Sharon Waxman On the Business of Entertainment
The founder and editor of TheWrap’s take on life on the left coast, high culture, low culture and the business of entertainment and media. Waxman writes frequently on the inside doings of Hollywood, and is is also the author of two books, Rebels on the Back Lot and Loot
It started out as an exciting business roll-up: The Hollywood Reporter and Billboard would combine forces with Golden Globes telecast producer Dick Clark Productions and the hot producing duo of MRC Entertainment, Modi Wiczyk and Asif Satchu, makers of “House of Cards” and “Ozark.”
The new venture would be owned by one of Hollywood’s most passionate investors, insurance billionaire Todd Boehly, and run by Wiczyk and Satchu — the CEOs of the new company, Valence — with an eye to exiting at a multibillion-dollar valuation.
But now four years later, the whole thing has fallen apart, ending in an acrimonious divorce between Boehly and the two producers, driven by the unsolvable mess of the Golden Globes and financial disappointment with MRC, whose sole TV hit of late has been Netflix’s just-ended drama series “Ozark.”
Valence is gone. THR and Billboard have been sold. And Boehly has barely spoken to his two deputies since last October, according to two individuals with knowledge of the situation. A representative for Boehly’s parent company Eldridge Industries declined to comment on this, and MRC didn’t respond directly to this assertion.
“The whole putting-these-pieces-together was ill-advised,” said a top industry executive who knows the parties on both sides. “I don’t see how they fit together. Going in to run magazines, dealing with the Golden Globes, and having to deal with the (Hollywood Foreign Press) organization? The whole thing wasn’t meant to be.”
A clash of styles over who’s gone more Hollywood
The two sides seem to have very different perceptions of what went wrong — including which executive has become the most enamored of the glamour and perks of Hollywood.
“Modi is much more of a Hollywood guy than Todd is. Their style is not Todd’s. Todd is very direct. He doesn’t need grandiose. They’re a little more into that than him,” said one insider with knowledge of Boehly, noting that Wiczyk and Satchu “certainly don’t lack confidence.”
But an insider with knowledge of the producers said the opposite was true, that the producers resisted when Boehly asked them to step in and actually run the Hollywood Foreign Press Association, the group behind the Golden Globes that became mired in controversy last year over its lack of Black members and history of cronyism. Meanwhile, the MRC founders cringed at every headline criticizing the Golden Globes and their related roles, after having weathered other scandals tied to the merger, including the 2018 ouster of THR-Billboard CEO John Amato, who was accused of sexual harassment after an internal investigation.
“Todd and Eldridge are very comfortable in high-profile assets and visible executive roles,” the insider with knowledge of MRC’s position said. “He was frustrated with them. They were frustrated with him. It got acrimonious. It never got self-destructive.”
Ultimately, Boehly — who first invested in MRC in 2014 with a $240 million cash influx at a $1 billion valuation — stepped in and took on the role of interim CEO of the HFPA last October and then bought it outright in July to end its nonprofit status.
The tarnished Golden Globes widen the split
The saga over the embattled Golden Globes was a key source of friction between the erstwhile partners. According to multiple insiders, Boehly was furious that his co-CEOs had been unable to manage last year’s fast-deteriorating PR nightmare which led to NBC canceling the 2022 telecast. That meant a devastating $30 million loss in revenue to MRC-owned Dick Clark Productions (rebranded as MRC Live & Alternative in 2020), which takes half of the $60 million telecast licensing fee that goes to the HFPA.
Early in the year, the HFPA had publicly committed to reform and diversity, hiring a diversity executive and pledging to increase the membership as a whole and bring in more members of color. But the process stalled throughout 2021, with infighting plaguing the process and stalling reform efforts. By last summer, the group added 21 new members, six of whom are Black — far short of what the association had publicly set as its goal.
Why this was MRC’s problem or fault is another question. While Wiczyk and Satchu were involved in discussions over the reform process — at one point bringing in a diversity expert of their own to help facilitate the group discussions — there was not a whole lot more they could do as outsiders because of the start-stop cadence of reform at the HFPA, NBC’s withdrawal and the fierce resistance of industry publicists who had instituted a boycott of the group that still hasn’t been lifted.
A spokesperson for MRC told TheWrap that MRC was very involved in helping support reforms during much of 2021: “At a certain point, we did take a step back because we were producing their show,” the spokesperson said. ”We wish them and our partners tremendous success.”
But according to an individual with knowledge of the conflict, Boehly had asked Wiczyk and Satchu to take over the HFPA themselves, and floated the idea of acquiring the nonprofit and have it become another asset of MRC. Neither Wiczyk nor Satchu were interested in taking the step of actually running a trade association, the individual said.
A frustrated Boehly then stepped in, getting himself named last fall as interim CEO of the HFPA, a move that raised complaints of conflict of interest. Boehly not only ran the HFPA and owned the production company that produced the Globes, he also owned the Beverly Hilton Hotel, where the awards had taken place for decades, as well as MRC — which produced movies and shows that competed for Golden Globes.
This entire strategy by Boehly made the MRC producers uncomfortable, two insiders told TheWrap. They saw Boehly as an outsider starstruck by the Golden Globes and intent on taking a more public role. And indeed, Boehly this summer bought the nonprofit association’s assets outright and made it into a for-profit company. For their part, the MRC producers are said by insiders to be thrilled to be rid of the Golden Globes headache as Dick Clark Productions reverts to Boehly’s ownership at Eldridge under the terms of last month’s split.
The shift to streaming puts the squeeze on profit margins
Boehly’s frustrations with the lack of progress at fixing the Golden Globes coincided with his skepticism over the financial state of MRC. The production company that had initially experienced high margins by deficit-financing projects like 2012’s hit Mark Wahlberg comedy “Ted” (which it produced for a low upfront price and then sold to Universal at a high profit) and had since given way to a much less profitable model, selling streamers “cost-plus” productions, meaning producers make only a set percentage of the production cost of a project, around 20%.
Unlike theatrically oriented film studios, streamers don’t cut producers into back-end deals based on metrics like box office performance that used to pay off big on hit movies. As a result, revenues on streaming projects are capped up front.
Despite the crunch on revenues and profits, MRC has done little to reduce its overhead costs to adjust to the industry’s financial realities. Even without Dick Clark Productions, MRC has maintained a staff of about 80 full-time employees, significant development costs and a big office in Beverly Hills.
A spokesperson for MRC pointed out that the company has a hugely robust development slate with eight shows in production, including “The Great” at Hulu, a ”Ted” prequel series at Peacock and five shows at Apple TV+. Multiple film projects are about to debut, including Emerald Fennell’s “Saltburn” on Amazon Prime and Tim Story’s horror-comedy “The Blackening” debuting at this month’s Toronto Film Festival. The company also retained partial library rights to big hits like “Ted” and “Knives Out,” although it hasn’t disclosed how much of a percentage it owns.
An individual with knowledge of MRC estimated that it will make $150 million in revenue this year, with about a 20% profit margin. “We are absolutely profitable and have a clean balance sheet — and a very successful path forward,” an MRC spokesperson said, adding that the company’s finances are private.
In addition, another insider explained that the head count at MRC would come down once the separation with Boehly is complete since departments like one devoted to mergers and acquisitions will no longer be necessary.
Even if true, those figures would generously put the company’s value below $500 million, according to financial analysts consulted by TheWrap. That is far below the $1 billion valuation the company reportedly had when Boehly first invested in 2014. The MRC insider disputed that this was the case, and said that all valuations have taken a huge hit this year with the steep drop in the stock market.
But a second individual with knowledge of the company said that Boehly became concerned enough with the finances at MRC that he sent his Eldridge co-founder and General Counsel Duncan Bagshaw to watch over the leadership beginning in late 2021. (The individual said Baghsaw was sent to “torture” Wiczyk and Satchu.)
An individual close to MRC said Bagshaw was part of the deal to unwind the Valence-turned-MRC deal — and not to oversee the company’s operations and finances.
MRC’s future
MRC is now back to its original mission – producing television shows and movies. Can this lead to a successful exit?
In interviews with TheWrap, four prominent Hollywood producers questioned how profitable MRC could be given its current business model. “I don’t know how you can justify 80 people in a cost-plus production model,” one of the producers said. That size staff “is a studio, not a production company, other than maybe Imagine (Entertainment).” (Ron Howard and Brian Grazer’s Imagine Entertainment is among the most successful production companies in Hollywood.)
“Eighty people is too many for a production company, of course. You run a production company with 15 people,” a second leading producer said. “There’s no way you’re making money in a production company unless you have a half dozen hit TV shows and franchise movies — which they don’t. And they’re funding some movies, which is coming from a credit line. Which you also have to pay for.” (MRC has a credit line of about $500 million, according to the company.)
The relationship between Boehly and the MRC partners wasn’t always so bitter. As the lead credit investor at Connecticut-based Guggenheim Partners, Boehly was an entertainment industry outsider when he first invested in MRC in 2014. He left Guggenheim the following year, taking with him a number of companies he’d been involved in at the firm, including the lucrative insurance firm Security Benefit, as well as the entertainment companies Dick Clark Productions, A24 and MRC.
“Todd Boehly had stars in his eyes, he had not yet come to Hollywood,” one executive involved in the 2014 deal said at the time. “They sold him on the dream, they said they were profitable for four years. They said they never lose. But as soon as they sold it, they stopped doing that (deficit finance) model and went into normal film finance and production.”
The final straw for Boehly apparently came this spring when A24, the indie studio behind Oscar winner “Moonlight,” “Uncut Gems” and this year’s art-house hit “Everything, Everywhere All at Once,” raised $225 million in equity against a $2.5 billion valuation. That company, launched with Guggenheim seed money, was co-founded by another Guggenheim alum, Daniel Katz. (Boehly maintains a minority stake in A24, along with investments in South by Southwest, Fulwell 73, Sugar 23 and Penske Media Corporation.)
So Boehly decided to divest his majority stake in MRC and shift the money into other properties. A spokesman for Eldridge pointed out that even though Boehly divested, he retains a minority stake in MRC.
And for Wiczyk and Satchu, the roll-up of MRC Entertaiment has not been the exciting adventure they expected. Instead, they have had to confront scandals not of their making, from the HFPA debacle to the Amato investigation and firing in 2018 to the massive annual losses at THR and Billboard that worsened steeply during COVID to management issues at Dick Clark Productions that included the 2021 dismissal of CEO Amy Thurlow following a Wrap investigation of her “toxic” culture.