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Warner Bros., which is in arbitration with the company over its ‘Matrix: Resurrections’ lawsuit, was floated as one bidder for its film and TV assets.
By Winston Cho
A clearer picture of Village Roadshow‘s downfall is coming into focus, with the film production and financing company filing for bankruptcy after a costly endeavor aimed at creating content in-house and the souring of its longtime partnership with Warner Bros.
The firm that backed the Matrix and Ocean’s franchises was once one of the most prolific behind-the-scenes financiers in Hollywood. Business was good. Its ownership of various copyrights gave it an enviable position in the entertainment industry: the opportunity to cocreate proven tentpoles and franchises based off of its vast collection of intellectual property. The company generated roughly $50 million annually off its film library.
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But in 2017, Village Roadshow pivoted to developing homegrown movies as part of a broader strategic shift aimed, in part, at weening itself off of the box office. It sold a controlling stake to asset manager Vine Alternative Investments and private equity firm Falcon Investment Advisors, using the funds to grow its production arm. TV emerged as a priority for CEO Steve Mosko, a veteran of Sony Pictures Entertainment. The goal was to create — and more importantly own — content without studio partners. The company billed itself as a one-stop production shop that could carry content ideas all the way to development, with the infrastructure in place to handle marketing and distribution on its own.
“It allows us to be a little bit more masters of our own destiny,” said Bruce Berman, then chairman and chief executive of Village Roadshow’s filmmaking unit, to The Los Angeles Times in 2017. (Berman stepped down in 2021 after 20-plus years with the company.)
Eight years after that quote, Village Roadshow pointed to the expansion of its business model as the thrust of its liquidity issues. It has $148,000 in cash on hand — enough to sustain operations for a week — as of Monday, when it filed for bankruptcy, according to court filings. Since 2018, the company has had 99 feature films and 233 TV series in development. Of those, only six movies and seven TV shows went into production at a price tag of $47.5 million. None of them were able to turn a profit indicating sustainability of the studio business.
Village Roadshow’s solo production venture coincided with a period of upheaval at WB that saw the studio refuse to develop titles in which the financier co-owned the related rights, including Sherlock Holmes, the Ocean’s series and Ready Player One. The shift predated the filing of a breach of contract lawsuit against the studio over its decision to release 2021’s The Matrix: Resurrections simultaneously on HBO Max and in theaters during AT&T’s Project Popcorn plan. In the suit, it claimed it was deprived of “any economic upside” in the release.
Before that feud, Village Roadshow wanted in on a TV series WB was developing based on Edge of Tomorrow but was told the project wouldn’t move forward if it didn’t relinquish its rights. WB ended up abandoning the show.
In a 2021 email to Village Roadshow general counsel Kevin Berg, Warner Bros. Television senior vice president Dave Brown wrote that the studio will be “unable to proceed on any project with Village Roadshow as a co-financier.” He added, “We have been in this situation before with other companies that co-own underlying rights, and our response is consistent — we invite them to function as an A-level production company. However, that does not necessarily mean that VR is going to be the best deal of any producer on the show.”
Brown said that the studio wouldn’t budge from its position moving forward: “I know there may be more titles to come where we want to go down this path. So, while this isn’t a template, I’d like to get to a place where we are setting expectations.”
Village Roadshow was cornered. Warners’ refusal to develop content alongside Village Roadshow left a chunk of the company’s intellectual property sitting on the sidelines. It opted to sue WB in a lawsuit that sought a court order that would force the studio to include it on at least 15 projects in development it claimed it was illegally shut out of.
The case was eventually moved to arbitration, with the company representing in court filings that it remains unresolved three years later, though WB lawyer Steve Warren said at a bankruptcy hearing on Tuesday that an arbitrator ruled against Village Roadshow, reported Reuters. Chief Restructuring Officer Keith Maib wrote in a court filing that the legal dispute has “irreparably decimated the working relationship” with the studio, wiping out lucrative income streams from the exploitation of new projects that could’ve been cofinanced by the company with WB, which maintained that its former partner “refused to honor its commitment to pay their share of production costs.”
Warners could emerge as a bidder for Village Roadshow’s library, Justin Bernbrock, a lawyer for the financing and production company said at the hearing on Tuesday. The company reached a tentative agreement to sell its intellectual property to investment firm Content Partners for $365 million but the figure is a baseline. Village Roadshow is fielding higher bids, which could also come from Blade Runner 2049 coproducer Alcon Entertainment, attorneys for the producer said at the hearing. (In 2017, when Vine took a majority stake in Village Roadshow, it also had a stake in Alcon).
Across nearly three years of litigation, Village Roadshow has incurred more than $18 million in legal fees, nearly all of which remains unpaid. That doesn’t account for a potential arbitration award against the company, which thwarted its efforts to avoid filing for Chapter 11 bankruptcy protection. It said in a court filling that it garnered “meaningful interest” from a potential buyer for the company or its assets, which it valued at $100 million to $500 million, but that the unknown outcome of the arbitration and its flailing studio business stifled the closing of the transaction.
Another factor undercutting its future in Hollywood: an order from the Writers Guild of America prohibiting its members from working with Village Roadshow after it failed to pay numerous writers. It owes roughly $1.4 million to the guild members, which Maib said has caused a “detrimental impact on its reputation in the industry.”
Other creditors include Bryan Cranston’s Moonshot Entertainment ($794,000), Kevin Garnett’s Content Cartel ($395,000) and Sony Pictures Television ($250,000) for development costs, in addition to its landlord for the West Hollywood office it moved to after leaving the Los Angeles office it had occupied for more than a decade.
Due to troubles obtaining financing to keep it afloat, Village Roadshow arranged roughly $13 million in funds, including from Falcon Investments and the Ontario Teachers’ Pension Plan, to carry it through bankruptcy. The deal is contingent on approval of a controversial provision in borrowing arrangements that “rolls up” existing debt into the new loan, effectively putting them near the front of the line in getting repaid.
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