This article was originally published in Maclean's Magazine on April 27, 1998
Drabinsky Moves to the Back Row
Garth Drabinsky should be used to it by now. He makes a decision, or launches a new venture, or sees a company under his command overhauled in one of those headline-grabbing power plays that have become as much a Drabinsky trademark as mega-musicals like Show Boat and Ragtime. The cry goes up for explanations and sound bites. Drabinsky makes himself available. He holds court. He makes impassioned speeches across his desk. He pronounces, at great length, on whatever he deems are the critical details, laying them out with an eye for pageantry, as though they were pieces of scenery in one of his stage productions. Then what happens, time and again? People refuse to stick to the script. Drabinsky is forced to see his material reworked the moment it gets beyond his control. It never fails to make him crabby and defensive.
He had hoped last week would be different. Drabinsky and longtime partner Myron Gottlieb announced that they are handing control of Livent Inc., their Toronto-based live theatre company, to former Hollywood super-agent Michael Ovitz and a group of U.S. entertainment executives in exchange for a cash infusion of $30 million and a pledge of some serious managerial help. The players all heralded this as a joyous corporate event, Drabinsky as vociferously as anybody. By accepting a demotion from the positions of Livent chairman and CEO to vice-chairman and chief creative director, Drabinsky says he will be able to forget about the day-to-day hassles - all that dickering with bankers and creditors - and devote his time to overseeing the production of plays. "This is absolutely, astoundingly positive," he says. Imagine that sentence with every word written in capital letters. "I am finally able to do what I really want to do now, for the next 20 years of my life. I am a happy man."
But during a wide-ranging Maclean's interview at Livent's Toronto headquarters, he did not look happy. He looked tired. The 49-year-old lawyer-turned-impresario - afflicted by a severe limp from a childhood battle with polio - had just gone through a paralyzing week of back spasms. The pressure and intensity of the past few months, he said, had left him exhausted. And after a day of trying to bat down headlines proclaiming he had lost Livent in a "takeover," Drabinsky was losing his patience - infuriated, once again, by the way his critics keep rewriting the script, suggesting he has been pushed aside by his wealthy and powerful American friends. "It wasn't a takeover," he says. "It was never a takeover. I was the catalyst for this happening. But people want to give it their own twist. They don't want to listen to facts. They want to pursue their own agenda."
It is hard to blame them. After all, it has been less than three months since Drabinsky finally appeared to have it all: fame, fortune, recognition and respect. In late January, Livent's New York production of the musical Ragtime opened to a booming box office and mostly rave reviews in the company's own 42nd Street theatre, a glittering $43-million showpiece erected from the ruins of the historic Lyric and Apollo playhouses. As the company's founder and controlling shareholder, Drabinsky was toasted as the savior of Broadway. His picture was on the front of The New York Times. He was the subject of one of those long profiles in The New Yorker. Twenty years after he first steamrolled into the public eye with his crazy notion that moviegoers could be persuaded to watch films in tiny box-like theatres, eight years after his dramatic ouster from his previous job as chairman and CEO of Cineplex Odeon Corp., Garth Drabinsky had made better than good. He had made history.
Thus it requires a bit of a stretch, a Broadway-sized suspension of disbelief, to wholeheartedly embrace the new downsized Drabinsky as the True Garth. And it is not just his critics who doubt his version of events. People who like and respect Drabinsky, who know him well, are struggling with the same problem. The inescapable fact is that when this deal closes in June, Ovitz, the onetime Walt Disney Co. president, will go into Livent with his chequebook and come out with 12 per cent of Livent's equity and voting control over 36 per cent of the stock - including the 25 per cent belonging to Drabinsky and Gottlieb.
On top of that, Ovitz and Livent's new management team - including New York investment banker Roy Furman, who will take over as chairman and CEO, and Ovitz's right-hand man David Maisel - will receive a wad of warrants and stock options tied to improved performance of Livent's sluggish stock. As part of the deal, Ovitz insisted on the right to buy 20 per cent of Drabinsky's stock, and nearly two-thirds of Gottlieb's, at last week's prices, at any time over the next year. "I don't care what kind of blustery line he gives you," said a Canadian entertainment executive, a self-professed admirer of Drabinsky, on condition he not be named. "It was his company, and now it's not, and I don't think that happens under happy circumstances."
The question everybody asks is: did he jump, or was he pushed? The answer probably lies somewhere in between. Drabinsky appears to have been persuaded, partly by Ovitz and Furman, that if he insisted on running his own show much longer he could end up back where he was in 1989 after the Cineplex debacle. His back was not exactly up against the wall, but the wall was moving towards him at a steady clip.
The fact is that theatre patrons have always had a very different picture of Drabinsky and his business than did the investment or theatrical supply companies that saw what actually went on behind the scenes. To ticket buyers, Drabinsky and Gottlieb are the clever money men who walked away from Cineplex Odeon with a single Toronto theatre and proceeded to build a $400-million company with six theatres across North America. They are known for churning out lavish musicals such as The Phantom of the Opera, Kiss of the Spider Woman, Joseph and the Amazing Technicolor Dreamcoat, Show Boat and most recently Ragtime, and for leading the charge towards increasingly higher ticket prices. (One of Drabinsky's frustrations is that he has been characterized as a money-grubbing financier, rather than a visionary hands-on producer. "I kept reading the reviews of Ragtime," he says, "and the new theme coming out of New York was 'corporate producing by committee' or something ridiculous like that, which really drove me crazy.")
The financial community, on the other hand, always viewed the principals as gamblers and jugglers. Livent stock is held by a number of blue chip financial institutions, but most view it as a speculative investment, similar to a junior resource company run by a brilliant but unpredictable entrepreneur. "You put your money in and you hope the gusher will come in and be big enough," a seasoned Toronto money manager said. Small suppliers in the Canadian theatre trade are thankful for Livent's business, but complain about the effort it takes to get paid. "Livent has always been notorious for dragging its bills," an independent theatre designer said.
Between 1989 and 1993, most of Livent's money came from its productions of Phantom, the Andrew Lloyd Webber musical that, Drabinsky says, has generated nearly $500 million in box-office sales in Toronto alone and turned Livent's Pantages Theatre into a local landmark. In 1993, Drabinsky and Gottlieb took the company public, raising more than $50 million - which, during some quarters, was roughly what Livent invested. Although Drabinsky and his Livent executives tended to talk as though the cash was flowing in and the sky was the limit, the reality was that they stretched every penny. "We were subject to a lot of restrictions on our bank financing, as we were a young company, and we had to raise equity every time we made a move," Drabinsky concedes.
In 1996, it looked as though the company had scored something of a coup when it tapped into a Boston fund manager called Tom Lee, who made a fortune financing leveraged buy-outs of the companies that make Snapple beverages and First Alert smoke detectors. Lee and his funds bought roughly $42 million of Drabinsky's stock, for which they were given two seats on the board. But with this new source of capital, Bay Streeters say, came increased pressure on the company to report more respectable profits.
Going into 1997, Livent had more than $75 million worth of deferred expenses built up on its balance sheet. It had done what Drabinsky now calls a "lousy" bond deal to raise the cash needed to complete the theatre renovations in New York. Livent was betting the farm on Ragtime, in the hope it would be profitable enough to offset those costs. Drabinsky now speaks openly about bungled tours, bad marketing and lost revenue as the company scrambled to keep all the balls in the air long enough for Ragtime to start throwing off the much-needed cash. Drabinsky worked 100-hour weeks last fall flogging a second debt financing, with which he paid back the old bonds and $44 million in bank debt, and was able to set enough aside to get his company through its current fiscal year.
A month ago, when a trio of longtime Livent executives resigned and people began asking questions about turmoil at the company, the remaining managers insisted it was business as usual. In fact, the company was deep in talks with Ovitz and Roy Furman, whose investment firm, Furman Selz LLC, was Livent's key financial underwriter. Drabinsky, who would talk to Furman at least four times a day, said he first approached Ovitz last summer after reading Ovitz's biography. Said Drabinsky: "I called him to say, 'A lot of the events you went through, I can relate to. And I just want you to know that I'm thinking about you and are you OK? How are you feeling, and let's have coffee, and come on the board of my company. If that would give you some excitement, I would like to see that happen.' " At the time, it did not, but it set the wheels in motion. Drabinsky then talked to Furman, who talked to Tom Lee in Boston, who talked to his good friend Michael Ovitz. Everybody denies pressuring Drabinsky, but they were all talking about the same thing: coming up with a package that would enable Ovitz to refinance the company, and finding the best person to take the helm at Livent when Drabinsky stepped aside.
In mid-March, Ovitz talked Furman into leaving the Wall Street firm he had sold to Dutch banking giant ING Group last year. He appears to have worked similar magic on Drabinsky, who calls Ovitz an "incredibly decent man" and a "kindred spirit" who persuaded him to recognize that great things can be accomplished when people do not insist on doing it all. Drabinsky tells a story Ovitz told him, about how Canadian Ivan Reitman used to write, direct, produce and distribute his own movies until Ovitz became his agent. "He said, 'Ivan, I want you to only worry about directing movies. I'll do the business, I'll free you up and all that.' " Reitman took the advice and went on to become one of the most successful directors of the 1980s, making a string of hits, including Animal House and Ghostbusters.
In return for taking a similar load off Drabinsky's shoulders, Ovitz extracted cheap stock options, including the right to buy a block of Drabinsky's own shares. "Michael wanted to have a certain critical mass of equity," Drabinsky says, the energy seeping out of his voice. "It's just the way we worked out the deal. It's perfectly acceptable."
Asked what the future holds, Drabinsky bounces right back. Ovitz will be the macro-thinker and facilitator, Drabinsky says, while Furman and Maisel handle the finances. Livent, meanwhile, "is going to be as much or more Canadian than ever," he insists. "The head office stays here. And it's to our economic advantage to develop shows in Toronto." Bob Fosse, Pal Joey, The Sweet Smell of Success and The Seussical are all being mounted in Canada, he adds. Right now, Livent's new creative director is heading for London, where he will oversee the opening of the West End production of Show Boat and think about organizing a London casting call, for the first time in three years. "Now that's appalling, that I've had so little time to stay on top of the talent in that country." He warms to the idea of spending long afternoons in the theatre talking with his directors about lighting and scenic design and costume changes.
But the more he gets going, the more Drabinsky starts to sound like the boss. "I am not walking away," he says. "I will run the things I want to run. I mean, what do you think? That you can bring in professional management from the outside and in one fell swoop they're going to understand this corporation in every respect?" This is when Drabinsky finally starts to sound happy. This is also the kind of talk that makes friends wonder how long the new managerial relationships will last. "Can you imagine Garth going to other executives and asking for financial approvals for his projects?" said one. "Frankly, I'll be very surprised if Garth is still there a year from now." Drabinsky would argue with this. Everyone else will just have to wait for Livent's next act.
Maclean's April 27, 1998