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Monetizing the Celebrity Meltdown

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“They overpaid by a mile,” snipes a rival bidder. “Film libraries are melting ice cubes. You’ve got to find a way to re-create revenue streams, which means making films, which means risks.” While Barrack understands that at some point, the library will need to be refreshed, his focus is on maximizing distribution of its existing content. As he sees it, the archive is less a depreciating asset than one for which the new-media turbulence poses an opportunity. The Colony-Tutor purchase is set to close later this month, and both Google and Netflix are already eyeing a digital-rights deal for the Miramax archive.

To fully harvest the library, Colony envisions possibilities including a Miramax cable channel, a Miramax night on another cable channel, a Miramax.com, a video-on-demand Miramax channel, even, one day, a Miramax studio. The Weinstein brothers were not happy to lose out to Barrack and Tutor, and because they retain sequel rights to six films in the library, including Scream and Spy Kids, they could potentially make life more difficult for Colony. Both Barrack and Lowe have received agitated phone calls. “Harvey was frustrated,” Barrack says, “because his parents’ names were on the wall.” (The brothers had named the company after their parents Miriam and Max.) “He sold that name and put a couple hundred million dollars in his pocket, and we had nothing to do with that decision, so you can’t blame us. On an ongoing basis, he is an incredible talent, and we would love to do something with him.”

Colony plans to do more deals in the movie business—perhaps rolling up other film libraries, such as Lionsgate’s—and in other entertainment sectors. It is looking at private TV channels (such as the New York Yankees channel), at European soccer teams, at sports stadiums, at structured-settlement types of royalty deals. Over the summer, Colony signed a deal with the yoga master Bikram Choudhury to help him transition his thousands of “authorized” studios to a franchise model.

But such deals can only be done one at a time. “The benefit and the detriment of that business, whether it’s Michael Jackson or Annie Leibovitz, is each one is so personalized,” Barrack says. “It’s a crafted investment, a venture-capital investment. It’s investing in talent that has been inefficient; by giving them a different set of clubs in the bag, you’ll make them efficient and take the arbitrage.”

All of this non-real-estate activity has at least a few of Colony’s 650 investors a bit unsettled. “I don’t like it,” says a longtime Colony investor of the Miramax purchase. “Just because you’re good in one thing doesn’t mean you’re good in everything. And what I don’t like most is that he’s not in full control. The risk in that deal is not the deal; the risk is in how well Barrack and Tutor get along.”

Nanula is well aware of the perils of dilettantism, and says that any new production would likely come later, as sequels or remakes of films already in the library, and be produced on someone else’s dime. “I think it’s a bit of a gamble,” acknowledges Richard Blum, the San Francisco investor (and husband of Senator Dianne Feinstein), who is putting money into the deal. “But part of what I like are the partners. It’s not like buying Treasuries, but I think these guys have a formula for success.”

After we drive to Barrack’s nearby ranch for a tour (vineyards, stables, two regulation-size polo fields), Lowe leaves for a night shoot in Big Sur. Barrack wants to have dinner in Santa Monica, so we take a helicopter up the coast. At Capo, we’re joined by Laird Hamilton, probably the world’s best big-wave surfer, and his wife, Gabrielle Reece, the professional volleyball player. Hamilton and Reece are the California dream incarnate, blond and buff and bluff. He’s six-foot-three. She’s taller. The couple divide their time between Malibu and Hawaii, where Hamilton grew up. Hamilton greets us with a nod and a quiet “aloha.”

Barrack, who has surfed since he bought his first Dewey Weber board for $15 as a teenager, got to know Hamilton after cold-calling him to speak at his annual investor conference. “He’s not all fogged up like all the financial guys and the guys on Wall Street,” Barrack had told me earlier. “I was always groping to convey to these investors how difficult it is to analyze risk. And Laird just hit the ball out of the park. His philosophy of life applies to everything.”

Hamilton reciprocates the admiration. “It took me about half a second to know that Tom is a good man,” he says. “It’s part of being in touch with your animal side. You just know—looking eyeballs.”


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