By PETER LAURIA
Last updated: 11:20 am
April 3, 2009
Posted: 1:12 am
April 3, 2009
A dispute has broken out between film companies Relativity Media and Metro-Goldwyn-Mayer over Relativity's decision to cancel a distribution deal with MGM in favor of one with Lionsgate, The Post has learned.
The deal Relativity is to sign with Lionsgate, which will pay the studio a distribution fee for the domestic rights to such Relativity films as "Brothers" and "Season of the Witch," was originally made with MGM.
The studio even provided Relativity, which is led by controversial financier-turned-producer Ryan Kavanaugh, with roughly $10 million in seed money as part of that deal, according to sources close to the situation.
But, after the two sides began dickering over issues such as whether Relativity or MGM would pay for film negatives and marketing, known in the industry as P&A, or print and advertising, and over which films MGM would have the right to distribute, Kavanaugh repaid the $10 million as part of a settlement to cancel the deal.
P&A costs proved to be a major sticking point, because at between $20 million and $40 million per film, whichever side was ultimately responsible for paying would be looking at total costs of more than $100 million.
But there were other challenges as well. One source quoted from a letter that MGM's lawyers sent to Relativity threatening breach of contract for "undermining the fundamental rights to the agreement" if the distribution rights to the Jackie Chan movie "Spy Next Door" was excluded from the pact.
In a joint statement, both Relativity and MGM claim that the dissolution of their deal was mutual and free of friction.
"MGM and Relativity maintain a close and very amicable relationship," the companies said. "We were working on a number of films together from a deal made years ago, but given the evolution of both companies it became clear that new and different film strategies were emerging. We mutually decided to go our separate ways and remain open and enthusiastic about future opportunities together."
Indeed, sources involved in the dispute agree that Relativity's movies are better off being distributed by Lionsgate -- they just don't agree on why.
Those close to Relativity say the company abandoned MGM because Kavanaugh felt the studio was in disarray and unable financially or operationally to properly release his films. As a guy Tinseltown loves to hate, Kavanaugh has a lot riding on the success of the films.
People close to MGM dismiss the notion that the studio couldn't handle the Relativity slate. They note that MGM boss Harry Sloan and motion pictures head Mary Parent were able to pretty up Tom Cruise's "Valkyrie" and ultimately make it profitable.
"They turned chicken sh** into chicken salad with that one," one source admiringly said of the movie's success.
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