by Noah Mintz

Relativity Media Logo [1]

RELATIVITY MEDIA

9242 Beverly Blvd #300, Beverly Hills, CA

http://relativitymedia.com

OVERVIEW:

Founded in 2004 by venture-capitalist and movie enthusiast, Ryan Kavanaugh, Relativity Media has and continues to produce, distribute, and structure financing for more than 200 films through their Relativity Studios division. These films have successfully accumulated more than $17 billion of revenue in the worldwide box office and generated over 60 Academy Award nominations [2]. Upon its inception, Relativity Media was widely praised for reimagining the Hollywood landscape in their buying of “textured, mid-budget films… To bankers, Kavanaugh appeared to have cracked the code, having come up with a way to forecast a famously unpredictable business by replacing the vagaries of intuition with the certainties of math” [3].

KEY EXECUTIVES:

RYAN KAVANAUGH, Chief Executive Officer [4]

RAMON WILSON, Interim President [4]

CAROL GENIS, Managing Director [4]

FINANCIALS & RESTRUCTURING:

After six years of financing and distributing high-profile films for major film studios like Sony Pictures Entertainment and Universal Pictures, Relativity Media began making and distributing their own movies in 2010 with their first original film, Season of The Witch (2010). Many industry professionals predicted the company’s downfall after witnessing Kavanaugh’s proven history of financial irresponsibility [5]. Yet Relativity persevered, dealing out successful high-grossing films like Immortals (2011 – $83.5 million), Limitless (2011 – $79.3 million), and Safe Haven (2013 – $71.3 million) [6]. Ryan Kavanaugh’s algorithmic, low-risk business model finally proved to be successful. With over $560 million of assets by the summer of 2015, Relativity seemed relatively untouchable. Yet when an outstanding $330 million in debt to various lenders came due in July of the same year (not to mention the $1.8 billion of debt due in the following years), Relativity was forced to file for Chapter 11 bankruptcy protection on July 30th in New York State Bankruptcy Court [5].

Relativity’s Ryan Kavanaugh Breaks Silence, Points Fingers in Emotional Post-Bankruptcy Interview [5]

Image from The Wrap’s “Ryan Kavanaugh’s Relativity Media Declares Chapter 11 Bankruptcy” [13]

Amongst Relativity Media and Kavanaugh’s slew of shortcomings and failures to fulfill many of its early bankruptcy pledges, Judge Michael Wiles shockingly granted Relativity Media approval to exit bankruptcy status after many negotiations and a successful $400 million refinancing plan with UK investment firm, Maple Leaf Films (of Maple Leaf Capital Group) [12]. While the investment company has an oddly shady past and limited credits in the film industry, Maple Leaf Films proved to be a significant life saver for the drowning Relativity Media. In the meantime, as they begin the post-bankruptcy reorganization phase, Relativity must face RKA Film Financing and FTI Consulting in court. In the coming months, Relativity will attempt to resolve RKA’s ‘Ponzi Scheme’ claim against the company, and FTI’s fee dispute that began in the summer of 2015 and could cost Relativity an added $4 million of debt [9].

PROJECTION & CONCLUSION:

Upon Relativity Media’s ultimate emergence from bankruptcy, Ryan Kavanaugh and his newly diminished team of industry professionals will continue in their attempt to regain the reputation that was lost in the summer of 2015. With the help of Maple Leaf Films’ convenient endorsement and Judge Wiles’ thoughtful compassion in bankruptcy court, Relativity looks to rebound with its upcoming films Masterminds (which was postponed from its original 2015 release), The Disappointments Room, Before I Wake, Kidnap, and Strangers 2. After a full year without a release, Relativity needs a break. While these upcoming releases do not necessarily ensure a future of success for Relativity, the big-named high-profile comedy, Masterminds, looks to be the company’s one saving grace. With Kristen Wiig, Zach Galifianakis, Owen Wilson, and Jason Sudeikis as the headlining cast, the 2016 comedy earned a 96% in the “Want to See” category on Rotten Tomatoes [14]. While it falls under the throw away genre of stupid comedies, it is likely to make Relativity some much needed cash. Check out the trailer below.

[17]^

There is no certainty when it comes to the future of Ryan Kavanaugh and his brainchild, Relativity Media, but on Relativity’s website dedicated to the company’s reorganization, the CEO and Chairman of the board said it best. While their shaky past two years have further diminished the reputation of a company once recognized as a revolutionary force in the film industry, Kavanaugh promised that “the Relativity that emerges from the Chapter 11 process will be better capitalized and have greater financial flexibility” [15].

Finally, here’s a sneak peek of Realtivity Media’s upcoming film slate directly from their website.

Screenshot of Relativity Media’s upcoming film slate direct from their corporate website [16].

SOURCES CITED:

[1] Logopedia. “Relativity Media – 2013 (Free Birds).jpg.” Wikia. Retrieved on: April 22, 2016.

[2] “Relativity Corporate Site – Leadership: About.” Relativity Media. Retrieved on: April 22, 2016.

[3] Wallace, Benjamin. Janruary 25, 2016. “The Epic Fail of Hollywood’s Hottest Algorithm.” Vulture Magazine. Retrieved on: April 22, 2016.

[4] “Relativity Corporate Site – Leadership.” Relativity Media. Retrieved on: April 22, 2016.

[5] Siegel, Tatiana. August 05, 2015. “Relativity’s Ryan Kavanaugh Breaks Silence, Points Fingers in Emotional Post-Bankruptcy Interview (Exclusive).” The Hollywood Reporter. Retrieved on: April 22, 2016.

[6] “Box Office By Studio – All Time: Relativity.” Boxofficemojo.com. Retrieved on: April 22, 2016.

[7] “Studio Market Share – 2015.” Boxofficemojo.com. Retrieved on: April 22, 2016.

[8] Gardner, Eriq. February 08, 2016. “Judge Officially Confirms Relativity’s Reorganization Plan.” The Hollywood Reporter. Retrieved on: April 22, 2016.

[9] Rainey, James. March 10, 2016. “Colbeck Capital Aided Ryan Kavanaugh’s ‘Ponzi Scheme,’ Film Lender Claims.” Variety Magazine. Retrieved on: April 22, 2016.

[10] Rainey, James and Lang, Brent. March 15, 2016. “Without Kevin Spacey or New Equity, Relativity Now Must Face Judgment Day.” Variety Magazine. Retrieved on: April 22, 2016.

[11] Lang, Brent and Littleton, Cynthia. March 13, 2016. “Relativity Relaunch: Kevin Spacey Nixes Chairman Role, Dana Brunetti Sets Deal.” Variety Magazine. Retrieved on: April 22, 2016.

[12] Rainey, James. March 17, 2016. “Relativity Media Claims Lifeline From Obscure Maple Leaf Films.” Variety Magazine. Retrieved on: April 22, 2016.

[13] Cunningham, Todd and Donnelly, Matt. July 30, 2015. “Ryan Kavanaugh’s Relativity Media Declares Chapter 11 Bankruptcy.” The Wrap. Retrieved on: April 22, 2016.

[14] “Masterminds (2016).” Rotten Tomatoes. Retrieved on: April 22, 2016.

[15] “Relativity Corporate Site – Reorganization.” Relativity Media. Retrieved on: April 22, 2016.

[16] “Relativity Corporate Site – Films.” Relativity Media. Retrieved on: April 22, 2016.

[17] Movieclips Trailers. “Masterminds Official Trailer #1.” YouTube. Retrieved on: April 22, 2016.