Village Roadshow’s Bankruptcy: Buyers Circle Over Library Assets That Generate $50M a Year

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A more distinct image of Village Roadshow’s decline is emerging, as the film production and finance company has filed for bankruptcy following an expensive venture to produce content in-house and the deterioration of its lengthy collaboration with Warner Bros.

Back in the day, I was part of a powerhouse financial group that had backed some serious blockbusters like The Matrix and Ocean’s series. We were thriving! Our ownership of numerous copyrights meant we held a prime spot in Tinseltown: the chance to collaborate on hit franchises and cinematic universes, drawn from our treasure trove of intellectual property. Every year, we raked in around $50 million just from our film library.

In 2017, Village Roadshow decided to focus on creating homegrown films as part of a larger strategic move to reduce its dependence on box office earnings. To achieve this, it sold a majority share to asset manager Vine Alternative Investments and private equity firm Falcon Investment Advisors, using the funds to expand its movie production division. For CEO Steve Mosko, who previously worked at Sony Pictures Entertainment, television became a key area of interest. The aim was to create content that Village Roadshow could own outright, rather than sharing it with studio partners. The company positioned itself as a complete production house capable of taking ideas from development through to marketing and distribution independently.

In 2017, Bruce Berman, who was at that time the chairman and CEO of Village Roadshow’s filmmaking division, told The Los Angeles Times: “It gives us a bit more control over our own future,” he said. (Berman left his position in 2021 after over two decades with the company.)

As a devoted admirer, I’d rephrase it like this:

Eight years have passed since that statement, and Village Roadshow attributes its financial struggles to the broadening of its business strategy. As of Monday, when they filed for bankruptcy, they had approximately $148,000 in cash reserves, sufficient for a week’s worth of operations, according to court documents. Since 2018, they have been developing 99 feature films and 233 television series. Out of these projects, only 6 movies and 7 TV shows went into production at a total cost of $47.5 million. Regrettably, none of them managed to turn a profit, suggesting that the studio’s sustainability might be in question.

During a time of change at Warner Bros., Village Roadshow’s independent film projects clashed with the studio’s decision to no longer develop movies where they jointly owned the rights, such as Sherlock Holmes, the Ocean’s series, and Ready Player One. This change occurred prior to Warner Bros. being sued for breach of contract due to their plan to simultaneously release 2021’s The Matrix: Resurrections on HBO Max and in theaters as part of AT&T’s Project Popcorn initiative. In the lawsuit, they alleged that this decision denied them “any financial benefits” from the release.

Prior to the dispute, Village Roadshow had expressed interest in a TV series that Warner Bros. (WB) was creating based on Edge of Tomorrow, but were informed that their involvement would halt the project unless they gave up their rights. Eventually, Warners decided not to proceed with the show.

In a 2021 email to Kevin Berg, general counsel at Village Roadshow, Dave Brown from Warner Bros. Television expressed that they would not be able to continue with any project where Village Roadshow acts as a co-financier. He further explained that this has been their standard response when dealing with companies that share ownership rights, suggesting they act as an A-list production company instead. However, he clarified that just because Village Roadshow is invited to function in this manner doesn’t necessarily mean they will offer the best deal among all producers involved in the project.

Brown mentioned that the studio was firm in its stance and unwilling to change course for future projects: “I understand there might be more projects where we wish to tread this path. Therefore, even though this isn’t a blueprint, I aim to establish clear expectations.

Due to Warners’ decision not to collaborate, Village Roadshow found themselves in a predicament with a significant portion of their intellectual property being underutilized. In response, they chose to file a lawsuit and ask the court for an order compelling the studio to involve them in at least 15 ongoing development projects, which they asserted they were unlawfully excluded from.

After three years, the dispute between the company and Village Roadshow was transferred to arbitration. Court documents submitted by the company stated that the issue remains unresolved. However, at a recent bankruptcy hearing, WB’s lawyer Steve Warren declared that the arbitrator had ruled against Village Roadshow, according to Reuters. In a court filing, the Chief Restructuring Officer Keith Maib explained that this legal disagreement has severely damaged the business relationship with the studio, effectively eliminating potential income from collaborative projects that the company could have co-financed with WB. WB asserted that its former partner failed to meet their obligation to cover production costs for these projects.

It’s possible that Warners might be one of the potential bidders for Village Roadshow’s library, as suggested by Justin Bernbrock, a representative from their financing and production company, during a hearing on Tuesday. While they have tentatively agreed to sell their intellectual property to Content Partners for $365 million, this amount is seen as a starting point. Village Roadshow is reportedly considering higher bids, which could also originate from Alcon Entertainment, another potential producer mentioned in the hearing. Interestingly, Vine, who took a majority stake in Village Roadshow back in 2017, also had an interest in Alcon Entertainment.

Over the past approximately three years, Village Roadshow has racked up over $18 million in legal expenses, most of which remains unpaid. This figure does not include a potential arbitration award against the company, which complicated their attempts to file for Chapter 11 bankruptcy protection. In court documents, they stated that they received “significant interest” from a prospective buyer for the company or its assets, with an estimated value ranging from $100 million to $500 million. However, the uncertainty surrounding the arbitration outcome and the struggling state of their studio business delayed the completion of the deal.

A potential challenge for its continued success in Hollywood is a directive from the Writers Guild of America that prevents their members from collaborating with Village Roadshow. This decision stems from Village Roadshow’s failure to settle debts totaling around $1.4 million to guild members. According to Maib, this financial issue has significantly damaged its standing in the industry.

Besides Bryan Cranston’s Moonshot Entertainment ($794,000), Kevin Garnett’s Content Cartel ($395,000) and Sony Pictures Television ($250,000), there are also development costs provided by other parties. These include the company’s new landlord in West Hollywood, to whom it moved after relocating from its old Los Angeles office that it had occupied for over a decade.

Because they were struggling to secure funding to keep it running, Village Roadshow managed to gather around $13 million, some from Falcon Investments and the Ontario Teachers’ Pension Plan, to help them navigate bankruptcy. This agreement is subject to approval of a contentious clause in the loan terms that consolidates current debt into the new loan. In essence, this means they move closer to the front of the line when it comes to repayment.

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2025-03-20 01:55