The sudden departure of Victor Loewy has left Motion Picture Distribution on shaky ground, amid speculation that New Line Cinema’s lucrative output deal could leave with him, and uncertainty regarding MPD’s European interests.

Loewy left the chairmanship of Alliance Atlantis Communications’ MPD late last month, reportedly after a spat with the board of directors following the firings of CEO Patrice Théroux and Paul Laberge, the distrib’s general counsel. His exit puts a cloud over AAC’s deal with New Line because of a ‘key man’ clause in their agreement.

In its lone statement on the matter, AAC concedes that an unnamed partnership – presumably New Line – is jeopardized by Loewy’s leaving, saying the deal ‘may be terminated at the supplier’s option following Mr. Loewy’s departure from the business. Management intends to actively work with that supplier to ensure continuity of the relationship.’

According to Ben Mogil, an analyst with privately held Toronto research and investment banking firm Westwind Partners, New Line is within its rights to abandon MPD, a loss that would cost AAC millions.

Loewy is also said to have strong relationships with other important MPD output partners, including The Weinstein Company.

‘If the New Line deal goes away… there is a good chance Alliance Atlantis may not be receiving its full dividends [this year],’ says Mogil. ‘People are not realizing how tenuous the situation is, because both parties have something to hold over the other. Loewy is holding over them the fact that New Line is very loyal to him, and [AAC] is holding over him an employment contract.’

MPD claims Loewy is bound by a non-compete rule for one year, but that could change, says Mogil, if Loewy argues that his departure was constructive dismissal – essentially that he was forced out.

A report issued by Westwind on July 27 also warns about the ‘stability’ of AAC’s European assets, as distributors are reportedly reluctant to offer titles to MPD’s European sisters Aurum in Spain and Momentum in the U.K. because of the current turmoil. Increasing competition from Lionsgate Entertainment’s growing Euro operation isn’t helping MPD, either.

But the marquee issue remains New Line, which has generated big money for AAC with titles including the Lord of the Rings trilogy, which garnered in the neighborhood of $50 million per picture.

‘The near-term risk for Motion Picture Distribution is that New Line goes somewhere else, like its parent, Time Warner,’ says Mogil. ‘The larger risk is that New Line ends up going to a company controlled by Loewy.’

The industry awaits Loewy’s next move. His old friend Robert Lantos – with whom he founded Vivafilm, now AAC’s Quebec distribution arm, and Alliance Communications – owns half of distrib ThinkFilm. Adding further intrigue are the persistent rumors that ThinkFilm is for sale, a notion not refuted by the distrib’s head, Jeff Sackman.

When reached at his office and asked if his company is going into play, Sackman said only, ‘Everything is for sale.’

While some speculate whether Loewy and Lantos would reunite at Think or create a new company using New Line releases as a launch pad, one industry insider sees a more likely scenario as Loewy and Théroux founding a new company. Mogil suggests that a reunion of the Vivafilmers – either inside or out of ThinkFilm – is unlikely.

‘Generally speaking, I think Victor wants to do more distribution and Robert is a producer at heart,’ says Mogil.

Calls to Serendipity Point Films, Lantos’ prodco, were not returned.

Another scenario has Loewy putting together an investment group and buying a devalued MPD. Loewy reportedly was looking for backers when AAC put MPD up for sale last year.

After the announcement of Loewy’s departure, AAC’s Movie Distribution Income Fund dove to $6.30 from about $8.50, and AAC stock dipped nearly a dollar to $34.45. Westwind has since lowered its projected target price for the income fund from $7.50 to $6, citing the New Line situation and the issues in Europe. The income fund units were trading at $5.30 as of Aug. 1.

New Line declined to comment on the matter. It has time to figure out its next move while the issues surrounding Loewy’s non-compete clause are dealt with. Barring the termination of their relationship, its output deal with MPD is good until 2008.

Friction said to exist between Loewy and AAC apparently increased when MPD was spun off as an income trust in 2003. Reports that AAC had been looking to sell its 51% ownership stake in MPD cooled off in the spring as the company said it was examining what effects new media and wireless could have on the industry.

‘We are currently reviewing the strategic importance of the Motion Picture Distribution business and as promised, we will report back when this review has been concluded,’ said Phyllis Yaffe, AAC’s CEO, in the statement.

As an indication of AAC’s main focus these days, the release goes on to tout previously announced European VOD deals for AAC’s hit franchise, CSI.

A spokesperson for Alliance Atlantis told Playback that the company is having a ‘quiet period’ and not speaking to the press about the MPD issue in the near term.

Meanwhile, former Famous Players boss John Bailey has been named interim CEO of MPD. Also a former senior exec at Paramount Pictures, his close relationships with suppliers make him a strong candidate as Théroux’s fulltime replacement. David Lazzarato, former vice chairman of the board of MPD and AAC exec VP and CFO, has taken over as chair from Loewy. Jim Sherry, president of the company’s Canadian theatrical distribution division, is also considered to be in line to head the firm going forward. *

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