Requiem for Relativity – Hollywood Should Mourn the Loss of a Studio

There should be no sneering, no schadenfreude for Ryan Kavanaugh’s fall

Last Updated: July 31, 2015 @ 3:12 PM

Though it’s almost August and a time to relax, Hollywood should mind the bellwethers.

It’s a terrible day in the movie industry when an independent studio fails. One less place for filmmakers and screenwriters to sell their projects. One less outlet to champion the magic of long-form storytelling. One less partner for exhibitors to haggle with. One less place for executives and producers to work.

The elite club of movie distributors shrinks by one.

The missteps that led to Relativity’s bankruptcy had been in the making for years. Anyone could see that the studio had trouble making a hit movie, had never created a franchise or developed a distinctive brand as a content creator.

What was Relativity, beyond the infectious enthusiasm of its ambitious founder,  Ryan Kavanaugh?

But Relativity should have failed five times over by now. I had been told so many times that Kavanaugh’s house of cards was about to collapse that I stopped believing it could happen.

Kavanaugh himself is said to be in a state of shock, since he had been aiming for an IPO this year rather than bankruptcy.

This much we’ve learned from the court filings: Relativity generated $500 million in revenue last year. That is a hugely impressive figure and evidence that Kavanaugh had built a substantial company in the decade-plus of its existence.

But the company also had $1.1 billion in liabilities and, apparently, lenders who had tired of hearing about the next big deal around the corner.

What was real and what was hype? I, too, had heard Kavanaugh say that his company was already doing over $1 billion in revenue. Over the years, there were huge deals that never came together, including a partnership in China and a massive production facility in Hawaii.

We’ve already detailed what lay behind Relativity’s failure — its outsized ambitions, a penchant for spending and high risk.

But there should be no sneering, no schadenfreude for Kavanaugh’s loss. It doesn’t look good for the industry when a studio fails. It’s not a headline that should be welcome to any public media company whose stockholders are not experts on what separates Relativity from anyone else, or who is raising money from distant financiers eager to be part of the glamour Hollywood offers.

The chips are falling and today a lot of people are left holding the bag, including one media buying agency – Carat USA – that faces a $36 million hole for money owed it by the studio. Other core entertainment companies are also owed millions: Technicolor, Cinedigm, Cinram. No doubt they can ill afford to just write off such sums.

Ninety Relativity employees are out of a job, while the remaining staff can’t feel confident about their prospects.

It’s a dark day in Hollywood.

The other piece of depressing news on Thursday was the sudden departure of COO David Glasser from The Weinstein Company. Glasser, a spark plug of nonstop energy and business acumen, was a critical partner to the singular force of nature that is Harvey Weinstein.

Glasser tempered Harvey’s…. temper. He spoke sense to the mogul when necessary, and took the company that rose from the ashes of Weinstein’s beloved Miramax to a position of financial stability at a time of huge uncertainty for movies.

Weinstein and Glasser were unable to agree on a new contract for the COO, who wants to lead TWC beyond the constraints of a company ultimately run by a visionary and idiosyncratic founder.

It’s hard to build an independent movie studio, have we mentioned that? A couple of new entrants are trying to follow in these footsteps – STX Entertainment led by Robert Simonds, and Broad Green Pictures, led by Daniel and Gabriel Hammond, to name two.

I hereby mourn Relativity, and you should too.