After over a month of planning and negotiations, Legendary Pictures officially launched in Hollywood, backed by a coalition of forces.
It was a day everyone had their eyes on!
A landmark moment for Hollywood's evolution!
Legendary Pictures had six institutional shareholders, pooling a total investment of $3.6 billion.
Dunn Capital kicked in $1 billion, making it the top shareholder with a 27.8% stake.
Beyond that, Michael Ovitz had secured a sweet $1.4 billion priority loan from Merrill Lynch, with interest rates between 6% and 10%—a pretty good deal.
All told, Legendary Pictures had $5 billion in cash on hand!
The portfolio investment plan was set up so the production company took on the lion's share of the funding, with the portfolio investors covering 10% to 40%. That way, the producer bore most of the risk and stayed motivated to deliver, while the portfolio side eased enough of the financial burden.
Hollywood movies these days averaged around $30 million to make. A big studio churned out 15 to 20 films a year.
That meant a major player's annual production budget hovered between $500 million and $600 million.
Not a huge number, really!
Take Dunn Films this year alone—
Unsinkable: $200 million. Mr. & Mrs. Smith: $100 million. The Chronicles of Narnia: $70 million. A Beautiful Mind: $40 million. The Grid: $50 million.
Excluding TV investments, Dunn Films had already sunk $460 million into just five movies this year!
And that's not counting next spring's slate—Pirate League series, Spider-Man sequels—big projects with budgets that'd scare most people silly!
That's where Dunn Films stood apart from Hollywood's giants.
It was Dunn's private empire, and with his uncanny foresight, he could throw massive sums at blockbusters without blinking.
No need for outside investors to spread the risk.
Compare that to a titan like Disney—$140 million on Pearl Harbor had everyone from Michael Eisner to the janitor sweating bullets, glued to the project's every move.
Legendary Pictures' $5 billion war chest, per Michael Ovitz, left $20 million for operating cash, with the remaining $4.8 billion earmarked for the portfolio plan.
Dunn was all over this—not just as Legendary's biggest shareholder, but because the "portfolio investment" model was his ticket to ruling Hollywood down the line!
U.S. antitrust laws capped entertainment companies—music, movies, whatever—at a third of the market's copyright share.
In 2000, the U.S. released 374 films. If Dunn Films put out more than 125, it'd trip the antitrust wire!
Sure, no company could pump out that many films right now. Even giants like Warner, Disney, or Paramount topped out at around 30 a year.
But… what if?
Dunn had been in Hollywood just four years and already carved out a huge chunk of turf, going toe-to-toe with Disney.
Give it a few more years—who's to say Dunn Films wouldn't dominate?
Teetering on the edge of antitrust limits, the portfolio model was the perfect weapon.
Through Legendary, Dunn could dip into other studios' projects without breaking a sweat.
The more partners Legendary snagged, the wider his reach.
If Legendary linked up with all six majors…
He'd have a hand in over 95% of Hollywood's movies!
Even if Dunn Films had to scale back someday, he'd still be in on most productions—making him Hollywood's undisputed king!
Movies were Hollywood, after all.
For now, it was all on paper. Legendary was just getting started, and step one was landing its first client.
Dunn flew back from Boston to L.A. to hash it out with Michael Ovitz.
Ovitz figured Legendary's $5 billion total, with $4.8 billion usable, was solid but shouldn't spread too thin across too many partners.
Best bet? Two partners, two-year contracts, $1.2 billion per year per studio at a 20% stake. Nice and balanced.
Dunn wanted as many partners as possible—pull all six majors onto his wagon, and his Hollywood throne would be untouchable.
But $4.8 billion only went so far. Short-term deals jacked up Legendary's risk, so they had to strike a sweet spot between partner count and payoff.
Dunn nodded at Ovitz's take. "Let's lock in one major studio first. The second partner? We can take our time—see who offers the best deal!"
Selfish? Sure. As long as Legendary's second slot stayed open, studios hungry for cash would orbit him, kissing up nonstop.
"Who're you thinking for the first deal?" Ovitz shot him a sly grin.
To Ovitz, snagging Wall Street money was the win. Done Deal!
Sure, Dunn Capital dropped $1 billion, and Ovitz chipped in $80 million, but this was Hollywood!
They held the reins here!
Even if the portfolio plan tanked hard, Ovitz's clout and savvy could easily cash out Dunn Capital and his own stake. Wall Street would eat the losses.
Hollywood was full of tricks!
Especially with outside investors—no mercy!
Wall Street got off easy as fellow Americans. Wait till Asian or Middle Eastern cash rolled in… then it'd be open season!
So Legendary's smooth launch was a no-lose gig for Ovitz. He gave Dunn, his young partner, plenty of respect.
Dunn smirked. "Lately… we've had a bunch of studios reaching out, right?"
"No kidding!" Ovitz beamed with pride, channeling his old days running Hollywood. "Everyone but Disney's been cozying up. You wouldn't believe how many dinner invites I've gotten!"
Dunn kicked back in Ovitz's office, legs crossed, at ease. "Portfolio investing's a fresh idea. Didn't think those old dogs would bite so quick."
Ovitz waved a hand. "Psh, how many really get it? Money talks!"
Dunn gave him a knowing look. "You've already got our first partner in mind, don't you?"
"Oh?" Ovitz blinked, playing coy. "No worries—I'll back your call."
Dunn's grin turned tricky. "Michael, don't play dumb. You really think I can't guess what you're up to?"
Ovitz froze, then burst out laughing.
"Don't let the six majors fool you—only one fits us right now," Dunn said coolly.
Ovitz nodded. "Yep. They've got to match Legendary's investment potential and give Dunn Films solid backup."
He shot Dunn a deep look. "Funny thing—Warner Bros. has been having a rough go lately."
Dunn chuckled. "Hollywood used to scam everyone else, but now Time Warner got played by an internet company! Heard they might sell off Warner Publishing to plug the hole?"
Ovitz said, "The AOL-Time Warner merger's a disaster. AOL's a lightweight internet outfit—if they're unloading assets to cover losses, it'll be Warner's stuff. Maybe Publishing, maybe Music. Either way, Warner Bros. won't see a dime from the parent company for years."
Dunn nodded happily, sipping his rich coffee with a satisfied sigh. "So, Warner's our first partner!"
"Exactly what I was thinking!" Ovitz chimed in, all praise.
AOL-Time Warner's merger had bled $40 billion, but a lean camel's still bigger than a horse. Warner Bros. remained Hollywood's top dog.
Strength, legacy, influence—Warner had it all in spades.
With Warner in Dunn Films' corner, Disney's next irrational attack wouldn't mean scrambling like the past few months.
Plus, since Dunn rolled out the portfolio plan and slapped Disney with a ban, Warner had shown real goodwill.
When Disney came at Dunn Films, Warner didn't kick them while they were down—they had their back. That's loyalty.
Any way you sliced it, Warner Bros. was Legendary's no-brainer first client!
"Alright then, Michael, set it up. Let's sit down with Warner's people and nail down the details."
Dunn stood, feeling the Hollywood ground beneath him grow thicker, firmer.