When Henry Winterstern resign-ed as CEO of First Look Studios on March 2, citing a dispute with board members over his plans to acquire Nu Image/Millennium Films, the independent film industry buzzed about his brief Hollywood career. “He burst onto the scene — he was so aggressive, and then gone so quickly,” indie producer Celine Rattray, whose film Dedication was acquired by First Look in January, told The New York Times. But two-and-a-half weeks later, Nu Image acquired a controlling stake in First Look, appointing Winterstern to the role of occasional adviser. Then, just over a month after his resignation, Nu Image named Winterstern as co-chairman and principal of First Look Holdings LLC — Winterstern would run the company alongside Nu Image principal Avi Lerner. The new arrangement was far from surprising to Winterstern, however; turns out the reason he stepped down in the first place was to partner up with Nu Image to reacquire control of First Look, the next best thing to purchasing Nu Image himself.
Winterstern might have failed to ignite the box office during his initial two years leading First Look, but the company’s relationship with Nu Image offers him another chance to achieve his goal of creating a stand-alone independent studio rivalling the likes of Lionsgate. With the animated Aqua Teen Hunger Force Colon Movie Film for Theaters, First Look’s first wide release, in the bag, Winterstern has plans to continue to grow the company. But the 50-year-old former Montrealer, who’s spent more years in real estate than he has in Hollywood, could be facing an uphill battle.
Though today he speaks of admiration for old Hollywood, Winterstern was more interested in finance than movies growing up in Montreal. (He moved to that city from his native Buffalo, N.Y., at age 4 and remains a U.S. citizen.) Winterstern became a major player in Montreal’s real estate scene after leaving McGill a few credits short of a degree in real estate finance, beginning his career in the late 1980s as a mortgage lender before founding Winterstern & Associates Inc., an investment firm that specialized in commercial real estate, in 1993. There, he set up a partnership with the Whitehall Street Fund, which is owned by Goldman Sachs, that saw them acquire Montreal landmarks Dominion Square and Place Bonaventure.
In 1999, with media and high-tech companies on the rise and the real estate market levelling, Winterstern became interested in working in entertainment for the first time. “I really felt that with Hollywood being so close to Canada there didn’t seem to be the proper dialogue and ability to invest in Hollywood that there should have been,” he says. The Caisse de dépôt et placement du Québec had a private equity division at the time called Capital Communications that wanted to invest in the entertainment business; the pension fund thought Winterstern, who had contacts in Los Angeles and financial smarts, would make a good partner, and together they set up a company called CDP Capital Entertainment, co-owned by Winterstern and the Caisse.
Winterstern arrived in Los Angeles in 2000 to look for assets, and got a crash course in entertainment investing: he acquired interests in production companies Mosaic Media and Lakeshore Entertainment, and Metro-Goldwyn-Mayer Inc., where he was made a director in 2001, and helped take Dick Clark Productions private. By 2003, however, the Caisse wanted out of the volatile entertainment sector and asked Winterstern to divest its Hollywood assets. With all he’d learned, Winterstern wanted to continue investing; he founded his own company, Capital Entertainment, obtained home video rights to the likes of Baywatch and American Idol and opened a production arm.
Then First Look Media, a company traded on the pink sheets with strengths in distribution and a 400-title library, attracted Winterstern’s attention. “Although I had a passion for production and development, I realized that the best investments would always be related to strong distribution capabilities,” he says. In July 2005, along with US$70 million from hedge fund Prentice Capital and an US$80-million credit line from Merrill Lynch, he merged Capital Entertainment with First Look Media to create First Look Studios Inc.
Winterstern wanted to build a company that harked back to Hollywood in the ’30s and ’40s — when studios worked more closely with the filmmaker — as well as compete with the likes of mini-majors Lionsgate and Weinstein Co., companies that do more than film production and distribution. He immediately hired industry veterans and expanded the company to include television, international and home entertainment divisions. He increased the company’s catalogue to 700 titles, and acquired DEJ Productions, the video production and distribution arm of Blockbuster, for US$25 million, and video distributor Ventura Distribution for US$20 million. First Look released its first pictures in 2005 and 2006, Larry Clark’s Wassup Rockers, The Dead Girl, and A Guide to Recognizing Your Saints — but they failed to register at the box office.
Winterstern’s rapid spending on acquisitions (and First Look’s relocation to a new US$4-million office earlier this year) have been blamed for the original company’s less-than-stellar performance; by the time of Winterstern’s resignation, anonymous First Look executives had told The New York Times the company had US$50 million in losses in 2006, and was unable to repay an US$8-million short-term loan from Prentice. Winterstern responded to the Times that the company’s losses were not that high, though declined to be specific, and that First Look had the cash to repay the loan but required capital because he wanted to purchase Nu Image. He feels any criticism over his spending is unfair. “I’ve always had a background of havinginvestment banking capabilities, so I think everything we did over the years was related to our growth strategies and in line with prudent business practices.”
Nu Image’s investment in First Look has restructured some of the company’s debt, and will help provide more financial flexibility, but Winterstern was always interested in making use of Nu Image’s strengths in production. Under the new arrangement, First Look has scaled back on movie production. Though the company is still open to co-producing certain projects, Nu Image will now make the films, while First Look will use its distribution strengths to get them to theatres. First Look isn’t the first company to look to the cost-saving measure of limiting production. Andy Nasr, media analyst at Raymond James in Toronto, notes that Lionsgate is so focused on limiting spending on films that it sold its production facilities, which he feels is a good model for independent studios, though New York–based media analyst David Bank of RBC Capital Markets feels the independent film industry has become crowded with studios copying Lionsgate’s successful model of acquiring films on the cheap for modest profits. Small companies like First Look face increasingly competitive bidding wars at festivals with wealthier studios in the fray. “Each of the major studios have started to devote more resources to independent films, the acquisition of independent films, and working with independent producers on those sorts of movies,” he says.
While Winterstern says First Look hasn’t strayed from its original goal of embracing creativity and encouraging filmmaker freedom, the company will now be focused on acquiring pictures that appeal to a wider audience. “I think the art-house films were a nice way to start and get our hands dirty, but now that we’ve really built our theatrical team and perfected our home video operation, we’re in a much better position to get involved in wide-release films,” he says. Aqua Teen Hunger Force Colon Movie Film for Theaters, which the company distributed domestcally, opened at nearly 900 theatres and took in US$5.5 million theatrically in the U.S., while Paris je t’aime made US$4.6 million domestically after First Look distributed it to 200 U.S. theatres. The company plans to build on this success and hopes to release at least two films this year on 1,500 to 2,000 screens. (A typical independent movie appears on 870 to 2,500 screens.) First Look’s latest release, King of California, which was produced by Nu Image/Millennium Films and stars Michael Douglas, opened in North America in mid-September.
No matter how well its films perform at the box office, however, First Look’s home video distribution operation will be key. Raymond James’s Nasr says the home video route can be profitable for independent companies as critically acclaimed indie films that do poorly at the box office often perform better on DVD. An agreement that will see Nu Image sell the First Look library internationally is already in place.
Industry veteran Tom Rosenberg of Lakeshore Entertainment, who produced the Oscar-winning Million Dollar Baby, and who, along with Winterstern, was a producer of The Dead Girl, echoes Banks’s view that the independent film industry is going through a particularly competitive period. But he feels Winterstern will be able to emerge on the other side. “I think he has a good understanding of the business, and the people who have come to know Henry know that you can never underestimate him,” Rosenberg says. “It’s very difficult for people from the outside to get into this business and remain, so he’s learned.” Winterstern’s unlikely entry into Hollywood, the quintessential underdog story, sounds almost like it could be the plot of a classic film — the sort of classic Rosenberg suggests Winterstern might have had a hand in were he around back in the golden age of Hollywood. “Henry would have been great here when Hollywood was just beginning. He’s a unique personality, he’s an entrepreneur,” Rosenberg says, “he’s a force of nature, which many of the people who started Hollywood were also.”