EXCLUSIVE: Ryan Kavanaugh may yet get his beloved Relativity back- at least its film operations- but even if the bankruptcy judge does approve the deal, the flame haired mogul has some major making-up to do with his international partners. A significant element of Relativity’s business model has always been its output deals with foreign distributors. Those deals, Kavanaugh has always argued, allowed Relativity to offset the majority of the risk on those offshore shoulders as well as allow the company to finance projects in the indie sweet spot range between $40-70 million. Without them it would be a struggle for the company to move forward with anything resembling a viable business plan, which is why their reaction to Kavanaugh potentially getting the company back may be as important as what the judge eventually decides to do.
‘I think it’s for us to decide what the deal is now moving forward and what the terms should be,” says one international buyer who had an output deal with Relativity. “We have been completely in the dark these past few weeks. We have heard nothing from Relativity during the whole bankruptcy proceedings. I understand there are confidentiality issues, especially with U.S. courts, but we have no idea who will even be running the company moving forward. We’ve paid deposits on titles like Masterminds and The Disappointments Room and we’re waiting to see what will happen.”
Relativity’s foreign partners have looked on in dismay these past months as the company has crumbled under a mountain of debt. Confusion also appears to be the order of the day with regards to the legal status of those output deals. Though none of the distributors Deadline spoke to said they wanted to rip up the existing deals, there was a definite sense that renegotiation – both in terms of percentages and financial guarantees for the future company’s well-being- will be high on the agenda when the sides do eventually sit down and talk.
“Relativity took a critical step forward this week, and the company is now on a path to emerge from chapter 11 with virtually no debt, a significant library and our business units fully intact – all of which positions our company for long-term growth. We look forward to working closely with all of our international partners as we move down this path,” said Relativity in a statement to Deadline.
Many do credit Kavanaugh and Relativity president Tucker Tooley with negotiating aggressive budget-linked output deals around the world- including Latin America, the UK, Spain, Germany, the Middle East and a number of other European and Asian territories. The departure of the well-liked Tooley will not help matters, given the relationships he had. Ironically, it is the levels of those deals which now give the distributors some leverage.
“It’s a different time now from when we first signed these deals, especially in Latin America with the currency crisis,” says Ivan Barreto Boeing, international acquisitions director at Imagem, who have an output for Latin America. “We do still want to work together. I’ve always said we’ve wanted that product but now we may need to go back and look at the agreements to make sure we’re protected. It will also be important for us to know what the company wants to do moving forward and what the status of their development slate is.”
In Relativity’s favor, at least in the short term, is that all their partner distributors believe in the commercial potential of Jared Hess’ Masterminds, starring Zach Galifianakis, Owen Wilson and Kristen Wiig, as well as Kate Beckinsale-starrer The Disappointments Room. Those are both completed and sitting on the shelf, making them attractive commodities for these distributors to get their hands on. Also of interest are development titles such as The Crow and Hunter Killer. That kind of fare- with mooted studio-style production values but in the indie space- are the kind of titles that once made Relativity such a compelling proposition for buyers. The problem is those titles were not being produced by the company in recent years, even before the financial tsunami that engulfed it for the best part of this year.
“The Crow has been on the development slate for years, ever since I’ve had an output deal with Ryan,” says one distributor. “I love that project and think it will really work in my territory but will they really be able to make it now?”
Ultimately, the biggest challenge – assuming the legal and financial hurdles are overcome- will be re-building the trust that has undeniably been dented. Lest one forget, it was only in February at the European Film Market in Berlin that Relativity were proclaiming new output deals with the likes of Tele Munchen Group in Germany and Austria and Viva in the Philippines. One can only imagine the reaction of those execs, who allowed themselves to be proudly quoted in the associated press releases at the time, to seeing Relativity’s financial woes play out so publicly only months later.
“Of course, trust is an issue,” says Barreto Boeing. “But you know what? This is the independent film business. We’ve seen this before, with Cannon, Capital, any number of companies. At the end of the day, if Relativity is able to prove to buyers it can come to market with studio-style product and actually deliver, people will want to do business with them. AFM will be a big test to see if they’re for real.”