Kimberly A. Owczarski, Ph.D. “Money Will Be Made”: Relativity Media and Hollywood’s Relationship with Wall Street

Abstract Although the last three decades has been rife with the collapse of high-profile independents from Orion to Miramax, Relativity Media’s journey from financer to producer and distributor to bankruptcy in just eleven short years was a bit different than other independents. This essay examines Relativity’s status as a mini-major film studio, what factors led to its ascent, and the situations which led to its subsequent demise. Chief in this examination is Ryan Kavanaugh’s role in Relativity—as founder and chief executive officer, his position was vital in shaping both the successes and the failures of the firm. Indeed, the breakdown of Relativity ultimately demonstrates the challenges facing independent studios navigating the contemporary media environment as the Hollywood majors continue to consolidate their power in the industry.

On July 30, 2015, lawyers for Relativity Media filed companies in a system that typically finds success for bankruptcy protection in a U.S. court. Despite through big-budget projects. a successful track record of releases that included Relativity entered the competitive film the big-budget action filmImmortals (2011) and market as economic conditions shifted in the Oscar winner The Fighter(2010), Relativity’s industry towards new finance models, a trait it dependence upon Wall Street investment coupled shares with many independent film companies with institutional overspending contributed to that have grown to prominence in the last few the company’s financial woes, especially after a decades. In the late 1960s and 1970s, the change series of underperforming films at the box office. of ownership in several of the major studios for As Relativity seemed poised for disintegration, the first time in their histories created instability much of the firm’s problems were attributed to the in the film market. Under different management company’s founder and chief executive officer, Ryan styles, the studios were forced to find novel ways Kavanaugh. Because Kavanaugh had a successful to become more profitable. The record-breaking track record of bridging Wall Street investment success of Universal’s Jaws in 1975 and 20th with Hollywood filmmaking in the earliest years Century Fox’s Star Wars in 1977 at the box office of Relativity—he had brokered deals with majors and in merchandize sales demonstrated the type Warner Bros., Universal, and Sony, among others— of texts that would increase profit margins for the the bankruptcy status seemed incongruous. Despite studios. Historically, studio financing has relied his investment accomplishments, Kavanaugh had on “a combination of self-supplied equity and wanted a more active role in the development film-specific bank lending.”1 Blockbuster films and creation of films. In running his own studio, particularly benefit studios because they guarantee Kavanaugh’s financial strategies were constantly income from various media forms, a necessity for questioned, especially in Relativity’s improbable studio financial stability and to secure large loans. rise and its subsequent descent into bankruptcy While blockbuster films could financially impact all in just eleven short years. Indeed, Relativity’s arms of the growing media companies, they came at collapse demonstrates the challenges facing nascent a high cost due to their production and marketing

50 The System Beyond the Studios Luci Marzola, editor, Spectator 38:2 (Fall 2018): 50-59. OWCZARSKI budgets. Studios thus reduced their output sig- throughout the 1980s and entered into financing nificantly to focus primarily on blockbusters. As and production, but its skillful release of the award- a result, the number of independent production winning sex, lies and videotape (1989) placed the companies has grown in recent decades in order to company at the forefront of independent film. take advantage of the holes left by the studios, both Miramax marketed the film to both arthouse and in terms of the number of films released as well as youth audiences, and exhibited the film in both the type of films produced. the small theaters catering to art film enthusiasts As the studios shifted their focus from and in multiplexes across the country. Alisa Perren large slates to big-budgeted blockbusters, several terms independent films that replicate aspects of independent film companies emerged to fill in the studio blockbusters (albeit on a smaller scale) as the gaps, chief among them Orion and Miramax. indie blockbusters, a hybridized genre that Miramax The cases of Orion of Miramax are instructive excelled at producing throughout the 1990s.3 comparisons for what would later happen with From the star-filled cast of Pulp Fiction (1994) to Relativity. Orion was founded in 1978 after several the high-budget period piece The English Patient top executives left United Artists due to disputes (1996), these films were critically lauded. By 1993, with Transamerica, the studio’s parent company Miramax’s track record was so strong that Disney, whose primary business was insurance. With the looking to expand its film holdings, purchased the reputation of these former studio executives, Orion company. With the infusion of corporate capital, the quickly procured a distribution and financing production and marketing budgets of Miramax’s deal with Warner Bros. which gave the fledgling films drastically increased. These expenditures led 2 company relative autonomy. The primary focus of to conflicts with Disney executives, especially as Orion was generating moderate success at the box several of these ventures failed to recoup costs. The office, with the potential for more revenue in the Weinsteins left the company they founded in 2005, emerging new media markets of VHS sales and and Disney let the division’s slate lapse, producing cable television licensing. This strategy initially only a couple of films a year until ultimately selling proved successful and based on its track record, Miramax in 2010. Orion was able to secure a much higher credit line in Although the last three decades has been rife 1985. As a result of the finance influx, the company with the collapse of high-profile independents like increased project budgets. The major studios had Orion and Miramax, Relativity Media’s history largely abandoned mid-range budgeted pictures was a bit different than these other film companies. to focus on blockbusters, and Orion was finding Its direct ties to Wall Street investment gave the success in that milieu with films like the Academy company access to large amounts of capital from the Award-winning Platoon (1986). However, as the start, limiting Relativity’s financial risk in potential production and marketing budgets quickly climbed projects. As a multimedia company stretching from for its films, Orion did not have the safety nets that music to television, and from fashion to sports, the majors did—extensive libraries of product going Relativity had multiple modes of revenue besides back decades, corporate capital, or even multiple its film studio. At the time of the bankruptcy media arms. As several mid-range pictures flopped, announcement, Relativity had a lucrative Netflix Orion’s executives were forced to file for bankruptcy in 1991, and the company ceased to function as a deal in place as well as dozens of output deals around production studio. the globe that helped finance upcoming films. The While Orion functioned as one of the largest company had established key relationships with independent studios for much of the 1980s, Universal Studios and Broadway Video (Lorne Miramax was central to shaping independent Michaels’ entertainment studio) among others to film in the 1990s. Founded a year after Orion by produce high-profile projects. There was no shortage brothers Harvey and Bob Weinstein, the key focus of press coverage of the company or of Kavanaugh, of Miramax in its earliest years was distributing who was named Showman of the Year by industry concert and foreign films to college campuses trade Variety in 2011.4 And yet, the company still and smaller art theaters. The company grew collapsed despite its various assets and strengths.

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As Relativity moved from a support institution the firm lost millions of dollars and was defunct to a mini-major (an independent company by 2002. Despite the firm’s failure and lawsuits competing with the major Hollywood studios), the from key investors in KC Capital, Kavanaugh was role of Wall Street capital significantly changed for able to launch Relativity Management in 2004 to the firm. In this essay, I examine Relativity’s status focus specifically on the film business. Between as a mini-major film studio, what factors led to its his Hollywood contacts and his background in ascent, and the situations which led to its subsequent venture capital, Kavanaugh leveraged Relativity demise. Chief in this examination is Kavanaugh’s Management as a key broker between Wall Street role in Relativity; as founder and chief executive investment and the studios. officer, his position was vital in shaping the firm. Relativity Management emerged in the midst Kavanaugh’s approach to financing was that “You of a shift in Hollywood from studio equity and can’t think of it as money….You have to think of it picture-specific bank loans towards slate financing, as math,” and was based on the insistence that all where outside investors backed several films in a films can be profitable, even if the revenues were in studio’s upcoming release schedule.7 Between 2005 smaller quantities than the Hollywood studios are and 2008, over $4 billion of hedge fund investment used to seeing.5 By focusing on the gaps left by the backed studio picture slates while another $8 studios’ slates, Relativity would be able to carve out billion was raised via private equity firms.8 Slate its existence in the competitive film landscape and financing deals offered several advantages. No one be profitable. However, like Orion and Miramax film’s performance determined profitability, and the before it, Relativity invested in bigger budget films studios did not have to commit as much of their akin to studio blockbusters, without the resources own capital to riskier projects. Slate financing also to support failure. While Relativity first bolstered provided the opportunity to invest across a studio’s several Hollywood majors’ production slates, the output, rather than in a specific picture or genre. independent company found their success elusive Kavanaugh expressed that the strength of slate when mimicking the same strategies in its own financing was in the variety of projects available: finances and productions. The collapse of Relativity “That’s why we are in the business of diversification. ultimately demonstrates the challenges faced by No one’s going to bat a thousand, and there are independent studios navigating the contemporary going to be some films that lose money and some media environment and competing with the that lose significant money. But all in all, money Hollywood majors. will be made.”9 Relativity earned money through a percentage of box office revenue and, in many of the Relativity and Hollywood Investment deals that Kavanaugh brokered, the company also received a percentage of ancillary market revenues Before Relativity launched as a media production (such as DVD sales or television licensing). The company, the firm functioned primarily as a firm also charged a standard $1 million fee for their financing vehicle for the major Hollywood studios. involvement with each film and Kavanaugh himself Indeed, Ryan Kavanaugh started his career as an received a producer’s credit.10 intern at the stock brokerage firm Dean Witter Although Kavanaugh brokered several slate Reynolds in the late 1990s, where he interacted financing deals via Relativity, three are worth noting. with several former studio executives including Jon First, Kavanaugh initiated the $525 million deal Peters, co-chairman of Sony Pictures from 1989- between Merrill Lynch and Marvel Entertainment 1991, and Mark Canton, executive vice-president which allowed the independent company to finance of motion picture production at Warner Bros. from its own movies based on its comic book properties.11 1989-1991. At 22-years old, Kavanaugh launched This set Marvel up to establish its own cinematic KC Capital, which primarily invested in new media universe—a strategy so successful that Disney companies with $500 million that he raised through purchased the company for $4 billion in 2009. his contacts from Dean Witter Reynolds.6 With the Second, Kavanaugh negotiated a $600 million twin punches of the dot com crash in 2001 and the credit line from Deutsch Bank in 2006 to finance economic fallout from the September 11th attacks, seventeen films across two separate studios, Sony

52 FALL 2018 OWCZARSKI and Universal, via a vehicle called Gun Hill Road. announced a $550 million investment by Citigroup Under the terms of the deal, Relativity would put for the firm to co-finance and co-produce its own up half of the budgets for seven Universal films films.17 Within a month, Relativity partnered with including The Fast and Furious: Tokyo Drift(2006) Sony for a five-year fund, entitled Beverly Blvd., and ten Sony Films including Talladega Nights: for approximately three-quarters of subsidiary The Ballad of Ricky Bobby(2006). 12 At the time of Columbia’s upcoming projects.18 These films in- the deal, Kavanaugh stressed that investing across cluded Kevin James’ comedy Paul Blart: Mall the two studios mitigated investors’ risk: “[I]f a Cop (2009), the action film Salt (2010) starring studio doesn’t have a particularly stellar year, we Angelina Jolie, and Oscar winner The Social Network have the hedge of another studio. The more films, (2010), demonstrating Kavanaugh’s keen focus of the lower the risk, the lower the volatility.”13 Four diversification. A year later, Kavanaugh secured months later, a second fund, Gun Hill Road II, a billion-dollar investment from the hedge fund was established for $700 million for an additional Elliott Associates.19 That investment was largely nineteen films across the two studios.14 Third, allocated to a fund labeled Beverly II with Universal Kavanaugh brokered the deal to establish Virtual Pictures to co-finance approximately 75% of their Studios, a partnership between Warner Bros. and productions through 2011.20 Films financed via Stark Investments for over $500 million across Beverly II included the comedy Bridesmaids (2011), seven films.15 This particular slate centered on the the high-budget action filmCowboys and Aliens high-budget project, Poseidon (2006). However, the (2011), and Oscar nominee A Serious Man (2009), film’s measly $60 million in receipts at domestic again representing a diverse slate. theaters doomed the partnership, especially since These deals point to a company becoming a its rumored $160 million production budget was financing and co-production partner for major nearly a third of the available fund. Hollywood studios, rather than functioning as a Besides its poor box office performance, mini-major itself. But Relativity made steps into Poseidon demonstrated some other key drawbacks development and production of its own projects, of slate financing deals. The studios’ marketing as well. In August 2006, executives negotiated for and distribution costs and fees were always the remake rights to 3:10 to Yuma (1957) after Sony reimbursed first, thus reducing the theatrical and placed the film in turnaround.21 Relativity produced ancillary revenue available for investors. Studios the film, but Lionsgate distributed it in 2007 as rarely allowed key properties to take part in slate Relativity did not have those critical capabilities. In financing deals, so the most profitable films were August 2007, Relativity hired film producer Tucker unavailable to investors. For example, the Harry Tooley to serve as the head of the firm’s creative Potter films were not available to Virtual Studios. operations. In the press release announcing Tooley’s The rate of return for investors in slate financing role, Kavanaugh emphasized the shifting focus of deals was often small, especially if more than one Relativity: “Our business model has expanded over film underperformed at the box office. Poseidon the last year in such a way that it was important lost investors at least $30 million on its own, and to have a thoughtful, creative producer on staff most of the films in the Virtual Studios partnership to support our rapid growth into development disappointed as well.16 Investors had no say in key and physical production.”22 In October 2008, production decisions—from budget to casting to Relativity executives negotiated a $150 million deal location—that might influence a film’s potential to with Universal to acquire their genre label Rogue perform at the box office. Pictures.23 Through this acquisition, Relativity The investors’ lack of control over the projects would receive Rogue’s library, in addition to its films available in the slate is a key reason Relativity in production and development. Management shifted from deal brokering for other The Rogue acquisition helped expand the media companies into film finance, development, company’s film slate, but the deal represented a and production. A year after it was founded, the relatively small output of sixty films total, and firm changed its name to Relativity Media to came with no distribution assets. While the emphasize its new role. In January 2007, Relativity company was thus active in production, its lack of

THE SYSTEM BEYOND THE STUDIOS 53 “MONEY WILL BE MADE” a distribution arm hindered Relativity’s ability to The causes for the retrenchment were mul- generate substantial revenue from its projects. For tiple—escalating budgets for the indie subsidiaries’ Relativity to expand and compete with the majors, fare, the major studios’ reduction of their overall it needed a distribution infrastructure. Yet, the slates, the declining revenues earned from DVD idea of bringing Relativity to a mini-major status sales and rentals, the decreasing attendance at seemed particularly ill-advised amidst the global movie theaters, and the overall economic downturn financial crisis of 2008. As banks and investment all signaled an end to the lucrativeness of the firms such as Lehman Brothers, Merrill Lynch, and independent film sector. As the majors retracted Wachovia posted multiple billion dollar losses, they from the independent film business, it opened up not only stopped lending, but also fought to survive. possibilities for new companies, especially well- Capital investment grew tight as “Lending volume funded ones like Relativity. Despite the economic in the fourth quarter of 2008…was 47% lower crisis and its impact on independent film, Relativity than it was the previous quarter and 79% lower continued to make major financial deals. Relativity than the peak of the credit boom” of early 2007.24 secured an additional billion dollars from Elliott Mini-majors DreamWorks and The Weinstein Associates in September 2008, a deal which Company, as well as Hollywood studios Paramount Kavanaugh claimed would “solidify our role as a and MGM, struggled to secure financing deals as competitive media entity.”27 Within days of the investment firms went bankrupt or had to be bailed Elliott announcement, Relativity revealed it had out themselves. Argued P. John Burke, a finance extended its agreement to fund much of Universal’s attorney at a private investment firm with ties to the slate through 2015.28 film business, “All of the studios, if they want to get Even with this infusion of Wall Street capital, a deal done in this environment, will need to better Relativity depended on deals with the majors for align their interests with investors.”25 According the bulk of its films due to a lack of a distribution to Burke, the studios would need to address the arm, whether through slate financing deals with significant drawbacks for investors in slate financing Sony and Universal or agreements reached for deals in order to continue securing capital. In the individual films. Relativity signed an agreement midst of the financial crisis, it was Kavanugh’s ties with Lionsgate in 2009 to release five films annually. to Wall Street that helped Relativity grow despite a Lionsgate, the largest mini-major operating at the treacherous investment landscape. time, was itself suffering the effects of the economic crisis and had slashed its own production slate and Relativity as a Mini-Major its marketing costs as a result. Partnering with Relativity provided a way for Lionsgate to keep its As the financial crisis began, it had a significant pipeline flowing. Relativity financed and produced impact on the independent film sector. Between the films, and shared in marketing costs while 2008 and 2010, several major independents (the Lionsgate received a typical distribution fee and 29 divisions of the major studios which focused split box office revenues. The first film released as on acquiring and producing independent-style part of the partnership was Brothers (2009), a drama films) shuttered. In February 2008, Warner Bros. starring Jake Gyllenhaal and Natalie Portman. announced that New Line Cinema would no Kavanaugh claimed it was profitable for Relativity because of how it was produced. The film received longer function as a separate corporate unit and a a $3 million tax credit and $23 million in foreign few months later completely shut down subsidiaries rights licenses before it was released, providing an Warner Independent Pictures and Picturehouse. 30 overage of $1 million from its production budget. In June 2008, Paramount Pictures absorbed the In terms of how Relativity would be profitable, marketing, distribution, and production capabilities Kavanugh stressed: “Let’s make movies in a way of its indie subsidiary, Paramount Vantage. In July where, if they hit the low-end scenario, we still 2010, Disney announced a deal to sell off Miramax make money.”31 Indeed, the company’s strategy was to an investment group for $660 million, removing to focus on star-laden mid-range budget pictures 26 the company from the independent film business. ($20 to $50 million) like Brothers that performed in

54 FALL 2018 OWCZARSKI that same range at the box office and had potential with Relativity worked for their market: to earn revenue in after markets. While Kavanaugh asserted that Brothers was Relativity produces studio-level titles. profitable before being released, it was a tenuous Independents can only compete with claim given the nature of the theatrical and the likes of Disney, Universal, Marvel’s distribution aspects of the industry. The scenario that superhero films, by having big studio-level Kavanaugh laid out does not take into consideration titles. Did Relativity movies do business the fact that any distributor Relativity worked with for us? Yes. Were they all extremely would receive their prints and advertising costs back successful titles? No they were not. But first, in addition to charging a distribution fee and they were fairly priced. And Relativity sharing in the box office revenues.32 Exhibitors also knows how to finalize a title and make it receive a significant share of box office revenue. look good onscreen.36 For Relativity to emerge as a major player in the industry and move beyond minor hits, then, it As Boenig claims, not every Relativity film was needed to retain more of this revenue. a hit in Brazil, but it was hard to deny how similar To help accomplish this, Relativity purchased their films looked to the majors’ fare, a key selling Overture Films from Starz Media in July 2010 point in foreign markets. Relativity’s Mirror, Mirror for an undisclosed sum. Overture was three years (2012), an updated take on the Snow White story old, but struggling to find an audience. Overture starring Julia Roberts, Lily Collins, and Nathan had marketing and distribution capabilities, which Lane, demonstrates the Hollywood style well. At an helped Relativity become “a full-fledged studio” estimated $85 million budget, the film only grossed according to Kavanaugh.33 Limitless (2011), one of $65 million at domestic theaters but earned a the first films distributed by Relativity, demonstrates respectable $118 million overseas. As a result of the the importance of a distribution arm for a studio. output deals in place, though, Relativity saw very Developed and produced in-house, the $79 million little of that foreign revenue. domestic gross helped Limitless perform well in According to Kavanaugh, Relativity could ancillary markets, with Relativity taking the largest absorb films like Mirror, Mirror that were less share as the distributor. Relativity also developed a successful at the box office because of the company’s spinoff of the film through its television division, overall business plan: “Our model is for 60, which was picked up to series by CBS in the 70 percent of our films to make a modest profit, 2014-15 pilot cycle. By developing, producing, and 20 percent to make more than a modest profit and distributing projects within the company, Relativity lose on 5 or 10 percent. [On an unprofitable film,] thus could reap rewards for years to come. we lose $5 million or $10 million, not $250 million, Relativity also entered into several key deals that like the studios can.”37 While it may not have been provided revenue outside of Wall Street investment a studio-sized loss, Mirror, Mirror was likely not a and box office returns. In July 2010, Netflix signed small loss for Relativity either, with marketing costs a long-term deal with Relativity for the digital and exhibitors’ shares taken into consideration. streamer to have first access to the company’s films Perhaps if Relativity’s other films performed at the outside of the DVD window, an agreement worth level Kavanaugh outlined, the company’s financial a reported $500 million annually.34 Relativity had strategy would work. By the end of 2012, however, also made over a hundred output deals with foreign that was hardly the case. Relativity had distributed distributors in which the distributors purchased just five films in 2012, with a total domestic box office access to Relativity’s entire slate of films, thus of approximately $200 million.38 At the beginning providing guaranteed revenue for each film released of the year, Relativity laid off ten workers in order regardless of their box office performance.35 Many to help finance four separate 30-second Super of these agreements were reached as a result of Bowl spots for the company’s upcoming film, Act New Line Cinema’s folding, leaving several of the of Valor, a marketing expenditure of approximately distributors without Hollywood-level product. Ivan $14 million.39 As a result of a financial dispute with Boeing of Brazil’s Imagem emphasized why a deal Elliott Associates, no Relativity films went into

THE SYSTEM BEYOND THE STUDIOS 55 “MONEY WILL BE MADE” production from Fall 2011 until April 2012, leaving The company soon went to the auction block, with a huge gap in film releases.40 Part of the conclusion the hope that by selling individual assets, Relativity of that dispute was the sale of Relativity’s pre-2012 could remain a film studio. Since it had already sold film library to Elliott Associates for an undisclosed most of the library and the majority of its films sum.41 Indeed, Relativity would lose $85 million for had been released by other studios, Relativity had 2012 despite the sale of the library.42 As Relativity few valuable assets remaining. In examining the increasingly mimicked Hollywood studios with the company’s portfolio, one banker claimed: “There use of substantial budgets, stars, and high-profile is no there there. . . . [T]here is no film library to marketing, its business strategy was not working speak of, and it could cost more to get upcoming effectively. films released than they are worth. No one is excited about this.”50 The unscripted TV arm was sold to Failing as a Mini-Major a consortium of companies in October for $125 million, while Kavanaugh led a group of investors Kavanaugh had argued in 2010 that box office was to re-acquire the rest of the company. not a determining factor in a film’s profitability: “The Despite feuding with several creditors involved entire film business is still run around theatrical, in the bankruptcy case, Kavanaugh announced yet theatrical is only 20 to 25 percent of the pie. in January 2016 that Relativity would purchase While there’s a big correlation, box office certainly Trigger Street Productions, a small independent run isn’t the judge of profitability.”43 Without a strong by actor Kevin Spacey and producer Dana Brunetti, performance at the domestic box office, however, it with Brunetti serving as Relativity’s new president. was difficult to raise interest (and dollars) for future In acknowledging the deal, Brunetti reiterated windows. It did not help that Relativity saw very Relativity’s business strategy: “[W]hile other little of the foreign box office due to its myriad studios are focusing on tentpoles and franchises, output deals. As Relativity entered 2013, its future there is a void with an eager audience for films hardly looked as rosy as it did at the beginning of the that are character-driven with great storytelling 2008 financial crisis. An April cover story inVariety that can be made at a reasonable budget. . . . I look stressed that the company was “under pressure to forward to the opportunities that being inside a grow” as investors and studio executives began to studio system will present.”51 However, it remained 44 question Relativity’s strategies. Relativity’s slate of unclear how the acquisition and new leadership nine films for 2013 only grossed $240 million at the would help the company’s financial problems. domestic box office. Nor was 2014 much better; the Weeks later, Kavanaugh announced a $100 million eight films released altogether grossed $185 million loan from several investors and finance companies.52 45 domestically, with none topping $40 million. By In March, Maple Leaf Films pledged an additional the end of 2013, the company was operating at a 46 $400 million, and both loans helped Relativity loss of $235 million. Weekly salaries alone cost emerge from bankruptcy.53 the company approximately $380 million a year, Yet, the Relativity that remained was not a more than the film arm generated in revenue.47 The mini-major studio that could aggressively challenge decade-old company had other staggering liabilities; Hollywood practices. The rest of Relativity’s 2015 in all, Relativity owed $1.18 billion to a spectrum of 48 films were held up as the company continued investment companies. wrangling with creditors. Several films that were Relativity was thus in a precarious position as it entered 2015. RKA Film Financing filed two finished such as the Halle Berry-starring Kidnap separate lawsuits against Relativity in late July 2015 (2017) were sold off as financial problems remained. for a total of $90 million, charging that the company Two films,Masterminds and The Disappointments had used RKA loans intended for marketing Room, were finally released over a year later in expenses to pay salaries, bonuses and operational September 2016 to little box office. Brunetti left his costs.49 Within days, Relativity filed for bankruptcy position in December 2016, after months of being protection as more companies indicated their intent unable to get any films into production. As a result, to sue and over $300 million in debt became due. Relativity had no film releases for the entire 2017 year.

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It remains to be seen whether Relativity can suggested that it would be a different type of film rise and compete again as a mini-major studio, company, one that understood and could endure the although the odds hardly seem in its favor. If the fiscal realities of today’s filmmaking environment. histories of Orion and Miramax are any indication, Despite a history of Wall Street investment, the peak of Relativity’s success has passed. In even while in bankruptcy, Relativity’s business growing Relativity, Kavanaugh replicated much of model ultimately was not sustainable. In the end, what made Orion and Miramax initially successful, Relativity’s role in Hollywood might have been but those same strategies are what ultimately caused short-lived, but its deep connections to finance each of their demises. Filling in the gaps left by the abetted the major studios as they transitioned to studios while simultaneously attempting to look like Hollywood product led to losses the independent new forms of financing, especially in the wake of the firms could not endure. The large infrastructure global economic crisis. Indeed, Relativity’s collapse required to compete with the majors was also a helped consolidate the major studios’ power not significant financial challenge. just in terms of market share, but also in securing Unlike these previous companies, though, the high finances that sustain contemporary media Relativity’s beginnings in high-finance investment production.

Kimberly Owczarski is an Associate Professor of Film, Television, and Digital Media at Texas Christian University. She has published articles in the Journal of Film and Video, Quarterly Review of Film and Video, Journal of Popular Culture, Jump Cut, and several anthologies. Her research focuses on the contemporary media industries. Notes 1Edward De Sear, “Why Hollywood Turned to Securitization,” International Financial Law Review 25, no. 4 (2006): 50. 2 Yannis Tzioumakis, American Independent Cinema: An Introduction (New Brunswick: Rutgers University Press, 2006): 227. 3Alisa Perren, “sex, lies and marketing: Miramax and the Development of the Quality Indie Blockbuster,” Film Quarterly 55, no. 2 (2001-02): 30. 4 Tatiana Siegel, “Ryan Kavanaugh: Showman of the Year,” Variety, May 13, 2011. http://variety.com/2011/ film/news/ryan-kavanaugh-showman-of-the-year-1118036637/ (accessed June 5, 2017). 5 Quoted in Chris Jones, “Ryan Kavanaugh Uses Math to Make Movies,” Esquire, Nov. 19, 2009. http://www. esquire.com/news-politics/a6641/ryan-kavanaugh-1209/ (accessed June 5, 2017). 6 Alex Ben Block, “Ryan Kavanaugh’s Theory of Relativity,”Hollywood Reporter, Sept. 29, 2010. http://www1. hollywoodreporter.com/hr/content_display/film/news/ e3i39345a5f3df4c124f48bbe39caeed092 (accessed Sept. 28, 2017). 7 De Sear, 50. 8 Mark S. Young, James J. Gong, and Wim A. Van der Stede, “The Business of Making Movies,”Strategic Fi- nance 89, no. 8 (2008): 30; Julia Boorstin, “Hollywood’s Next Round of Financing,” CNBC, December 13, 2011. http://www.cnbc.com/id/45661875/Hollywood_s_ Next_Round_of_Financing (accessed January 12, 2012). 9 Quoted in Nicole LaPorte and Gabriel Snyder, “Relativity Factor,” Variety, May 11, 2006. http://variety. com/2006/ film/markets-festivals/relativity-factor-1200336682/ (accessed Sept. 28, 2017). 10 Benjamin Wallace, “The Epic Fail of Hollywood’s Hottest Algorithm,”Vulture , Jan. 24, 2016. http://www. vulture.com/2016/01/relativity-media-ryan-kavanaugh-c-v-r.html (accessed Sept. 28, 2017). 11 Pamela McClintock, “Marvel Touts Par’s Hero Worship,” Variety, Apr. 29, 2005. http://variety.com/2005/ film/news/marvel-touts-par-s-hero-worship-1117921854/ (accessed Aug. 14, 2015). 12 Tatiana Siegel, “H’Wood Relativity Theory,” Hollywood Reporter, Jan. 20, 2006. LexisNexis (accessed Aug. 14, 2015). 13 Quoted in Siegel, “H’Wood Relativity Theory.” 14 LaPorte and Snyder.

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15 Michael A. Hiltzik and Josh Friedman, “Hollywood’s Hedged Bets,” Los Angeles Times, Feb. 16, 2008. http:// articles.latimes.com/2008/feb/16/business/fi-hedge16/2 (accessed Mar. 29, 2016). 16 Pamela McClintock and Jill Goldsmith, “Funds Crunched,” Variety, July 12, 2006. LexisNexis (accessed July 12, 2011). 17 Pamela McClintock, “Fiscal Theory of Relativity,”Variety, Jan. 31, 2007. LexisNexis (accessed Aug. 14, 2015). 18 Diane Garrett, “Sony Banks on Relativity,” Variety, Feb. 5, 2007. http://variety.com/2007/film/features/sony- banks-on-relativity-1117958732/ (accessed Sept. 29, 2017). 19 Tatiana Siegel, “Relativity Media Launches Subsidiary,” Variety, Jan. 7, 2008. http://variety.com/2008/film/ markets-festivals/relativity-media-launches-subsidiary-1117978561/ (accessed Oct. 3, 2017). 20 Josh Friedman, “Universal Signs Up $1-billion Partner,” Los Angeles Times, Feb. 28, 2008. http://articles. latimes.com/2008/feb/28/business/fi-universal28 (accessed Oct. 3, 2017). 21 Turnaround refers to a studio packaging their work on an unproduced film to sell to another company. Michael Fleming, “Relativity’s Eyeing ‘Yuma,’” Variety, Aug. 3, 2006. http://variety.com/2006/film/markets- festivals/relativity-s-eyeing-yuma-1200342520/ (accessed Oct. 3, 2017). 22 Quoted in Dave McNary, “Tooley Joins Relativity Media,” Variety, Aug. 14, 2007. http://variety.com/2007/ film/markets-festivals/tooley-joins-relativity-media-1117970208/ (accessed Oct. 3, 2017). 23 Borys Kit, “Relativity Goes after Rogue Pictures,” Hollywood Reporter, Oct. 20, 2008. http://www.hollywood- reporter.com/news/relativity-goes-rogue-pictures-121442 (accessed Oct. 3, 2017). 24 Victoria Ivashina and David Scharfstein, “Bank Lending During the Financial Crisis of 2008,” Journal of Financial Economics 97, no. 3 (2010): 320. 25 Quoted in Rebecca Winters Keegan, “Financial Crisis Puts Squeeze on Hollywood,” Time, Sept. 18, 2008. http://content.time.com/time/business/article/0,8599,1842122,00.html (accessed Oct. 4, 2017). 26 Yannis Tzioumakis, “‘Independent’, ‘Indie’ and ‘Indiewood’: Towards a Periodisation of Contemporary (post-1980) American Independent Cinema,” in American Independent Cinema: Indie, Indiewood and Beyond, eds. Geoff King, Claire Molloy and Yannis Tzioumakis (New York City: Routledge, 2013): 28. 27 Quoted in Tatiana Siegel, “Relativity Banks More Coin,” Variety, Sept. 23, 2008. LexisNexis Academic (ac- cessed Nov. 9, 2017). 28 Tatiana Siegel, “Relativity Renews Its Vows with U,” Variety, Sept. 25, 2008. LexisNexis Academic (accessed Nov. 9, 2017). 29 Claudia Eller, “Lions Gate Turns to Relativity Media to Fill Movie Pipeline,” Los Angeles Times, Apr. 27, 2009. http://latimesblogs.latimes.com/entertainmentnewsbuzz/2009/04/lions-gate-makes-norisk-distribution- deal-with-relativity-media.html (accessed Oct. 4, 2017). 30 Block. 31 Quoted in Block. 32 Rachel Abrams, “Debt of a Salesman,” Variety, April 9, 2013. http://variety.com/2013/film/news/relativity- media-ryan-kavanaugh-pressure-grow-1200340497/ (accessed Mar. 29, 2016). 33 Quoted in Elizabeth Guider, “Relativity Takes over Overture Distribution,” Hollywood Reporter, July 23, 2010. http://www.hollywoodreporter.com/news/relativity-takes-over-overture-distribution-25873 (accessed Oct. 4, 2017). 34“Netflix and Relativity Media Announce Groundbreaking Deal to Stream First Run, Studio Quality Theatri- cal Movies to Netflix Subscribers,”PR Newswire, July 6, 2010. https://www.prnewswire.com/news-releases/ netflix-and-relativity-media-announce-groundbreaking-deal-to-stream-first-run-studio-quality-theatrical- movies-to-netflix-subscribers-97833449.html (accessed Mar. 29, 2016); Siegel, “Ryan Kavanaugh: Showman of the Year.” 35 Block. 36 Quoted in Elsa Keslassy and Patrick Frater, “Relativity International’s Distributors: ‘All We Wanted Was More Product,’” Variety, July 30, 2015. http://variety.com/2015/biz/features/relativity-international-distributors- left-in-the-lurch-1201553259/ (accessed Nov. 6, 2017). 37 Quoted in Siegel, “H’Wood Relativity Theory.” 38 “Box Office by Studio,”Box Office Mojo, n.d., http://www.boxofficemojo.com/studio (accessed Nov. 8, 2017). 39 Nikki Finke, “Relativity Media Begins Laying Off Staff,”Deadline Hollywood, Jan. 19, 2012. http://deadline. com/2012/01/relativity-media-begins-laying-off-staff-217526/ (accessed Nov. 8, 2017); “Super Bowl Ads Cost Average of $3.5 M,” Associated Press, Feb. 6, 2012. http://www.espn.com/nfl/playoffs/2011/story/_/id/7544243/

58 FALL 2018 OWCZARSKI super-bowl-2012-commercials-cost-average-35m (accessed Nov. 8, 2017). 40 Ben Fritz, “Relativity Back in Business with Debt Backed by Ron Burkle,” Los Angeles Times, May 31, 2012. http://articles.latimes.com/2012/may/31/entertainment/la-et-ct-relativity-loan-burkle-20120531 (accessed Nov. 8, 2017). 41 James Rainey, “The Fall of Relativity Media: Six Lessons Dealmakers Can Learn,”Variety , Dec. 2, 2015. http://variety.com/2015/biz/news/relativity-fall-analysis-dealmakers-1201651351/ (accessed Mar. 20, 2016). 42 Sharon Waxman, “New Relativity Details: Studio Lost $135 Million in 2013,” The Wrap, Aug. 1, 2015. https://www.thewrap.com/new-relativity-details-studio-lost-135-million-in-2013-exclusive/ (accessed Nov. 8, 2017). 43 Quoted in Frank DiGiacomo, “The Theory of Relativity,”Vanity Fair, Feb. 9, 2010. https://www.vanityfair. com/news/2010/03/kavanaugh-201003 (accessed June 5, 2017). 44 Abrams, “Debt of a Salesman.” 45 “Box Office by Studio.” 46 Waxman. 47 Tatiana Siegel, “Relativity’s Ryan Kavanaugh Breaks Silence, Points Fingers in Emotional Post-Bankruptcy Interview,” Hollywood Reporter, Aug. 5, 2015. http://www.hollywoodreporter.com/features/relativitys-ryan-kava- naugh-breaks-silence-813257 (accessed Aug. 9, 2015). 48 Siegel, “Relativity’s Ryan Kavanaugh Breaks Silence.” 49 James Rainey, “New Lawsuit Calls Ryan Kavanaugh ‘Con Man,’ Accusing the Relativity Chief of Fraud,” Variety, July 24, 2015. http://variety.com/2015/film/news/ryan-kavanaugh-lawsuit-relativity-fraud-1201548076/ (accessed Aug.19, 2015). 50 Quoted in Brent Lang and James Rainey, “Relativity Bankruptcy Auction: ‘No One Is Excited about This,”Variety , Sept. 2, 2015. http://variety.com/2015/film/news/relativity-media-bankruptcy-auction-bid- ding-1201582933/ (accessed Mar. 20, 2016). 51 Quoted in Gregg Kilday, “Relativity Turns to Kevin Spacey and Dana Brunetti to Run Its TV, Film Busi- ness,” Hollywood Reporter, Jan. 6, 2016. http://www.hollywoodreporter.com/news/relativity-turns-kevin-spacey- dana-852782? (accessed Mar. 20, 2016). 52 Eriq Gardner, “Relativity Media Says It Has More than $100 Million in New Financing,” Hollywood Report- er, Jan. 25, 2016. http://www.hollywoodreporter.com/thr-esq/relativity-media-says-has-more-858992 (Accessed Mar. 20, 2016). 53 James Rainey, “Relativity Media Announces $400 Million Investment from Maple Leaf Films,” Variety, Mar. 16, 2016. http://variety.com/2016/film/news/relativity-media-maple-leaf-films-investors-1201731918/ (ac- cessed Mar. 20, 2016).

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