EXCLUSIVE: This is a huge story everyone in Hollywood and Cannes will be talking about today and this weekend. As an insider just explained to me, Relativity Media President Michael Joe will be brought in-house at Elliott Associates which has long bankrolled Ryan Kavanaugh’s company: “So somebody who knows the business and knows all the ins and outs of Relativity will be able to manage all of it properly.” It’s known that Elliott Associates — specifically Elliot Management Corporation, a division of the investment group — has poured untold hundreds of millions into Ryan Kavanaugh’s Relativity Media — as recently as $200 million in March — and seen very little return. “The issue is they haven’t exercised enough control over their investment and now they want to exercise control so that can make these millions work for them,” the insider tells me. This move today clearly means that Elliott has lost confidence in Kavanaugh’s ability to run Relativity  independently and has taken away his financial authority. “It put its foot down and brought Joe in and then said Kavanaugh had to get other executives to manage Relativity besides himself,” the insider says. 

UPDATE: I have confirmed that Elliott hiring Michael Joe was that company’s idea and decision. Joe was a much valued EVP at Universal Pictures until Kavanaugh hired him at Relativity. Sources tell me that Michael and Ryan have “been on the outs” recently which also doesn’t bode well for Kavanaugh. However, I have confirmed that it was Kavanaugh’s idea and decision — not Elliott’s — to move up Steve Bertram, who’s currently COO and CFO but from now on will be doing the CFO and President jobs, and bring in reality TV producer Mark Burnett’s COO and General Counsel Brian Edwards as COO of Relativity Media.**

Meanwhile, Relativity keeps expanding its reach after doubling in size and transforming from a production company to a studio. All the while churning press for itself and Kavanaugh — especially recently because the movie side has just made some very big-money bets on big features with big name casts. That’s a lot of risk for Relativity and Elliott together, more than the investor could tolerate.

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Today’s move by Elliott also comes after Kavanaugh announced in early March that Relativity Media had closed a new round of financing with its longtime backer for an amount “in the $100s millions” for producing, financing and marketing films. Elliott, once the most patient of financiers, just got tired of waiting for results.

UPDATE: Relativity Media just issued the news release (below) which spins a different story from the real situation I’ve been told about. This is not just a matter of Relativity Media “reinforcing its executive ranks”:

(Beverly Hills, CA) May 12, 2011 – Relativity Media and Elliott Management Corporation announced today that Relativity’s President Michael Joe will be joining their financial partner Elliott Management Corporation; Steve Bertram, current COO & CFO, will assume the role as President & CFO of Relativity; Brian Edwards, formerly the COO and General Counsel of Mark Burnett Productions, has joined Relativity as COO.

In Joe’s new capacity at Elliott Management Corporation, he will help to manage Elliott’s entertainment assets, specifically, working closely with Relativity to optimize the Elliott-Relativity partnership. Joe will remain in Los Angeles.

Said Joe, “Given my background in the business, this position allows me to leverage all of my resources to help build Relativity’s and Elliott’s partnership. I look forward to continuing to work with Ryan, Steve, Brian and the entire Relativity team.”

Kavanaugh added, “This move, coupled with Bertram and Edwards’ expertise and experience, creates a dynamic platform. Given Relativity’s future plans, and given Steve and Brian’s close involvement with the DreamWorks Animation IPO and their guiding of the sale of DreamWorks LLC to Viacom, there is no better management team I could imagine.”

“Michael has a sterling reputation in the entertainment industry,” said Jesse Cohn, Portfolio Manager at Elliott. “We had identified the need for this role at Elliott, and we are fortunate to fill it with someone with Michael’s credentials, valuable experience at Relativity and Universal, and a close pre-existing working relationship with our team.”

As President & CFO, Bertram will assume supervision of the company’s operations worldwide, while maintaining oversight of banking relationships and corporate finance responsibilities. Bertram will be reporting directly to Kavanaugh.

“Relativity has an exciting future and these changes will strengthen our operation and enable us to continue developing new opportunities,” says Bertram. “Michael Joe has been a great partner to me and I look forward to continuing our work together in his new capacity.”

In addition, Edwards, formerly the COO and General Counsel of Mark Burnett Productions, has been appointed to Relativity’s COO, where he will manage the studio’s business affairs, legal and business administration, while working side by side with Steve Bertram managing day-to-day activities across all divisions.

While at Mark Burnett Productions, Edwards led the negotiations for company’s recently-announced joint venture with Hearst Corporation while also working on such series as Survivor, The Apprentice and NBC’s upcoming The Voice. Previously, Edwards was a partner in Overnight Productions, following an eight year executive role at DreamWorks, where he rose through the ranks as General Counsel and COO. Prior to DreamWorks, he was a partner at law firm, Greenberg Glusker. Edwards earned his bachelor’s degree in journalism and law degree with honors both from the University of Texas.

“Relativity is doing things no other studio in town is doing, and they have proven to be the innovator and to be the leader of needed change within our industry. I jumped at the chance to join this incredibly talented team. The company is led by an impressive management team and I look forward to being a part of the organization, and to helping Relativity grow to new levels.”

Relativity currently has the box office hit Limitless in theaters. Looking ahead, Relativity will release Judy Moody and the NOT Bummer Summer based on the popular kids book series on June 10th, 2011, followed by David Ellis’ Shark Night 3-D on September 2nd, 2011. On November 11th, 2011, the studio will release the highly-anticipated Immortals, starring Henry Cavill, Stephen Dorff, Isabel Lucas, Freida Pinto, Luke Evans, Kellan Lutz, with John Hurt and Mickey Rourke. The studio is about to begin production on a yet-to-be titled Snow White film starring Lily Collins as Snow White, Oscar®-winner Julia Roberts as the queen and Armie Hammer as the prince.