Veteran motion picture executive Mike Medavoy and former Columbia Pictures Entertainment executive Arnold W. Messer on Monday unveiled the formation of their new entertainment "label," Phoenix Pictures.
The partners stressed that their start-up will be more akin to label companies such as New Regency, Morgan Creek Productions and Castle Rock, which rely on major studios for their distribution than do independent movie companies, such as Savoy Pictures and Samuel Goldwyn Pictures.
Phoenix will initially concentrate on producing feature films, with the eventual goal of developing a presence in television and in other media. The company will make four movies a year with average budgets of $25-$30 million--with an ultimate target of eight annually. Medavoy said the first film will probably begin production early next year.
Monday's announcement triggered conflicting accounts of how much seed money the Phoenix partners have.
"We control $500 million of production financing as of today between our equity investors, bank commitment and other deals," Messer said.
But sources close to the deal said that with a combination of equity, production financing and bank credit, the amount of immediately available money is $120-$140 million. That could rise as high as $500 million, said one of the sources, "if they ramp up to eight movies a year and the movies perform well."
The management of the start-up company, which includes Medavoy, Messer and former Carolco Pictures president and current Phoenix consultant Peter Hoffman, will own 30% of Phoenix. The remaining 70% will be owned by Onex Corp., a Canadian airline food and auto parts company, by Great Britain's Pearson Television and Sony Pictures Entertainment, along with two wealthy investors who Medavoy and Messer declined to name.
Showtime was expected to be an investor and to strike a pay TV deal with Phoenix, but as of Monday afternoon no deal had been completed.
The new venture puts Medavoy in business with the same company, Sony, that ousted him--albeit under a different management--in January, 1994.
A source close to the deal said SPE's direct equity investment is roughly $15 million, with a production financing commitment bringing the total investment to about $50 million. SPE will contribute a certain percentage of the budget for each Phoenix movie.
SPE, which will receive a low distribution fee, will have worldwide theatrical and video distribution rights to Phoenix's movies, excluding Japan.
SPE also has TV rights to Phoenix films outside of Japan, North America and continental Europe.
Phoenix has a domestic network TV licensing agreement with CBS; a distribution agreement with Canal Plus for continental European TV rights, and a joint venture with Pearson TV to produce movies of the week that gives Pearson international rights to those projects.
Medavoy said the company has a unique arrangement with an international insurance broker that Phoenix can use as collateral to secure loans with Chemical Bank, which will provide a revolving credit line for production financing.
Medavoy and Messer said that Phoenix will not pre-sell any foreign rights to its films except for in Japan, where releasing costs are higher than most territories.
"We control over 95% of the gross profits after Sony's [distribution] fee and before creative participations," Messer said. "We're totally dependent on the performance of the pictures."