When Harvey met Mickey

The Weinstein brothers, renowned for their cut-and-thrust style of producing films, have turned Mira

Harvey Weinstein has reached a moment of choice. He and his brother Bob, co-chairmen of Miramax, have been renegotiating their contract with Walt Disney Company, which expires in September 2005. It is nearly a year away and they have already been in talks for several months - but then, there's a lot to discuss.

And a lot at stake. Disney has owned Miramax since the early 1990s, but it was Harvey and Bob who built it from the ground up. Starting out in the 1970s as concert promoters in Buffalo, New York, the brothers worked their way into the film business by buying cheap foreign films and recutting and distributing them in the US market, as they did with The Secret Policeman's Ball in 1981.

Although the Weinsteins found both critical and commercial success with the release in 1989 of Steven Soderbergh's Sex, Lies and Videotape - bought for $1m, it grossed $25m - their business model was based on the law of large numbers: purchase and release enough films, and the large profits from the few hits would, with any luck, compensate for the small losses on many flops.

But this was never a purely mercenary operation. Harvey, the more voluble and high-profile of the pair, is known as a lover of film - he tells interviewers that his epiphany came at the age of 14 when he watched Francois Truffaut's Les Quatre Cents Coups. And although he has earned the nickname "Harvey Scissorhands" for his willingness to cut large amounts of footage from the films he acquires or develops, he has always insisted that this is to ensure the film gets as much market exposure as possible. "I'm not cutting for fun," he told the journalist Ken Auletta for a profile in the New Yorker in 2002. "I'm cutting for the shit to work. All my life I served one master: the film. I love movies."

Harvey has also, however, cultivated a reputation for ruthlessness, megalomania and rage. His explosions are legendary in the industry - he once put a New York Observer reporter in a headlock while throwing him out of a party - and they are presented for public consumption in Down and Dirty Pictures, a new book on the independent film industry in the 1990s by Peter Biskind, the author of Easy Riders, Raging Bulls. As Biskind relates, Harvey blasted the award-winning theatre and film director Julie Taymor after a disagreement over a test screening of her movie Frida. "You are the most arrogant person I have ever met," he screamed. Turning to Taymor's partner, the film composer Elliot Goldenthal, he then bellowed: "I don't like the look on your face. Why don't you defend your wife, so I can beat the shit out of you?"

In 1993 Disney, seeking entry into the world of independent cinema that Miramax was coming to dominate, bought out its partners for $60m. Armed with a stable Disney-provided budget, the Weinsteins soon sailed the company into deeper waters. No longer just acquirers and distributors, they began to produce films of their own. Bob's Dimension Films, a division of Miramax, concentrated on highly profitable teen and horror films, while Harvey began funding larger projects and supporting breakthrough directors such as Quentin Tarantino, Robert Rodriguez and Gus Van Sant. Oscars started to roll in.

Miramax's budgets for movie development steadily grew. No longer was Harvey content with $2m purchases. He wanted to produce big pictures - $80m films such as last year's Cold Mountain. "Harvey didn't want to be just Harvey Weinstein, he wanted to be Louis B Mayer," the former Disney motion pictures executive Chris McGurk told Biskind. At the same time, Miramax's acquisition activities shrivelled away: only three films were purchased in 2003. Harvey was making much bigger bets on a far smaller slate of films, and because risk was no longer spread widely, each film had to be less risky. To many critics, Harvey had turned Miramax from a distributor of edgy, independent cinema into a romantic-comedy-releasing, risk-averse "mini-major".

And because many bets still failed to pay off, the finances weakened. While Dimension continued to pour profits into Disney's coffers, Miramax's entrepreneurial quirks came under scrutiny. According to Biskind, the company lacked standard managerial skills: millions of dollars in staff time were wasted while Harvey and Bob sat indecisively on issues, or argued with each other. Disney was particularly concerned about Miramax's accounting practices. Bill Mechanic, then head of international video for Disney, told Biskind that, in 1994, he had to call Bob up and say: "Bob, you're now part of a public corporation. It's actually a federal offence to report incorrect information, an SEC violation."

Worse, Harvey's relationship with Disney's chief executive, Michael Eisner, has steadily worsened. Eisner was apparently furious when, in 1998, Harvey launched Talk magazine with Tina Brown, the former editor of the New Yorker, without his approval (the magazine folded in 2002). He has intervened to prevent Harvey from releasing potentially controversial films such as Dogma (1999) from the director Kevin Smith - "If one person does not go to Disneyland because of this movie, that will be one person too many," Eisner told Harvey - and more recently Fahrenheit 9/11, which Eisner forced him to distribute via Lions Gate Entertainment. Weinstein once huffed to Variety magazine that "Michael Eisner can't make me do anything". But it has long been clear that he can, and does.

Eisner has announced his retirement, but this is not until September 2006, long after the Weinsteins' contract will have been renewed or cancelled. So Harvey and Bob are mulling over their options. They could leave Disney, but that would mean leaving behind Miramax and its 500-film library - according to Biskind, Eisner told McGurk: "As long as I'm around, we're never selling that company." They could split up: Bob and Dimension Films would stay with Disney, while Harvey would leave to start something new. But Harvey would probably have a difficult time attracting investors without Dimension's more predictable cash flow to backstop his riskier slate of quality films.

Or they could stay with Disney. That is not a soft option, either, because Disney is bargaining hard. Not only does it want to pay the brothers less, according to reports, but it also wants to impose tighter controls on Miramax's $700m budget. Miramax claims to be profitable. Yet in June this year, the Associated Press quoted Walt Disney Co's president, Robert Iger, as saying that "they're not taking into account standard overhead, distribution fees, bonuses that we pay Bob and Harvey. Nor are they applying current accounting rules." Whatever the case, Disney's proposed changes would return Miramax to buying or making smaller films, some of which would win Oscars, it hopes - and many of which would make profits.

What Miramax can't do is grow bigger. With his power trips and manipulativeness, Harvey has alienated a swathe of the film-making community. And because Miramax is no longer the only game in town for independent directors and producers - the other big studios have opened indie divisions of their own - it is becoming harder to attract talent back to make second films. At the same time, Miramax's acquisitions and development spree in the 1990s helped push up prices, both for actors and for film rights. Growing bigger gets ever more expensive, and Miramax is probably too ill-disciplined to handle the risk. According to Variety, the company "prematurely exhausted much of its annual production and acquisitions budget" by early this summer, and it has subsequently laid off 25 per cent of its staff in two recent rounds. In 1998, 30 former employees even sued Miramax for unpaid overtime wages. As Paul Webster, formerly head of production at Miramax, said to Biskind: "Harvey doesn't care about budgets - until he needs to care, and by then it's too late."

The former US president Bill Clinton, who knows Harvey, told the New Yorker that "there's something there that planted a deep yearning in him that would let him define the work of his life, at least in part, by how much he got done how quick". Harvey Weinstein is indeed a man in a hurry. The trouble is, he's also a man with few places left to go.

Peter Biskind's new book, Down and Dirty Pictures: Miramax, Sundance and the rise of independent film, is published by Bloomsbury (£18.99). Michael Moore's Fahrenheit 9/11 is now available on DVD

Ian Garrick Mason is a freelance journalist in Toronto. He also writes for the San Francisco Chronicle and the Boston Globe