Kevin Winter / Getty Images for HFPA
Ryan Kavanaugh, pictured here with
Bradley Cooper in 2012,
is unable to make payments on $320 million in debt and
has
started layoffs at Relativity Media.
Entertainment entrepreneur Ryan Kavanaugh, the financial
whiz who piloted his own helicopter and sought to rewrite the Hollywood rules
of engagement, has been grounded.
The highflying, hard-living mini-mogul, unable to make
payment on $320 million owed to lenders, has begun laying off staff from his
Beverly Hills-based Relativity Media. The studio behind movies such as
"The Social Network" and "The Fighter" could file for Chapter
11 bankruptcy as soon as Thursday, according to people familiar with the matter
who weren't authorized to speak publicly.
It's a violent return to Earth for one of the movie
industry's youngest and flashiest power players, who at 40 boasts more than 60
film producing credits and friendships with Leonardo DiCaprio, Bradley Cooper
and Ryan Seacrest.
In stumbling, Kavanaugh joins a long list of ambitious
arrivistes who hit Hollywood backed by outside money and full of plans for
upending the traditional studio system before being brought down by the brutal
realities of entertainment industry economics. Shaking up Tinseltown proved
hazardous for the likes of Franchise Films' Elie Samaha, Carolco Pictures'
Mario Kassar and Andrew Vajna, and Italian media magnate Giancarlo Parretti.
"Here's a guy who comes in with a lot of money, a
lot of chutzpah, and a lot of connections," said Wheeler Winston Dixon, a
film studies professor at the University of Nebraska, Lincoln. "But it's
really the choices that were made in terms of what films he was making. If you
look at the films and what they made, there's your problem."
On his way up, the redheaded Kavanaugh had all the right
moves. The former Wall Street money man affiliated himself with powerful
charities and famously irritated West Hollywood residents by using the Sofitel
Hotel rooftop emergency landing pad as his personal helicopter parking spot.
His private life was, in true Hollywood style, quite
public. He married Los Angeles dancer Britta Lazenga on the Italian resort
island of Capri in a 2011 service swarmed by paparazzi and attended by
DiCaprio, Cooper and Gerard Butler.
Kavanaugh's subsequent 2015 marriage to Sports
Illustrated swimsuit model Jessica Roffey was held at a Malibu restaurant
co-owned by Robert De Niro and featured an intimate musical performance by
Aerosmith frontman Steven Tyler.
Now, after a string of box-office misses, the studio that
afforded him this lifestyle is against the wall.
Relativity confirmed Wednesday it is laying off 75 of its
350 full-time employees, or about a fifth of its staff, with cuts mainly
affecting newer units such as its fashion and sports divisions. It's also
embroiled in a legal battle with one of its lenders, RKA Film Financing, which
has called Kavanaugh a "con man," saying he misspent marketing funds.
Relativity denies this claim and has countersued for $200 million.
Relativity has missed a string of loan payments, and
creditors are now demanding their money. The studio, in turn, has put a number
of its upcoming releases on hold.
Its biggest problem has been a lack of hits at the box
office. Although Relativity had some early successes as a fledgling studio, it
hasn't had a breakout hit since 2013.
The run of bad luck is in sharp contrast to how he
started his Hollywood career.
Kavanaugh, a UCLA dropout who began making stock market
purchases when he was 6, has long been known as a sharp financial mind. The
venture capital firm he started in his mid-20s came to an end after the market
turmoil following the 9/11 terrorist attacks.
He then reinvented himself as a high-end matchmaker
between Wall Street institutions and film studios. Kavanaugh arranged
multibillion-dollar deals to co-finance hundreds of motion pictures while also
generating millions in producer fees for Relativity.
Kavanaugh took a supposedly "Moneyball"-like
approach to picking films, focusing on pictures that cost less than $100
million to make and spreading the risk through inventive financial deals. The
company was said to make choices based on mathematical formulas that would weed
out flops, a similar tactic that Wall Street hedge funds use to make stock
picks.
The strategy was such a success that he turned Relativity
into a full-fledged studio in 2010 that would release its own films rather than
merely fund pictures put out by bigger companies like Sony Pictures and
Universal Pictures. He came to the business with bold claims of changing the
Hollywood model and concocting ways to reduce the risks inherent in making
movies.
"Do you know how many people saw 'The Assassination
of Jesse James'?" Kavanaugh said during a 2009 interview with Esquire
magazine about one of his more artsy films. "You and seven other people.
Paul Blart grossed nearly $200 million worldwide. I'll take Paul Blart all day,
every day."
Although "Paul Blart: Mall Cop" wasn't a
critical hit, the movie made money. Kavanaugh's financial acumen wowed many
Hollywood insiders and investors, but he was still met with skepticism from
Hollywood's big studio establishment.
Kavanaugh was trying to get an independent shop off the
ground at a time when the box office was largely driven by the conglomerate-owned
major studios, and companies like MGM and Miramax were on the ropes. Many in
the movie business said Kavanaugh's risk-management tactics weren't all that
different from what corporatized studios had already been doing for years.
But it proved difficult for his studio to consistently
pick pictures that would draw big audiences to the multiplex. It had early wins
such as the Bradley Cooper thriller "Limitless" and the
swords-and-sandals epic "Immortals," but also put out bombs like
1980s-themed "Take Me Home Tonight," Nicolas Cage's "Season of
the Witch" and the Gerard Butler-starring "Machine Gun
Preacher."
The risk-averse strategy also had a downside in a
business where high stakes can mean high rewards. It kept Kavanaugh from
betting on potential franchise films that drive the box office today, and fill
the coffers of the major studios.
Relativity's struggles have provoked a certain amount of
schadenfreude in the industry as creditors circled. For example, there was talk
in Hollywood that the bankruptcy coincided with news Thursday that Kavanaugh
sold his Malibu beachfront retreat for $8.7 million.
Analysts don't expect Kavanaugh to lick his wounds
forever. Some believe that the studio chief will try to buy back his studio out
of bankruptcy in what could shape up to be a classic Hollywood comeback story.
"Maybe Relativity 2.0 will be a little more sober,
thoughtful and more long-lasting," said Tom Nunan, a former film and TV
executive who teaches at UCLA.
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