hoc opus

Genius Products, the home entertainment distributor controlled by The Weinstein Company, announced in Variety today that it has been made the exclusive distributor "to release Tartan USA's library and new titles domestically on DVD."

Tartan USA is the domestic operations for Tartan Films, a producer, financier and distributor based in the UK. According to Variety, "[the] First title to roll out under the pact will be Korean pic "Cello," which will be marketed under Tartan's Asia Extreme genre imprint." Korean box office winner "Oldboy" was also distributed under this banner.

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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."

Tapping into its private equity backing, Emmett/Furla has provided money for both development and production, including development funds. Outside of its deal with Millenium, the company has provided partial and complete production funding for such films as "King of California" and "The Tenants."

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

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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."

Genius purchased Wellspring with a focus on its film and TV library with more than 750 titles, an 800-title short film library, and now has confirmed that choice by announcing that all titles remaining in the Wellspring pipeline will be distributed theatrically by TWC and Genius will handle home video distribution. And this rationalization will save Genius a hefty $1 million a year in overhead.

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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."

London, who previously had a first look deal with Paramount, has demonstrated his producing accumen, with "Sideways" grossing $110 million worldwide against a $17 million budget and "The Family Stone," with a budget of $17.5 million has grossed $90 million worldwide.

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."

And, more importantly, the expectation of profit from investing in "smaller movies" is illustrated by participant Harvey Gettleson, chief operating officer of Gonda's Lexington Ventures, who

"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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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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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.'"

"However," as noted in Variety, "a clause in the [acquisition agreement] will allow MGM to become an independent distributor and cease its arrangement with Sony in April [2005], if the company chooses."

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."

What's not yet clear is how MGM will work with the Weinsteins on home video, given Genius Products LLC, a joint venture that, according to The Hollywood Report, "will get exclusive U.S. home video distribution rights to all feature films and direct-to-video releases owned or controlled by the Weinsteins." Also afoot is the potential sale of United Artists, after The Times Online reported that MGM has been approached by at least one party with a $500 million bid for the unit, which would be sold with some library titles and, likely, its post-theatrical distribution agreements.

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