Disney, Miramax Agree to End Diverging Partnership

Walt Disney Co. and Miramax Film Corp. co-founders Harvey and Bob Weinstein agreed to part ways Tuesday, ending a tumultuous, 12-year marriage that had devolved into one of Hollywood’s most closely watched reality shows.

The divorce, coming after nearly six months of sometimes testy settlement talks and weeks of last-minute legal wrangling, marks the final chapter in a partnership that transformed the world of independent movie companies.

The Weinsteins finally will be set free of the corporate shackles they’ve long decried but must leave behind the company they founded a quarter-century ago, named after their parents, Miriam and Max.

“The toughest part of the entire negotiation was giving up the name,” said Harvey Weinstein during a conference call with reporters Tuesday.

The Queens, N.Y.-born Weinsteins will return to life on their own in an industry far different from the one they exited when they were acquired by Disney in 1993. Today, nearly all of the so-called specialty film companies are owned by media giants, feeding off their deep financial pockets and global distribution reach.

Weinstein said he and his brother intended to create a “fully integrated media company” -- temporarily called the Weinstein Co. -- that would not only encompass movies but also ventures in television, the Internet, book publishing, theatrical shows and a cable movie channel.

Disney has agreed to let the Weinsteins offer jobs at their new company to about 100 of Miramax’s current 300 employees, although how many will stay is still unclear.

Walt Disney Studios Chairman Dick Cook, who played a key role in helping bring what he called the “long and arduous” negotiations to an end, tried to put the best face on the separation.

“There’s no question that Harvey and Bob brought some of the finest films to the big screen,” he told reporters.

Asked why the relationship imploded, Cook said that over the years Disney decided it was allocating too much money to Miramax and that “perhaps there was another way of doing that.”

The usually outspoken Harvey Weinstein, who also tried to take the high road when discussing the dissolution, used the opportunity to give his own pointed take on what went sour.

“There were divergent beliefs,” Weinstein said. He cited five deals that he said Disney Chief Executive Michael Eisner scuttled over the years, including a joint venture with Cablevision to buy two cable channels -- Bravo and the Independent Film Channel -- and an opportunity to produce the “Lord of the Rings” trilogy, which became a huge windfall for Time Warner Inc.’s New Line Cinema.

“In the new Disney, those entrepreneurial efforts will be met with a strong response,” Weinstein said, implying that Disney’s newly named CEO, Robert Iger, would give such projects a green light.

Disney, which bought the New York-based art house film company from the Weinstein brothers for about $80 million, will retain Miramax’s most valuable asset -- a library of about 550 movies that include such acclaimed hits as “sex, lies and videotape,” “The Crying Game,” “Pulp Fiction” and best picture Oscar winners “Chicago,” “The English Patient” and “Shakespeare in Love.”

Disney also retains the right to co-finance at least 25 films produced by the Weinsteins’ new company, including sequels to such successful franchises as “Spy Kids” and “Scary Movie,” which were made by Miramax’s Dimension Films unit. Under the agreement, the Weinsteins will keep the Dimension Films label, launched in the mid-1990s by Bob Weinstein.

Although the Weinsteins’ relationship with their corporate parent began with great promise and resulted in much success, it began to deteriorate during the last several years. The two sides battled over film budgets, the Weinsteins’ compensation and the amount of money Disney gave them to make and market their movies.

Beyond the financial scrapes, the partnership was further damaged by the clashing personalities of Harvey Weinstein and Eisner. Relations between the men boiled over last summer when Disney barred Miramax from releasing Michael Moore’s controversial anti-President Bush documentary “Fahrenheit 9/11.”

Their highly public feuding became fodder for critics who accused Eisner of alienating Disney’s key creative partners, including Pixar Animation Studios. Last year, Pixar broke off talks with Disney to renew a partnership that added hundreds of millions of dollars to Disney’s bottom line with six consecutive hits.

Eisner’s falling-out with Pixar chief Steve Jobs, however, will have far more financial effect on Disney’s bottom line than his break with the Weinsteins. In 2004, Miramax contributed $71 million, or less than 2% of Disney’s overall operating income.

“Most investors aren’t worried about Miramax from a financial standpoint as they would be about changes in Disney’s relationship with Pixar,” said Jeffrey Logsdon, an analyst with Harris Nesbitt.

Tensions between the Weinsteins and the Disney brass cooled considerably in recent months as Cook and Disney Studios Chief Financial Officer Alan Bergman took a lead role in the settlement talks. Also helping calm the waters was the Weinsteins’ lead negotiating attorney, Skip Brittenham, and William Morris Agency chief Jim Wiatt, who was brought in as a mediator.

The Weinsteins will remain as Miramax co-chairs on a nonexclusive basis until their employment contracts with Disney expire Sept. 30. In the interim, they will oversee the production, marketing and distribution of 15 to 20 films scheduled for release, including this weekend’s “Sin City,” directed by Robert Rodriguez.

Cook said he expected to announce by July a new management team for Miramax that would report to him. Among a long list of potential candidates is Daniel Battsek, who runs Disney’s international film operation in London.

Sources say the total value of the Weinsteins’ settlement is about $130 million, which covers their 2004 and 2005 bonuses, along with their share of future profits in films they initiated at Miramax. But their actual payout will be considerably less after the Weinsteins buy back about 40 projects from Disney and deduct the profit they received from “Fahrenheit 9/11,” which the brothers released through another distributor.

Under the separation pact, Disney would also keep Miramax Books, which has published some 70 titles, including 20 bestsellers. Sources said the Weinsteins would retain a 40% interest in the performance of the books unit over the next two years. They then plan to start their own publishing operation.

The separation presents both sides with new opportunities and some major challenges. Disney plans to remake Miramax, downsizing it and instilling more financial discipline in the model of News Corp.’s highly successful Fox Searchlight, which produced this year’s critically acclaimed “Sideways.”

Disney’s most daunting task in starting anew will be finding a new Miramax chief with the creative instincts of Harvey Weinstein and the financial restraint of his brother Bob, not to mention trying to duplicate the duo’s extraordinary marketing skills. The brothers have amassed a remarkable record of Oscar nominations and wins.

Although Harvey Weinstein, in particular, has had highly publicized creative battles with various filmmakers over the years, he and his brother have a loyal following with a cadre of directors that include Quentin Tarantino, Anthony Minghella, Robert Rodriguez and Kevin Smith.

Harvey Weinstein is expected to continue championing smaller artistic movies as well as the occasional bigger budget films. His younger brother probably will remain focused on moderately budgeted films targeting the MTV generation.

But launching a start-up venture today presents the Weinsteins with daunting challenges, without the benefit of having a brand name recognized throughout the world.

Among the myriad obstacles, the most pressing will be their efforts to raise enough capital to fund the overhead as well as production, acquisition and marketing of movies at their start-up operation. The Weinsteins have hired Goldman Sachs & Co. to help them secure funding and hope to raise as much as $1 billion to finance their new venture.

From the get-go, the marriage between Miramax and Disney seemed odd: a buttoned-down, fiscally conservative family entertainment concern protective of its image combining with a street-smart duo from New York who operated their edgy independent outfit with boisterous bravado.

But each offered something to the other. For cash-strapped Miramax, Disney’s deep pockets gave the brothers the kind of financial resources they needed to survive and grow. Miramax gave Disney the opportunity to supplement its mainstream films with sophisticated, lower-cost fare that would garner awards and prestige.

The marriage soon developed strains over such controversial Miramax releases as the 1994 gay-themed release “Priest,” the teen sex drama “Kids” in 1995 and the 1999 irreverent religious comedy “Dogma.” In more recent years, friction developed between the partners not only about content but also about rising costs as the Weinsteins’ ambitions grew and Disney’s tolerance waned.

Now both are on their own again.

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Studio’s story

1979: Harvey and Bob Weinstein form Miramax Film Corp., naming the company after their parents, Miriam and Max.

1988: Miramax releases Errol Morris’ controversial documentary “The Thin Blue Line.”

1989: The studio has its first mainstream hit with “sex, lies and videotape.”

1992: The Weinsteins score an even bigger commercial hit with “The Crying Game.”

1993: Disney acquires Miramax Films for about $80 million.

1994: “The Crow” becomes a hit for Bob Weinstein’s new genre label, Dimension Films. Miramax’s thriller “Pulp Fiction,” made for only $8 million, earns more than $200 million worldwide.

1997: Miramax’s “The English Patient” wins best picture Oscar.

1999: Miramax’s “Shakespeare in Love” wins best picture Oscar.

1999: When Disney balks over Miramax’s controversial film “Dogma,” the Weinsteins form a separate company to buy the rights and distribute it.

1999: Miramax and Hearst Corp. team up to launch Talk magazine, with Tina Brown as editor.

2000: Disney renews the Weinsteins’ contracts and agrees to raise Miramax’s annual production and marketing budget to $700 million from $450 million.

2002: After huge losses, Miramax shutters Talk magazine.

2002: Miramax’s “Gangs of New York,” an expensive epic from director Martin Scorsese, is a box-office disappointment.

2003: Miramax’s “Chicago” wins best picture Oscar.

2003: “Kill Bill” does well, but the costly $80-million Civil War drama “Cold Mountain” fails to catch fire.

2003: Tensions between the Weinsteins and Disney erupt over Miramax’s push into bigger budget films.

2004: Tensions boil over when Disney bars the Weinsteins from releasing Michael Moore’s “Fahrenheit 9/11.”

2004: Under increasing financial strain, Miramax lays off 33% of its staff and pulls back on producing new movies.

2004: Disney decides not extend the Weinsteins’ contracts under the same financial terms.

Tuesday: The companies announce that the Weinsteins will leave Miramax in September.

Source: Compiled by Times librarian JOHN JACKSON using Times research and Internet Movie Database

Los Angeles Times

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The settlement

What Disney gets:

* The Miramax name

* The Miramax and Dimension Films libraries of about 550 titles

* Book publishing house

* The right to co-finance more than 25 films with the Weinsteins, including sequels to “Spy Kids” and “Scary Movie”

What the Weinsteins get:

* $130 million minus their proceeds from “Fahrenheit 9/11” as well as a significant sum to buy back 40 projects from Disney

* The Dimension Films name

* The right to co-finance with Disney such TV projects as Bravo’s behind-the-scenes reality series “Project Greenlight” and “Project Runway”

* The right to co-produce with Disney a number of Broadway musicals based on Miramax hits such as “Shakespeare in Love”

Source: Times research

Los Angeles Times