05.21.10 8:45 PM ET
Why the Weinsteins Won't Get Miramax Back
After high-stakes (and highly public) negotiations, Disney has ended talks with Bob and Harvey Weinstein in their effort to buy back Miramax Films for close to $625 million, sources tell The Wall Street Journal. Peter Lauria on why petty infighting is to blame.
To the surprise of precisely no one, antagonism between billionaire supermarket magnate Ron Burkle and the round mound of Tinseltown Harvey Weinstein is likely to derail the odd couple’s attempt to acquire the legendary studio home of Pulp Fiction and Chicago from Disney.
Sources cautioned that the proposed $625 million deal is not completely dead yet, but that it appears destined to fall apart given the infighting between Burkle and Weinstein. Indeed, a source close to the negotiations said Disney executives are prepared to sell and wanted to announce the deal last week, but they couldn’t because advisers for both Burkle and Weinstein were still arguing about their own contracts.
“People all over town have been warning Ron not to get into bed with Harvey,” says a former studio boss.
A Disney representative did not return a call for comment. According to a joint statement provided by Burkle and Weinstein, “The Weinstein Brothers, The Weinstein Company and Ron Burkle are all working toward a deal to purchase and operate Miramax. The parties continue to work diligently toward an agreement.”
Burkle and Weinstein entered into exclusive negotiations with Disney a few weeks ago, and have been granted repeated extensions by the studio in an attempt to reach an agreement. The problem is, Burkle and Weinstein have to iron out the structure of their own partnership first.
• Why No One Wants Miramax“People all over town have been warning Ron not to get into bed with Harvey,” says a former studio boss, likening the potential partnership to the disastrous relationship Burkle had with former superagent Michael Ovitz, which resulted in a years-long legal dispute.
Burkle, who made his fortune in the decidedly unsexy world of grocery stores and is desperate to shed the omnipresent “supermarket magnate” tag that precedes his every press mention, agreed to put up most of the $625 million to acquire Miramax, as well as pay Weinstein a fee to manage and distribute the studio’s movies. That led to the mistaken impression that Weinstein was actually going to once again own Miramax—the studio lovingly named for his parents Miriam and Max—even though he and his brother, Bob, would in reality be little more than Burkle’s employees.
According to a second source close to the deal, Burkle was irked by the fact that people thought Weinstein would be in control of Miramax and was simply using him for his money—Weinstein isn’t putting up any of his own money in the potential purchase. Because of that, this source said, Burkle is trying to minimize the power the Weinstein brothers would have over Miramax in their proposed partnership agreement.
“He’s trying to essentially put Harvey right back into the situation he was in with Disney, where he went from owner to employee,” says this source.
Or, as a source in the Burkle camp previously told The Daily Beast, “Ron’s not going to be put in a situation where he doesn’t have control over his own investment.”
That may be true, but Weinstein has leverage of his own, in the form of sequel rights to franchises like Scream, Scary Movie, Spy Kids, and Halloween, which Burkle would not be in control of even if he did buy Miramax. According to a third source involved in the deal, Weinstein’s position is that if he doesn’t get the control he wants from Burkle, then he’s simply going to stand in Burkle’s way and prevent him from making new movies. That strategy would hinder value creation and essentially leave Burkle with the “melting ice cube” that is Miramax’s film library (in industry parlance, a film library is referred to as a melting ice cube because it loses value without having new films to refresh its worth).
After building Miramax into the preeminent art house studio—by turning films with shoestring budgets like Sex, Lies and Videotape, The English Patient, and Pulp Fiction into critical and commercial smashes—Weinstein sold out to Disney. Once there, Weinstein traded low-cost prestige films for big-budget flops, engendering so much ill will that he was eventually pushed out by former Disney CEO Michael Eisner.
From there, the brothers Weinstein set up their own shingle—The Weinstein Company—and raised roughly $1 billion in debt and equity from the likes of Goldman Sachs, Perry Capital, Softbank, and WPP. While the money was intended primarily for movie production, Harvey Weinstein also used it to invest in such things as fashion house Halston, niche social network asmallworld.com, and home-video distributor Genius Products, among other things. Those investments, coupled with the poor performance of films like Derailed, Nine, and Zach and Miri Make a Porno, resulted in multiple rounds of layoffs and a $500 million debt restructuring.
The Weinstein Company’s poor performance as a standalone studio and dire financial position are perhaps the only reasons a deal with Burkle for Miramax could still be salvaged. Burkle doesn’t need this deal, but Weinstein does, if for no other reason than the perception that he has some positive momentum. All he has to do is subjugate his ego, which Weinstein has attempted before to no avail. (According to the former studio boss, after Eisner fired the brothers Weinstein, they publicly took the position of tough guys standing up to an evil corporate master, but behind the scenes they actually lobbied Eisner to reconsider and take them back. This time, they said, they’d be good soldiers. It didn’t work.)
One thing’s for sure, though, Burkle and Weinstein are running out of time. Now that the ripple in the relationship has been exposed as a full-blown laceration, you can bet that Platinum Equity, the company run by brothers Alec and Tom Gores, whose $550 million bid was turned down in favor of the Burkle-Weinstein partnership, are already writing a new check to bring to Disney CEO Bob Iger first thing Monday morning—if they haven’t already, that is.
Peter Lauria is senior correspondent covering business, media, and entertainment for The Daily Beast. He previously covered music, movies, television, cable, radio, and corporate media as a business reporter for The New York Post. His work has also appeared in Avenue, Blender, Black Men, and Media Magazine.