This Successful Alliance Doesn’t Include the Hollywood Pack

Twenty years ago, a young Canadian-based producer named Robert Lantos made an unusual decision--not to go Hollywood.

After making the moderately successful 1978 movie, “In Praise of Older Women,” he was offered a development deal at a major studio with an office on the lot. Most ambitious 27-year-olds would have jumped at the chance.

“I decided not to do it because it seemed like such a cliche. The first time somebody from L.A. returns someone’s call, they move here,” said Lantos, 47, a Hungarian immigrant. “So I became doggedly determined to build my own business in Canada.”

Today, as chairman and chief executive of Toronto-based Alliance Communications Corp., which he co-founded with Victor Loewy in 1985, Lantos operates the largest entertainment company in Canada, with annual revenue of about $270 million in Canadian dollars (or about $197 million American).

The publicly held company, which has been trading on the Canadian exchange for the last three years and on Nasdaq since February 1996, is Canada’s top independent film and TV producer and distributor and has about 300 employees in six offices, including Montreal, Vancouver, Los Angeles and Paris.

As the largest Canadian theatrical distributor, the company releases about 70 movies a year, of which it produces fewer than 10, and has exclusive agreements with such top suppliers as New Line Cinema and Miramax.

Alliance is also Canada’s leading specialty television broadcaster, controlling about two-thirds of the Canadian cable universe through its 55%-owned Showcase. In the fall, it will launch another cable channel, the History and Entertainment Network.

Alliance is arguably the largest non-American independent supplier of TV product to U.S. network and cable broadcasters. In addition to six one-hour pilots, Alliance is partnering on three “event-type” projects: a one-hour series based on Arnold Schwarzenegger’s blockbuster “Total Recall”; a TV movie based on Louisa May Alcott’s recently discovered first novel “The Inheritance,” to air on CBS in April; and a live-action movie based on “The Hunchback of Notre Dame,” to star Richard Harris and Mandy Patinkin, scheduled to air on TNT this spring.

The company is not well-known in Hollywood’s movie community but recently attracted major attention when Time Warner Vice Chairman Ted Turner trashed director David Cronenberg’s controversial movie “Crash,” which Alliance financed and Time Warner-owned New Line is set to release in the U.S.

“I personally was appalled and am appalled by it,” Turner said of the film, which depicts people who are sexually aroused by car crashes.

Turner’s criticism could have a positive effect on Alliance by drawing attention to the fact that it’s a place where independently minded directors can get their films financed outside the Hollywood studio system.

“They’re very feisty and very tough and they don’t back down--they’re not afraid,” said Cronenberg, whose film credits include “The Fly” and “Naked Lunch.”

Native Canadian Bob Cooper, the former president of HBO and now head of Sony’s TriStar Pictures, who has known Lantos for many years and was briefly in partnership with him, said, “He is very bright, aggressive and takes huge risks.”

Cooper said that it’s easy to underestimate Lantos because “his style could appear to be brash, insensitive and of little depth, [but] in fact it’s the reverse . . . the guy is very literate and his strategies are not impulsive but well-thought out.”

Lantos, who owns about 20% of Alliance and is the company’s largest shareholder, said it is crucial for the company to stand apart from the Hollywood pack.

“Competing head on against the major studios . . . is really a losing proposition unless you are at least the same size,” Lantos said in a recent interview at the Four Seasons Hotel in West Hollywood.

“So everything we do is designed to focus on areas where we can compete with an edge because we don’t have the resources or size.”

That translates into different strategies in film and television. On the movie side, Alliance doesn’t attempt to compete in the mainstream with big budgets, big stars and big special effects. Rather, its films are lower cost and auteur-driven like “Crash,” Atom Egoyan’s “Exotica” and Jean-Claude Lauzon’s “Leolo.”

In TV, the company focuses on product with international appeal and takes advantage of Canadian economic incentives. It has established strong relationships with U.S. broadcasters and has successfully licensed one-hour dramatic action series, two-hour movies and the occasional miniseries to overseas distributors.

Its self-financing arrangements and international track record give Alliance some advantages. Said Lantos: “In the U.S., when a network cancels a show, life is over, and it doesn’t work that way for us.”

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Lantos believes Alliance is diversified enough to protect against cyclical downturns in any one of its five operating divisions: TV production and distribution; motion picture production and distribution; broadcasting; multimedia; and Equicap, a financing unit that syndicates tax-incentive investments in entertainment products to Canadians on a commission basis and arranges gap financing for independent producers.

“The outlook for the company is outstanding,” said David Doft, an equity researcher at New York investment banking firm Furman Selz, which co-managed Alliance’s latest equity offering over the summer.

Doft said the main reason the company’s stock is currently lagging--it’s $9 a share, down from $12 a share when it first started trading on Nasdaq in February--is because of a ruling by Canadian tax authorities that could impact its financing business.

The analyst believes that Alliance, which has been consistently profitable for years, is “positioned very well” in the TV and movie business and said Furman Selz is targeting a stock price of $14 a share.

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Lantos, who says Alliance is currently debt-free, said the company is on the lookout for “acquisitions to strengthen our library and our distribution.” If a Canadian TV network becomes available, the Alliance chief said, “we would certainly go after it.” Even though Canada is a “relatively modest piece of the global puzzle for us, it’s important for us to have a stronghold across the board, including broadcasting, so our home base is a sort of Fort Knox that we can use as leverage and on which we can build.”

Last summer the company launched a new movie division, Alliance Pictures International, to handle movies in the $10-million to $25-million range.

“In the past we’ve only done one movie of that size a year or every two years and now we’re going to build up the production schedule over the next couple of years to five or six a year,” Lantos said.

“That’s where our philosophy on the movie side is changing. Thanks to the obsessive focus of the conglomerates and relentless chase of the billion-dollar blockbuster, they are more and more vacating the field of serious filmmaking for adult audiences.”

Lantos said the division would produce “films that don’t resemble other films, films that could never possibly lead to a sequel or a television series, films that could never sell a single toy to anyone.”

Because it presells its films, Alliance typically covers its costs even on nonperformers. On its most expensive production ever, “Johnny Mneumonic,” which cost $25 million and was a flop in the U.S., Lantos said “our presales were higher than the cost of the movie.” Lantos claims Alliance has never lost more than $50,000 on a movie “because we’re very conservative and we make movies that nobody else makes.”

It also helps that the company has access to a significant level of government subsidies for production of Canadian films, which can account for 10% to 40% of the budget.

When asked if he ever envisioned following in the footsteps of Cooper and becoming a Hollywood mogul, Lantos said with a smile, “He and I took different paths a long time ago.”

Born in Budapest, the only son of Holocaust survivors, Lantos and his parents immigrated to Uruguay when he was 8, moving to Montreal six years later in 1963 at age 14. In the 1970s, he and fellow college student Loewy, a 10% shareholder in Alliance and president of Alliance Releasing, broke into the business by starting their own distribution company in Montreal. Lantos became an independent producer for 10 years before forming Alliance in 1985.

“It’s been a very long road,” Lantos said. “When you build your own road, you end up hitting all sorts of unexpected obstacles and then you have to take detours and build bridges. It wasn’t a straight line as I thought it would be.”