Miramax’s Production Duo Extending Run With Disney

Miramax Films’ founding producer brothers Harvey and Bob Weinstein have extended their employment contracts with the Walt Disney Co.-owned company another seven years.

Disney acquired the scrappy New York-based independent movie distributor of films such as “Pulp Fiction,” “The Postman” and “The Piano” three years ago for about $75 million, of which $50 million was paid upfront to the Weinsteins. At the time, the co-chairmen signed five-year contracts with an option for additional two years at Disney’s discretion.

Although the Weinsteins essentially still had four years to go on their original contracts, Disney management wanted to ensure that they would stay in the fold because they are considered Miramax’s most valuable asset.

“Though they had a long time left on their contracts, it became clear that the Miramax dynamic was so much different now than when we acquired them,” said Chris McGurk, president of Disney Motion Pictures Group, alluding to Miramax’s greatly improved balance sheet.

McGurk would not divulge financial details, but an informed source said Miramax’s operating profit for the fiscal year that will end in September is on track to be similar to that of fiscal 1995, which was $50 million on revenue of more than $300 million. That far exceeds all the years Miramax was financially independent and, by the Weinsteins’ own admission, had a constant cash-flow problem.

Although the new deal extends the brothers’ contracts through 2003, Harvey Weinstein said “the package gives us terrific incentive to continue doing what we’re doing.”

A source said the Weinsteins will get “significant additional compensation” at the end of the seven-year term if they agree to enter into another seven-year deal.

Harvey Weinstein also noted that the new agreement is structured similarly to Miramax’s actor deals in that it allows for “low upfront [payments] and a big piece of the back end.”

Whereas Disney has recouped its initial investment in Miramax, Disney’s cash outlay for Miramax’s productions, acquisitions and marketing costs has been in the hundreds of millions of dollars. The company, which has a 257-title library, releases about 40 movies a year, with an average production cost of $12 million, an average cost of acquiring finished films of $4 million and an average print and advertising cost of $5 million.

“They have perfected the singles and doubles strategy, so their risk-reward profile is incredibly appealing to us,” McGurk said, noting, “we are quite pleased with our projected return on investment.”

Though Miramax releases its share of box-office losers, it hedges its bets by preselling foreign rights to its movies to minimize its risk.

Since its acquisition, Miramax has launched a successful second film label, Dimension Films, specializing in genre movies such as “The Crow.” It also has expanded into publishing and music, with plans to venture into television, possibly with the Miramax channel to rival Ted Turner’s TNT.

Bob Weinstein, who runs Dimension, said Disney has seen a 40% return on investment on the 2-year-old label. Sources said Disney is prepared to commit at least $500 million more over the next seven years to ensure the label’s continued growth.