Company Town : On-Screen Chemistry : The Synergy Between Unlikely Partners Miramax and Disney Has Surprised Many--Including Miramax and Disney

It seemed like a doomed marriage from the get-go. Today, it’s a little-known success story.

While they’ve been far from the ideal couple creatively, financially speaking, Miramax Film Corp. and Walt Disney Co. have been a virtual match made in heaven.

In May, 1993, Miramax, the industry’s feistiest independent movie distributor--of such provocative films as “The Crying Game” and “Pulp Fiction”--was acquired by Hollywood’s squeakiest-clean, family-brand studio, Disney.

Industry naysayers concluded that Miramax’s founding brothers, Harvey and Bob Weinstein--who base their 16-year-old scrappy company in the hip Tribeca district of Manhattan--were financially desperate, or simply nuts, to sell out to the conservative, image-obsessed Disney.

And the button-down Disney, it was thought, was asking for trouble by getting into business with two tough bullies from Queens known as much for their street-fighting style and propensity for controversy as for their relentless passion for movies, their great taste in unconventional material and their marketing savvy.

The Weinsteins insist their company was never going broke, but they admit to a never-ending cash-flow problem. They say they sold when they saw the handwriting on the wall for an undercapitalized independent in an increasingly competitive, capital-intensive business. They felt that as long as they were assured creative autonomy, they’d be better off with a deep-pocketed parent who could give them the market clout they needed to exploit their particular brand of films.

What they didn’t expect was the two most successful years in the history of their company, which began as a concert film distribution operation named after their parents, Miriam and Max.

Harvey Weinstein says the partnership “reflects even more success than everybody thought we’d have--including us.”

While neither Disney nor Miramax would divulge financial figures, a source familiar with Miramax’s performance said the company’s operating profit for the fiscal year ending Sept. 30 was $50 million on revenue of more than $300 million. In their first full year under Disney (fiscal 1994), Miramax logged about half that--still far exceeding any previous year’s earnings.

“Prior to the acquisition, Miramax averaged $5 million to $6 million a year in profits,” said the source, “and some years it was zero.”

From Disney’s perspective, Motion Pictures Group Chairman Joe Roth says, “we’re odd bedfellows from a content standpoint, but from a business standpoint, we’re terrific partners.” On a profit-loss basis, he adds, “it’d be hard to find a better acquisition.”

Chris McGurk, who as president of Disney Motion Pictures Group runs the business side for Roth, says “Miramax’s revenues and profits are more than four times bigger than they were when we bought them. They had a phenomenal first two years which exceeded everybody’s expectations.”

Because the Weinsteins get a percentage of the operating profit of Miramax--a wholly owned, autonomously run subsidiary of Disney--Roth says, “there’s a real incentive there for their films to do well.”

This year, Bob Weinstein said the company is projecting a total of $200 million in domestic box office gross receipts--a record for the company.

In a deal that was the brainchild of former Disney Studios Chairman Jeffrey Katzenberg, the brothers sold Miramax for about $75 million. The Weinsteins got rich and Disney got its hands on Miramax’s library of 200 or so films, including “sex, lies and videotape” and “Cinema Paradiso,” as well as entree into a business that the mainstream studio known for its formula movies previously had no access to.

The financial fruits of the marriage have been so great that the parties are already negotiating to extend their relationship beyond the Weinsteins’ five-year deal, which expires in 1998 with a two-year option at Disney’s discretion.

Bob Weinstein recalls a time, pre-Disney, when Miramax had a revolving credit line through Chase Manhattan and he’d try to convince bankers that a quirky, gender-bending movie like “The Crying Game” by then-unknown director Neil Jordan was a good bet. (The film ultimately grossed $63 million domestically and was by far Miramax’s most successful movie at the time.)

“I used to say to myself, ‘Why am I doing this?’ It was always like pulling teeth,” Weinstein says, adding, “Those same guys at the bank thought that when I said, ‘We want to go wide with a film’ [a major nationwide release of a movie], that I was talking about a weight problem.”

Weinstein says that despite different creative agendas, “it’s great having a partner that understands exactly what you do--it cuts through all the red tape we used to spend hundreds of hours on . . . and they’re very supportive even when we don’t have a winner, because they understand the down cycles.”

And certainly Miramax continues to have its share of box office flops, including this year’s “Picture Bride” and “The Crossing Guard.”

The relationship benefits Miramax financially in a range of ways. It gives the company more clout with theater owners, more available cash for productions, acquisitions and releasing costs, and access to potentially higher profits on their films on a worldwide basis.

While Miramax markets and self-distributes its movies theatrically in the United States, it gains by using Disney’s other distribution outlets, including its international and home video operation.

“Getting the weight of our home video and international distribution business as well as our output deals in domestic and foreign pay TV has really helped take them into a whole other league in terms of total worldwide revenues their films can generate,” says Disney’s McGurk.

For example, under Disney’s domestic pay TV deal with Encore, Harvey Weinstein estimates, Miramax enjoys more than a “10% to 15% increase in revenues over what we had before.”

Weinstein also notes that Miramax would have never seen the kind of ancillary money it did on “Pulp Fiction”--whose box office gross was more than $200 million worldwide--if not for its Disney connection. Disney’s Buena Vista Home Video shipped 715,000 units to make the movie the biggest rental title of all time. McGurk estimates that it can easily do another 1 million in a repriced sell-through next year.

“Those kinds of numbers before the acquisition would have been impossible to obtain,” he says.

Weinstein also points out that Miramax had two children’s movies, “Gordy” and “The Arabian Knight,” which failed theatrically but “were rescued by Disney in home video. Now, that’s a clear case of synergy.”

And no way, adds Weinstein, would Miramax’s small Italian film “Il Postino” have done the kind of “record business” it did overseas if it hadn’t been released through Disney’s Buena Vista International.

Disney has also enabled them to make long-term commitments to filmmakers--as they did to Jim Sheridan (“My Left Foot”)--rather than lose them to the major studios after releasing their first movies.

“We were tired of being in the minor leagues and being undercapitalized,” says Harvey Weinstein.

With Disney bankrolling their films, Miramax has been able to increase budgets and make and release more movies. Miramax has ramped up its distribution slate to an average of 35 films a year--more than some of the major studios.

Under their initial agreement with Disney, the Weinsteins were allowed to green-light movies up to $12.5 million without seeking Disney’s OK. Roth revised that to an average of $12.5 million, giving the producer brothers the ability to make more expensive movies along with the low-end ones.

While the brothers make the hard-to-believe claim that Disney has been ultimately supportive through all of their clashes, controversies nonetheless erupted over their films “You So Crazy,” “Priest” and “Kids.”

Says Harvey Weinstein: “I don’t want so many loyal supporters of Miramax thinking we just do controversial films. I want to take a year off from controversy.”

Right, Harv. And Disney is contemplating releasing its next animated feature as an NC-17.

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Life Under Disney

Scrappy, Manhattan-based independent movie company Miramax Film Corp. was acquired by Walt Disney Co. in May, 1993, for about $75 million, $50 million of which was paid upfront to founders Harvey and Bob Weinstein. The rest was paid over their five-year employment contracts.

CREATIVE CLASHES

* March, 1994: Miramax is forced to sell off its sometimes raunchy concert film “You So Crazy,” starring comedian Martin Lawrence, because as the subsidiary of a member company of the Motion Picture Assn. of America, it was forbidden to release it without a rating.

* April, 1995: Controversy erupts when various church groups and religious organizations protest “Priest,” a film about a homosexual cleric.

* June, 1995: Disney refuses to distribute NC-17-rated “Kids,” photographer-turned-director Larry Clark’s graphic portrayal of sex-obsessed homeless New York teens. Miramax sets up an independent releasing company, Excalibur Films, to distribute the movie.

FINANCIAL RESULTS

* For the fiscal year ended Sept. 30, Miramax profit is about $50 million on revenue of more than $300 million, according to a source familiar with the company. That compares to a profit of $4 million three years ago.

GROWING THE BUSINESS

* December, 1993: Miramax Books publishes its first screenplay, “The Piano,” through Disney’s imprint Hyperion, which broke sales records at 62,000 copies. That figure is then topped by screenplay sales for “Pulp Fiction” at 110,000 copies.

* May, 1994: Miramax puts its low-budget genre film label Dimension Films on the map with the successful release of “The Crow,” which grosses $51 million.

* Fall of 1994: Miramax Records releases its first soundtracks, “Clerks” and “Ready to Wear,” followed by this year’s “Smoke” and “Il Postino,” both distributed through Disney’s Hollywood Records.

* September, 1995: Miramax signs a deal to form a stop-motion animation production company with San Francisco-based Twitching Image, headed by animator Henry Selick, who directed the 1993 Disney release “The Nightmare Before Christmas.” --CLAUDIA ELLER