Posted: Thurs., May 10, 2007, 8:30pm PT - www.variety.com/article

Variety Business
Cuban, Wagner rewrite profit model
Duo tweak back end process

Backend points might be worth something, after all.

Veterans of the film and TV trenches have long told war stories about the struggle to collect on their net or gross participations. Now Mark Cuban and Todd Wagner have found another way to rewrite the rules for profit participants.

The duo are backing a new company dedicated to buying out the profit-participation stakes held by individuals in films and TV programs, among other intellectual properties, in an effort to assemble a portfolio of properties that in aggregate will generate a steady stream of income.

Based in West L.A., Content Partners was formed about a year ago by industry vet Steven Kram, the former exec veep and chief operating officer of William Morris Agency, and Steven Blume, former chief financial officer of Brillstein-Grey Management. Company aims to bridge the gap between the time that actors, writers, directors and producers are granted points in a picture or a piece of the backend of a TV series and when they actually see the first checks from those profit-participation stakes.

Through their experience in helping to manage the profit-participation rights of high-end clients, Kram and Blume realized there was a demand in the creative community for a company that would provide participants with lump-sum payments for stakes that otherwise might not pay off for years.

Kram and Blume drafted a business plan and made a proposal to Cuban and Wagner, based on their reputations as innovators and risk-takers. The duo behind 2929 Prods., Magnolia Pictures and Landmark Theaters, among other showbiz concerns, bought it in the room, so to speak.

"I think its a unique opportunity," Cuban said in an email interview. "The creative community faces the challenge of not having predictable cash flow. (Content Partners) solves that problem by buying participations and equity from individuals. Its a win-win for all involved."

During the past 12 months, with $100 million in funding, Content Partners has cut deals with dozens of profit participants in everything from vintage TV shows to movies released during the past six months. Kram, who is prexy-CEO of Content Partners, declined to name any of the people with whom the company has done transactions, citing confidentiality agreements, but he said Content Partners' portfolio now includes properties owned by Universal, Fox, Warner Bros. and Sony Pictures, among other major production entities.

"We're allowing creative people to have much more certainty in their financial future. Our service allows them to better plan their financial lives, and in some cases, we give them the freedom and the funds to pursue their passion projects," said Kram, who left William Morris at the end of 2005 after 17 years amid a management shakeup at the agency.

Content Partners' deals with profit participants are buyouts, not long-term loans, a la the so-called Bowie Bonds that were floated to music rights holders about a decade ago without much long-term success for the banks that funded them.

In assessing the value of a profit participant's stake, Content Partners runs the numbers and comes up with detailed long-term projections for a property's potential in all manner of venues and formats -- from international TV sales to remakes and sequels to the potential for DVD re-releases, etc. -- and ancillary markets a la licensing and merchandising. In some cases, profit participants want to hedge their bets against the possibility of a future bonanza by selling only a portion of their stake, Kram said.

Once they cut the profit participant a check, all future money from that stake, or portion of the stake, flows to Content Partners. From there, the responsibility for monitoring how the studio or copyright holder treats the property and deciphering studio income statements is on Content Partners.

Making such long-term bets means that there's genuine risk involved for Content Partners as technological changes are rocking the industry and there's no telling what the long-term value of individual movies and TV shows may be, noted top legal eagle Martin Singer, who said he's had several clients cut deals with Content Partners. There's an important comfort factor, however, in that Kram and Blume have solid reputations and long-term professional relationships with the town's top talent reps.

"It's a great concept. I'm surprised nobody came up with it before," Singer said. "Now you've got a service where you can get cash value for profit participations where you never could before and you don't have that uncertainty about the timing of (the payoff). It's great to have that option ... and it's great that you've got two people running it who have tremendous integrity and great reputations in their respective fields."