Relativity Media

Posted on February 18, 2016 by Noah Mintz

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]

With this major speed bump in Kavanaugh’s plan for the future of Relativity Media, the production company came out of the 2015 fiscal year on a surprisingly high note: ranking 12th amongst all other production companies in total market share with 0.6%, and grossing $74.2 million on four movie releases (making them the third largest mini-major production company) [7]. Similarly, things began to look up for Relativity Media at the start of this Spring when United States Bankruptcy Judge Michael Wiles confirmed a reorganization plan for Relativity on February 8th, 2016. With an offer from Trigger Street Productions‘ notable industry moguls Kevin Spacey and Dana Brunetti, Relativity was set to have their debt reduced by over $630 million [8]. Although the deal included Relativity losing their television, fashion, and sports agency divisions to various lenders as a partial settlement for their egregious debt, the film division, Relativity Studios, was granted approval to release their upcoming films Masterminds, The Disappointments Room, Before I Wake, Kidnap, and The Strangers 2 upon successful completion of the deal. Just one month after the negotiation was proposed on the other hand, Spacey backed out, citing his busy acting schedule as an excuse for his inability to serve as Relativity Studio’s new chairman [9][10]. Brunetti did remain on board, however, and now serves as the studio’s President of Production in both film and television operations [11]. After multiple other financial dealings fell through including the unsuccessful Trigger Street negotiation, Relativity entered bankruptcy court once again on March 19th, now with only $16 million of financial help from various capital groups, as opposed to the $100 million Kavanaugh had pledged upon filing Chapter 11 [10].

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

On top of Relativity’s fruitless financial dealings, news broke of Relativity Media’s apparent ‘Ponzi Scheme’ in late March. According to Variety magazine’s online article, “The New York investment firm Colbeck Capital aided and abetted Relativity Media’s fraudulent acquisition of a crucial film-release loan — money that was misspent on corporate expenses and to support the high-flying lifestyle of Relativity founder Ryan Kavanaugh” [9]. This claim by RKA Film Financing seeks over $110 million in damages, and has the potential to put Relativity further in debt if found guilty [9].

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.

Viacom

Posted on March 25, 2015 by Jacqueline Perrelli

by  JACKIE PERRELLI

Viacom Logo [1]

Company

Viacom is an entertainment powerhouse responsible for connecting with audiences through a variety of platforms. With approximately 700 million global subscribers [2], Viacom distributes their content across television, and more importantly, online. Lately, Viacom has been focused on restructuring the company and finding new ways to reach audiences. With his recent two-year contract extension, Philippe Dauman, [3] both CEO and President, is believed to be the right man in charge to handle the Viacom reboot.

Dauman’s leadership is especially important in a time when Sumner Redstone, founder of Viacom, is in questionable health. Redstone was not able to attend the last shareholder meeting held in early March [4]. The company is prepared; however, for a post-Sumner world. A board of trustees is in place consisting of current CEOs and family members, ready to protect the Viacom empire. It has even been rumored that Viacom will merge with another media conglomerate, but told not during Redstone’s reign [5].

Background

Viacom TV Channels [23]

MTV, VH1, CMT, Logo, BET, Nickelodeon, Comedy Central, and TV Land are a few channels inclusive to the Viacom brand. In 1987 Redstone, controlling shareholder, bought the company for $3.4 billion dollars [6]. Today, Viacom’s share price is 69.77 [7]. This number is the result of a 14 percent decline last year and already another 8.8 percent downfall in 2015 [8]. Within the past 52 week period the Viacom share price has been as high as 89.76 [7]. One source of the drop in stock price can be attributed to poor ratings.

Stock Price [9]

Viacom Ratings [11]

Viacom pinpoints Nielsen ratings and their inability to calculate views from online sources [10]. Due to the fact that most traditional viewers are switching to some sort of online viewing, ratings from online sources are imperative to Viacom. Since last year, most Viacom channels have declined greatly and are down 30 percent ratings wise [11]. For this reason and many more is why Viacom is in the middle of a reconstruction period.

Online Content

Noggin is a new mobile subscription service for preschoolers.

Noggin Streaming Service [13]

With the goal of staying relevant in a world that skews online, Viacom created a streaming service outside their traditional cable package. This streaming service, Noggin, is through Nickelodeon and aimed at a younger demographic. Due to an 18 percent tumble in audience viewership last quarter, Viacom introduced the service in order to compete with other companies. However, known for their television bundle, Viacom has to be careful not to turn viewers completely online, resulting in subscription cancellation. The livelihood of other channels like VH1, MTV, and TV Land, are at risk if viewers abandon their subscriptions [12]. Viacom is already in risky territory with Suddenlink, the seventh-largest cable operator in the U.S, having recently discontinued their services with Viacom [14].

Viacom VS Suddenlink [22]

Not wanting to pay significant increases for channels, Suddenlink got rid of the bundle completely. Although Suddenlink lost significant viewers from the Viacom split, 99.7 percent of their customers continued to pay for Internet services [14]. At a time with such a strong online presence, Viacom fears that other cable companies could follow in Suddenlink’s footsteps and drop the channel lineup; resulting in solely online streaming. In preparation for the future of television, Viacom has planned to reorganize their company. This has resulted in the favoring of employees with technical capabilities rather than traditional workers as content continues to move online [12].

Viacom Restructuring

Along with a changing platform for providing content, Viacom is experiencing changes throughout the entire company. Most of the changes occurring in the company today stem from both low ratings and advertisement sales. To ameliorate the ad sales, Viacom is going into upfront season with a new strategy to boost advertisers participation within the network. With the Nielsen ratings not sustaining the amount of klout they once had, Viacom has chosen to guarantee success for the advertiser’s ads by broadcasting to very niche audiences [15].

[16]

That in mind, the company outlined a plan that would restructure the Viacom brand moving forward. This business plan included the layoff of 400 jobs across the company ranging from New York to Los Angeles, and encompassing some highly ranked positions. With the elimination of some jobs and cancellation of underperforming shows, Viacom aims to save $350 million dollars annually once the restructuring is complete. But before this can happen, Viacom put a halt on their share buyback program, which aims to shrink the number of outstanding shares, and recorded a $785 million in pre-tax charge for the compensation of laid off workers, abandonment of ineffective programming, and declining ratings due to online competition [17].

To learn more about the Viacom reboot period and which shows are getting cut from the Viacom lineup: click here [18].

Another part of the Viacom restructure deals with the consolidation from three television network groups into two. The first group includes: Comedy Central, MTV, Spike, Logo, and VH1, while TV Land and CMT are now placed with Nickelodeon. The first group will focus towards general content, while the second network group will have a more family-entertainment aspect to it [19]. The Viacom reboot has a significant focus on a shift from traditional TV to more digital content, having a more niche staff, and investing in areas that progress Viacom as a company.

New Audiences

Funny or Die Logo [20]

As Viacom attempts to save money and explore new options, the company has two audience-building transactions in the works. The first transaction deals with the acquisition of three comedy websites. The Onion, Funny or Die, and CollegeHumor, give Viacom more ways to tap into digital and online audiences. [12]

International Revenue [21]

The second transaction involves new audiences and opportunities for Viacom in India. With a very saturated, highly online, U.S. market, Viacom is looking to places overseas worth investing in. While U.S. viewers tend to get most of their content in ways other than the traditional TV, India offers more pay-for-tv customers. Viacom already owns Channel18 in India and is now vying for five more local entertainment channels. The company sees India as a place to invest with over 250 million households with pay-TV service and subscriptions. A benefit of investing in areas overseas are the low-budget production costs and the ability to expand Viacom’s American channels to new countries. Foreign markets allow Viacom to tap into potential audiences outside The United States [21]. India is a popular market not only for Viacom, but also other television companies that are beginning to see the potential in investing overseas.

Overview

It is apparent that many changes are taking place at Viacom, and will continue to take place until the company feels ready and back on its feet. The reorganization of the company, streaming service, and plans for the future are all positive ways in which Viacom can grow and prosper.

Sources

[1] Stempel, Jonathan (March 12 2015). Viacom Agrees To $7.21 Million Settlement To End Interns Wage Lawsuit. Huffington Post. Retrieved: April 9 2015.

[2] About Viacom. Viacom. Retrieved: April 9 2015.

[3] Hagey, Keach and Stynes, Tess (January 15 2015). Viacom Extends CEO’s Contract by Two Years. The Wall Street Journal. Retrieved: April 2 2015.

[4] Szalai, George (March 12 2015). Sumner Redstone to Miss Viacom Shareholder Meeting. The Hollywood Reporter. Retrieved: April 2 2015.

[5] Atkinson, Claire (March 14 2015). Post-Sumner CBS-Viacom power a mixed bag. New York Post. Retrieved: April 9 2015.

[6] The Autumn of Sumner. The Economist. Retrieved: April 9 2015.

[7] Viacom Stock Price. Google Finance. Retrieved: April 10 2015.

[8] Sakoui, Anousha (April 6 2015). Viacom Halts Buybacks, Sees $785 Million Restructuring Costs. Bloomberg Business. Retrieved: April 9 2015.

[9] Viacom Stock Price. Yahoo Finance. Retrieved: April 9 2015.

[10] Hagey, Keach and Ramachandran, Shalini (February 11 2015). The Picture Gets Fuzzy at Viacom. The Wall Street Journal. Retrieved: April 9 2015.

[11] Layoffs, restructuring leads to chaos at Viacom. Fox Business. Retrieved: April 14 2015.

[12] Steel, Emily (January 29 2015). Nickelodeon to Offer a Streaming Service as Viacom Steps Up Digital Efforts. The New York Times. Retrieved: April 9 2015.

[13] Perez, Sarah (February 25 2015). Nickelodeon Unveils “Noggin,” A Mobile Subscription Service For Preschoolers Arriving In March. Tech Crunch. Retrieved: April 13 2015.

[14] Steel, Emily (March 8 2015). Provider’s Dispute With Viacom Highlights Skirmish Over the Cable Bundle. New York Times. Retrieved: April 6 2015.

[15] Steinberg, Brian (April 13 2015). Time Warner, Viacom Back Away From Nielsen Guarantees For Ads. Variety. Retrieved: April 15 2015.

[16] Ryssdal, Kai (April 14 2015). Make more upfront: Viacom, Turner discuss new ad model. Marketplace. Retrieved: April 14 2015.

[17] Gottfried, Miriam (April 7 2015). Viacom: Buyback Step Back Isn’t a Setback. The Wall Street Journal. Retrieved: April 9 2015.

[18] Viacom faces behemoth $785M charge. Youtube. Retrieved: April 15 2015.

[19] Viacom restructures to take $785 mn charge, brings TV networks into two units. Television Post. Retrieved April 10 2015.

[20] Hunsucker, Andy (November 10 2011). A Place For Film Interviews – Funny Or Die Producers. Indiana Public Media. Retrieved: April 14 2015.

[21] Sharma, Amol (January 19 2015). Why Viacom Is Looking to India for a New TV Audience. The Wall Street Journal. Retrieved: April 9 2015.

[22] Goff, Andrew (October 2 2014). Ack! The Suddenlink vs. Viacom War Now Hurting Humboldt’s Ability to Watch the Daily Show Online. Lost Coast Outpost. Retrieved: April 13 2015.

[23] Dampier, Phillip (April 1 2015). Viacom Demands 100% Rate Increases for Hundreds of Small Cable Systems, Military Bases. Stop the Cap! Retrieved: April 13 2015.

Principles & Practices

Website by the students of TRF235

Tag Archives: Restructuring