The mini-mogul behind Relativity Media said he’d change Hollywood, now studio files bankruptcy
Entertainment entrepreneur Ryan Kavanaugh, the financial whiz who piloted his own helicopter and sought to rewrite the Hollywood rules of engagement, has been grounded.
The highflying, hard-living mini-mogul, unable to make payment on $320 million owed to lenders, has begun laying off staff from his Beverly Hills-based Relativity Media. The studio behind movies such as “The Social Network” and “The Fighter” filed for Chapter 11 bankruptcy protection Thursday, the company said.
It’s a violent return to Earth for one of the movie industry’s youngest and flashiest power players, who at 40 boasts more than 60 film producing credits and friendships with Leonardo DiCaprio, Bradley Cooper and Ryan Seacrest.
In stumbling, Kavanaugh joins a long list of ambitious arrivistes who hit Hollywood backed by outside money and full of plans for upending the traditional studio system before being brought down by the brutal realities of entertainment industry economics. Shaking up Tinseltown proved hazardous for the likes of Franchise Films’ Elie Samaha, Carolco Pictures’ Mario Kassar and Andrew Vajna, and Italian media magnate Giancarlo Parretti.
“Here’s a guy who comes in with a lot of money, a lot of chutzpah, and a lot of connections,” said Wheeler Winston Dixon, a film studies professor at the University of Nebraska, Lincoln. “But it’s really the choices that were made in terms of what films he was making. If you look at the films and what they made, there’s your problem.”
On his way up, the redheaded Kavanaugh had all the right moves. The former Wall Street money man affiliated himself with powerful charities and famously irritated West Hollywood residents by using the Sofitel Hotel rooftop emergency landing pad as his personal helicopter parking spot.
His private life was, in true Hollywood style, quite public. He married Los Angeles dancer Britta Lazenga on the Italian resort island of Capri in a 2011 service swarmed by paparazzi and attended by DiCaprio, Cooper and Gerard Butler.
Kavanaugh’s subsequent 2015 marriage to Sports Illustrated swimsuit model Jessica Roffey was held at a Malibu restaurant co-owned by Robert De Niro and featured an intimate musical performance by Aerosmith frontman Steven Tyler.
Now, after a string of box-office misses, the studio that afforded him this lifestyle is against the wall.
Relativity confirmed Wednesday it is laying off 75 of its 350 full-time employees, or about a fifth of its staff, with cuts mainly affecting newer units such as its fashion division. It’s also embroiled in a legal battle with one of its lenders, RKA Film Financing, which has called Kavanaugh a “con man,” saying he misspent marketing funds. Relativity denies this claim and has countersued for $200 million.
For the record:
An earlier version of this story said that layoffs would affect Relativity Media’s sports business. Relativity Sports was not part of the company’s bankruptcy filing and is not affected by the layoffs. The story also referred to Kavanaugh as a UCLA dropout. Kavanaugh left UCLA early but finished his degree in 2012.
Relativity has missed a string of loan payments, and creditors are now demanding their money. The studio, in turn, has put a number of its upcoming releases on hold.
Its biggest problem has been a lack of hits at the box office. Although Relativity had some early successes as a fledgling studio, it hasn’t had a breakout hit since 2013.
The run of bad luck is in sharp contrast to how he started his Hollywood career.
Kavanaugh, who began making stock market purchases when he was 6, has long been known as a sharp financial mind. The venture capital firm he started in his mid-20s came to an end after the market turmoil following the 9/11 terrorist attacks.
He then reinvented himself as a high-end matchmaker between Wall Street institutions and film studios. Kavanaugh arranged multibillion-dollar deals to co-finance hundreds of motion pictures while also generating millions in producer fees for Relativity.
Kavanaugh took a supposedly “Moneyball"-like approach to picking films, focusing on pictures that cost less than $100 million to make and spreading the risk through inventive financial deals. The company was said to make choices based on mathematical formulas that would weed out flops, a similar tactic that Wall Street hedge funds use to make stock picks.
The strategy was such a success that he turned Relativity into a full-fledged studio in 2010 that would release its own films rather than merely fund pictures put out by bigger companies like Sony Pictures and Universal Pictures. He came to the business with bold claims of changing the Hollywood model and concocting ways to reduce the risks inherent in making movies.
“Do you know how many people saw ‘The Assassination of Jesse James’?” Kavanaugh said during a 2009 interview with Esquire magazine about one of his more artsy films. “You and seven other people. Paul Blart grossed nearly $200 million worldwide. I’ll take Paul Blart all day, every day.”
Although “Paul Blart: Mall Cop” wasn’t a critical hit, the movie made money. Kavanaugh’s financial acumen wowed many Hollywood insiders and investors, but he was still met with skepticism from Hollywood’s big studio establishment.
Kavanaugh was trying to get an independent shop off the ground at a time when the box office was largely driven by the conglomerate-owned major studios, and companies like MGM and Miramax were on the ropes. Many in the movie business said Kavanaugh’s risk-management tactics weren’t all that different from what corporatized studios had already been doing for years.
But it proved difficult for his studio to consistently pick pictures that would draw big audiences to the multiplex. It had early wins such as the Bradley Cooper thriller “Limitless” and the swords-and-sandals epic “Immortals,” but also put out bombs like 1980s-themed “Take Me Home Tonight,” Nicolas Cage’s “Season of the Witch” and the Gerard Butler-starring “Machine Gun Preacher.”
The risk-averse strategy also had a downside in a business where high stakes can mean high rewards. It kept Kavanaugh from betting on potential franchise films that drive the box office today, and fill the coffers of the major studios.
Relativity’s struggles have provoked a certain amount of schadenfreude in the industry as creditors circled. For example, there was talk in Hollywood that the bankruptcy coincided with news Thursday that Kavanaugh sold his Malibu beachfront retreat for $8.7 million.
Analysts don’t expect Kavanaugh to lick his wounds forever. Some believe that the studio chief will try to buy back his studio out of bankruptcy in what could shape up to be a classic Hollywood comeback story.
“Maybe Relativity 2.0 will be a little more sober, thoughtful and more long-lasting,” said Tom Nunan, a former film and TV executive who teaches at UCLA.
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