The Moneymen

When TV writer-director-producer Paul Haggis was carjacked at gunpoint in the parking lot of a Blockbuster Video on Wilshire Boulevard, he turned the incident into the germ for his feature script “Crash,” with the carjackers becoming two of his protagonists.

The film, which he calls an urban drama in the narrative style of 2000’s “Traffic,” tackles the topic of race relations in Los Angeles. “I wanted to do something that was irreverent, funny, tragic and shocking,” the Canada-born Haggis says from the editing bay where his directorial debut is being cut. “When you set out to do something like that, you pretty much know it’s not going to be a studio picture.”

Haggis encountered resistance from the indie world, too: As he sent out the script he wrote with Bobby Moresco, the message he received time and again was that the topic of race, from a white director, was too risky.

Haggis admits freely that “Crash” could have languished in his bottom drawer had it not been for real estate mogul-turned-movie producer and financier Bob Yari. Yari loved the original perspective and gutsy story line and brought the film to his Bull’s Eye Entertainment partner Cathy Schulman.

Before long, production was under way with a star-studded cast that includes Don Cheadle, Sandra Bullock, Brendan Fraser, Thandie Newton, Matt Dillon, Ryan Phillippe and rapper Ludacris.

But Haggis’ story is not unique. A couple of years after a spate of wealthy individuals from outside industries — including Yari, Denver-based billionaire Phil Anschutz, Broadcast.com’s Mark Cuban and Todd Wagner, the Money Store’s Marc Turtletaub, Gateway Computers’ Norm Waitt Jr., FedEx’s Fred Smith and financier Jim Stern — set up production shingles in Hollywood, their slates are in full swing, and the effect of their presence is being felt throughout the independent film business. Whether they be agents, producers or talent professionals, industry veterans are calling these moneymen a godsend.

“They are making a substantial impact on the business,” says Mark Gill, who headed Yari’s Stratus Film Co. before taking over Warner Independent Pictures. “What I see happening is these guys stepping in to provide the last 20%-30% of the financing and then the wraparound financing that pulls it all together. That’s the difference between a movie living or dying.”

It’s not only for a feature here or there: The amount of production these financiers has set in motion is significant. Through Crusader Entertainment and Walden Media, Anschutz has greenlighted three $100 million-plus movies: the upcoming releases “Around the World in 80 Days” (Buena Vista), “Sahara” (Paramount) and “The Chronicles of Narnia: The Lion, the Witch and the Wardrobe” (Buena Vista). About a dozen more films are in production or development at those two companies, with budgets ranging from $20 million-$100 million.

While Yari generally is working on smaller projects (with budgets in the $5 million- $50 million range), he is responsible for more than $100 million worth of production in the pipeline through his four companies: Stratus, Bull’s Eye, El Camino Pictures and Bob Yari Prods.

Beyond investing in a few films, some members of this financier group are putting money into long-term infrastructure, an indication that they hope to ride out any early setbacks. Yari plans to create an indie studio that, within two years, will house a video arm and a platform for theatrical releasing. He also recently acquired a majority stake in foreign-sales company Syndicate Films, which will represent most of Yari’s product overseas.

Cuban and Wagner, who made billions during the tech boom, have bolstered their 2929 Entertainment by acquiring the Landmark Theatres chain, Magnolia Pictures Distribution and Rysher Entertainment’s television library. They also own production company HDNet Films and cable channel HDNet, essentially making 2929 a vertically integrated company with the means to develop, produce, distribute and broadcast content. They are set to release first theatrical feature, “Godsend,” this month through Lions Gate.

While the flurry of activity has captured the industry’s attention, the impact of these players perhaps owes more to timing than to the details of the deals themselves. “The foreign sales market is off by 20%-30%, German tax funds are a shadow of their former selves, and the U.K. market just got cut in half five weeks ago,” Gill says.

Also, other investors and the Japanese companies that were prevalent during the 1990s have disappeared. Collectively, that translates to billions of dollars that have left the film-financing pool during recent years. Amid that climate, a Yari or an Anschutz can move ahead quickly, attracting underemployed top talent and veteran insiders in the process. “These guys are spending money when relatively few people are,” Gill says.

Adds Stern, who felt the economic climate was right to set up his Endgame Entertainment: “The dissolution of European markets created more cash needs in Hollywood. There were great opportunities to raise money and to take advantage of inefficiencies in the market.”

Stern’s current projects include Miramax’s “Proof” and the Tobey Maguire starrer “Electroboy.”

Some of these wealthy individuals already have achieved movie success. Waitt, who set up Gold Circle Films, struck gold with a 50% equity investment in 2002’s “My Big Fat Greek Wedding.” Smith has been around a few years longer with Alcon Entertainment and has seen profit with 2000’s “Dude, Where’s My Car?” and 2002’s “Insomnia.”

But finance pros are quick to note that the investments of a few billionaires don’t come close to offsetting losses sustained by the industry. “The studios are really hungry to find people who want to invest in their movies,” says Adam Platnick, head of Freestyle Pictures and a veteran of raising capital for Hollywood film companies. “There’s no other international company that’s replacing the group that was co-financing big-budget movies. Companies like Canal Plus, PolyGram and Helkon have all stopped or gotten out of the business; there are only a couple players left, like Village Roadshow, that can afford to co-finance (a film on the scale of 1999’s) ‘The Matrix.'”

Among the billionaire investors, only Anschutz has greenlighted a picture on a blockbuster scale — but he is not aiming to fill the passive role with the studios that international companies did in the past. This new group looks to the studios more as marketing and distribution partners, rather than financing partners.

In fact, as the majors respond to the economic downturn by contracting their slates and focusing on surefire franchises, many of the upstart players see an opening to create studio-quality fare at a reduced price. “There definitely is a target niche that is undersupplied,” Yari says, citing a mature foreign market that is willing to pay more for fewer star-driven vehicles than for a raft of no-name indies or studio bombs. “We look for projects that work internationally in as many territories as possible; we either presale or vet the valuations in the international markets before we start a film.”

Perhaps because of their outsider status, these wealthy individuals also tend to bring unconventional approaches to their business deals — and that, in turn, has created new opportunities in the marketplace.

Anschutz, for example, was able to move forward on “80 Days” after U.S. distributor Paramount pulled out before filming began. At $110 million, the movie was one of the most expensive films ever to go into production without distribution. Such circumstances might have crippled another project, but because of his deep pockets and trust in the material, Anschutz was able to bet on finding a distributor when the film was completed. (Buena Vista is set to release the action-adventure in June.)

Stern brought his hedge-fund background to his Hollywood endeavors, and instead of creating a production company, he set up Endgame as a discretionary fund with several other equity investors. “There is a certain investment time frame that’s built in; we’re not a company — we have to return capital at a certain point,” he says. But because of that structure, Stern has the luxury of picking and choosing projects without an obligation to make a slate of films in order to be profitable.

His moves are being studied as other producers seek new sources of capital to launch their projects. Surprisingly, there is a fair amount of interest from Wall Street investors in such a structure. “There’s not a lot of alternatives out there right now,” Relativity Management founder and former venture capitalist Ryan Kavanaugh says. “You have a very fickle stock market, a venture market that is scary to Wall Street, an inflated real estate market and a very low interest rate in the bond market. Suddenly, the movie industry doesn’t look so bad.” Kavanaugh is doing his part to facilitate the relationship between the two worlds: He brokered a deal between veteran Wall Street investor Mark Kimsey’s Daedalus Fund and producer and former studio head Mark Canton in Canton’s new entity, Atmosphere.

Yari’s El Camino Pictures arrangement with William Morris Independent also was an unconventional move that took observers by surprise. Films are packaged by WMI heads Rena Ronson and Cassian Elwes, with Yari as the company’s owner and primary investor. Yari puts up the first piece of equity for a project, and the rest of the budget comes from tax incentives, presales and gap financing. Ronson says the setup has changed radically the way she can approach material.

“By putting up an initial cash pay-or-play commitment, he makes it possible for a first-time director to get a shot at landing the actors of their choice,” she says. That essentially solves the “cart and horse” problem faced by most indie producers, who struggle to find a financier who will commit without a star or a star who will commit without financing. Yari has given a significant leg up to emerging filmmakers: Seven of his 12 films are by first-time directors.

But all of this new money doesn’t enter the market without strings attached. In the case of Anschutz, a practicing evangelical Presbyterian, the investor has been open about looking for family-friendly projects that square with his ideology. While his commitment to making clean, uplifting G- and PG-rated films might sound out of step with Hollywood, Anschutz is betting that a void exists for fare that appeals across generations. “We wanted to make films that you would not be embarrassed to bring your mother to or your kids to,” says Howard Baldwin, former president and CEO of Crusader, who left the company recently to form production outfit Baldwin Entertainment Group with his wife Karen.

Warns Gill, “The bad news is, not all of these guys will last.” In the movie business, not all apparent success stories have happy endings, either. Bob Sturm, who co-financed Fox Searchlight’s “One Hour Photo” through his Catch 23 Entertainment, saw a return when the film grossed $44 million at the boxoffice. But after an initial quick rise that included hiring former Artisan executive Jeremy Barber and making a bevy of slate and business announcements, Sturm got cold feet and decided to retrench on his investments and scale back the operation.

With such a clear loss of momentum, the future of Catch 23 appears to be in question. One former employee says that at the root of the firm’s problem was a lack of understanding between outsiders and insiders regarding running a business in Hollywood. It’s not an unfamiliar story, and perhaps it’s more surprising when an outsider does have the wherewithal to survive.

For Haggis, it only took one investor with chutzpah to make a dream project a reality — and the way he sees it, the longer a guy like Yari can stick around, the better it is for the business. “There are very few producers today who will take the risk,” Haggis says.

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