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‘South Park’ Creators to Start Company, Important Studios

Andrew Ross Sorkin and Amy Chozick
Monday, 14 Jan 2013 | 12:45 AM ET
From left, Robert Lopez, Matt Stone and Trey Parker.
Joan Marcus
From left, Robert Lopez, Matt Stone and Trey Parker.

The creators of "South Park" are branching out beyond the underpants business.

Taking after the Gnomes on the animated series who ardently practice American capitalism, Trey Parker and Matt Stone have wooed investors and raised money to form their own production studio, which they plan to announce on Monday.

The new company is to be called Important Studios and hopes to be just that. With an estimated value of $300 million built on revenue from "South Park," now in its 16th season on Comedy Central, and the Broadway megahit "The Book of Mormon," the studio will have the power and money to approve television, movie and theater projects, including a big-screen version of "The Book of Mormon."

On Friday, Mr. Parker and Mr. Stone were putting together the final news release to announce their studio. They settled on this quip: "Having worked with several different studios over the years, we came to realize that our favorite people in the world are ourselves."

The pair will join a short line of Hollywood players who have formed their own studios as a way to gain control over the creative, production and distribution process.

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Merv Griffin created a television empire that he parlayed into real estate and other ventures. Dick Clark created Dick Clark Productions, which continued after his death last year. In 2006, the "American Idol" host Ryan Seacrest created Ryan Seacrest Productions, which produces reality shows including "Keeping Up With the Kardashians" and related spinoffs.

Lately, those independent studios have become ripe for acquisition as media conglomerates look to expand their library of intellectual property and consumer products. In October, Disney said it would pay $4.05 billion in cash and stock for Lucasfilm, the production studio created by George Lucas, and the company that produced "Star Wars" and its lineup of lucrative sequels and prequels.

Mr. Stone initially said he hoped Steven Spielberg's DreamWorks or Mr. Lucas's Lucasfilm could serve as a model for Important Studios, then paused for a moment. "In some ways it's a stupid comparison because they are gargantuan," he said. "We want to be a smaller, more humble version of that."

He continued: "If DreamWorks is Walmart, we are over here knitting sweaters."

The "South Park" creators have made millions and attracted both fans and detractors in satirizing everything from Christmas (celebrating the holiday with singing fecal matter) to Islamist extremism (depicting Muhammad in a bear suit) and race relations (naming one of the only black characters on the series Token).

Important Studios will incorporate revenue from "South Park" and "The Book of Mormon," as well as revenue from future projects. "The Book of Mormon," one of the highest-grossing Broadway musicals in recent years, received nine Tony Awards in 2011 and has grossed more than $200 million.

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That amount continues to grow because the New York production makes $1.6 million a week, according to the producers. A touring version of the show makes about $1.6 million a week, and another production in Chicago grosses $1.5 million a week. And the show is about to go into production in London.

Mr. Stone and Mr. Parker, who created the musical, are the largest shareholders in "The Book of Mormon," followed by the film producer Scott Rudin and others. Among the first projects that Important Studios is likely to develop is a movie version of the musical.

Mr. Stone said he and his partner had been considering forming an independent studio for almost two years. "At first we thought we'd get some money from a hedge fund or a Russian oligarch or something," Mr. Stone said, seemingly half-joking.

Instead, they teamed with a nascent Hollywood oligarch. Through their relationship with Ariel Z. Emanuel at the talent agency William Morris Endeavor Entertainment, they met Joseph Ravitch. Mr. Ravitch heads the Raine Group, a boutique merchant bank that focuses on entertainment, digital media and sports. (William Morris is an investor in Raine.)

Mr. Ravitch, a former Goldman Sachs banker who advised on the sale of Metro-Goldwyn-Mayer and helped the N.B.A. set up its business in China, hit it off with the two men. Raine invested about $60 million in Important Studios in exchange for a stake of just under 20 percent. Mr. Stone called Raine "big brains with big Rolodexes" and said "the money has some intellect with it."

For his part, Mr. Ravitch said, "Our bet is they will create some exciting stuff over the next five years, and this allows them the creative and financial flexibility to own their future."

Invariably, Mr. Ravitch and his investors will eventually want to sell their stake, raising the prospect that Important Studios could ultimately be sold to a larger media company like Viacom.

In the meantime, the deal speaks to a huge shift in power in the entertainment industry, thanks to the Internet and the changing ways people watch television. Creators like Mr. Stone and Mr. Parker have the opportunity to have a more direct relationship with their millions of fans, potentially bypassing the traditional Hollywood machinery to promote new projects and make old ones available.

"South Park," in particular, is an early pioneer of making television available through online streaming. Even as Viacom, which owns Comedy Central, filed a lawsuit against Google over the unauthorized posting of clips of its shows on YouTube, factions within the company pushed to make episodes of "South Park" available free almost immediately after their initial broadcast.

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In a meeting in 2007 on online piracy, Erik Flannigan, executive vice president for digital media at the Viacom Entertainment Group, typed "South Park" into Google on a giant screen in a conference room. The first several Web sites that came up offered illegal pirated versions of the series. That put the impetus on the media company to make "South Park" available online, which sharply cut down on piracy.

Its early and robust online presence gave "South Park" a more direct relationship with fans, which Mr. Stone said would help in introducing future projects.

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"Ten years ago, you needed that studio machinery to start cranking its marketing muscle," Mr. Stone said. "Now we could market a movie-size project. We bring a lot of heft."

Mr. Stone said he and Mr. Parker hoped to use the new money to allow them to "be more prolific with less struggle."

"We want to have a little control over our life," he explained. "We used to walk into a studio and try to become an employee. We're done with that. We are too grown up for that."

Important Studios' balance sheet will also probably give Mr. Stone and Mr. Parker more leverage when negotiating with other studios. Doug Herzog, president of the MTV Networks Entertainment Group, who brought "South Park" to Comedy Central, said of the new studio: "Bringing money to the table goes a long way. Money talks." He said the studio would allow the two men "to pursue their vision in as pure a way as possible. Matt and Trey with a lot of money. Be afraid."

Mr. Stone and Mr. Parker have had an unlikely journey to moguldom. After meeting at the University of Colorado in Boulder in 1992, the two introduced a stop-motion animated short called "The Spirit of Christmas" (known as "Jesus vs. Frosty"). A second Christmas-inspired short film, known as "Jesus vs. Santa," had its debut in 1995 and further built the team's cult following.

In 2007, Mr. Stone and Mr. Parker, with the help of their lawyer, Kevin Morris, cut a sweetheart deal with Comedy Central: a 50-50 joint venture on all revenue not related to television. That meant the two men have had a huge stake in the all-important digital rights to "South Park" as well as movies, soundtracks, "Oh my God! They Killed Kenny!" T-shirts and other merchandise. That deal was said to be worth $75 million for the two men. Mr. Stone and Mr. Parker are at work on a second "South Park" video game.

Despite their goofy characters and collaborations, Mr. Stone said, "We're closet responsible." Of course, even with a couple of hits under their belts, nothing is foolproof. "We could fall flat on our faces," he said.

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