How to Make Financially Responsible Movies

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April 28 (Bloomberg) –- Relativity Media Founder and CEO Ryan Kavanaugh discusses his company’s approach to film from the 2014 Milken Global Conference on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Welcome back to "street smart." boeing says it is comfortable with the 787 this year.

We spoke with the ceo at the companies annual general meeting today.

Matt miller did ask about the plans for the 777. as we're fleshing out the 787, i think after that, which will be the beginning of the next decade, we will address that market segment which you legitimately raise as something we asked for.

I think boeing's best role is technical support, as i tried to say here to the regulators and to the governments involved.

We are leaving no stone unturned in looking at an re-examining the technologies that were associated with tracking the flight, which insured tamper proofing of information on and off the airplane.

We are going to stay laser focused on that and providing all the information to the authorities that they need.

Let's head back out to los angeles right now where the milken global conference is underway.

Jon erlichman is there, joined by another special guest.

Ryan kavanaugh is the ceo and founder of relativity, where the most well-known film distribution companies.

They put out 10-15 movies a year.

They currently have 37 reality series.

Just as a side note, the second-biggest porch agency in the industry.

With everything on your plate, what you most passionate about right now?

It's kind of like asking which of your children is the favorite.

We are working on a project right now called mad vine.

It basically looks at all the problems in the antiquated systems in the advertising business.

Brands are having a harder and harder time reaching consumers.

We have launched an agency branding company that we call 360 vertical.

We pick a brand for each market segment and integrate them into film, television, sports, fashion, and they become our exclusive partner.

You like to find businesses that maybe the little bit of an update.

With the film business, a lot of people describe it as -- maybe the budgets are too big, bigger than they need to be.

I think it has generated five times what the production budget was.

Are there others that are getting tougher to make the kind of movies you want to make, financially responsible movies?

Shockingly, you would think it is getting tougher, but it has actually been getting easier.

As the studios are growing and they are subsidiaries of much larger fortune 100 companies.

They are swinging for the goal.

You have small programs but you have huge superhero movies on top of each other.

Warner bros., fix our, superman, batman, iron man.

They're all really big.

You need all the quadrants.

We make movies that we target to be in the $20 million-$60 million box office range.

It takes almost all the risk out of our films.

There are singles and doubles, to use a baseball analogy.

What is a home video right now?

Dvd, literally.

Our digital is much higher.

The young males and females, we target them specifically.

We end up with 85% of our films making a profit versus other studios that end up with about 50%. do you ever feel like we are being over branded at this point?

Every single actor, musician, athlete that sits down here, everybody wants to be a brand.

Can they really be?

I don't know that everybody can be a brand.

At the end of the day, it's great that if someone can act, they are saying i want to expand out.

The same thing with athletes.

In our sports agencies, that is part of why we grow so fast.

We allow them access to film, television, fashion.

A new movie is coming out next year that's going to be great.

What about rock nation getting into the space?

Trying to offer it to other athletes and musicians.

I would probably say that is a direct response to us.

During free agency we took more athletes than anybody has in the history of free agency because we can offer them true access to film and television.

We make 15 movies the year.

We do all of our own soundtracks.

If we want to make it happen for us, we make it happen.

Jay-z is really good at since -- discovering talent, but he has others to do it.

He recently got into the headlines because of your interest in baker studios, which is me is in the process of acquiring.

Is this a sign of things to come with relativity?

Good question.

If you can get in the weeds, we like that.

I might get myself in trouble.

That would make another headline.

The reason i like the maker business model, they have something unique.

They have literally hundreds of millions of people interacting with their content.

They have end-users and people who are on youtube actually working with content.

But they don't have as a business model that works financially.

At the end of the day, it is an advertising model.

Because we have so much content, movies, television, athletes, and we have 11 shows around our athletes.

We are the largest supplier of sports content outside of the league.

Rick so if you didn't get makers, are you going to bid for something out?

Where in active negotiations with other laces.

When you look at the way that maker has treated the most important people, people who actually create the content, they are the most important.

They got nothing in the sale.

They are not under contract so they will wall.

Maker goes -- you mentioned there are a lot of other studios doing these big films.

You guys are involved in the next -- paul walker obviously a friend of years.

What is the process like and what has it been like?

It's bittersweet.

Paul was a very good friend and a really good guy.

It's tough because you are walking a fine line.

You want it to be successful for business reasons and for his legacy.

At the same time come you've got to be careful.

You don't want to overstep bounds of someone when you really want to honor his memory.

We tried not to over promote and over market.

We knew that the audience and his fans would find it.

His fans really did end up loving it.

He was very true to himself in it.

Thank you so much, ryan kavanaugh of relativity.

Breaking news we want to get to right now on herbalife.

The numbers just coming out, 150 versus 130. the company saying it will defend its dividend.

We are hearing from carl icahn on twitter.

The company has been in a lot of controversy.

Is also under investigation by the fbi and the illinois attorney general, among others.

But business continues to go gangbusters, earnings rising more than is the mated.

-- war than estimated.

Now looking for 12% sales growth for the full year.

You mentioned that the company is softening its dividend.

It is doing that to use that cash to buy back more stock.

One of the tools in its arsenal in the fight against bill ackman has been a promise or threat of being able to buy back shares in order to bring up the stock price.

Ackman has shorted the stock both out right and through options.

For those who are supporters, they have said this is something they would be able to use at some point to bring the stock price back up.

They are going to be deploying even more cash away from the dividend.

The company says it will buy back 260 $6 million worth of its own shares in may and june.

For a total of about $581 million.

Carl icahn writes -- confirms confidence in the future.

A little bit ironic to hear someone like carl say suspend the dividend, but he does like the idea of a buyback.

We have seen that before and it usually signals confidence in the future.

Do we have the after hours trading on this one?

I think it is down about one percent on the news.

As you were alluding to earlier, the controversy between carl icahn and pershing square.

Atlantis preparing to release a short documentary later this week.

Julie hyman, thank you very much for breaking down those numbers.

Coming out, marvel has managed to dominate the comic book world . find out who we are teaming up with next for your entertainment dollar.

Stay with us on "street smart." i will be right back.

? we bring you the business behind media, entertainment, and pop culture.

Ringling brothers has been charming kids for over 100 years.

Now the company is hoping to spread the big top fun and excitement into the marvel universe.

Joining me is the executive vice president and producer of feld in attainment.

How is the deal with marvel going to work?

We're so excited that this will be the first live touring production of over 25 marvel heroes and villains.

It is the largest and most ambitious project we have ever taken on.

What makes it so large and so ambitious?

Is it the number of cities you will be touring?

Is it the production itself, the number of actors involved?

We have 85 cities in the u.s. and canada in the two are in the first two years.

A very aggressive schedule.

The entire production itself, over 20 trucks are going to hit the road with this show.

We have over 25 heroes and villains including fireman, the avengers, and x-men.

There is something about superheroes in general that appeal to people.

It appeals to the inspirational and ambitious side of all of us.

How are ticket sales looking this month?

We went on sale in january in ticket sales were really strong.

The best seo we have ever had so we're really excited about that.

We have an offer where kids can get a free comic book day gives you a sneak peek into the original story of the show.

So it is a good time to be hard of it.

You have disney on ice, and of course the circus.

Tell me about "frozen turcotte -- about "frozen." that might be a good combination with disney on ice.

There is a disney on i show that will hit the ice this fall.

We have not released exactly what the theme of the show is going to be but we promise it will be fantastic.

We go into rehearsals with ringling brothers barnum and bailey.

We are increasing our portfolio this year.

It is a big year for feld entertainment.

Are people spending?

Two dates this year we sold over 9 million tickets.

In an average year we do about 30 million tickets worldwide and perform in over 70 countries.

So having a great year.

What are the countries where you are seeing the most volume other than the u.s.? i would say the continent of south america has more opportunities popping up for us.

Asia is of course a huge emerging market.

We just played australia and we have plans to go back.

The expansion is incredible.

Exit is a family business.

I think i interviewed your dad on this very set.

Really growing up in the circus.

Thank you very much, good to have you here.

That doesn't today for "street smart." tomorrow will be a big day for tech earnings with numbers out of twitter.

We will be all over that for you.

On the markets is up next.

We will see you tomorrow.

? bloomberg television is on the markets.

Let's take a look at where stocks closed out the session, not much change when all is said and done.

We saw little bit of increase for that destin be -- the s&p, the dow and the nasdaq.

People still watching earnings, still watching the situation internationally in russia, but a lot of volatility throughout the session.

In the treasury market today we actually saw little bit of fall in the price in yields and we do have the federal reserve beginning a two-day meeting tomorrow, so people are watching that and expecting they will further scale back their bond purchases that they had been using to support the economy.

For the key data and events investors should be watching, i am joined by the market strategist and portfolio manager . i just mention what was going on with treasuries and i mentioned the fed meeting.

Any kind of nuance or surprises people are going to be looking for from the fed?

I think the expectation pre-firmly for another $10 billion cut in quantitative easing, and fewer monthly asset purchases by the fed.

I think the market has largely shrugged off a lot of what has happened so far.

If you look at credit markets, for example, the spread between corporate bonds and treasuries or high-grade corporate bonds have gotten very tight.

You have to go back to 2005 to see the level of tightness you are seeing in the corporate bond market.

Not a lot of concern about risk there.

If you look at what is happening in the equity markets, we have had a good run from the bottom last year which was a good year.

The earnings picture, supposed to have negative earnings when came into the quarter.

We are starting to see a little bit better results for the quarter.

Overall the market is priced with a fair degree of optimism.

And yet it's not gaining a lot of traction, it's just not going down much.

We have been in this water treading mode for a while and there has been a lot of the boat -- lot of debate about the economic data.

What is it going to take to break out of that?

Think you have to have a compelling case that the economy has indeed re-accelerated out of a slowdown during the winter.

What is going to be that conclusive case?

You need to put together a series of data points.

During march and april we have seen a pickup in manufacturing.

A pickup in final demand in terms of automobile sales.

We will get more data on that shortly.

There has been a meaningful improvement in employment.

It's just a matter of putting together a series of data points to begin to reaffirm a lot of improvement in the second quarter is going to be better.

We only grew about 1% in the first quarter and that is not getting the job done.

I know you are overweight u.s. equities.

You have had a lot of short bets on small caps recently.

Why are you flying in the face of that trend?

Vexed that is something we have to watch.

We have moved money away from nondollar assets into dollar assets some time ago.

We are watching that trade very carefully.

There are some issues we need to be cognizant of.

Number one, when you look at valuations, they have become

This text has been automatically generated. It may not be 100% accurate.


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