Nota bene: Whither Weinstein's company?
|Felix Salmon||Mar 6, 2018|
It’s traditional, at the Oscars, for the previous year’s Best Actor winner to present the award for Best Actress. This year, that didn’t happen. Last year’s award went to the problematic Casey Affleck, who sensibly decided to no-show this year rather than cause a firestorm in the year of #MeToo. If Affleck had presented the award, that would have been akin to Ron Burkle, another problematic man, buying The Weinstein Company: unacceptable on its face.
Except, that seems to be exactly what is going to happen.
How did this come to pass? And also, have I mentioned that I take requests? Here’s an email from a reader:
I would like to read an article about why anyone would want to buy the Weinstein Company. Value of damaged goods? TWA never recovered after its deadly flight to Paris.
And if old investors WPP and Goldman were “wiped out” of the new deal, does that mean they lost their investment?
I’ll answer my reader’s questions first. Why would anybody want to buy the Weinstein Company? Because, outside the House of Mouse, movie studios have zero brand value. And so if the value of the Weinstein brand has plunged to zero, that’s a change of absolutely nothing.
Going to see a movie because you like, say, Fox Searchlight is a bit like buying a book because you like Hachette. I’m sure there’s someone, somewhere, weird enough to do that, but in the real world no one knows or cares who produced any given movie or TV show. (And the real value of The Weinstein Company is in its TV shows, not in its movies.) People who love Project Runway love Project Runway; they’re loyal to the show, and don’t know or care who produced it. Especially after the name gets changed. Similarly, when you watch Silver Linings Playbook on the plane, you care about the movie, not about which production company is getting royalties.
What that means is that the brands Burkle is buying really aren’t damaged. They have value, and he’s snapping them up on the cheap.
As for investors being wiped out, yes, that means they lost their investment. Everybody with an equity stake in the Weinstein Company, including Bob Weinstein, has seen the value of that stake go to zero. If you’re owed money by the company, you will get what you’re owed. But none of Burkle’s money is going to the former owners, and certainly none of it is going to Harvey Weinstein.
Still, if you add up all the debts owed by The Weinstein Company, it comes to about $225 million, and all the talk about the Burkle-backed deal puts it at $500 million. Even if you add in another $90 million for a victim compensation fund, who gets the rest of the money?
The answer is hard to find — and indeed even New York attorney general Eric Schneiderman couldn’t find it, in the first instance. The Burkle-backed investor group certainly had its optics down, with a woman (Maria Contreras-Sweet) acting as the face of the deal, and lots of talk about victim compensation funds and a new board dominated by women. But the group wanted to retain one of Harvey Weinstein’s key enablers, David Glasser, as the head of the company, and seemed disinclined to answer specific questions about their plans.
The clear risk was that Burkle would effectively buy The Weinstein Company for $225 million, pinkwash it with a new name and female board, make vague noises about extra investment and victim compensation funds, but ultimately change very little. Only after Schneiderman stepped in was Glasser fired and a clear $90 million found for the victim compensation fund, bringing the group’s guaranteed investment up to $315 million. The rest of the $500 million, still, is essentially going to go into a bank account controlled by the people who bought the company: they’re really just moving money from one pocket into another.
This is probably the optimal outcome, in terms of the various stakeholders associated with The Weinstein Company. The shareholders, and anybody who could be considered to be Harvey Weinstein’s boss, get wiped out. The creditors — people who provided services and who weren’t yet paid — will get paid. The employees, mostly, will retain their jobs. And Harvey’s victims will have access to a significant pool of money. It’s certainly not a happy outcome: Nothing associated with Harvey Weinstein and Ron Burkle can reasonably be described that way. But my guess is that The Weinstein Company, under its new name, is going to be a pretty precarious place for a while, until the new owners, board, and management can start explaining clearly what it is and what its purpose is.