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Cautious Approach To Production Aids Remake of Artisan

Cautious Approach To Production Aids Remake of Artisan

By CONOR DOUGHERTY

Staff Reporter

Stung in its initial rush to get into the production business, Artisan Entertainment is emerging from a nearly two-year retrenchment with a pared down slate and renewed emphasis on its burgeoning library.

Artisan is looking to domestic distribution deals for films like “National Lampoon’s Van Wilder” ($22 million in box office, plus 1.5 million DVD units sold) and art-house favorite “Rodger Dodger,” now generating Oscar buzz.

All told, revenues this year could top $380 million, which would make 2002 Artisan’s best year ever.

“We all recognize production is a business you want to be in,” said Amir Malin, Artisan’s chief executive, “but how aggressive are you in that business? Are you going to be as aggressive as a major studio, or are you going to be taking a more conservative approach. We’re certainly in the latter category.”

Artisan has just three movies in pre-production right now, two slated for 2003 release. The first, “Havana Nights: Dirty Dancing 2,” is a $20 million co-production with Miramax Films. It’s an obvious choice the original “Dirty Dancing,” the 1987 hit starring Patrick Swayze and Jennifer Grey, is the most popular title in Artisan’s library, selling more than 150,000 DVD and VHS units per month on average, Malin said.

The limited production slate is a marked departure from the big plans the company had in the wake of the mammoth success of “The Blair Witch Project,” the horror picture it bought for less than $1 million.

Until 1999’s “Blair Witch,” which grossed more than $141 million in domestic box office, Artisan had relied heavily on its recently-enhanced library, including “It’s a Wonderful Life” and “Dirty Dancing,” to bring it to profitability.

Artisan produced the $34 million sequel to “Blair Witch,” 2000’s “Book of Shadows: Blair Witch 2,” which grossed $26 million in box office and another $14 million in video sales.

Strategic cost

Pulling back quickly from the post-“Blair Witch” production push, Artisan instead focused on acquiring films and exploiting its 7,000-title film library.

It reduced its debt to the lowest level since 1997; a company source familiar with the situation said total debt is about $100 million, down from almost $250 million in mid-2001.

Last April, Artisan was rewarded when a syndicate of banks, led by J.P. Morgan Inc., gave it a $210 million revolving line of credit, which replaced a $175 million line set to expire in July.

Most of the library consists of United States and Canadian home video distribution rights, which are held for a limited amount of time, and therefore decrease in value as the rights expire. Malin said maintaining key titles is not an issue and that Artisan is actively renewing the rights to its catalog, while at the same time buying further rights to the library.

Bolstering its production side, Canadian telecommunications firm BellGlobe Media paid $20 million for a 20 percent stake in Artisan in 2001, its Landscape Pictures group becoming an Artisan division. Landscape pictures is headed by former Dreamworks executive Robert Cooper and will handle Artisan’s films budgeted at more than $30 million for distribution by the major studios.

While emphasizing the library has put Artisan on track for its best sales year to date, the decision to proceed more cautiously on the production side irked some brought on to develop a slate of features.

“People came because there was a tremendous sense of promise and optimism. Those feelings were replaced with fear and risk aversion. Some of us felt we were hired to do a job and then weren’t permitted to do that job,” said one former executive. “Maybe a more modest approach was called for, but we thought we were being called to generate a lot of activity.”

After coming on during those heady days, several production executives left after relatively short tenures, and rumors of a power struggle persisted. Malin, who in April 2000 was promoted from president to co-chief executive with Mark Curcio, denied there was any struggle.

“The production game from Day 1 was a learning experience for us,” Malin said. “When I took over as CEO, I wanted to figure out a game plan where if we were going to be in the production business, we were going to do it right and with the right people involved.”

Malin hinted that the lackluster performance of Artisan’s in-house productions was a factor in the departures of Curcio, who left a few months after Malin was named co-chief executive, and former President Bill Block, who had a year left on his contract at the time of his departure in August 2001, as well as other production executives.

“Almost every single acquisition the company was involved with returned profits and that’s not something you could say on the production side,” Malin said. “The feeling was that we needed a better effort on that front. That may have led some people to leave.”

Block could not be reached and Curcio declined comment.

From the outside, those doing business with Artisan found the post-“Blair Witch” period to be one of confusion at the company.

“There were three guys who seemed to be running it and it was hard to discern who was doing what,” said Rick Hess, an agent in the packaging and finance division of Creative Artists Agency.

Rebound and rebound

The first turnaround for Artisan came after the $150 million leveraged buyout of its predecessor, Live Entertainment, in 1997. The new investor group, led by Bain Capital, began acquiring the rights to films from Republic Pictures, Vestron, Carolco and Hallmark Entertainment, creating a substantial library.

Buoyed by “Blair Witch” and a newly profitable library, the firm not only looked to a public offering and a ramped-up production slate, but was on the receiving end of several offers to buy the company.

Various suitors, including Lions Gate Entertainment and Metro-Goldwyn-Mayer Inc., courted Artisan in 2001. Later in the year, the company turned around and made its own $100 million offer for Lion’s Gate, later rejected.

As Artisan continues looking for new ways to fill its distribution channels, Malin said the company would continue to acquire films as the primary means for filling the pipes, particularly for the company’s Family Home Entertainment division, but that production will become an increasing part of Artisan’s business going forward.

“I think we really met the challenge and built (the company) up,” Malin said. “We were never as good as ‘Blair Witch’ and we were never as bad as ‘Blair Witch 2.”‘

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