STX Entertainment Chief Robert Simonds on Why He’s Spending $750 Million Making Movies This Year: ‘We Believe in It’

Simonds tells TheWrap: “We are throwing a lot of capital around, but we believe in it”

Last Updated: April 1, 2015 @ 3:52 PM

STX Entertainment Chairman Robert Simonds announced on Wednesday that he had partnered with China’s Huayi Brothers to finance and produce an expanded slate of movies — up to 15 feature films a year — further boosting the firepower behind his year-old STX Entertainment. TheWrap spoke to the budding independent mogul about why he’s so bullish on making movies while the studios are cutting back. He said: “We will spend $750 million this year in making, marketing and distributing movies. We will spend $950 million next year and between $1.15 and $1.25 billion in 2017.”

Sharon Waxman and Todd Cunningham: This is a pretty exciting deal, how did it come about?
Robert Simonds: When we funded STX a year ago, we were originally designed to do 8-10 movies a year at an average budget of $30 million and an average p&a (prints and advertising) of $35 million per film.

I was sitting in Beijing about 5 months ago, there are a lot of major players here. I’ve known Donald Tang for a couple of decades, he’s one of my closest friends, a former vice chairman of Bear Stearns and chairman of Bear Stearns Asia. Donald’s expertise is he’s a spectacular bridge to two cultures … he said, “I think there’s an opportunity to bring Huayi into what we’re doing.”

Donald said, “Let’s see if we can do a transaction.” Five months later we closed and fully funded. He was the secret sauce.

How does this partnership work? Do they co-own the films?
Predominantly the Huayi Brothers are participating on a global basis in our entire slate. The way the deal is structured, their equity investment plugs into other lines of credit and supercharges us. So instead of being able to make 8-10 movies, we are immediately upsized to 12-15 movies a year. While we’ve got four movies in the can right now, at the moment we’re shooting a Matthew McConaughey $65 million movie shooting in New Orleans. We will be announcing the next seven or eight movies in the next month. This is done and done.

You are owned by private equity. How much equity do the Huayi Brothers have?
It’s a slate deal. They don’t have equity in the company; Huayi has direct ownership in each of our movies. We closed and fully funded in March, and we went on hiring spree and ended up getting so many amazing executives — Kevin Grayson, Oren Aviv, Adam Fogelson. Adam said, “I’m seeing something really weird, the combination of what we’re doing, the paralysis in Hollywood … How can we take advantage of these?” I couldn’t then reopen my equity. I had just closed it. But that’s what drove this: How do we expand our story with blue chip players.

We will spend $750 million this year in making, marketing and distributing movies. We will spend $950 million next year and between $1.15 and $1.25 billion in 2017.

That is ambitious. Why are you so bullish on the movie business?
We feel it’s a perfect time to be doing what we’re doing. The reason the major studios stopped making these movies isn’t because they aren’t profitable; it’s because if you have millions in overhead, it makes sense to shift your business plan to franchise movies. They’ve created a vacuum in this space. What we found is that people want to work — talented directors and movie stars.

Others have tried this before. You might talk to Jeffrey Katzenberg or Ryan Kavanaugh about how hard it is to start a studio. Do you have some special sauce?
We believe in what we’re doing. It is really competitive. Really difficult. We’re trying to do this in most rational way possible. Right now we found there’s a gigantic opportunity with talent to let them tell their stories. We’re not trying to compete with anybody. We’re trying to fill a vacuum. That’s why we’ve so radically upsized.

We are throwing a lot of capital around, but we believe in it.

Will you have guaranteed distribution in China?
No we do not. The way this deal is structured, Huayi is participating on a global basis — in the North American market, in our Showtime deal. Hopefully in conjunction with them, we will figure out how some of these movies can perform in China.