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POLYGRAM AND INTERSCOPE JOIN IN BUILDING WORLDWIDE MOVIE PRODUCTION AND DISTRIBUTION ENTITY

 POLYGRAM AND INTERSCOPE JOIN IN BUILDING
 WORLDWIDE MOVIE PRODUCTION AND DISTRIBUTION ENTITY
 LOS ANGELES, Aug. 10 /PRNewswire/ -- PolyGram (NYSE: PLG), the global music and entertainment company, and Interscope, one of the foremost Hollywood film producers, have entered into an agreement jointly to build a worldwide movie production and distribution entity. PolyGram will acquire a controlling 51 percent interest in Interscope. The goal of both companies is to use PolyGram's resources and Interscope's expertise to expand production and to design a worldwide distribution unit.
 This announcement was made today by Alain Levy, president and CEO of PolyGram, Michael Kuhn, president of PolyGram Filmed Entertainment, Ted Field, chairman and CEO, and Robert Cort, president and COO, of Interscope.
 Interscope has produced in excess of 25 motion pictures including such successes as "Cocktail," "Three Men and a Baby," and "Hand that Rocks the Cradle," generating estimated worldwide revenues in excess of $1 billion over the past eight years. Its revenue-to-cost ratio has been significantly higher than the industry average, and the average negative cost of its pictures at under $16 million is well below the industry average.
 Specific points of the agreement are as follows:
 -- Interscope intends to develop and produce eight films over the next two years. Production is expected to increase to between nine and ten films annually by 1997.
 -- Initially, these films will be distributed domestically in the USA and Canada by a major studio and, internationally, principally by PolyGram. Thereafter, in major territories the business plan envisages direct distribution of all movies by PolyGram.
 -- The negative cost of Interscope's production slate is planned to be appreciably below industry average.
 -- Funding will be provided by PolyGram, but co-financing arrangements and


foreign pre-sales are an integral part of Interscope's new business plan and this is in line with PolyGram's previously stated philosophy of risk containment.
 The initial consideration for the controlling interest and certain services of Field and Cort is $35 million, to be financed out of PolyGram's group cashflow and available funds.
 PolyGram anticipates that if its overall film division, including its interest in Interscope, performs according to its business plan, PolyGram's previously announced net working capital commitment for production and marketing costs of $200 million may rise in later years. However, in line with its overall strategy, exit provisions allow PolyGram to limit its working capital exposure if existing production units and Interscope perform significantly below expectations.
 Interscope will retain its creative autonomy and will continue to provide its development and production services on projects that it has previously set up at the major studios. Future development of movies, however, will be undertaken in-house. By the end of 1993, Interscope anticipates that it will have committed the funds previously raised by Nomura Babcock & Brown for co-financing film productions. Nomura Babcock & Brown will retain the option of raising certain additional money for Interscope.
 PolyGram will continue to fund its existing production units (principally Propaganda, Working Title, and A&M Films) which will function autonomously from Interscope.
 In announcing the agreement, PolyGram President and CEO Alain Levy commented: "This investment is in line with our stated philosophy of building in a controlled manner our own worldwide film operation. Top quality, cost-conscious, commercially successful film makers of the caliber of Ted and Robert coming to PolyGram underline the seriousness of our commitment to this goal and ensure that we will have a significant core of creative talent for producing major films which is the basis of our long-term strategy. In addition, PolyGram is afforded a unique flexibility as to its speed of entry into film distribution and balance of risk and reward during the early stages of its entry into the film business."
 PolyGram Filmed Entertainment President Michael Kuhn added: "Interscope's history of making moderately budgeted, highly commercial, highly profitable movies speaks for itself. The excellent group of creative talent we already call on will now be increased by one of the best creative teams to have emerged in the last ten years. I am confident that in the future their movies and those of our existing production companies will complement each other so that this division of PolyGram will be profitable for the group and will soon attain a significant position in the movie business. Interscope's commercially successful movies have previously yielded substantial profits to its distribution partners. In the future, and with funding from PolyGram, Interscope and PolyGram will be able to access this distribution margin."
 Ted Field and Robert Cort stated, "We are thrilled to be joining PolyGram on this exciting new undertaking. All of us believe in the viability and desirability of a new production and distribution entity to compete with the existing majors. We intend to progress to that end with a healthy respect for the challenges we face. Our commitment to the idea of lower cost films which have been the hallmark of Interscope will continue. We think that we have the creative team in place at Interscope to drive such a production philosophy and in PolyGram we have a powerful strategic partner with whom we share a vision of how our mutual goals may be accomplished."
 PolyGram's other production companies include: Propaganda Films, Working Title Films, A&M Films, three French production companies, R Films, Noe Productions, and Midi Minuit Partizan, and Teddy Poly Films in Hong Kong. It has video operations in 25 countries. PolyGram Filmed Entertainment, a division of PolyGram recently announced along with Universal Pictures the formation of Gramercy Pictures, a company to market and distribute theatrical pictures in the U.S. and Canada.
 The transaction is subject to conclusion of definitive documentation and the obtaining of applicable regulatory approval, all of which is expected to occur by the end of September 1992.
 -0- 8/10/92
 /CONTACT: Dawn Bridges of PolyGram Holding, 212-333-8357, or Amanda Whitwell of PolyGram International, in London: 71-493-8800/
 (PLG) CO: PolyGram Holding, Inc.; Interscope ST: New York IN: ENT SU: JVN


TS-OS -- NY011 -- 8390 08/10/92 09:21 EDT
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Date:Aug 10, 1992
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