The Weinstein brothers' strip-mining of Project Runway-the powerhouse fashion contest they own-is in keeping with the guiding principle they've stuck with since their heyday at Miramax. Harvey's critical successes were funded by profits from his brother's B-movies; and now the irascible film producer is milking reality television for the same purpose. Fine-except the Weinsteins' demands for payment from Marie Claire for the privilege of association with Project Runway (which we reported yesterday) are extreme even for them. And their motives may have less to do with greed and more with desperation. Hollywood insiders speculate the brothers' $1bn launch financing isn't as much of a buffer as it seems: the investment bank and other investors may pull some of the funds at the end of the year.
Now the Weinstein Company-the mini-studio launched by the brothers after they fell out with Disney-hasn't been a complete failure. Quentin Tarantino's Grindhouse (widely believed to be their biggest flop) might actually eke out a profit over its entire life. There's some buzz for at least two coming productions: Nine, Weinstein's film version of the Tony-winning musical, and Stephen Daldry's The Reader, a holocaust-guilt tale. And Project Runway-which recently wrapped up its fourth season-is of course a big hit.
Let's also stipulate that the rumor of the impending crunch is vague. The mini-studio is privately held which means there's no easy way of knowing the terms on which the Weinsteins raised funds in 2005. Some of the tittle-tattle may be merely wishful thinking; most of the Hollywood establishment wishes the worst for Harvey Weinstein; the mini-studio frontman has been counted out before, and has rebounded. Says one insider: "He comes back like a cockroach."
But some kind of financial pressure is entirely plausible. The Weinsteins-despite their reputation as two of the most successful film producers of the last 20 years-have surprisingly meager personal resources; when running Miramax they made more money for Disney than they ever did for themselves, and they remain heavily dependent on outside investors.
Those backers aren't happy. Already last year there were rumblings that the Weinstein Company had lost the confidence of shareholders such as Tarak Ben Ammar, the Tunisian dealmaker. Fortune's Tim Arango reported then that the Weinstein Co. was missing its financial targets; he said shareholders were putting pressure on Weinstein to focus on movie making rather than pursuing his ambition to be an all-round media mogul with investments in internet companies such as A Small World, the briefly fashionable social network.
So what? The Weinsteins' $1bn should cover them for a few more years. But there's a problem. Investors likely have the ability as well as the inclination to demand some of their money back. One assumes that the $420m the Weinsteins raised by selling 49% of their company is committed: that the founders are under no obligation to buy back the shares, though that's not unheard of.
The remainder of the Weinsteins' fund was in the form of debt, however. A loan is often subject to covenants, such as the maintenance of a certain amount of cash flow, and a repayment schedule. For instance, the Weinstein Co. projected it would reach profitability this year; if that's not the case, the lenders might have reserved the right to demand repayment.
Even in the heyday of Weinstein's Miramax-when he produced Acadamy Award winners such as The English Patient, Shakespeare in Love and Good Will Hunting-Harvey Weinstein was known as one of the most unpleasant negotiators in the entertainment business. (See the clip from HBO's Entourage, left, for a lightly fictionalized rendering of his famously titanic rage.) If his funding is really as insecure as suggested, the irascible film producer at least have better reason to be quite so bad-tempered.
Disclosure: Harvey Weinstein used to live in the apartment above me, and once cornered me at the local deli to complain about a post on Defamer about his girlfriend, designer Georgina Chapman. Fine to criticize Brad Pitt, he said. "He gets $20m a picture." But Chapman? "She's a civilian." But he waited until I had bought my strawberry milk-and he never yelled.