304-596-1 Miramax: A Victim of Interpersonal Conflict? Introduction Miramax Film corp., a division of Walt Disney (Disney) is headed by the Weinstein brothers, Harvey and Bob. Started by them in 1979 as a unit to buy and release foreign-language and independent films (indie-film), Miramax was acquired by Disney in 1993. Miramax built up a steady reputation as a pioneer of the indie-film genre, amassing a record 221 Oscar nominationsin the pastfifteen years. But relationsbetweenHarvey and Disney’sCEO MichaelEisner havebeendeteriorating steadily over the past few years over issues of compensation, control, accounting and creative independence. A flare-up between them in 2004 over the controversial documentary Fahrenheit 9/11 worsened the relations. Disney and Miramax work on a contractual basis. The current contract between Disney and Miramax will expire in 2009, but an option gives Disney the right to renegotiate it in September 2005 and set the terms for the next four years. While Eisner wants Disney to have a greater control over Miramax’s operations and the Weinstein brothers to accept lesser compensation, Harvey and Bob have announced that they would not accept an unfair compromise. Talks of a breakup were getting louder, when Eisner unexpectedly announced in September 2004 that he would be stepping down as Disney’s CEO in 2006. That was seen to change the equation for the Weinsteins who announced that they would like to stick with Disney. Whether a mutually agreeable settlement could be reached between the two parties remains to be seen. Miramax-The Early years Born in 1952 in Flushing, New York, Harvey Weinstein (Harvey), the co-founder of Miramax Studios had been a part of the entertainment industry since his high-school years. He acted as the manager of a music band, Goosemen, started by his high-school friends. The band was a failure, but Harvey retained the basics of the music-promotion business he learnt during that stint. He joined the State University of New York at Buffalo in 1969. Within months, he teamed up with Corky Burger, a friend and started a music concert promotion company called Harvey & Corky Presents. The company was at the center of Buffalo’s rock music scene for the next three years, during which time Harvey dropped out of college and persuaded his brother Bob to do the same and join him in his business. In 1979, the brothers set up Miramax- named after their parents Miriam and Max.According to Harvey, he became a lover of cinema and was inspired to get into the movie business after watching The 400 Blows, an art movie by Francois Truffaut. Harvey decided to make a career out of promoting and marketing movies that were away from the mainstream genres, movies which otherwise would not get the attention he thought they deserved. Miramax distributed its first movie, The Secret Policeman’s Other Ball, in 1982, but its first big success came in 1989 with Steven Soderbergh’s Sex, Lies and Videotape, an indie film that won the Palme d’Or at Cannes and grossed more than $100 million in worldwide sales. The movie brought Miramax and the Weinstein brothers into Hollywood’s notice as innovators of cinema. The brothers followed the film’s success by buying and promoting off-track and foreign movies like My Left Foot and Cinema Paradiso, both of which won Oscars in 1990. Harvey’s business model was based on the law of large numbers.1 1 Mason, G., Ian “When Harvey met Mickey”, www.newstatesman.com, October 11th 2004 This case study was written by Kalyani Vemuri under the direction of T Phani Madhav, IBSCDC. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources. © 2004, IBSCDC. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner. Distributed by ecch, UK and USA North America Rest of the world www.ecch.com t +1 781 239 5884 t +44 (0)1234 750903 ecch the case for learning All rights reserved f +1 781 239 5885 f +44 (0)1234 751125 Printed in UK and USA e [email protected] e [email protected] 304-596-1 Miramax: A Victim of Interpersonal Conflict? He bought and released alargenumber offilms,hopingthat profitsfrom the few that wouldclickwould compensatethosethat didn’t. He reportedly had a contrarian knack of picking up offbeat movies and themes he felt would appeal to American audiences.According to New York writer Peter Biskind,2 Harvey created the indiewood hybrid, the film that is somewhere between commercial studio product and old-fashioned indie movies. He was also active in the editing room, cutting out large parts of the films he bought to make them more suitable toAmerican audiences. Subsequently, critics gave him the moniker, Harvey Scissorhands. “I’m not cutting for fun,” he once saidin his defense. “I’m cutting for the (film) to work. All my life I served one master: the film. I love movies.”3 Other films he released included x-rated ones like The Cook, The Thief, His Wife and Her Lover and Tie Me Up! Tie Me Down!. Harvey ran into problems with the Motion PictureAssociation ofAmerica (MPAA) due to the content of his movies. Harvey fought a lawsuit against the MPAA, resulting in the implementation of the NC-17 rating that helped distinguish between adult-oriented films from pornography. After Disney’s Acquisition In 1993, Disney wanted to enter the growing indie-film market, of which Miramax was the most visible player. Disney’s competitors were getting into television and Michael Eisner (Eisner), its CEO, didn’t want to let Disney enter either cable or the networks market. He believed that if Disney had a wider control of the content, it would be better positioned to deal with companies like News Corp., Viacom and Time. Miramax’s business plan, which focused on buying and making low-budget movies and then marketing them, seemed attractive to Disney. Eisner hoped that by acquiring Miramax, he would have a unit that would bring in stable returns and a lucrative movie library without too much investment from Disney’s side. And steadily, Miramax could be developed into the biggest player in the indie-film category. Jeffrey Katzenberg, the then Disney President (who quit later to co-found Dreamworks SKG) approached the Weinstein brothers with a purchase offer. The terms were- Miramax would be a part of Disney,but would have its own budget and latitude in filmmaking. The relation would be contractual. The terms of working between Miramax and the parent company, Disney and the compensation of the Weinsteins would be mutually re-negotiated after the lapse of the contract period. Miramax had been going through a lean phase since 19914 and the brothers agreed to the acquisition plan. The Weinsteins sold Miramax in 1993 to Disney for $75 million. Harvey remained the head of the division and managed the company’s public front while Bob looked after the backend working. In 1994, Miramax spent $8 million to buy Pulp Fiction, an indie-film by up and coming director Quentin Tarantino that had been developed but later rejected by TriStar Pictures. The movie went on to gross $100 million in US alone, becoming the biggest success in the indie-film genre hitherto. It became a phenomenon, whetting the appetite of American moviegoers for similar art-house movies. Soon, producers began to bring projects that were rejected or shelved by big studios to Miramax. Fox had refused to make The English Patient, Universal Pictures had stalled Shakespeare in Love and Castle Rock Studios had shelved Good Will Hunting. Miramax put in its resources to complete all the three movies that later became both Oscar and box-office successes (Annexure 1). The English Patient won nine Oscars and Shakespeare in Love gathered seven, including the one for best picture. Apart from spotting andencouraging talented artists like Gwyneth Paltrow and directors likeTarantino, Robert Rodriguez and Steven Soderberg, Miramax also built up a reputation for savvy Oscar-marketing. “Harvey is fearless with his creative opinions, and driven by marketing,”5 says Tom Pollock, former chief of Universal Pictures. More than winning, Harvey believed in getting nominated for as many categories as possible. Harvey wanted to use the Oscars-campaign season to promote his movies that were running in cinema houses and drive up sales. He said once, “A successful awards season can make the difference between a movie grossing $5 million at the box office and a movie grossing $20 million.”6 In the past 15 years, Miramax got 221 Oscar nominations across several categories and 15 best-picture nominations.7 Critics peg Miramax’s marketing spend on a single film anywhere between $25-40 million. In 1999, when Miramax spent $15 million to promote Shakespeare in Love, which won the best picture Oscar over DreamWorks’ Saving Private Ryan, industry leaders felt the need for an Oscar campaign-finance reform. Rick Sands, Miramax’s chief operating officer denied the accusations 2 Author of “Down and Dirty Pictures: Miramax, Sundance, and the Rise of Independent Film”, Simon & Schuster,January 2004 3 “When Harvey met Mickey”, op.cit 4 Biskind, Peter “Monsters Inc”, The Guardian, October 1st 2004 5 Rickey, Carrie “Miramax chief’s heavy-handed tactics spark an Oscar backlash”, The Philadelphia Inquirer, March 20th 2003 6 Gumbel, Andrew “How the mogul of Miramax made winning Oscars into a business”, The Independent, December 20th 2003 7 Caulkin, Dave “Life Isn’t Beautiful”, Newsweek, October 11th 2004 2 304-596-1 Miramax: A Victim of Interpersonal Conflict? and said, “If you could buy an Oscar, then everyone would do it.