How the star-powered movie studio behind the summer hit 'Bad Mums' is competing with the Hollywood establishment

Bad mums STX Entertainment finalSTX Entertainment‘Bad Mums.’

To be successful in the movie studio system, the conventional wisdom is that you have to own incredible intellectual properties that have the potential of raking in billions of dollars over multiple platforms.

But there’s a studio that has been holding its own for the last two years, without the help of superhero movies and franchises. Now they’re looking to branch into other mediums with the hopes of becoming the one-stop-shop for stars when they want to develop a project.

STX Entertainment laid its foundation through its movie studio, which has released a remarkable six titles since its start in 2014 (it will be ten by the time 2016 ends), but with the recent news that the company has received significant strategic investments from two major players in Hong Hong, it has suddenly become a powerful mini-major that plans to spend as much yearly in the making and marketing of its content as the big conglomerates like Disney, Sony, and Warner Bros.

If you’re not familiar with the company name, you’ve likely come across the titles it’s released. First out of the gate was the thriller “The Gift” in August of 2015, which took in over $58 million worldwide at the box office (its budget was $5 million). What’s followed has been continued success in the genre realm with “The Boy” (over $64 million worldwide) but there’s also been disappointments like “Hardcore Henry” ($14.3 million worldwide) and “Free State of Jones” ($20.8 million).

However, the company believes it has hit its groove with its summer release “Bad Mums,” which has become its most successful release thus far with over $85 million worldwide to date and only an 18% drop in domestic box office in its third weekend.

The decision-maker on the studio side is former head of Universal Adam Fogelson, who, before being let go in 2013, green lit the projects that would go on to give the studio its record-breaking box office in 2015 (including over $1 billion worldwide grosses from “Furious 7,” “Jurassic World,” and “Minions”).

Adam Fogelson Alberto E Rodriguez GettyAlberto E. Rodroguez/GettyAdam Fogelson, chairman of STX movie picture group division.

The way Fogelson sees it, the STX model was tailor-made for what catches his eye.

“I was roughly at Universal for 15 years, and it’s pretty much the only studio in town that could not rely on franchises and existing IP to drive its own slate,” Fogelson told Business Insider. “So the very types of films STX was in the business to make, I knew from experience could be incredibly profitable.”

STX founder Robert Simonds launched the company after a career producing memorable comedies that included the Adam Sandler classics, “The Waterboy,” “The Wedding Singer,” and “Happy Gilmore.” Knowing that Fogelson had spent over a decade moulding the releases of such unlikely hits for Universal like “American Pie,” “Bring It On,” “The Bourne Identity,” and “The Fast and the Furious,” he quickly snatched up Fogelson to run his movie studio in hopes of bringing those types of titles to STX.

In other words, the titles that big studios no longer want to make.

“The reality is in the franchise game there are only two options, meet the incredibly high bar of expectations and financial rewards or get killed,” said Fogelson.

All but extinct are the star-driven movies, where a name alone can carry a title to box office glory. Taking their place are comic book characters and superheroes, however, STX hopes to fill that void in not just the feature film space, but on TV, the internet, and virtual reality.

“I hadn’t anticipated the sheer demand for these mid-range movies with major stars,” STX president Sophie Watts told Business Insider.

Fogelson agrees.

“The level of interest is even greater than I anticipated,” he said, referring to the marquee actors and directors who want to develop projects through STX.

Hardcore-henry-stillSTX Entertainment/YouTube‘Hardcore Henry.’

But not all the projects have been home runs.

Their first major TV series, “State of Affairs,” was canceled by NBC after just one season. It was a project Watts said they rushed into. Then there’s the release of the first-person action movie “Hardcore Henry,” which the studio released on an eye-popping 3,015 screens its opening weekend only to earn $5.1 million. Fogelson said not to expect any more big gambles like that on the feature film side anymore.

“[‘Hardcore Henry’] did not work at all the way we thought it might, and the fact that the type of storytelling was so experimental, I certainly think we are going to be very careful going forward to make sure that we are spending our time and energy on more down-the-middle propositions.”

The company is using these growing pains to refine what makes the most sense to back.

Learning from their lacklustre return on adult-themed “Free State of Jones,” STX recently parted ways with the musical “Gypsy,” which had Barbra Streisand attached, after a financier who was in for a third of the budget dropped out. Looking to be left with a bigger stake in a long gestated project with a budget north of $50 million, the company cut ties.

On the TV side, they have 22 non-scripted shows already secured at numerous networks.

Sophie Watts Frazer Harrison GettyFrazer Harrison/GettySophie Watts, STX president.

And with her background working with the likes of Paul McCartney, Elton John, and U2, Watts said a music division at the company is “inevitable.”

STX’s initial backing came from Chinese private equity firm Hony Capital, a good partner to have as the Chinese entertainment market is skyrocketing. Now they have doubled-down on their relationship in the region with the news late last week that STX has received significant strategic investments from Hong Kong’s largest pay-TV service, PCCW, and China’s leading provider of online services, Tencent Holdings.

Though no figures were disclosed, a source close to the deal told Business Insider that this gives STX a valuation of $1.5 billion.

“The deal with Tencent and PCCW should give STX the financial backing to move into these other media in a significant way,” Lindsay Conner, entertainment industry lawyer and partner in the firm Manatt, Phelps & Phillips, told Business Insider. “The deal makes a lot of sense on both sides of the Pacific — STX gets the funding it needs for a strategic expansion, and two valuable distribution partners in China; Tencent and PCCW get an investment in a top-notch Hollywood content production team, which should soon have the capacity to distribute television and digital content in the US and elsewhere.”

Going forward, STX will continue to be aggressive. Fogelson plans to release between 12-15 movies in 2017, all ranging in budgets between $20 million and $80 million.

Anticipated titles include this year’s Toronto International Film Festival closing night film, “The Edge of Seventeen” (opening November 18); their first Chinese co-production, the Jackie Chan movie “The Foreigner” (along to open in November), an Adam Sandler animated movie that’s in the works, and the titles they purchased at Cannes: the Aaron Sorkin-directed “Molly’s Game” (which starts production soon) and the highly anticipated Martin Scorsese movie “The Irishman,” which is to star Robert D Niro, Al Pacino, and Joe Pesci.

This continues Watts’ mission of being a home for the biggest stars.

“I think that we live in a very changed landscape and my belief is that the world’s best storytellers, the world’s biggest stars, spend too much time trying to move their ideas forward in what is typically a very frustrating and inefficient system,” she said. “So what keeps my up at night is building a system where in a 21st century world you can access your stars in ways that practically are very very difficult to what a traditional studio can embrace.”

“If you get it right it’s something that will go down in the history of the business as a major achievement,” adds Fogelson. “That’s pretty rare to make that kind of impact.”

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