How an agent turned his pie-in-the-sky memo into a reality.

Agent X: A helpful reader (and we could use more of you) has reminded us that years ago—in 1999, to be specific—young Modi Wiczyk wrote a memo on the future of Hollywood. It was called "Another New Ball Game."

Recall that last week, we told you how the Endeavor agency—in which Wiczyk is a former partner—got Sacha Baron Cohen a sweet deal for making Bruno (the follow-up to Borat) at Universal. The deal involved the brief use of a financing vehicle called Media Rights Capital. Some studio types were suspicious that MRC was a unit of Endeavor and that the whole point of using MRC was to get a deal that no studio would otherwise have yielded. It would be against the law for MRC to be a unit of Endeavor because it is against California state law for agencies to produce films. Endeavor has said that MRC is a separate entity.

The co-CEO of MRC is Modi Wiczyk.

Few ideas are original, and Wiczyk would seem, in his 1999 memo, to have tipped his hat to his forebears. Peter Guber—the former Columbia Pictures chief who almost decimated the studio in the early '90s—wrote a memo as a young executive in 1969. It was called "The New Ballgame"—a 15,000-word prediction of future shock in the movie business. (The premise was that home video would transform the movie business as well as music, theater, religion, sex, and just about everything else.)

In the early '80s, Michael Eisner wrote another state-of-the-industry memo, replete with baseball metaphors, when he was an executive at Paramount. Jeffrey Katzenberg, as the restless chairman of the Disney studio, annoyed Eisner when he wrote a similar memo packed with baseball metaphors in 1990.

Wiczyk's "Another New Ball Game" was, potentially, a more revolutionary memo. He wrote it as a young executive at a company called Summit Entertainment. The memo predicted the decline of the studios, with filmmaking talent as the beneficiary. He also predicted that a management company with a lot of big stars would start to produce and own films. "The most immediate and pressing challenge would be to get the studios to carry the product," he said. The likelihood of a studio boycott was remote, he said, because "whichever studio was suffering at the time would probably break ranks in the name of short-term self-preservation." Hmm.

Michael Ovitz eventually tried to launch such a management company and failed. But Wiczyk's memo said the agencies could also carry out the change. "A similar structure could be created which complies with the conflict-of-interest laws," Wiczyk wrote. "If [a] fund was created as a stand-alone entity and the agency had an arms-length service contract, they could avoid conflict-of-interest violations. … Admittedly this is a delicate issue and a tough deal to pull off, but it's certain someone would try it." Why? The potential for enhancing agency commission was "too rich to ignore." In fact, he said, an agency could double its annual revenues.

All this seems very prescient in light of the Bruno deal. Whether Endeavor really can run with that ball remains to be seen. Wrong sport, but you get the idea. (link)

Tuesday, March 13, 2007

Funny business: When Fox let slip the opportunity to make Bruno, Sacha Baron Cohen's follow-up to Borat, some thought the studio let one of the hottest stars in the firmament get away. Others said the deal, which cost more than $40 million, was too rich—especially since it's an open question whether Cohen can pull off another movie based on people not recognizing him (this time as a gay Austrian fashion maven).

The Bruno deal raises another good question: Has Endeavor, the agency that represents Cohen, invented the perfect crime? Or did it simply come up with a clever way of striking a very favorable deal that infuriates the studios?

Endeavor has had some Oscar heat lately—its clients include Martin Scorsese, Alejandro González Iñárritu, and many others (though Reese Witherspoon just bolted). Even before Borat opened, the agency presided over a bidding war for Bruno among several studios. Universal's winning bid was $42.5 million—a big bump up from Borat, which cost less than $20 million (and has grossed more than $250 million worldwide).

Before the bidding frenzy started, Endeavor sold Bruno to a financing entity called Media Rights Capital. MRC didn't take much of a risk, since the studios were fighting to buy the project before the proverbial ink was dry. In fact, MRC sold the package to Universal at such lightning speed that some at the studios have wondered aloud (if not on the record): Why did Endeavor need to bring MRC into the deal?

And that raises the question: Is MRC a separate company, or is it Endeavor in different clothing? It is against California state law for agencies to produce films, and Endeavor has said that MRC is a separate entity. But some in Hollywood perceive MRC as a unit of Endeavor—a unit positioned to cherry-pick projects. Former Endeavor agent Modi Wiczyk is co-CEO of MRC.

One executive who passed on Bruno said MRC seems to be an "internal production machine" for the agency. An executive at another company also expressed doubts about the deal. "None of the math made sense," this executive said. Estimating high, the film seemed to require a budget of only about $30 million, "even if you give Sacha the $15 million that he wanted" for starring. And if that were true, then whose pocket would be lined with the markup?

An Endeavor source says all this is the bitter cavil of the defeated. "MRC is its own company," he says. After all, Endeavor would hardly risk its business by breaking the law. And through the independent MRC, Endeavor got Cohen one hell of a deal (and presumably an extra-nice commission for itself). MRC agreed to pay Cohen $15 million instead of the $12.5 that a studio would have paid, and gave him the lion's share of profits as well as creative control. And in the end, he gets to own the negative—a worrisome prospect for studios that live on the income thrown off by their libraries. That's a package the studios would never have matched—much less beaten—without an electric prod.

One of those executives who did not think the deal was well-advised sees it as a bad precedent, explaining that a studio "should not step into a deal where you're violating the most basic practices of the business you're in."