A Hollywood Split's Shrunken Assets
By Ronald Grover
It's Hollywood's biggest split since Jen and Brad. Within days, Disney (DIS ) and those wild and crazy Weinstein boys, Miramax founders Harvey and Bob, are expected to call it quits. This may not qualify as a quickie divorce, but as far as Disney dissolutions go, it will be a cheapie.
Remember onetime studio chief Jeffrey Katzenberg's legal battles to get his promised $280 million in bonuses? And former Disney President Michael Ovitz' $140 million severance package -- for 15 months on the job? Still, as is the case in most breakups, no one will really come out a winner when this 12-year marriage ends.
STAYING AS CONSULTANTS.
The particulars of the divorce, at least as explained to BusinessWeek Online by someone close to the talks, seem fairly straightforward. (Neither Disney nor the Weinsteins would talk for this article.) The Weinsteins will receive in the neighborhood of $100 million to resolve their longstanding complaints that they have been stiffed on bonuses.
The brothers will get their Dimension Label, which made such box-office winners as the Scary Movie and Spy Kids series of films. The Weinsteins will control those pictures but, under the deal, Disney will be allowed to act as partners in funding any future Dimension flicks.
Disney gets the two movie moguls as consultants through the end of September, when their contracts expire, as well as the Miramax label and the rights to its library of 600 or so films, including such hits as Chicago, The English Patient, and Shakespeare in Love.
The reason for the split: Harvey can't stand working with Michael Eisner, something Harvey has never been shy about saying. And with Eisner intending to stick around until his contract expires in September, 2006, Harvey wants out of his current deal.
In recent months, the animosity seems to have traveled both ways. Eisner has pointed out to investors that the Weinsteins made money for Disney in only two of the last five years. Harvey has complained about Disney cutting Miramax's $700 million annual budget and refusing to release Michael Moore's Fahrenheit 911. So, if the Weinsteins get their freedom and Disney gets one of the hottest names in the business of artsy films, why isn't this a Hollywood ending?
First, look at it from Disney's perspective. True, it gets all those titles in the Miramax library, but that isn't as great a deal as a casual glance might suggest. The distribution rights to most of those films are jointly owned by a cast of hundreds of other companies worldwide. That's a standard practice among outfits like Miramax and Lion's Gate, which sell off some of the rights to films they make to defray costs or share rights to obscure foreign films or jewels in the rough that they bring to the U.S.
Take the Howard Hughes biopic, The Aviator. According to the Web site imdb.com, Miramax shares U.S. rights for the film with Warner Bros. (TWX ), while Initial Entertainment Group controls foreign rights. Shakespeare in Love was distributed by Miramax in the U.S. but by Sony and others elsewhere in the world. These kinds of deals reduce the library's cash-flow potential.
O.K., but Disney will own the Miramax name -- derived from the first names of Harvey and Bob's parents -- so all it needs to do is produce more of those great low-budget artsy films that once made Miramax the envy of Hollywood, right? Well, back when Miramax started, it didn't have the kind of competition it does now. Other studios, inspired by Miramax's success, have set up their own small-budget, artsy divisions. Fox's (FOX ) Searchlight Pictures has produced the low-cost winners Sideways and 28 Days Later, and Universal's (GE ) Focus Films released Lost in Translation and Eternal Sunshine of the Spotless Mind.
Disney intends to slim down Miramax and hire a new boss, but it won't be as simple as that. Some of the hottest directors in the business, including the likes of Quentin Tarantino and Robert Rodriguez, are Weinstein guys. Miramax, minus Harvey and Bob, will lack the allure for the kind of talent that once flocked to it. Despite their flaws and faults, the brothers were true showmen who nurtured special relationships with even the most difficult of directors. They'll be difficult, if not impossible, to replace.
Not that Harvey and Bob are exactly swimming downstream, either. The less-than-shy Harvey once boasted that he had folks lining up outside his New York City condo to finance him. Not true -- at least not now. Word around Wall Street is that investment bankers feel leery of a guy who, according to Eisner, was far less businessman than showman. (True, Eisner's credibility has taken a licking of late in James Stewart's tell-all book, DisneyWar, and movie accounting allows studios to see losses where others may see profits.) But Harvey has had problems lining up the $250 million or so that he and Bob want to start a new studio.
Talks with longtime buddies at Blackstone Partners broke down last week, I'm told, and Harvey is now chatting up Goldman Sachs (GS ). He has also been talking of late to former Artisan Entertainment CEO Amir Malin, who just started a $200 million Qaulia investment fund to finance entertainment ventures, in hopes of showing other investors that savvy money is lining up behind him.
The Weinsteins will eventually raise their money, even if it totals less than they had hoped. But then there's the question of who will distribute their movies if doing so means dealing with the temperamental duo. Indeed, the brothers are notorious for taking control of marketing, arguing loudly with those who disagree with them, and running up sky-high ad budgets to ensure a big opening. Most movie studios won't be willing to give up that kind of control, even to a couple of guys with an armful of Oscars. So don't look for many big-dollar advances.
Where does that leave Disney and the Weinsteins? You can bet that they'll work together down the road, especially on sequels to those Dimension films. But odds are that they won't ever get back together in any kind of serious way. Few divorced couples ever do.
The marriage was awful -- even if it did produce some terrific offspring. But divorce also sucks, as both Disney and the Weinsteins may discover soon enough.
Grover is Los Angeles bureau chief for BusinessWeek
Edited by Patricia O'Connell