Meet the man who brought back the Weinstein movie empire—sans Weinsteins
In early 2018, the fabled film studio built by Harvey and Bob Weinstein stood on the verge of destruction. The charges of sexual assault against Harvey Weinstein brought by multiple women, and years of mismanagement and corruption hidden from the public eye, so battered the production house behind movies like The Butler, Paddington Bear and Spy Kids that the banks were poised to foreclose on the films they’d financed, splintering one of Tinseltown’s top libraries.
The Hollywood establishment was buzzing, even hoping, that the leading independent that backed such talents as Quentin Tarantino on offbeat, medium-budget films when the majors turned their attention to blockbusters was as over as The Bride’s hit list in the Tarantino-Weinstein revenge thriller Kill Bill.
Instead, what was once the Weinstein Company found an action-hero rescuer you’d think would be miscast for the role, a Texas restructuring specialist with no movie experience.
In July of 2018, Andy Mitchell, CEO of Lantern Capital Partners––who’d previous prospered in such workouts as Southern California Edison and GMAC during the financial crisis, as well as reviving a zinc recycler, a school supplies retailer and a notorious seller of timeshares––bought the Weinstein Co.’s assets out of bankruptcy for a mere $350 million in cash and assumed liabilities.
To the amazement of movie veterans who predicted that nobody would put money in an outfit that once carried the Weinstein name, Mitchell mined boffo box office from its trophy properties by running the studio himself during the first year Lantern owned it. That success enabled him to recruit A-list partners and a star CEO, reboot production on movies and TV shows, and squeeze top dollar from the library as stay-at-home families streamed such favorites as Scream 3 and Silver Linings Playbook.
(Harvey Weinstein, meanwhile, was convicted in early 2020 and sentenced to 23 years in prison on rape and sexual assault charges.)
A new name and a new deal
At the market close on July 15, Mitchell announced a new milestone. The studio, re-titled Spyglass Media Group in 2019, is selling most of its 277-film library to Lionsgate, producer of such favorites as La La Land and The Hunger Games, and owner of the Starz cable network. Lionsgate is also investing fresh funds in Spyglass, earmarked for new films and TV shows, in exchange for 20% of the equity. Mitchell’s Lantern will retain the largest shareholding, with the remainder held by its existing roster of minority investors: Warner Bros., Cineworld (owner of Regal Cinemas), Eagle Pictures of Italy, and Gary Barber, Spyglass’ CEO and former chief of MGM. Mitchell, having run the studio for the first year before handing the reins to Barber, remains on its board, and through the Lantern investment he’s a major shareholder.
The deal officially makes Spyglass a moneymaker. It also ensures that though their tainted studio name is gone forever, the franchises that the Weinsteins created in their heyday, and their tradition of nurturing independent filmmakers, will live on. In an in-depth interview with Fortune, Mitchell declared that the library sale will return his investors, as well as the Warner, Eagle and the other shareholders, every dollar they staked on Spyglass, “plus a nice profit.” Put simply, the transaction brought Spyglass a lot more than the $350 million Mitchell spent to salvage the Weinstein properties, though the principals didn’t disclose the exact purchase price.
Most of all, Spyglass will harbor the cash and intellectual property to make independent films both at the Weinstein’s old pace, and in the brothers’ traditional sweet spot––arthouse choices that range from low-budget to a cost of around $50 million. Spyglass retains to rights to films such as soon-to-be-released Scream 5, the latest entry in the franchise, and Hell Raiser, now in pre-production. It also continues to co-produce its hit TV show Project Runway with NBCUniversal’s Bravo network; Spyglass just wrapped on season 17.
Spyglass retains all the intellectual property from the library to extend the previous franchises, or do remakes. Fresh entries in the Hell Raiser, Spy Kids and Scream series are among the coming attractions. In development is what Mitchell sees as inspirational film in the Chariots of Fire tradition, based on the bestseller The Boys in the Boat, chronicling how the University of Washington crew team triumphed at the 1936 Olympics in Munich.
“We’ll be a pure production company doing five or six movies, and about the same number of TV shows, every year,” says Mitchell. “It will be all about quality, not quantity. The big studios have so much overhead. There’s a lot of pressure to keep all those people busy. They need to do, say, 20 movies a year. They also have to aim for a Star Wars or Avengers.” That leaves a big opening for Spyglass. “We’re willing to take on creative challenges that the big studios are less focused on,” he adds.
Backstory 1: The only bid
Though Mitchell says he knew nothing about Hollywood at the time, the Weinstein saga from a purely business angle offered just the kind of opportunity he prizes. “We go looking for guys in tough situations who have to get out,” he says.
In November 2017, a month after the famous New York Times story that documented Weinstein’s payoffs to female accusers, Mitchell got a call from an advisor representing the creditors. “We didn’t know the show biz people but we did know the restructuring people,” he says. Mitchell began studying the Weinstein Co. books to decide if Lantern should make a bid. “It was obvious that Harvey never made money, he was just good at raising money,” Mitchell told Fortune. “No one was making money but Harvey and Bob.” He marveled at their outrageous extravagances. “Their drivers had drivers,” he says. “Harvey would command extra scripts for the same movie––he did that for ‘The Boys in the Boat.”
The company, he recalls, was past due on payments to talent, the studios that helped them produce the films, even rental on storage lockers containing everything from scripts to old props. Production on its films was dragging because as the brothers struggled to obtain new funding. The banks increasingly viewed the studio as a poor credit. “When the scandal broke, the Weinstein Co. went from being an insolvent company to a company with no hope of survival,” says Mitchell.
Only two of the outside members of the board––which had included such billionaires as Paul Tudor Jones and Marc Lasry––remained after the scandal broke. They were Tarak Ben Ammar, the Tunisian producer who runs Eagle Pictures, and Lance Maerov, an M&A executive at advertising giant WPP. Both Ben Ammar and Maerov served as directors safeguarding their companies’ equity stakes in the Weinstein Co. Although their investments vanished, Ben Ammar and Maerov launched a crusade to save the studio. Their efforts were crucial keeping him in the hunt. Says Ben Ammar: “We weren’t going to wake up finding that some adviser to the creditors chased buyers’ Andy and Milos Brajovic away.”
From the start, Mitchell believed that the enterprise could only be saved via bankruptcy. “I told that to Lance and Tarak,” he says. “If you buy it outside of bankruptcy, you’re buying the corporate shell. You buy the corporate identity. You can be sued for anything the company did in the past. You inherit all of its problems.” But he also loved the assets, and believed no rival would buy it outside of the bankruptcy process. “Weinstein had great IP,” he says. “But I had no desire to purchase the company as it was then. It was too screwed up. My view was, ‘The boat is sinking and we’re Noah’s ark.’ To survive the flood, they need to change to our new boat.”
What Mitchell wanted was to buy the only the assets in a bankruptcy proceeding that would also determine precisely what the many hungry, angry creditors would receive. His goal was to save the business. The process ensured that the creditors would be fairly paid, but that the studio would emerge with the vast majority of creditor issues addressed, leaving a clean balance sheet. The bankruptcy court also distributed settlements to Harvey’s victims from the cash provided from the purchase, plus payments from the Weinstein Co.’s liability insurance.
As Mitchell predicted, no buyers stepped forward to keep the Weinstein Co. from becoming a ward of the courts, although Tom Barrack of Colony Capital expressed interest early on and investor Ron Burkle announced a deal in early March of 2018 only to walk away days later. In the bankruptcy proceeding, Mitchell made what’s known as a “stalking horse” bid for all of the Weinstein assets, for that $350 million. “It was that bid that kept them out of liquidation,” says Mitchell. “It meant that the company wasn’t about to die, that someone was willing to hire the employees.” Of course, the process was open to all-comers. About 40 rivals stepped up. “Every one of them wanted to take pieces of the business not the entire basket. They were trying to cherry pick. I had the advantage of wanting the whole truckload,” says Mitchell.
Backstory 2: You’ll never work in this town
Mitchell’s gambit attracted widespread derision. “A lot of movie people told me, ‘Dummy, you’ll lose your shirt. Hollywood will never work with you.’ My own big investors are telling me, ‘I gave you hundreds of millions of dollars, and you’re buying the Weinstein Co. once run by a sexual predator?'” According to Mitchell, two perceived problems kept investors at bay. The first was the view that audiences would shun all entertainment backed by Harvey Weinstein. “A lot of people in Hollywood thought that America would boycott these movies. I thought that was false from my own experience,” he says. “Moviegoers who live in Texas or Kansas never heard of Harvey Weinstein, but they know Paddington Bear and Tarantino films. My own five kids love those movies. People don’t watch credits the way Hollywood does.”
The second fear: Studios that license Weinstein films and shows would renege on their contracts by declaring that Harvey’s misdeeds constitute a “material adverse change.” A so-called MAC was a strong possibility, the doubters said, and if a Netflix or Amazon terminated their deals, the studio would go broke once again. Mitchell didn’t buy that argument, either. “I knew and the lawyers said that a company can’t walk away because one producer does something terrible,” he says. “There’s no clause that says if he or she does XYZ, the contract no longer applies. Think of all the people who worked on those movies. All of that great work would be thrown away because of what an executive producer did.”
In July of 2018, the judge declared Lantern the winner. Its $350 million, a combination of cash and assumed liabilities, constituted the entire pool available to creditors who, along with shareholders had awarded the Weinstein Co. well over $1 billion in capital. The creditors who got first dibs were the banks that financed the library. Their position was super-strong because the cash flows from the films themselves went to them directly, and secured their loans. If the banks didn’t get paid, they’d take the movies and sell them off. Those lenders received $165 million in cash. Another $50 million went to fees for lawyers, financial advisors and other other administrative expenses. The court also paid tens of millions to studios that had strong claims because they’d co-financed films still in production with the Weinsteins.
All told, the fall of the Weinstein Co. cost equity investors $450 million, and lenders another several hundred million. A company owned by billionaire Len Blavatnik took a $45 million hit as an unsecured creditor in the TV business.
When Mitchell took charge, the studio still employed around 80, about half the pre-bankruptcy workforce. “I had to make extra-sure that I was re-hiring those people into a new company, which was called Lantern Entertainment,” says Mitchell. “We had an all-hands meeting at the offices on Wilshire Boulevard. I said, ‘We’re buying the assets. Please come work for the new company. But this will be a formal onboarding process.” A hand shot up. One employee asked, “Will you do criminal background and drug tests?” “I was amazed,” recalls Mitchell. “I said, ‘Yes, of course.’ The next day I was more amazed when 12 people quit.”
Though ejected from management, Bob Weinstein wanted to produce movies for the new enterprise. “He’d say, ‘I know the talent.’ And some people wanted to work with Bob. Not everybody hated him. But I wanted to de-Weinstein the company,” says Mitchell.
Finding the right team
By early 2020, Spyglass was generating strong returns from the library, now free of the debt and liabilities used to buy the company. The previous year, Mitchell had attracted new investors, including Ben Ammar’s Eagle Pictures, Warner Bros., Cineworld, and most important, the former MGM chief Gary Barber. The new partners bought in at close to Mitchell’s original cost, according to Mitchell. Barber was looking to beef up his Spyglass studio that had made independent films in the past, notably 27 Dresses and Sixth Sense. In April of 2019, Barber replaced Mitchell as CEO, and Lantern changed its name to Spyglass Media Group.
A major reason for the the studio’s success was Mitchell’s decision to outsource sales of its library to Lionsgate. The larger studio had the flexibility to package Lantern and Spyglass offerings with its own hit films, lifting licensing fees for both sides. Naturally, America’s binge-streaming in the pandemic greatly swelled the value of the Spyglass portfolio, especially since no new content was coming out. “Everyone was stuck at home with nothing to do but watch TV, so our timing was excellent,” says Mitchell. That partnership led to Liongate’s purchase of the majority of films in the library, a deal that will provide Spyglass with strong momentum.
The studio’s back producing movies. It recently wrapped on Scream 5, for which it assembled the original starring cast encompassing Courtney Cox, David Arquette and Neve Campbell. It kept The Upside, a film with Kevin Hart, Nicole Kidman and Bryan Cranston that grossed $130 million in 2019. “The company had lost its distribution. That was Harvey and Bob’s speciality. We shopped The Upside to most of the major distributors before STX stepped up,” says Mitchell. Spyglass is working on another Spy Kids sequel and picked up rights to the old TV show Knight Rider, about a talking car. It also plans to remake the old Italian film Perfect Strangers in partnership with Ben Ammar’s Eagle Pictures.
So how does this restructuring specialist view his sojourn in the dream factory now that’s he’s mainly back in Dallas? “A big time agent said to me, ‘We love you private equity guys,'” says Mitchell. “‘You come to Hollywood in your private jets, and you leave in a Greyhound bus.’ I should have had more trepidation. The insiders’ view is, ‘Who do you to think you are to come in here and show us how to run our business? You’re not welcome!'”
Mitchell earned his welcome by rescuing an iconic-brand-gone-wrong— and by showing that you can nurture new talent and make daring choices without the indulging in the crazy extravagance that has turned so many Hollywood business stories into the darkest of film noir melodramas.
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