hoc opus

Emmett/Furla Films has renewed their nonexclusive agreement with Millenum Films to produce at least eight pics a year budgeted in the $25 million-$65 million range over the next three years. According to Variety, the companies have completed more than 25 films over the last five years. From George Furla,

"Our relationship with Avi [Lerner] and Millennium is truly multidimensional. Not only are we able to cash-flow pre-production and development costs, we can also fully fund the negative costs of entire projects. By doing this, we are able to spread the risk and can thus produce more projects together."

Emmett/Furla is a wholly-owned subsidiary of public company Family Room Entertainment (FMLY).

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Mixed amidst Viacom's first release of financial data ― net earnings of $130 million, down nearly 70% due to a $94 million loss in the studio driven by a 42% drop in worldwide theatrical revenues ― was more detail on its impending sale of the DreamWorks 61-title library. Executives indicated that the expect at least $900 million for the library, up from earlier estimates of $800 million-$850 million.

While Paramount is still in talks with George Soros' Soros Capital Management, according to Variety, other possible buyers include "Goldman Sachs, led by banker Joseph Ravitch, [who] is said to be readying an offering worth about $930 million. Ravitch helped put together financing for the Weinstein Co. and the sale of MGM to Sony and a group of investors. And another possible offer is said to be coming from Dresdner Bank representing some Russian investors." Should Soros prove successful, it is reported that he might be joined by Dune Capital Management the film co-financing entity, which is a spinoff from Soros Capital.

Whichever way it falls out, this puts the value of the rights to these films at an average of approximately $15 million.

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Now that Genius Products and the Weinstein Company are well on their way to forging a joint home video distribution company, what would that mean for Genius' efforts to distribute product theatrically through the Wellspring brand acquired in March 2005 when they completed their purchase of American Vantage Media Corporation. Succinctly stated by Variety:

"Wellspring -- which specializes largely in foreign-language pics and has a track record with long-running arthouse films -- was acquired by Genius last year, and the company's role in Genius' plans fell into question when the Weinstein Co. entered the fold."

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Today, MediaPost provided news from E-Poll, an online market research/polling company focused on entertainment, that

"when asked which pricing model they would prefer for an ideal VOD service, more than 75 percent of respondents opted for "free"--meaning no monthly subscription fee and no per-show fee."

Taken in tandem with statistics from Leichtman Research - providing actionable research on broadband, media and entertainment - on MultiChannelNews that less than 20% of those surveyed would utilize only VOD or DVRs, that 65% of digital-cable customers have used VOD., and backing up today's research, that only 16% of current VOD users would be very likely to pay $0.99 to watch a program on demand.

Add in Comcast's announcement that it is implementing technology to insert "fresh" ads into VOD streams and it becomes clear that DVD dollar levels for VOD programming are a bit off, excepting cash picked up from iTunes videocasts. So, take that revenue out of your business plan for Revenge of the Scary Thing IV.

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Variety reported today on Beverly Hills-based Groundswell Productions, producer Michael London's film fund financed production and financing company aiming for five pics per year under $20 million each.

"Groundswell launches with an initial capitalization of $55 million and is in the midst of additional fund-raising with a target of $100 million over the next six months courtesy of Beverly Hills-based Lexington Film Funding and New York-based Crescendo Independent Film Fund."

While it is unclear whether Lexington Film Funding is managed by Lexington Venutres or is a part of Lexington Entertainment Group, both companies are owned by Lou Gonda, a billionaire who made his money at International Lease Finance with aircraft leasing (see this May 2000 LA Business Journal article).

The LA Times sums up the significance of this next influx in a stream of cash currently flowing into Hollywood,

"No matter how unpredictable the movie business can be, private investors are drawn to it like moths to flame."

"said that by controlling costs, he expected to average $20 million to $25 million in profit per film over a slate of movies once all the revenue streams, including home video and TV sales, were factored in."

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Boosting his available war chest to over $250 million, Ashok Amritraj has secured an additional $100 million in financing for Hyde Park Entertainment from Swiss investment banks (per Variety). This will allow Hyde Park to fully finance three movies a year, upping their co-financing deal with Fox.

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Barely a week after announcing the launch of Artisan founder Bill Block's QED International, "a Beverly Hills-based financing, sales and production company backed by an initial round of nearly $10 million in private equity" (per Variety), the company has just announced at the Berlin Film Festival that it will will jointly co-finance and co-produce four movies with InterMedia.

Demonstrating its desire to do more than "fill[ing] what it sees as the ever-growing need for a place where a variety of indie and studio producers can go to secure money and packaging aid," the deal is the first of several that QED is contemplating.

With so much new money in Hollywood tunnelling directly to the studios in the form of co-financed slates, QED has a mission:

"We are launching QED at this time because we see an opportunity in the landscape for a focused sales agency that fully services studio and independent producers that extends beyond just the deal to marketing, delivery and distribution to our territorial partners," Block said.

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Former Disney unit MovieBeam, with a service that allows customers to rent movies from a library of 100 titles stored in a set-top box, has been restarted with $48.5 million in fresh cash from Disney, Intel, Cisco and Mayfield Fund and Norwest Venture Partners, two venture capital funds. The newly independent company carries with it the distribution agreements that it has with all major studios excepting Sony -- which, while in discussions with MovieBeam, according to Variety, "is likely holding back content for its own video-on-demand service Connect, set to add movies in March." One should note, though, the recent reorganization of the currently-music-download-only-service and its uphill fight against Apple's iPod and iTunes Music Store combo, as reported on ZDNet News

Details about the service from Variety highlight Disney's demonstrated commitment to collapsing the distribution windows to a what-you-want-when-you-want-it-where-you-want-it model:

Most films will be available in the video-on-demand window, which typically comes 30 days after homevideo. But in a deal that's the first of its kind, MovieBeam will have films from Disney the same day they hit homevideo, with an option to watch in high-definition.

The LA Times also notes that "other experiments with video on demand, such as MovieLink and CinemaNow, have failed to catch on with customers. Adams Media Research estimates that Internet movie rental services reaped only $17 million in revenue last year."

This is another setback for NetFlix, which announced a delay in launching its own VOD service back in October, when "Reed Hastings, the company's chief executive, told analysts on a conference call that the costs of licensing content for a download service would be prohibitive in the current climate." (see MarketWatch)

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Summit Entertainment has formalized its history with Constantin Film by closing a first-look distribution deal to sell rights "to all countries excluding North America, which Constantin will continue to handle itself, and German-speaking territories, where Constantin has its own distribution." As noted by Variety, "Summit's pact with Constantin formalizes a long-standing relationship between the two companies."

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Sony has set its wholesale prices for next-gen Blu-Ray discs. Amidst all of the chatter of the flattening of the home video revenue juggernaut, it's not surprising that Sony is seeking to secure growth in home video. Even if people don't seek to upgrade their libraries, new title sales will still deliver more money.

As reported by The Hollywood Reporter,

"Catalog Blu-ray disc titles will wholesale for $17.95, about the same as DVDs when that format hit the market in 1997. New-release Blu-ray discs will wholesale for $23.45, a premium of 15%-20% over what suppliers were charging for new theatrical DVDs."

Sony's company line was presented by Benjamin Feingold, president of Sony Pictures Home Entertainment, "The premium is for a way better format and to remind retailers that at the time we launched DVD, VHS was selling for $55 wholesale in the first window."

In this announcement, Sony also highlighted its bundling of DVDs and UMDs for just pennies more than the cost of a DVD alone.

UPDATE: This isn't surprising given the announcement coming just a few weeks later, covered in Variety and The Guardian, that "Sony Pictures Home Entertainment, Paramount Home Entertainment and Warner Home Video are cutting back on movie releases for the PSP." Bundling will help Sony move the remainder of its inventory and prop up the type of numbers it reported in 2005 for UMDs. However, The Guardian summed it up in typical Brit bite:

"While it might not surprise you that UMD, a disc format that can only be played in one company's machine, costs more than a DVD, and can't be (easily) played through a TV might not have a great chance of thriving, the same thought clearly didn't occur to Sony's executives."

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Changes are afoot at MGM and the focus is finally clearing up. As pointed out by The Hollywood Reporter,

"Hollywood's once-mighty lion is, in fact, owned mostly by equity investors, including Providence Equity Partners (29%), Texas Pacific Group (21%), DLJ Merchant Banking Partners (7%) and Quadrangle Group(3%). Sony and Comcast each have a 20% stake. MGM has a distribution partnership with Sony that covers films produced by MGM that originate from the library, like the upcoming Bond installment 'Casino Royale.'"

First, MGM hires Harry Sloan as chairman and CEO in October of last year, who announced his intentions to beef up production activities. Then, it's announced that Rick Sands will be moving into the COO spot, just as Dan Taylor resigns his post as President. So, although the original story behind the transaction was for Sony to mine the value of the 4,000 title library, growing its value through new distribution channels (think VOD and VCast), now's there's an announcement that MGM is looking to become the indie rent-a-system pipeline.

That's right, the studios are consolidating - as Dreamworks moves into Paramount and Pixar makes permanent its Disney pipeline - but smaller players are flush with cash - think The Weinstein Company. In fact, specifically think about Harvey and Bob, because Variety reported that MGM "is close to a deal with the Weinstein Co., and in talks with several production companies, including Lakeshore Entertainment and Bauer Martinez, to forge distribution pacts." It has been reported that any such deals would be non-exclusive and focus MGM on distribution and marketing, without spending its own funds on development or production. The Los Angeles Times gets to the meat of the matter for why anyone would want to distribute through MGM,

"Movies flowing through MGM's distribution pipeline would qualify for the studio's existing pay TV and other ancillary deals in the U.S. and in such foreign markets as Japan, Australia, Latin America, Brazil and Europe. Those deals are financially significant to producers because they can yield tens of millions of dollars that can be used to fund new productions."

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