for
Fahrenheit 9/11
, it allowed Moore a generous profit participation—which turned out to be 27 percent of the film’s net receipts. Disney, in honoring this deal, paid Moore a stunning $21 million. Moore never disclosed the amount of his profit participation. When asked about it, the proletarian Moore joked to reporters on a conference call, “I don’t read the contracts.”
What of Disney? After repaying itself $11 million for acquisition costs, it booked a $46 million net profit, which Eisner split between two subsidiaries, the Disney Foundation and Miramax. With his $21 million, Michael Moore had perhaps the happiest ending of all.
THE SAGA CONTINUES
While Disney made a profit on the paranoia in
Fahrenheit 9/11
, it led Eisner and other Disney executives to question whether Harvey Weinstein was worth the trouble he had caused the corporation. While Weinstein told journalists how much money he had made for Disney, an internal audit showed that Miramax under Weinstein, rather than adding to Disney’s profits, actually was hemorrhaging rivers of red ink. This reversal of fortune proceeded from a loophole in the original deal that Jeffrey Katzenberg, then Disney’s studio head, negotiated with Weinstein in 1993. The Weinsteins had demonstrated a superb gift for finding, shaping, and marketing independent films like
Sex, Lies, and Videotape
and
The Crying Game
. To give the brothers a powerful incentive to ferret out similar arty winners, Disney agreed to give them a performance bonus of between 30 percent and 35 percent of their film profits, a bonus that would be calculated each fiscal year. The deal also tied Miramax’s capital budget for acquiring and producing films to its annual performance. So, the more money Miramax made in a fiscal year, the more money the Weinsteins made and the bigger the capital budget of their Miramax division. The loophole was thatDisney agreed to calculate Miramax’s profits in a fiscal year solely on the films released that year. In making what seemed like a minor concession to Weinstein so that he could use his discretion in timing the marketing of art films, Disney did not foresee how brilliantly he would game the calendar to create the illusion of profits for Miramax and the reality of huge bonus payments for himself and his brother, Bob. He simply shifted potential money-losing films into future fiscal years so that they didn’t reduce either his bonus or Miramax’s capital budget. To prevent Weinstein from overspending, Eisner later imposed a further condition on the deal: For every dollar Miramax exceeded its capital budget, a similar amount was deducted from the Weinsteins’ annual bonus. To avoid this penalty, Weinstein could delay releasing high-budget films in years in which he was close to exceeding his capital budget. As a result, even more films got dumped into Weinstein’s limbo of unreleased movies. For example, Zhang Yimou’s
Hero
, which had been acquired at Sundance in 2002, was held for more than two years so that its nearly $20 million cost would not count against the Weinsteins’ bonus.
Hero
was released in 2004, a year less profitable for Miramax in which no bonus would be paid anyway.
In 2005, Eisner decided not to renew the Weinsteins’ contract. Whereas Miramax belonged lock, stock, and barrel to Disney, the Weinstein brothers had a claim to subsidiary Dimension Films, which Eisner wanted to keep at Disney. So he had to negotiate an exit package for the Weinsteins. Enter Hollywood lawyer (and Shakespearean scholar) Bertram Fields, who got them a $130 million settlement (partially based on what turned out to be Miramax’s phantom profits in prior fiscal years), and allowing Harvey and Bob Weinstein to create a new film company, Weinstein Brothers Pictures.
After their departure, Disney released many of the delayed movies, which produced losses in 2005 alone of over $100 million. Harvey Weinstein, known for his artful films, also demonstrated
Fahrenheit 9/11
, it allowed Moore a generous profit participation—which turned out to be 27 percent of the film’s net receipts. Disney, in honoring this deal, paid Moore a stunning $21 million. Moore never disclosed the amount of his profit participation. When asked about it, the proletarian Moore joked to reporters on a conference call, “I don’t read the contracts.”
What of Disney? After repaying itself $11 million for acquisition costs, it booked a $46 million net profit, which Eisner split between two subsidiaries, the Disney Foundation and Miramax. With his $21 million, Michael Moore had perhaps the happiest ending of all.
THE SAGA CONTINUES
While Disney made a profit on the paranoia in
Fahrenheit 9/11
, it led Eisner and other Disney executives to question whether Harvey Weinstein was worth the trouble he had caused the corporation. While Weinstein told journalists how much money he had made for Disney, an internal audit showed that Miramax under Weinstein, rather than adding to Disney’s profits, actually was hemorrhaging rivers of red ink. This reversal of fortune proceeded from a loophole in the original deal that Jeffrey Katzenberg, then Disney’s studio head, negotiated with Weinstein in 1993. The Weinsteins had demonstrated a superb gift for finding, shaping, and marketing independent films like
Sex, Lies, and Videotape
and
The Crying Game
. To give the brothers a powerful incentive to ferret out similar arty winners, Disney agreed to give them a performance bonus of between 30 percent and 35 percent of their film profits, a bonus that would be calculated each fiscal year. The deal also tied Miramax’s capital budget for acquiring and producing films to its annual performance. So, the more money Miramax made in a fiscal year, the more money the Weinsteins made and the bigger the capital budget of their Miramax division. The loophole was thatDisney agreed to calculate Miramax’s profits in a fiscal year solely on the films released that year. In making what seemed like a minor concession to Weinstein so that he could use his discretion in timing the marketing of art films, Disney did not foresee how brilliantly he would game the calendar to create the illusion of profits for Miramax and the reality of huge bonus payments for himself and his brother, Bob. He simply shifted potential money-losing films into future fiscal years so that they didn’t reduce either his bonus or Miramax’s capital budget. To prevent Weinstein from overspending, Eisner later imposed a further condition on the deal: For every dollar Miramax exceeded its capital budget, a similar amount was deducted from the Weinsteins’ annual bonus. To avoid this penalty, Weinstein could delay releasing high-budget films in years in which he was close to exceeding his capital budget. As a result, even more films got dumped into Weinstein’s limbo of unreleased movies. For example, Zhang Yimou’s
Hero
, which had been acquired at Sundance in 2002, was held for more than two years so that its nearly $20 million cost would not count against the Weinsteins’ bonus.
Hero
was released in 2004, a year less profitable for Miramax in which no bonus would be paid anyway.
In 2005, Eisner decided not to renew the Weinsteins’ contract. Whereas Miramax belonged lock, stock, and barrel to Disney, the Weinstein brothers had a claim to subsidiary Dimension Films, which Eisner wanted to keep at Disney. So he had to negotiate an exit package for the Weinsteins. Enter Hollywood lawyer (and Shakespearean scholar) Bertram Fields, who got them a $130 million settlement (partially based on what turned out to be Miramax’s phantom profits in prior fiscal years), and allowing Harvey and Bob Weinstein to create a new film company, Weinstein Brothers Pictures.
After their departure, Disney released many of the delayed movies, which produced losses in 2005 alone of over $100 million. Harvey Weinstein, known for his artful films, also demonstrated
Similar Books
