July 18, 2008 / 7:31 AM / 10 years ago

Weinstein brothers endure challenging second act

NEW YORK (Hollywood Reporter) - As far as Harvey Weinstein is concerned, he and his brother Bob have been battling naysayers for 25 years.

Bob Weinstein (L) and his brother Harvey Weinstein, the founders of The Weinstein Co., an independent motion picture studio, pose at the premiere of their studio's film "1408" in Los Angeles, California June 12, 2007. REUTERS/Fred Prouser

Although they proved their critics wrong more than once during their long run at Miramax, when they walked away from the company they founded, they inevitably faced a chorus of skeptics who doubted their ability to create a new, independent entertainment company on a grand scale.

Since setting up their privately held Weinstein Co. in 2005 with $490 million in equity and a $500 million debt facility, the duo haven’t reached the same highs they enjoyed at Miramax. Box office high points like 2006’s “Scary Movie 4” (which grossed $178 million worldwide) and 2007’s “1408” ($131 million) lacked the cultural sizzle and awards validation of “Pulp Fiction” or “Shakespeare in Love.”

Two $4 million acquisitions, “Dedication” (purchased with First Look) and the Oscar-hyped “Grace Is Gone,” grossed a poor $93,000 and $51,000 respectively at U.S. theaters last year.

But while their theatrical track record has been decidedly mixed, the Weinsteins say they’ve been busy building a 600-title library and tending to ancillary businesses such as home video and pay TV.

“The press only see the theatrical side of the business,” Harvey said. “But you folks don’t see a movie like ‘The Reef,’ selling three or four hundred thousand DVDs and doing big business at Blockbuster.”

The brothers insist they’ve finally got all the elements in place to do justice to a full slate of films, some already shooting, others ready to go before the cameras.

Still, like everyone else in the indie film sector, the Weinsteins face a tightening credit market and a glut of films that have made scoring a hit ever harder. As a result, some question how the Weinstein Co. is financing its many projects.

Insisted one Wall Street observer, “They are running relatively low on capital right now,” though he quickly added that “their house is getting in order.” Pointing to a precipitous drop in the stock of Genius Products — the Weinstein Co. has a 70% stake in Genius’ home video company — Merriman Curhan Ford & Co. analyst Eric Wold said, “What’s impacted the Genius stock since last November, when it started a freefall from $2.50 down to 20 cents a share, has been fear about the Weinsteins’ financial situation.”

“Nonsense” is Harvey Weinstein’s response to such aspersions. “People have been writing negative stuff about us for the longest time, and it never pans out.”

If the Weinstein Co. is under such financial pressure, how has it managed to ready a string of big-budget productions, not to mention shepherding a new season of “Project Runway” onto the air, he pointed out. “Perhaps we’re too active,” he sarcastically interjected.

If anything, Weinstein said he’s “bullish” about the company’s current prospects. “We’re well-financed, and every one of these new productions has been budgeted out.”

Reviewing the current state of his company, Weinstein said, “It took us two and a half years to build an infrastructure.” Added Bob, “It was a harder load than we thought it would be.”

As its theatrical distribution deal with MGM draws to a close, it says it will begin releasing all its films itself; it’s got a newly announced pay TV deal with Showtime; home video distribution through Genius and Blockbuster, and free and pay TV deals throughout Europe.

The Weinsteins are currently embarking on several deals where they’ve taken on partners, which will limit their financial exposure.

They have found one ally in Ryan Kavanaugh’s Relativity Media, which has taken a 25% stake in the all-star $80 million adaptation of the Broadway musical “Nine,” and could well invest in further productions.

The Weinstein Co. also is looking for a studio willing to step up to share the costs of producing Quentin Tarantino’s World War II tale “Inglorious Bastards” in exchange for foreign rights.

“It’s not so much about the money as about having a good partner who can press the button,” Harvey said. Saying that it’s just coincidental that the two high-profile films are designed as co-productions, he added that “70%-80% of our slate has no partnerships.”

At the same time, the Weinstein Co. has stepped away from a string of film acquisitions.

“Outlander,” a $30 million sci-fi fantasy starring Jim Caviezel that has spent more than a year in post-production, is quietly being shopped to other distributors; “Virgin Territory,” a period comedy starring Hayden Christensen and Mischa Barton, is going straight to video.

The Weinstein Co. has let several of its film festival buys, including “Vince Vaughn’s Wild West Comedy Show” and “All the Boys Love Mandy Lane,” go to other distributors.

Although not addressing such films specifically, Harvey Weinstein said, “We don’t believe in spending the P&A (prints and advertising) on a movie that’s just not going to work.”

In fact, the Weinstein Co. has created a new distribution label, Third Rail Releasing, to handle films like the recent Catherine Zeta-Jones vehicle “Death Defying Acts.” Acquired primarily for the home video market, the Weinstein Co. released the film in just two theaters to fulfill contractual obligations.

Reuters/Hollywood Reporter

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