About three years ago, Diane Keaton and Queen Latifah were talking to MGM about starring in a film directed by “Thelma and Louise” writer Callie Khouri.
Today, they’re wrapping up the film, called “Mad Money,” which also stars Katie Holmes. It’s being bankrolled by Douglas County-based Starz LLC through its new venture, Beverly Hills-based Overture Films.
“It was a project when I was running MGM,” said Chris McGurk, former chief operating officer at MGM and now Overture’s chief executive. “It fell out of MGM when the company was sold.”
Starz, which is owned by Liberty Media Corp., announced the formation of Overture Films in November, bringing in former MGM and United Artists executives McGurk and Danny Rosett. The duo’s credits include such films as “Hotel Rwanda,” “Legally Blonde,” and “Bowling for Columbine.” The other key Overture executive is Peter Adee, president of worldwide marketing, distribution and new media.
The nation’s second-largest premium pay- TV company is taking a different tack than its competitors HBO and Showtime, which have found success with original TV programs such as “The Sopranos.”
Overture Films puts Starz in the movie-production business, as well as the distribution business. Overture produces and distributes movies such as “Mad Money” to theaters nationwide. Starz Media distributes the DVD domestically and abroad. The film eventually is shown on the Starz pay-TV networks and becomes available as a digital download from Vongo, Starz’s online subscription-based video service.
Robert Clasen, Starz chief executive, said the company, in the past, has done a good job of gathering movie content for its pay-TV networks, but now that people get their entertainment from so many different sources – theaters, TV, the Internet and iPods – the focus needs to be on having control of all those different sources.
“If we own all the audiences where they’re going to watch it, we get to monetize (movies) in all those locations,” he said.
Clasen said 20 percent of prime-time television viewers watch movies.
While major film studios do own DVD-distribution companies, only Time Warner Inc., with its ownership of Warner Bros. Entertainment, HBO and Time Warner cable, comes close to being able to offer a similar pipeline for movies.
“We thought that Starz and Liberty were the perfect fit that could leverage distribution for a competitive advantage in the marketplace,” McGurk said. “It would be incredibly difficult without them.”
Distribution is key
Starz Entertainment has 15.8 million subscribers nationwide. HBO leads the pack with 28.7 million subscribers, and Showtime comes in third with 14.3 million subscribers, according to Kagan Research.
Distribution is key in the film industry. Films unable to secure theatrical, home video and pay-TV distribution deals struggle to reach audiences and make a profit.
“So many independent films can’t see the light of day because they have no distribution,” said S. Mark Young, a University of Southern California professor specializing in the sports and entertainment business.
He said more than 50 percent of a film’s revenue comes from DVDs and other downstream revenue sources, such as pay-per-view, on-demand, pay TV and online downloads. Only one in 10 films makes money at the box office.
With Overture Films, Starz expects to have an additional eight to 12 movies to add to its annual acquisition of about 120 films. Overture will either purchase films, as it did with Charlize Theron’s “Ferris Wheel,” or shoot its own films, such as “Mad Money.”
After MGM’s 2005 sale to a group of investors, McGurk and Rosett came up with the idea to form a studio that would produce films with a maximum budget of $30 million, far less than the average $100 million cost of making a film last year.
“It makes sense. One of the things (Starz) was facing was making sure they got enough output to their pipeline,” said David Bloom, a former MGM executive under McGurk.
Can’t bank on any one film
“But it’s a higher-risk business. You have to invest in a slate fashion. You don’t bet on a single film. Of any 10 films, six lose money, three more or less break even, and one will be a hit, but you don’t know which,” Bloom said.
This isn’t the first time Starz has tried to make its own movies. In 1999, it created Starz Pictures, an attempt to produce made-for-cable movies. It made only one film, “Joe & Max,” a biopic about the 1938 heavyweight championship boxing match between Joe Louis and Max Schmeling. Starz Pictures was shuttered in 2002.
Overture is different as it is staking out its own territory in Hollywood, particularly with industry veterans McGurk and Rosett.
Before taking on Overture, McGurk was an adviser for video-distribution company IDT Entertainment, a division which was acquired by Douglas County-based Liberty Media last May.
“I joined IDT knowing that Starz was interested in acquiring IDT. I had only been there for two weeks before Liberty made an offer to buy. Timing is suspicious for good reason,” McGurk said. “They had the kernel of the idea at Starz to create their own captive film studio. We had a business plan.”
Now with 40 employees in California and New York, Overture has four movies in the works.
McGurk can bring profits to Overture – and, ultimately, to Starz and Liberty Media – given his success “walking a tight line” financially at MGM, Bloom said.
“Chris is a sharp guy and well-experienced. He was at Universal and Disney. He came into MGM as the Hollywood guy,” Bloom said, adding that McGurk played a key role in the Disney acquisition of Miramax Films.
“Chris will be the guy watching the bottom line,” he said. “He can be prudent.”
And despite the low price tag of its films, Overture said it is able to lure A-list actors because of the quality of its scripts. In addition, Overture will try to get actors to take a modest upfront payment in exchange for a percentage of later revenues.
“We’re allowing the material and the story to attract the cast and the filmmaker,” Rosett said. “Talent seeks out low-budget material. Those types of opportunities to define who they are as an actor.”
Staff writer Kimberly S. Johnson can be reached at 303-954-1088 or kjohnson@denverpost.com.
