Hollywood's Leading Financier Will Calculate For Food


A new profile of Hollywood cash wunderkind Ryan Kavanaugh takes folks behind the curtain at Relativity Media, the deep-pocketed enterprise that has a stake in a growing number of studio products around town. Sony and Universal are well-known as Kavanaugh's most frequent partners, with others signing up as fast as they can while their own money trees wilt in the recession heat. (Relativity last year even bought its own genre label, Rogue Pictures, off Universal.) The profile's set-up is kind of hilarious, featuring Ron Howard himself hanging out in the lobby awaiting a meeting with Kavanaugh (Brian Grazer must have hit traffic or be allergic to Relativity's foam ceilings), but it's what's happening elsewhere in the office that might be worth a closer look.

Esquire hopped into the high-tech hamster wheel where Kavanaugh's staff digests numbers -- big numbers with many zeroes that used to be the domain of studios themselves. Now, however, with projects reportedly flowing in by the dozen and risk-averse lots looking for anyone they can find to share the cost of building a release slate, Relativity has devised a proprietary formula to know just whether or not Ron Howard should have even made the trip to West Hollywood in the first place:

[A project is] fed into an elaborate Monte Carlo simulation, a risk-assessment algorithm normally used to evaluate financial instruments based on the past performance of similar products. Enough variables are included in the Monte Carlo for [Relativity] to have reached the limits of their Excel's sixty-five thousand rows of data: principal actor, director, genre, budget, release date, rating, and so on. After running the movie through ten thousand combinations of variables (in marathon overnight sessions), the computers will churn out a few hundred pages that culminate in two critical numbers: the percentage of time the movie will be profitable, and the average profit for each profitable run. The computers will also calculate the best weekend for the movie to be released, whether Russell Crowe will earn his salary or Sam Worthington will be good enough, and the box-office effect of an R rating versus PG-13.

Sounds like something right out of Moneyball, right? (Hell, Moneyball's recent adaptation woes probably stemmed from little more than feeding Steven Soderbergh's name into the software.) And yet even with 65,000 rows of data bursting Excel's binary seams, Relativity still went in on Evan Almighty, Land of the Lost and Cirque du Freak. What gives? "Outliers," of course, which sounds a lot like a fancy term for William Goldman's enduringly quotable (and accurate) axiom that "Nobody knows anything" -- not even Excel:

When the computers favorably assessed Land of the Lost, they didn't factor in our sudden collective fatigue with having Will Ferrell yell at us. When they ran the numbers for 300 -- a movie about an ancient battle waged between mostly naked men starring nobody famous set against a blood-soaked, computer-generated backdrop framed by a cult graphic novel -- they couldn't have bargained for anything like its eventual worldwide gross of more than $450 million.

Hmm. It's weird, but isn't this the kind of rationalization piece we usually see about moguls right before a long, slow, ugly tumble? Think Harvey Weinstein, Harry Sloan, Philippe Martinez. Sure, Kavanaugh has proven that the discriminating apportionment of $2 billion pays off in nickels (Public Enemies), dimes (The Ugly Truth) and crisp dollar bills (Paul Blart: Mall Cop -- Kavanaugh gleefully admits he's "not in this for the art"). But if Universal can hardly buy a hit this year, and one modest success it did buy, Bruno, wasn't even Relativity's, when does it become more of a political game than a numbers crunch? I mean, the guy had Ron Howard waiting in his lobby while Kavanaugh attempted to broker a book option in his office. The whole thing smacks of "too big to fail" -- it has for a while now -- and yet does anybody have a back-up plan just in case? This is the movie business we're talking about, after all.

· Ryan Kavanaugh Uses Math to Make Movies [Esquire]


  • HwoodHills says:

    1. Van Airsdale, you are a genius. Why? Because the magazine blurbs all read like "Charlie Brown Teachers" to me.
    2. Kudos for posting an intelligent story.
    3. Kavanaugh should become the new Poster Boy for the "Anti-Red-Headed- Step-Child Defamation League."

  • Indeed you are correct. This is just like hedge funds (excluding Bernie Madoff). The lack of disclosure with billion dollar media funds (Kavanaugh has allocated approximately $6.5B to $7.5B of investor funds), and yet nobody knows what his return on investments are, or the cuts he has made to studios, or anything else about Realativity's long term profitability. More importantly, the worst part is that his track record is dismal, and he's previously tanked on Gun Hill I & II. Meanwhile, Cuban and others are buying up other film funds like Melrose I & II for pennies on the dollar because of the banking cash crunch. Not to mention that hedge funds like Elliot Associates aren't presenting any definative "Kavanaugh" numbers either. It's goning to be like the dead relationship between Ben Waisbren (Kavanaugh and Ben had a falling out when Kavanaugh helped Stark Investments lose $350MM), and Milwaukee's Stark hedge fund was about the most conservative (Midwestern values) going. It's about time someone protected the principal on media funds. Oh... Wait... Someone has... My company does it. 888 217-7800

  • Socal-RN says:

    I knew Ryan in high school and early college (we lost touch about 1994). He is a very smart, charming, fast talking CON MAN! Narcissitic to the bone– grandiose, liar, thinks he is “above the law”, he makes “friends” only to use them and get soemething from them, etc. We used to say this guy could sell ice to an Eskimo– he really could, he has a strong gift of gab and can talk in circles — looking you straight in the face and convincing you that the sky is not blue. Seriously, he is very cunning, very smart, SUPER smooth and thus . . . . VERY dangerous. Anyone who trusts this guy is a sucker and I have no doubt the house of cards will fall.

  • Finance Associate Finance Associate New York, NY Job Description: The Finance Associate provides support to the Planning & Contract Management unit and will report to and work closely with the Director of Budgeting and Forecasting. S/he will be involved in ....

  • jimmy d says:

    dyer and Cavanaugh both suffering from narcissistic personality disorders with the exception that dyer has Legal plan where film investors are guaranteed not to lose money........Big Difference!!!!!!!!!!

  • Binky Dyer says:

    Troy "Binky" Dyer thinks Jimmy D (who says above), that Ryan and I both suffer from Narcissistic Personality Disorders, never though to rationally consider Kavanaugh lost a half-a-billion or more of investor's funds while profiting handsomely, while Mr. Troy "Binky" Dyer's IRS 181 , 162 Bonus , and 199 ideas save American investors and tax-payers billions in taxes every year, while NEVER LOSING A SINGLE PENNY to bankruptcy. Kavanaugh lined his pockets. Dyer doesn't earn anything from producing media, TV, or films. Kavanaugh took fees, participation, and profits, while never protecting his investors. Dyer gives his brilliant ideas away for FREE, while protecting all. The opposite of Relativity.