Relativity Media’s Ryan Kavanaugh

***Image***Last year, Forbes dubbed Ryan Kavanaugh the most-watched man in Hollywood. In just a few years, Kavanaugh has made Relativity Media, which he leads as CEO, a major force in Tinseltown with his "risk-mitigated" approach to moviemaking. The studio, which received a cash injection from billionaire investor Ron Burkle in 2012, has been involved in the production, distribution or financing of 200-plus feature film titles, among them David Fincher's The Social Network, Limitless with Bradley Cooper and Luc Besson's The Family. Its recently established television division has developed a roster of unscripted offerings, most notably the MTV hit Catfish: The TV Show, and it now has a number of scripted titles on the way, beginning with Act of Valor, based on the movie of the same name, with TANDEM Communications for National Geographic Channel. It also operates a music division and a sports agency. Kavanaugh recently met with World Screen Weekly to talk about using movies as pilots, cord-cutters and giving consumers one platform to access a broad range of content.

WS: Tell us about the expansion into scripted TV content.
KAVANAUGH: We are more known as a film company. One of the things we've always done within all of our businesses is find the inefficiencies that exist in a 100-year-old studio system and try to change the model. That's what we did in film. One of the issues we had as we looked at the scripted television model was, there were really three ways people were doing it. You spend millions of dollars on a pilot and you throw it on the air and it doesn't work and then you've wasted millions of dollars, plus advertising. You skip the pilot and make ten episodes and spend tens of millions of dollars and if it doesn't work then you cancel. Or you go to some third party to try and write that check and they lose tens of millions of dollars. With the TV model you don't have data, so you're taking effectively unlimited risk in the piloting model. Even on the [scripted shows] that work, it takes so many years to start making money. It was a model that was extremely hard to crack. The reality model worked really well for us. It was risk-mitigated, with a nice continuous profit margin.

Catfish is actually what led us into the scripted model. One of the things that frustrated me was, movies would come out that didn't quite perform and it seemed like people would tell me they loved those movies more than the ones that did perform. When Catfish the movie came out it did $3 million—we didn't lose money but it wasn't the success we wanted it to be. But again I was hearing all over the place, I saw Catfish, I loved it. The one thing that was unique about that particular group of people was, it wasn't banker friends, it wasn't actors or directors, it was 15- to 23-year-olds. I had this epiphany. Movies are made for a broad spectrum. You spend tens of millions on marketing, so if you only hit a small segment, they might love it, but that correlates to a number that doesn't really make sense in the movie business. When you translate that to TV, it becomes a very interesting model. I can look at any movie now, and from the exit polling, the research, we have 15 times the data on movies as any pilot would ever have. I know what audiences liked, what they didn't like, almost scene by scene. What characters they liked. Was it too dark, too light? I know the exit polls by age range, by demographic, by genre. Movies are the greatest pilots ever known. We've got the story line, we know what the audience wants, we know what we can change to make it better. Catfish was our first trial on that. The first episode [of Catfish: The TV Show] had 2.7 million viewers. There were 6 million or 7 million people that invested in the franchise [by watching the movie] and a third of them liked it enough to continue on with television. That's what led to [plans to make TV series out of] Limitless and Act of Valor. Limitless has 20 million people invested in the franchise. I can understand everything [audiences] liked about it. Did they like the love story? Do they want him to have a girlfriend or be a single guy? Do they want him to be more of a superhero or do they like his intellect? We can take all the data [we have from the feature] and drive a series with millions in marketing already spent on the brand.

WS: Can you take what you know from audience research in the film world to try and get better data on TV shows?
KAVANAUGH: I don't think you can, and that's why it's unique that we can do this. One of the reasons we can get this data is because we have people who are physically walking into movie theaters and buying tickets and we have people who are physically buying it on iTunes or on DVD—anything that's not free or pay TV, we get all the data. The problem with TV is, you know who is subscribing, you don't necessarily know who in the household is watching. The only way to poll is to call up homes randomly and ask, "What did you think?" That's not the best way to do a market study. So it puts us in a unique position. We have that data and can use it to launch multiple successful shows.

WS: How do you take a 90-minute story and start thinking about how to extend into an 8-, 10-, 13-part series?
KAVANAUGH: You can't do it on every movie. We'll probably do five or six a year. I think Limitless is really simple—a guy takes a pill and it unlocks 100 percent of his brain and he basically has supernatural powers. You have a bad guy who wants the pills and a guy who wants to use them for good. Act of Valor—we're taking real stories that happened to Navy Seals and weaving in a fictitious story line. I'm not going to be able to make Mirror Mirror into a series. But Immortals I can definitely take into a series. The Family could be a great series. You have to be discerning. There are certainly going to be four to six every year that we can spin off.

WS: How important is the international co-production model for you?
KAVANAUGH: It's important but not that important. Normally in this model, when you're going to a network or a cabler or a co-financier, you're saying, We'll put in half, you'll put in half. Because we already spent $50 million, $60 million, $70 million on worldwide marketing, because the brand already has value, we believe that our contribution of the IP is equal to or greater than a 50-percent contribution. The movie has already covered its risk. We're contributing value, they put up the cash—it becomes a partnership where we don't need the international co-productions. Having said that, international co-productions make it more profitable for everyone, so if we can do them and it makes sense and it doesn't hurt the content, then we'll do them.

WS: Tell me about the "theory of everything" you talked about in your keynote at MIPCOM in Cannes in October.
KAVANAUGH: With TV Everywhere, it's not about if it's coming, it's not about if the cord is being cut, it's right here. Nine percent of homes have never paid for television in the U.S. Eleven percent have cut the cord. So 20 percent of the U.S. audience is already off of those [pay-TV] boxes. Forty-five percent of Americans say that they think cable and satellite are too expensive. Every study says 30 percent of the current subscribing audience is at risk of turning it off. At Netflix, half of their audience doesn't pay for any other form of television. The writing is on the wall.

We have ten-plus movies a year, 30 series on the air, we're the second-largest sports agency, we've been putting out five to ten hours of original sports content every week, we have a music business, we own a fashion agency. We've set ourselves up to be what we believe is the only place that has created a 360-degree content platform. People have to go to numerous places [to consume content]. We're setting up a "theory of everything," which is one screen, you've got it all. Your movies, your TV, your scripted, your unscripted, your sports programming, fashion programming, horror programming. We think no one else is ready to do this.

One of the important things to take away from this is, the debate doesn't need to happen. If 50 percent are going to be cord-cutters, 50 percent are not. When you look at the dynamics of those two audiences, they're a little bit opposite. Those who will continue to pay for cable or satellite, they want to be able to watch The Bachelor at 8 o'clock on Thursday. They want it right then. The 50 percent that's cut the cord doesn't care about first run. They're binge-consuming audiences, so they'll wait until the entire season is done. The two worlds can coexist.

WS: But those who are cutting the cord are also not watching live sports.
KAVANAUGH: That's where it's interesting for us. Number one, the cablers and satellite do hold sports hostage. When you look at what's out there today, you can watch the games or pre- and post-shows. The people who are cutting [the cord] are making the decision that it's not important enough for them to pay the $100 a month to get the sports. They probably want it, but they can't get it.

We're the second-largest sports agency in the world, so part of the reason that we're putting ten hours of sports content out a week is that we will give audiences, rather than the games, a connection to be able to interact and see their sports idols or icons in action.