Big Problemo in Bid for ‘Terminator 3’
A safe rule of thumb in any business dealing is never assume anything.
Bucking that rule can prove embarrassing, if not frightfully expensive--as Fox Filmed Entertainment Chairman Bill Mechanic is finding out.
For months, sources said, Mechanic has been negotiating deals with Arnold Schwarzenegger and director James Cameron to bring “Terminator 3” to the big screen.
No matter that Fox didn’t have the necessary underlying rights to the “Terminator” franchise. Mechanic assumed that would be a no-brainer. After all, half-ownership of the rights to “T3” were sitting in U.S. Bankruptcy Court as part of the liquidation of defunct producer Carolco Pictures.
While he was negotiating with the star and director, Mechanic was also working to finalize a deal with producer Gale Anne Hurd for her half-interest in the sequel rights. She was a producer of Hemdale Film Corp.’s original 1984 “Terminator” film and Carolco’s 1991 blockbuster sequel.
Mechanic’s strategy was to lock down deals with Schwarzenegger, Cameron and Hurd before securing the rights. After all, what good would the rights be without the commitment of the creative team to make the movie?
No problemo, Mechanic presumably figured. Wrapping up the three deals would give him the leverage he needed with the court to acquire Carolco’s half-interest in “T3” without contest.
What Mechanic didn’t consider was that somebody else might try to tie up those rights.
That somebody was Carolco co-founder Andy Vajna, who for the past several weeks had been quietly negotiating with the Bankruptcy Court to secure the rights for himself and his former Carolco partner Mario Kassar. The ex-partners thought “Terminator 3” would be the perfect kicker to launch a new production venture the two plan to form, sources said.
The two producers had enjoyed much success together during Carolco’s heyday in the late 1980s and early ‘90s, including “Total Recall” and the “Rambo” movie series. Like many high-flying independents, Carolco found itself drowning in a sea of red ink and filed for bankruptcy in 1995.
Last Tuesday in Bankruptcy Court, Vajna--who left Carolco in late 1989 a rich man to start Cinergi, another film company that is also defunct--smartly positioned himself to acquire Carolco’s half ownership in “T3” by signing a $7.5-million sale agreement to buy the rights. While the deal doesn’t guarantee him the rights, it gives him the option to match any higher offer that may come in during an overbid auction to be held in Bankruptcy Court on Oct. 14.
Sources say Mechanic put himself in a highly embarrassing position with Schwarzenegger and Cameron, whose agents and lawyers assumed that Fox either had the underlying rights or had an assured claim to them. The studio chief is said to be furious with Vajna for making the deal unbeknownst to Fox.
But it’s not as if Fox hadn’t been aware for a long time that the rights were out there for the taking.
Howard Weg, one of the lawyers representing Carolco’s liquidating trust, points out, “it was known far and wide for well over two years--before the bankruptcy--that Carolco was interested in making a deal for ‘Terminator 3,’ ” and that several studios, including Fox, had “made inquiries about the rights.”
At one time, Fox nearly had the rights in its pocket.
The day Carolco filed for bankruptcy on Nov. 10, 1995, Fox signed a deal to acquire all of the company’s assets for $50 million. Those assets ranged from the company’s library and studio in North Carolina to sequel rights to all of Carolco’s movies, including “T3.”
Then, in January 1996, French pay TV giant Canal Plus bid $58 million just for Carolco’s film library, excluding all sequel rights, development projects and the film studio. Unwilling to match or better the offer, Fox withdrew its bid.
Now, if Fox wants the “T3” rights, it will have to pay dearly. Either the studio must be prepared to pay more than the $7.5-million floor, or more than any other offer from potential bidders, or try to team up with Vajna in his bid. At the moment, however, sources say Mechanic and Vajna aren’t exactly on speaking terms.
Vajna didn’t return repeated calls. Nor did Cameron. Representatives for Schwarzenegger and Hurd said their clients declined comment.
Speaking on Mechanic’s behalf, Jeffrey Godsick, Fox’s senior vice president of publicity, said, “Based on the deals we believe we’ll have with these three people [Schwarzenegger, Cameron and Hurd], we will aggressively bid for the rights.”
If Vajna and Kassar wind up with the rights, they’ll need a studio to finance and distribute the picture, though nowhere is it written that it must be Fox. Vajna’s free to go anywhere.
Kassar has an overall production deal at Paramount Pictures, signed in January 1996, which gives the studio a first look at any films the producer brings there over three years. But presumably he’d be allowed to produce “T3” elsewhere as a gun for hire.
It’s unclear how his plans to re-team with Vajna in a new company would effect his deal at Paramount, which has a number of options, including converting the arrangement to include Vajna. “T3” would certainly be a nice incentive for doing that. Fox and Paramount are currently partnered on Cameron’s upcoming, mega-budgeted movie “Titanic,” due out in December.
Industry movie executives believe the potential cost of “T3” could outdistance “Titanic,” one of the most expensive movies of all time at well over $200 million, because the sequel rights will be so expensive, not to mention the cost of special effects and Schwarzenegger’s deal. The action star, whose career is in need of a blockbuster, will presumably receive more than the $25 million he nabbed for “Batman & Robin,” which included an advance against merchandising sales.
It will be interesting to see just how far Fox will go financially to bid on “T3,” given how deep the studio is in on “Titanic.” Fox is footing the lion’s share of the costs, since Paramount’s production investment is capped at $65 million.
No matter who winds up with the “T3” rights, rest assured they’ll go for a record amount of dough.
And while Mechanic might have assumed he’d have lots of leverage with Carolco’s bankruptcy lawyers, in effect he’s given them the leg up.
“We expect the price for the rights will go substantially higher [than the $7.5-million floor bid],” said attorney Rick Wynne, also on the team representing the Carolco trust. In fact, the lawyers have their own side bet going.
“My number is over $10 million,” said Wynne. “How much are the rights to a movie that could generate over a half billion dollars worth?” (“Terminator 2,” released by TriStar Pictures, grossed more than $500 million at the worldwide box office alone).
The enduring appeal of the “Terminator” franchise was confirmed again Sunday night, when “Terminator 2 drew 16% of the television audience on NBC, a respectable share since it has aired before.
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