Taking Risk on ‘Saw’ Gives Firm’s Executives a Big Cut

On Halloween weekend last year, the founders of Twisted Pictures sat down to a gloomy meal at the Palm restaurant in West Hollywood.

The three Hollywood producers had spent $1 million of their own money to fully finance a gory little horror movie called “Saw” that was opening in theaters that day. But early box-office returns were weak. Their gamble, it seemed, wasn’t going to pay off.

Then the clock struck midnight on the East Coast. Suddenly, their cellphones started ringing. Moviegoers were thronging at the late, late shows, leading a charge that would propel “Saw” to take in $18 million in that first weekend alone.

Today, “Saw” has grossed more than $102 million worldwide, and its sequel, “Saw II,” has pulled in $75 million at the box office in less than three weeks. And because they retained the rights to the franchise, Twisted Pictures founders Mark Burg, Oren Koules and Gregg Hoffman have become very rich. Just ask them.

“The best deal we made wasn’t financing the movie, it was not selling the movie,” Koules said last week as he sprawled in a sagging leather chair at the production and management company’s offices in Hollywood. “We make more money than anyone you’ll ever interview.”

One of the first rules of Hollywood moviemaking is never spend your own money. Most producers prefer, when they can, to get a studio or outside investors to foot the bill. But the Twisted Pictures trio knew from experience that reduced risk would also mean reduced rewards.

Rather than sell the movie before release, as is common, the three partners say they bet on its success, holding on to a significant percentage of net profit rather than settling for a one-time producing fee. By setting out to break the rules, they ended up making one of the most profitable independent movie deals of the decade.

“I’m envious,” said John Davis, who has produced dozens of films including “I, Robot” and “Garfield” the old-fashioned way: with studio financing.

There are a few famous examples of self-financed movies that hit it big -- George Lucas’ “Star Wars” prequels and Mel Gibson’s “The Passion of the Christ,” to name two. But Davis said the “Saw” franchise’s success remained a rarity.

“You can count on your hands the number of times this has happened,” he said. “I wouldn’t recommend a lot of people go out and finance their own movies.”

The men of Twisted Pictures say they took the leap with their eyes wide open.

Each had spent at least a decade working in the film industry. Hoffman, 42, had been an executive at Disney, where he developed movies such as “101 Dalmatians” and was among the producers on “George of the Jungle 2.” Burg, 45, and Koules, 44, had founded Evolution Entertainment, a management and production company whose clients include Charlie Sheen and Kevin Dillon.

But all three say that as they compared themselves with their peers, they were underwhelmed.

“By American standards we were doing well -- but not by Hollywood standards,” said Burg, whose production credits include films such as “Can’t Buy Me Love,” “Bull Durham” and “John Q.” “We got tired of feeling like we were the people doing all the work and watching the studios take all the profit.”

So they decided to get into the game, setting their sights on finding a commercial film project they could finance themselves.

In 2003, after months of looking, an agent friend of Hoffman’s showed him a heart-stopping eight-minute short film called “Saw.” Made by two young Australians, the film depicted an imprisoned man trying to free himself from an explosive muzzle strapped to his face. The twist: to succeed, the man had to eviscerate a fellow prisoner.

Such a plotline would not have moved most people to crack their nest eggs, but Hoffman and his partners saw in the sadistic tale just what they’d been looking for: an edgy horror flick that could be made on a modest budget.

But first they had to secure the rights. As luck would have it, the filmmaking duo -- director James Wan and actor Leigh Whannell -- had just arrived in Hollywood, looking to sell their movie. Twisted Pictures offered them both money and creative control. The pair could act in and direct the film, and take a share of whatever money it might make. In exchange, the producers got the copyrights to the feature film and any future franchise.

Burg and Koules dug into their personal savings and came up with a million dollars. Hoffman, who didn’t have the cash, put in sweat equity: He would supervise the day-to-day production of the film.

Less than a month after seeing the short, Twisted Pictures had sealed the deal to make “Saw.” That fall, Wan, then 26, directed it over three grueling weeks in downtown Los Angeles.

Not long afterward, while the film was in postproduction, Peter Block, who heads acquisitions for Lions Gate Films, began visiting the editing suite. Even before “Saw” got into the Sundance Film Festival, where it would play three packed midnight shows, Twisted Pictures had signed with Lions Gate Entertainment Corp. to market and distribute the film and its sequels.

Today, the two “Saw” films stand to take in as much as $300 million combined from worldwide box office, DVD, television and merchandising revenue. But the Twisted Pictures partners aren’t willing to say how much money they’ve earned.

That’s partly because the division of the spoils has been complicated by a pending lawsuit filed on behalf of Cary Elwes, who starred in the first film. Elwes alleges that he has not received his fair share of the profit.

Despite that Hoffman said, “We’ve won the lottery.”

On “Saw II,” the Twisted Pictures producers say they share 87.5% of the net profit -- although it is unclear what that amounts to, given that creative Hollywood accounting often means, as the saying goes, “there is no net.” According to people close to the deal, Lions Gate and Twisted Pictures will split roughly equally whatever money is left over after distribution fees, marketing costs and the profit participation of the talent.

Twisted Pictures is just getting started. Its distribution deal with Lions Gate guarantees the release of several more low-budget pictures. And the company recently signed a two-picture deal with Bob Weinstein’s Dimension Films.

Burg, Koules and Hoffman say success has changed their lives very little, except for how much time they’ve had to devote to setting up trust funds for their kids.

And yes, they have kids -- all under age 11. Burg says his son is too frightened to wear a “Saw” T-shirt. Koules has kept the DVD, which is packaged in a special case that oozes with fake blood, out of his home. None of the Twisted Pictures executives’ offspring have been permitted to see either R-rated “Saw” film.

“No way,” said Hoffman, although he stopped far short of apologizing for the violent content of the company’s franchise. In fact, as they relaxed one recent afternoon in an office littered with scary props, a margarita machine and an ornate, claw-footed billiards table, the men behind Twisted Pictures seemed as if they couldn’t be prouder.

“In general, horror fans are rabid and underserved,” Hoffman said. “ ‘Saw’ is the thinking man’s horror movie.”