Relativity's Ryan Kavanaugh: His meteoric rise and possible fall.

FT
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July 23 2011 7:05 AM

The Would-Be King of Tinseltown

The meteoric rise and possible fall of Relativity's Ryan Kavanaugh.

Article from Financial Times

This article originally appeared in Financial Times. Click here to read more coverage from the Weekend FT.

Ryan Kavanaugh of Relativity Media
Ryan Kavanaugh of Relativity Media

High on the cliffs of Anacapri, overlooking the blue waters of the Bay of Naples, sits Da Gelsomina, a renowned restaurant and hotel. Surrounded by vineyards, it is known for its beautiful swimming pool and fine food: the pickled aubergines are one of its specialties.

The venue was booked a few weeks ago for a lavish private wedding party. Capri used to be the holiday destination of choice for vacationing Roman emperors but at the beginning of July it was the Hollywood elite that descended on the island. Leonardo DiCaprio attended; Bradley Cooper, the star of the Hangover films, was also present, as was Ryan Seacrest, the host of American Idol, and Gerard Butler, who starred in the sword-and-sandal epic 300. They were there to see their friend Ryan Kavanaugh marry his fiancée, Britta Lazenga, a dancer with the Los Angeles Ballet. The guests are household names but it is unlikely you will have heard Kavanaugh's name before—although you may have seen it, or that of his company, as the credits rolled in one of the many films he has produced, such as The Fighter, a winner at this year's Oscars, or Limitless, the March hit that starred Cooper and Robert De Niro. As the founder and chief executive of Relativity Media, a company which has, in only a few years, evolved into a fully fledged movie studio, Kavanaugh is a mogul in the making, his ascent to the upper echelons of Hollywood's hierarchy as rapid as it has been unexpected.

At just 36, the red-headed Kavanaugh has already produced more than 30 movies. He has raised billions of dollars from Wall Street firms, money which has been invested in more than 100 films released by Hollywood studios—Sony Pictures and Universal Pictures, among others. Hancock, Mamma Mia!, The Social Network, Salt, and the upcoming Cowboys & Aliens, starring Daniel Craig and Harrison Ford, have all been partially financed by blockbuster deals that were arranged by Kavanaugh.

Such a meteoric rise has not gone unnoticed: The film trade paper Variety recently anointed Kavanaugh its "Showman of the Year" in a special issue which included 20 pages of gushing tribute ads from friends and business partners. Variety also declared that Kavanaugh "eschews sleep, clocking a mere 90 minutes to two hours a night" and revealed, among other things, that when not producing movies he spends his time "working with sick kids in hospitals," practicing "transcendental meditation," and "closing in on a cure for cancer" through his involvement with a bio-tech venture.

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Kavanaugh's is an unlikely path to movie moguldom. After attending UCLA, he started a small venture capital and stock trading firm, which attracted several film-industry clients. The company would eventually collapse, but while pondering what to do next Kavanaugh realized there was money to be made funneling Wall Street funds into Hollywood.

Films have not always been the best bet for Wall Street: They are unpredictable investments and big budget releases can be risky. But in the heady days before the 2008 financial crash Wall Street could not get enough of Hollywood, and Kavanaugh had a ringside seat. Private equity firms and hedge funds poured billions of dollars into movie "slates"—the multiple movies produced and released by Hollywood studios each year. These deals had typically been arranged by big banks but Kavanaugh carved an opening for himself, utilizing his Hollywood connections and financial acumen to perfection.

Kavanaugh was new to the party and spoke openly about how he was going to fix a broken entertainment industry that he claimed wasted too much money. This made him as many enemies as friends yet he struck gold and the studios lapped up the cash he sent their way.

But Kavanaugh was not content to be a financial middle-man. In 2005, he formed a pivotal bond with Elliott Associates, a mammoth New York hedge fund, when it made a small investment in one of his slate deals; within three years it had invested hundreds of millions of dollars in Relativity to help him achieve his dream of starting his own movie studio. Other banks pulled out of Hollywood financing, scarred by the financial crash, but Kavanaugh kept going, backed by Elliott's millions.

Recent events have sorely tested those ties. Kavanaugh wanted more money to expand his company late last year but the hedge fund wouldn't play ball. Barbs were exchanged via the Hollywood press, relations soured and the drama has left Kavanaugh at a crossroads. He has plenty of detractors and many people have told me they think he is heading for a fall. And yet he is close to selling part of his company to new partners in a deal with the potential to power Hollywood's youngest movie studio to new heights. The question is, does he have what it takes to stay in the game as one of Hollywood's most influential players?

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