The town is lamenting the expected loss of another independent company, as Global Road heads into a weekend where it is releasing A.X.L., a film that will lose enough in releasing costs that it will likely tip Global Road into some kind of default situation with the banks that earlier this week took control of its domestic theatrical business.
It is stunning if you consider it has been just six months ago that new CEO Rob Friedman boldly told international buyers that Donald Tang’s Tang Media Partners would spend $1 billion in productions over three years to bolster a company that fused together IM Global and Open Road. Estimates had the company generating 15 movies per year by 2020, eight of which would be homegrown.
Now, the expectation is that the company will look to sell off some completed titles like Playmobil and send them back to the filmmakers that brokered deals with Open Road. There are prickly lawsuits with Len Blavatnik and Tencent — the latter over the allegation that money earmarked for building TV that instead was used to cure its financial ails. All this can only be spooking the bankers that hold the company’s fate in their hands.
Staffers who were hired with great plans and who bought into the idea that funding would follow, are nervous that layoffs are imminent. Most of the senior staffs of IM Global and Open Road – just over 100 in total — left and were replaced and there is an estimated 110 employees twisting in the wind at this moment.
Some still cling to a glimmer of hope that a white knight could emerge, or that the banks led by Bank of America might hang in. Or that there might be an attempt to sever the domestic theatrical business that came with the Open Road acquisition from the foreign sales and TV businesses that make profit primarily from library title income, even though the division hasn’t been active enough.
There is a feeding frenzy among vendors that understandably fear they might soon be creditors, and are jockeying to get back projects, and get paid. Estimates are that A.X.L.’s launch costs pushes Global Road’s exposure to at least $10M. It is tracking toward a gross this weekend between $3M-$5M on under 1700 screens. That is bad, but it won’t come close to the pain caused by Hotel Artemis, the new company’s first acquisition, and the film which seems to have served as the tipping point for what is happening now. That film’s losses are estimated to be in the $20M range after it opened to $3.2 million in box office in June.
The big question is, how did so many substantial people drink the Kool Aid that Tang served up, and came aboard a company that was never properly financed, despite promises from Tang that big money was coming from China? It is perhaps easy to take a leap on faith when you need a job and there aren’t a lot of them out there. Aside from Tang being unable to sway Chinese investors with the cash flow of IM Global’s 600 library titles, or gap accounting moves that can make it seem like revenue is coming in from the domestic theatrical business of Open Road, even though that distributor bought from Regal and AMC now seems to be the root of the current financial problems. Also, some feel Tang seemed to not appreciate the value of human capital, in buying two stable businesses, but quickly losing the executives who built them, in Stuart Ford and Tom Ortenberg. The latter left learning at the last minute that Friedman was hired above him.
The prior exit of Ford was acrimonious and while Global Road re-staffed, it was not lost on anyone that Ford’s fledgling business AGC came to Cannes with a big Laika pic Missing Link and a huge Roland Emmerich pic Midway, and Global Road had basically nothing. At the upcoming Toronto Film Festival, AGC and Ortenberg’s new distribution shingle come with the festival’s loudest title, Fahrenheit 11/9, while Global Road faces the possibility of Chapter 11.
And while staffers were told that TV and international sales were not going under bank control, those units haven’t generated much of anything over the last year, but does have a self-sustaining library of titles accumulated by IM Global – which Tang bought for $200 million.
Staffers Deadline spoke to over the past few days were angry and feeling betrayed. “It was slightly strange that more projects haven’t been announced but we’re all surprised by the last few weeks,” said one. “There were indications that things were okay and we thought the money was there. It’s quite outrageous when you think of it. We can smell the job losses. It’s sad.”
Sources in the pic brokering community said that they never bought into Tang’s strategy which amounted to running before he could walk. They said Global Road was not considered a serious suitor for plum projects, because everyone in town knew they had gone on several dog and pony shows to raise funds, but none came forth.
Friedman made the hires and got incoming staff to trust him that he would preside over the building of a company that hasn’t had time to really get its own projects off the ground. The chances of that happening are looking dimmer and dimmer by the hour. There is no looming blockbuster to hang in there for. The most promising title that Global Road has equity in is the Barbara Broccoli-produced The Rhythm Section, which stars Blake Lively and is directed by Reed Morano and will be released by Paramount. That film is in post production. Global Road also has the Johnny Depp-starrer City of Lies, which was pulled off the release calendar.
There are good people at that company, like Friedman, who’ve won before and are scrambling to keep Global Road from becoming one more cautionary tale about the perils of the independent film business, particularly if distributors are depending on money from China at this volatile moment. Or when a business is built on a promised and not nearly enough cash in the bank. The lack of resources have likely killed a business plan that could have been successful if there had been a cushion to absorb the costs that come with absorbing an acquisition like Open Road.
“We expected more clarity by now,” said one puzzled employee. “Of course we’re hoping the company can keep going, but it’s very uncertain and there will be a level of damage if it does go ahead.”