Making movies pencil out

Yeah, I know - it's impossible. But former MGM vice chairman Chris McGurk thinks he's on to something. Really. He's now CEO of the upstart Overture Films, which will roll out its first feature next week, the heist comedy "Mad Money" that stars Diane Keaton, Queen Latifah and Katie Holmes. Liberty Media Chairman John Malone is bankrolling the venture, helped along with Liberty's existing assets. Liberty, you see, owns the Starz and Encore cable channels, which will end up showing Overture films through another Liberty unit, home-video distributor Anchor Bay. As laid out by the NYT, Overture has $325 million in financing — $225 million in bank loans, $50 million in equity from Liberty Media and $50 million in debt that it failed to sell to outside lenders. The idea, it seems is to set their sights low.

“If we spend $30 million marketing ‘Mad Money,’ we open to $10 million, and we do $25 million” over the film’s theatrical run, Mr. McGurk said, “we’ll be doing just fine.” The business plan calls for making movies for less than $30 million in most cases, and holding Overture’s share of production costs to $10 million or $15 million by selling foreign rights or taking on partners. Mr. McGurk said that at MGM, over six straight years its movies in the under-$30 million range averaged nearly 30 percent profits — though roughly a third lost money — because of hits like “Legally Blonde” and “Barbershop.”

Bill Mechanic, the former studio chief at Fox who as a producer courted Wall Street at one point, said Mr. McGurk had “built a smart mousetrap,” but noted that “everybody comes up with these financially driven business plans in a business that’s only half financially driven.” Minimizing risk is great, but “You’re not in business not to lose money,” he added. “The real issue is, will they make movies that people want to see?”



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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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