Play It Again, Boys

By Jeffrey Resner

Harvey Weinstein has a perfect ending in mind for Miramax Films, the company he and his brother Bob were forced to leave behind in 2005 when they departed the Walt Disney Co. after 12 colorful years. In Harvey's final scene, the two snag back the name from the media giant, which has turned Miramax into a declasse, financially diminished Mouse brand. Harvey, the brash movie mogul who helped spin the low-budget indie-film trade into a booming business, doesn't need more wealth. And he's not pushing for another Academy Award. He won the hardware in 1999 for producing Shakespeare in Love, and he has marketed pictures that have scored nearly 60 other Oscars. But Miramax holds special meaning for the brothers primarily because it was named after their mother Miriam and their deceased father Max. That's about as sentimental as Harvey gets. At Disney his brawls with filmmakers and show-biz executives made almost as many headlines as his shrewd, aggressive handling of such quirky hits as The Crying Game, Pulp Fiction and Chicago.

"We're different now, and so we're doing something completely different," says Harvey. While they would love to reclaim the old name, one thing the Weinsteins don't want back is the old film-business model. "We've already done a movie company. Today we're in the business of providing content and our own distribution pipelines."

The siblings are heading a new entity called simply the Weinstein Co., which sounds relatively unflashy, although its grand ambitions dwarf anything the pair did at Disney. Movie production and acquisition still form the backbone, but the Weinstein Co. is positioned more as a diversified boutique media company encompassing home video, cable television, Broadway theater, book publishing, video games and, of course, the Internet. With dozens of projects under way, the Weinsteins estimate that they'll break even next year, turn a profit in 2008 and probably launch an IPO by the decade's end.

If so, it will mark the brothers' third financial bonanza in show business, the first taking place when they sold their struggling indie-movie company to Disney in 1993 for $70 million. After bristling for years under the control-freak management of former Disney CEO Michael Eisner, they ended the bitter final chapter of their Miramax reign on an up note. "After we signed our final contracts, we took all the Disney lawyers to a three-hour, raucous, rollicking dinner," recalls Harvey.

The boys had good reason to celebrate. They got not only an estimated $130 million in goodbye bucks but also fabulous parting gifts: shared distribution rights to completed pictures, brother Bob's lucrative Dimension Films label, sequel rights to (and split proceeds from) 15 movies, including Scary Movie, Scream and Spy Kids. The Weinsteins had both capital and content--starting anew but not a start-up, says Bob.

Investors have thrown money at them. They amassed a $1.2 billion bankroll, including $500 million through a debt sale and the remainder via 32 investors ranging from fellow entrepreneurs like Internet billionaire Mark Cuban and carpet kingpin Julian Saul to hedge funds and financial firms, including Wellington Management and Fidelity Investments. Declares Harvey: "We now have the ability to buy a company for a billion dollars."

Yet their indie upbringing taught them to be tight with a dollar and careful about cash flow. A key strategy calls for building a formidable library that can spin off immediate revenues while providing fodder for various platforms. Former MGM owner Kirk Kerkorian--who flipped his studio three times--advised the Weinsteins to scoop up all the solid content they could get their hands on. The fickle nature of the movie business makes each film a gamble. Hence a large library reduces overall risk.

Summing up their strategy, Mike Medavoy, a veteran producer involved with the Weinsteins on two projects, says, "They probably learned a few lessons from their time at Disney. No. 1: it's nice to have a big banker in back of you. No. 2: this business is filled with mistakes, and margins are shrinking, so you have to be more careful than ever before. And No. 3: it's good to hedge your bets."

In the evolving media environment, the Weinsteins are multiproduct, multichannel. "One of the most important things is the ability to do a lot of movies and slot them in various places," says Harvey. "Some will go directly to TV or video or the Net. Others will go to theaters. It's a brave new world." Plans call for 18 big-screen projects in 2007, with an equal or greater number going direct to video. "The emphasis on theatrical is to be pickier," he explains.

Their early slate of theatrical releases has had mixed results. Hits included sequels Clerks II and Scary Movie 4, along with the computer-animated Hoodwinked! Another toon, Doogal, was a dog, as was Mrs. Henderson Presents. "We've been hitting singles and doubles, but when you get a lot of those, they turn into runs," says Harvey.

Over the past year, the brothers seem to have made more big deals than big movies. "Our meetings used to be about acquiring films. Now they're about acquiring companies," Bob recently told Harvey, only half-joking. They got 70% of publicly traded home-video label Genius Products in exchange for licensing the DVD rights to Weinstein movies--a "pretty radical" move, says Genius chairman Stephen Bannon. Genius distributes material from World Wrestling Entertainment, Discovery Kids and ESPN and in November signed an exclusive rental agreement with Blockbuster. Other affiliations include ownership of a small arts and entertainment channel with Hubbard Broadcasting, J.P. Morgan Chase and Perry Capital; a publishing pact with Hachette; a production arrangement with BET founder Robert Johnson; and a new Latin American film fund.

Their most undervalued asset, says Harvey, is a stake in private online company aSmall World.net an invitation-only social-networking site that hopes to attract international movers and shakers: think of it as a MySpace for millionaires, where you could interact with Naomi Campbell instead of Tila Tequila.

Ah, but it's only money. The real prize lies in the pursuit of power, innovation and, of course, approval from Mom. Miriam Weinstein, 80, is still upset with Disney for not allowing her sons to take back her namesake banner. Maybe if her boys do well this time around, they could just buy Disney instead.