pay channels all supply us their films, but this is an example of the other way to get there, which is to compete with those guys," said Ted Sarandos, Netflix's chief content officer.

Netflix currently pays Starz to stream films from its suppliers, which include Walt Disney Pictures and Sony Pictures, during the pay TV window. Its Internet offering is otherwise made up of independently produced pictures and those that have finished their pay TV run, which typically lasts about eight years after theatrical release.

While specific financial details were not disclosed, people familiar with the deal said Netflix's payments to Relativity would be similar to those typically made by pay channels to studios and could go as high as about $100 million per year.

That figure will largely depend on how many movies Relativity ends up producing and how they fare at the box office. Sarandos said he was expecting roughly 12 to 15 pictures in 2011.

The deal doesn't cover movies that Relativity co-finances with Universal Pictures and Sony Pictures under existing agreements. It only include the ones it makes as part of a small but growing initiative to fully finance productions itself, including through Rogue Pictures, the low-budget label it bought from Universal last year.

Among the movies Relativity has financed in the last year are the hit romantic weeper "Dear John" and the flops "MacGruber" and "The Spy Next Door." Upcoming films that will go through Netflix include boxing drama "The Fighter," starring Christian Bale and Mark Wahlberg, and the Nicolas Cage thriller "Season of the Witch."

"This is very similar to the kind of deal that gets made with HBO or Showtime, but it has characteristics that we feel make this a better all around structure," said Relativity chief Ryan Kavanaugh.

A major difference is that Netflix will allow Relativity to sell and rent its movies through digital stores such as iTunes and Amazon.com as well as video game consoles. HBO and other pay channels forbid other methods of digital distribution during certain periods when they have exclusive rights.

-- Ben Fritz

Photo: Ryan Kavanaugh, Relativity Media's chief executive. Credit: Michael Kelly / For The Times