Hollywood's New Moguls Shake Things Up

They're hardly descendants of pioneering Hollywood bosses like the Warner brothers and Louis B. Mayer. Nor are they Murdochs or Redstones, the current titans of media and entertainment. But Sidney Kimmel and Sam Nazarian—two "high-net-worth individuals" you've probably never heard of—are already showing they can spend like any mogul worth his Ferrari. Last week, Kimmel plopped down $40 million for Johnny Carson's Malibu estate, a few days after Nazarian bought the famed Sahara Hotel & Casino in Vegas, where the Rat Pack once roamed.

Yes, there are rules for living like a mogul. But Nazarian, 31, co-owner of Element Films, and Kimmel, 78, head of Sidney Kimmel Entertainment—along with others like them—insist they're twisting the Hollywood rules. They see themselves as members of a new breed of movie mogul, bent on remaking Hollywood through a combination of ready cash, fiscal discipline and unusual control that's embodied in cost-conscious films—with such stars as Kevin Costner, Terrence Howard and Robert Downey Jr.—that are beginning to reach theaters. Kimmel grew up in Depression-era Philadelphia, where he drove cabs for a while and later started a company called Jones Apparel that made him a billionaire. His two-year-old mini-studio is behind the new espionage film "Breach," and at least four others are on the way this year, including "Charlie Bartlett," a comedy starring Downey and Anton Yelchin.

Nazarian, meanwhile, is the scion of a family reputed to be the richest Persian Jews outside of Iran. The family's billions already jump-started his reign as king of Los Angeles nightlife with clubs that have become the playgrounds for Paris, Lindsay and Britney. Now, three-year-old Element —launched with a young former agent and film exec, Adam Rosenfelt—has at least nine films in the pipeline. The drama "Pride" (Terrence Howard and Bernie Mac) opens this month, followed later by the thriller "Mr. Brooks" (Costner, Demi Moore and William Hurt) and other films.

Well-heeled, starry-eyed men usually discover that Hollywood is a sucker's bet. But the likes of Kimmel and Nazarian, as well as veteran film execs now jumping into independent producing, may actually be playing a different game. At a time when big-studio chiefs are wringing their hands over costs even as they greenlight $200 million "franchise" films, the would-be moguls are squeezing film budgets, with movies that rarely cost even half the $60 million average for big-studios films. Rather than dabbling in the random pet project here and there, they are betting on a full lineup of several films to better their chances of a hit. Most important, they aren't simply financing the budget for making or buying films; instead, they're covering the hefty costs for prints, advertising and marketing of the finished movie—something previously left to the majors, which gained full control of the film in the process. They rely on the big studios only for guaranteed distribution at a fee less than the typical 10 to 15 percent of ticket sales. Nazarian and Kimmel are even handling their own foreign sales. Real-estate tycoon Bob Yari, one of the higher-profile new moguls (Oscar winner "Crash" and "The Illusionist"), is now going a step further by also distributing films. In effect, the new high rollers are doubling down.

This approach generally gives the upstart moguls more control, and that equals power in Hollywood. Supposedly, it also avoids "Hollywood accounting," whereby a film generates a fortune in ticket sales but never shows a profit for the producer who sank millions into it. Independents "were at the mercy of the studios," says Nazarian.

Two studios in particular, Lions Gate and MGM, are most aggressively embracing the shift. MGM—now owned by a consortium of private-equity funds, Comcast and Sony—relies heavily on cash-flush independents, including Kimmel, for movies to feed its distribution pipeline. "There are a lot of companies that are demonstrating they have the expertise to develop and create content, we believe, more efficiently than the studio system," says Rick Sands, MGM's No. 2 exec. Nazarian's Element has a similar distribution pact with Lions Gate.

Lots of people think the only real change has been the gusher of Wall Street money that's enabling more wealthy outsiders to leverage their balance sheets to make a Hollywood splash. At least one newcomer has already crashed—Henry Winterstern, a Canadian entrepreneur who sought to elevate the indie movie company First Look Studios into the majors. "Whenever there is excess capital, people take risks," says Tom Rosenberg, chairman of longtime indie Lakeshore Entertainment ("Runaway Bride" and "Million Dollar Baby"). "The money has rushed into Hollywood in the last year and a half. In a year and a half, it'll go someplace else. It's the fad now."

Wall Street is no doubt enabling this new crop of moguls—a recent change from when the major studios monopolized the smart money. Now, blue-chip firms such as Goldman Sachs are trying to raise, in some cases, hundreds of millions of dollars to launch indies. Among the beneficiaries, too, are former studio execs like Mark Gill (Miramax) and Rob Friedman (Paramount). The surge is also helping indie godfathers Harvey and Bob Weinstein. They're back on the indie scene with the upstart Weinstein Co. after several acrimonious years at Disney, which now owns their Miramax studio. "There are lots of people ... doing a first-rate job at producing, acquiring and distributing films, similar to the model we created at Miramax," says Harvey. "In fact, many are taking an even more hands-on approach."

With credits dating back two decades (he backed the 1986 hit "9i Weeks"), Kimmel isn't quite a Hollywood parvenu. But now he wants to control the show, not just be the guy who writes the check. "I wasn't 100 percent focused when I started [producing] in 1993," says Kimmel, who in those days was full-time CEO of Jones Apparel. Changing the rules has been more evolutionary than revolutionary: for his film "Breach," he had to rely on the old approach, handing control of the film to Universal for marketing and release. But he won't be doing that with the comedy "Death at a Funeral" and "Married Life" under his new MGM distribution. "I'm in the movie business full-time now," says Kimmel. Which is good news for the redecorator of Johnny Carson's house.