Miramax: Harvey Is on the Line

With Disney breathing down his neck, studio head Weinstein needs a hit

How do Hollywood moguls settle a dispute? Over waffles, if they're DreamWorks SKG partner Jeffrey Katzenberg and Miramax Film Corp. Co-Chairman Harvey Weinstein. In this case, both men wanted to open their respective Leonardo DiCaprio flicks on one of the country's biggest box-office days, Dec. 25. Normally, you might handicap this one for Weinstein, who's more pugnacious and a whole lot bigger than Katzenberg. But surprisingly, during an early October breakfast in New York, Weinstein ceded Christmas Day to Katzenberg for Catch Me If You Can. Miramax' Gangs of New York will premiere on Dec. 20. "Harvey graciously acknowledged that we planted our flag on Dec. 25," says Katzenberg.

Losing the prime release date is just the latest problem for Miramax in the past year. The studio has put out fewer big hits than in prior years, its top marketing executives bolted, and it laid off 75 staffers earlier this year, the first major downsizing in Miramax's 22-year history. Now, it faces its riskiest holiday season ever, releasing four films into a crowded field of competition. In all, the studio will likely spend $150 million to make and market the new films that are scheduled for release in the coming weeks. And the buzz for Gangs of New York is mostly bad, raising questions about whether DiCaprio has lost his magic. "It's karmic payback for Harvey," says one A-list director, referring to the brusque, ultracompetitive Miramax co-chairman.

Complicating Miramax' Christmas prospects, Gangs will open during one of the busiest holiday seasons in recent years, with 22 major films jammed into a two-month period, according to box-office tracker Exhibitor Relations Co. Among the competitors for eyeballs will be the 20th James Bond film, Die Another Day, and sequels to Star Trek and Harry Potter and the Sorcerer's Stone, which last year grossed $318 million (table). "It can be a killing field out there for some films," says independent film marketing consultant Peter Graves.

Weinstein's big bet on the holiday season is also giving a migraine to Michael D. Eisner, CEO of Miramax parent Walt Disney Co. (DIS ) Hollywood power brokers have been whispering for months that Eisner is steamed at Weinstein for allowing the costs of Gangs to go as high as an estimated $120 million, making it Miramax' priciest project ever. (Miramax claims it cost only $100 million.) Disney is already battling a lackluster economy at its theme parks and tepid ratings at its ABC television network.

How much of a problem Miramax will be for Disney is unclear. The parent has given Weinstein and his brother, Co-Chairman Bob, pretty much a free hand ever since Disney bought the studio for $60 million in 1993. Disney doesn't break out Miramax' numbers, but sources say the studio's operating profits--which Weinstein claims were $140 million (and others dispute)--will be down for the fiscal year ended Sept. 30. Expect a further drop this year if Miramax suffers yuletide disappointment. A Disney executive denies that Eisner is upset with Miramax, noting that the revenue from the Miramax library "by far exceeds any year-to-year earnings comparisons."

Miramax executives insist they have insulated themselves from losses on Gangs. As they do on most films, the Weinsteins routinely bring in partners to share the costs. That's the case with the much-delayed Gangs, a violence-splattered 1800s piece directed by Martin Scorsese, who began filming the movie, also starring Cameron Diaz and Daniel Day-Lewis, without a completed script. Early on, Disney sold the foreign rights for $65 million. DiCaprio and Scorsese paid a total of $7 million to help fund overruns, but that still left Disney and Miramax to put up the rest. To market the film in the holiday crush, Disney and Miramax will need to spend $30 million or more.

How Miramax will get its money out of Gangs is hard to fathom unless it's a big hit. Having sold off the foreign rights, Disney and Miramax won't see a dime from countries where DiCaprio and Day-Lewis are popular, especially in Europe. At 2 hours and 40 minutes, the number of nightly showings is limited. And with Gangs rated "R" for its violence, it's roped off from the teen viewers who can make films monster hits. Instead, teens will likely flock to the second installment of PG-13-rated Lord of the Rings, The Two Towers, that opens two days earlier or Steven Spielberg's Catch Me If You Can. Miramax officials counter that polls show that awareness for Gangs is high and the "R" rating shouldn't make a difference. Factoring in video and DVD sales, claim Miramax executives, Gangs needs to take in $60 million in the U.S. to break even.

Gangs of New York isn't Miramax' only holiday challenge. It's also releasing an English-dubbed version of Pinocchio starring Roberto Benigni, best known to U.S. audiences for Miramax' 1999 smash Life Is Beautiful. Pinocchio opened strongly in Italy, where Miramax doesn't own the rights, but it isn't expected to do as well in the U.S. Miramax' two other holiday films are uncertain as well. The buzz is good for Chicago, the film version of the Bob Fosse stage musical starring Catherine Zeta-Jones and Richard Gere. But it's just about nonexistent for the George Clooney-directed Confessions of a Dangerous Mind, about game-show impresario Chuck Barris, who claims to have been a Central Intelligence Agency hit man. Both movies will be released on a limited basis in December, before a broader January release.

A hot Christmas would help Miramax, whose 2002 so far hasn't matched last year's blowout, with blockbusters such as horror thriller The Others and the PG-rated action film Spy Kids. Miramax' 21 films so far this year have averaged $10 million each at the box office--half last year's average. It lost money on the Nicole Kidman thriller Birthday Girl and will likely lose more on Waking Up in Reno, the just-released Billy Bob Thornton comedy. Even Spy Kids 2's $84 million box office disappointed after Miramax projected a $100 million blockbuster.

Miramax didn't make Weinstein available for this article, but in earlier interviews he has said he is again focused on the business after being distracted in the past year by investing in Broadway plays, such as The Producers, and stumping for Democratic pols such as Hillary Clinton.

Still, Miramax could end up in Disney's doghouse next year. Another looming budget-breaker is Cold Mountain, based on Charles Frazier's Civil War best-seller. The payday for stars such as Kidman, Renée Zellweger, and Jude Law has nearly doubled the film's bud-get, to $84 million, sending onetime partner Metro-Goldwyn-Mayer Inc. (MGM ) fleeing and forcing Miramax to search for another partner. Miramax execs say they'll find the money. They'd better. If Gangs of New York bombs, Scor-sese's mean 19th century streets may not be the only bloody place around Miramax.

By Ronald Grover in Los Angeles

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