Even as Alliance Atlantis’ Bon Cop, Bad Cop closes in on Quebec box-office history, the distrib’s corporate woes are providing even more compelling drama.

Every day seems to bring a new twist in the current battle raging between AA’s Motion Picture Distribution and departed execs Victory Loewy, Patrice Théroux and Paul Laberge – and more subplots than a Robert Altman movie. But amidst all the allegations, rumors and speculation, one thing seems abundantly clear – AA should have sold its 51% stake in MPD while the going was good.

That AA has remained in the film distribution game this long is a surprise. Last year it announced that it was looking to sell this part of its business, looking toward the future primarily as a broadcaster of 13 specialty channels. Company honchos Michael MacMillan and Phyllis Yaffe had long predicted that the specialty market would continue to grow, and they were right. The CRTC recently reported that revenues for pay and specialty channels rose to $2.2 million in 2005, a 6.3% hike over 2004. And no doubt the success of international franchise phenom CSI, the worldwide revenues for which AA splits with CBS, has altered the company’s focus.

The latest broadcasting buzz has the company eyeing the conventional TV space, which it could enter by purchasing some or all of the half-dozen stations Bell Globemedia is offering to sell off to appease regulators in its proposed takeover of CHUM Ltd. A far more grandiose theory has AA making a play for CanWest Global.

But before any of this conceivably goes forward, AA has to deal with the mess that currently characterizes its film distribution arm – a mess largely of its own creation.

AA says it backed off its sale of MPD – the balance of which is held by the Movie Distribution Income Fund – because of uncertainty surrounding the fast-expanding multiplatform universe. True, broadcasters and film distributors aren’t yet seeing big money off the Internet and mobile devices, but who knows what lies ahead. It makes sense to own as much content as possible to supply these newer viewing devices.

This is all fine and good, except that cracks in the distrib’s foundation were already on the verge of becoming an earthquake.

Tensions between MPD chair Loewy – who, with buddy Robert Lantos started it all in 1972 with the launch of Vivafilm, today AA’s highly successful Quebec distribution arm – and AA upper management was so obvious that it was even addressed in MDIF’s annual report last year. The document basically acknowledges occasional philosophical differences between the two parties, and warns that, in the future, these could lead to Mr. Loewy’s resignation. And MPD would have been well aware that such an action would only be calamitous for itself, as it is widely understood that U.S. studio New Line Cinema (the Lord of the Rings trilogy, Snakes on a Plane) would be able to terminate its lucrative output deal with MPD were he to leave. And Loewy’s relationships with other major suppliers made him indeed the key man.

So how could MPD expect to properly protect itself and its shareholders with this disaster waiting to happen?

And, sure enough, it did come to pass, after MPD fired president and CEO Théroux and general counsel Laberge for allegedly deceiving the board and ‘advancing business activities for personal gain.’ When informed of the board’s dismissal of his colleagues and allies – a decision made without his involvement – Loewy stormed out, and with him, who knows how much potential MPD business.

We haven’t seen the last of Victor Loewy. MPD obtained a court injunction to block him temporarily from starting a rival firm, while an arbitrator decides whether the ex-chair should adhere to MPD’s one-year non-compete clause. However that plays out, Loewy will likely start a new distribution company, and he could very well lure away both staff and suppliers from his former employer.

While this is the current scenario, a recent story in The Globe and Mail revealed that in February 2005, the Ontario Teachers Pension Plan offered to buy AA’s stake in MPD for around $12 for each of its ordinary units, and about $9 for its subordinate units. AA reportedly did not even give the offer much thought. Meanwhile, more recently, the U.K.’s Marwyn Investments announced its intention to acquire 100% of MPD for $10 to $10.50 per unit, hinging on a number of factors, including the continuation of major output deals. MPD angered shareholders and analysts amid speculation that Marwyn had approached it with an offer earlier than MPD was willing to acknowledge. As of Aug. 30, shares of MDIF were down to $6.91.

Meanwhile, the industry awaits New Line’s decision about the future direction of its output deal.

MPD missed the boat at least once before on a good opportunity to sell. It would be wise to not do so again, but depending on what New Line decides, its chances of getting what would have been an attractive price one year ago have been seriously undermined, and AA’s own lack of foresight to blame. For a company that has previously demonstrated such prescience, it is a rare fumble.

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This issue of Playback sees the departure of stalwart staff writer Dustin Dinoff to pursue other interests. Dustin has done an admirable job in returning to the Playback fold and filling in for the past year in a big way. Best of luck, DD.

Also, Playback welcomes Marise Strauss as our new staff writer. Marise is no stranger to us, having contributed freelance stories for the past five years. Marise joins us full-time after five years with Broadcast News.