Inside the STX Mess and the End of Sophie Watts’ Odd Couple Executive Pairing (Exclusive)

STX Entertainment, one of the few independent movie companies to launch in recent years, started with an unusual partnership between a blue-blood finance executive and a charismatic business ingénue from the British music scene, neither of whom had deep roots in Hollywood’s tricky landscape.

One of those partners, president Sophie Watts, suddenly exited this month amid a cloud of accusations that, according to multiple STX insiders, her CEO Robert Simonds was “obsessed” with his subordinate, attempted to control her movements and that the company failed to respond to her numerous complaints about his behavior.

No new president has been named to replace her, and Watts — who was billed as an STX co-founder in a company bio from 2016 — has been erased from the STX website and even on Wikipedia.

It’s a sudden and mysterious turn of events for a company that prided itself on seeking to shake up the way Hollywood does business.

Also Read: STX President Sophie Watts Exits Over CEO Robert Simonds' Alleged Harassment (Exclusive)

After declining to respond to TheWrap despite numerous requests, STX issued this statement on Wednesday:

“We direct you — once again — to the joint STX-Sophie Watts press release issued on January 16, 2018 and Sophie’s internal personal memo to employees.”

The statement, which can be found below in full, did not address the specific question of Simonds’ relationship with Watts but it did stress that STX regularly reviews and updates “our internal policies and procedures to protect and nurture our people.”

A spokesman declined to say whether any internal measures had been taken in response to the reports of harassment, and again referred reporters to the company’s written policy.

Also Read: STX Gets Investment From John Malone's Telecom Giant Liberty Global

Unusual Origins

Many things about the origins of STX are unusual: its investment from China and private equity fund TPG with a promise to spend $1 billion a year on content, its reliance on a network of close friends from Yale University, its ability to hire veteran Hollywood executives including former Universal chief Adam Fogelson, former Disney marketing head Oren Aviv and many others.

But nothing was more unusual than Simonds teaming up with the then-26-year-old Watts in 2012 to lead an entertainment company when her only experience was as a financier or executive producer on two 2011 documentaries, “Bully” and “Sarah Palin: You Betcha.”

From the start, many even inside STX remarked on the odd pairing. Simonds was a strait-laced, married, wealthy, middle-aged man with a finance background, taking as his partner a loud and proud lesbian 25 years his junior, whose friends were the likes of singer Ariana Grande and hipster DJ Samantha Ronson.

Watts had short, bleached blond hair, a British boarding school accent and an unmistakable personal style. “She’d wear the most expensive silk blouse but way too low cut, without a bra,” said one former employee. “She’s got that fashion model thing.”

Simonds, scion of a wealthy family from Arizona, had been a producer on broad comedies like Adam Sandler’s “Big Daddy” and “The Water Boy,” and Steve Martin’s family movie “Cheaper by the Dozen,” but he came from the finance world rather than the hands-on producing side of the business. (On the STX website he is billed as an “accomplished businessman.”)

His closest friends at Yale, Bill McGlashan and now-Treasury Secretary Steven Mnuchin, were also at the intersection of finance and entertainment. Watts came to Hollywood by way of London and the music business.

Her mother, Tessa, was an early member of Richard Branson’s team at Virgin Records and became a respected executive who helped to create legendary music videos like “Sledgehammer,” and to launch MTV in Europe. She died of cancer just months after STX was founded in March 2014.

Both McGlashan and Simonds found Watts unusually riveting as she spun a vision of creating a digital-age entertainment company making mid-budget movies at a time when Hollywood studios largely did not, the insider said. While Watts grew up in the fast lane of British pop music, that did not necessarily give her credibility in Hollywood.

Simonds, it seemed, was not deterred. He made her president and introduced her in public as a co-founder.

“She was focused and smart and could move him [Simonds] forward,” said another former employee. “She brought something to the table he didn’t have — a big personality and luster. Without her — we used to talk about it — [STX] was a bunch of old men. She was the only one who made it look forward-thinking.”

Still, optically the pairing was jarring to many, especially as the two were inseparable as co-executives — he the CEO, she the president — who shared an office and went everywhere together in style, including on private planes to China, where STX’s leading investors Tencent and Hony Capital were based.

In meetings, Simonds praised his young charge as an agent of change and a visionary executive to a point that made employees uncomfortable – particularly given her lack of experience.

“It became an unhealthy obsession of his,” said one of the former employees, using a term echoed by multiple people interviewed for this story. “It was common knowledge. “They had some kind of friendship that was peculiar to everybody, because it made no sense why she was being anointed the way she was.”

Also Read: 'Bad Moms' Studio STX Plans 2018 IPO on Hong Kong Stock Exchange

From left: Mila Kunis, Bob Simonds, Annie Mumolo, Kathryn Hahn and Sophie Watts attend the New York premiere of “Bad Moms” in 2016. (Photo: Getty Images)

Relationship Sours

Even as STX was rolling out its first theatrical releases, insiders say that Simonds and Watts maintained at best an arms-length role in the moviemaking process. (Watts didn’t present the studio’s slate at 2016’s high-profile CinemaCon presentation, but she did shmooze with “The Free State of Jones” star Matthew McConaughey at Mr. Chow atop the Caesar’s Palace afterward.)

“She was everybody’s boss. Technically we all reported to her. But we never talked to her. We didn’t intersect with her,” said one of the former employees. Movies were acquired and put into development, while Watts focused on other projects, such as tapping friends in the gay music community to start a short-lived digital platform.

Watts eventually hired former Yahoo marketing chief Kathy Savitt to run digital, thought she exited after just eight months, in May 2016.

Despite flops like “Free State of Jones,” the company scored its first big hit in summer 2016 with the comedy “Bad Moms” — which grossed $184 million worldwide on a modest $20 million budget — and also secured strategic investments from the Chinese technology giant Tencent and Hong Kong-based telecommunications firm PCCW.

In addition to its original capitalization, the company had access to about $700 million in new capital for a planned expansion and was worth roughly $1.5 billion.

But in the office, three former employees reported seeing heated exchanges between the two top executives. The relationship between Watts and Simonds began to visibly fray. Two insiders said that Watts was pushing back on Simonds’ unwelcome interest in her – such as asking to move to a separate office – and reported her displeasure to General Counsel Noah Fogelson, begging for protection.

“They’d be alternately lovey-dovey and hysterically angry at each other,” said one of the former employees. “It was a common sight to see Sophie in Noah Fogelson’s office broken apart in tears.”

Said another former employee: “I saw them fight a lot. I saw them clash.”

Said a third insider: “Watts called Noah Fogelson asking for help for years. We have glass walls and offices…. We heard her calls and their arguments and helped her when we could.”

Also Read: STX Entertainment Struggles With Flops, Executive Exits and a Shift in Strategy (Exclusive)

On Wednesday, TheWrap received the following statement from STX regarding this report, and its initial report on Jan. 16:

STX sent a statement announcing Watts’ departure 20 minutes after TheWrap published the initial report — and nearly 24 hours after it was contacted for comment.

As TheWrap previously reported, Watts complained repeatedly about the unwanted attention, and Simonds’ wife suspected a sexual relationship, calling the office to complain that the two were engaging in oral sex, according to two knowledgeable individuals.

In September 2016, an outside attorney was brought in who recommended that a bodyguard be present when the two were alone in the office, and that they not fly to Asia together without others present, one of the insiders said. STX attorney Bert Deixler said: “There was no bodyguard, there was no recommendation. That’s not true.”

By the fall of 2017, the conflict became more than Watts could handle. She ceased coming to the office, and in January her exit was attributed to her desire to start a new venture. When TheWrap reached Watts for the original report she merely stated, “I can’t comment on any of this.” Since then her cellphone has been out of service.

Also Read: Maya Rudolph to Reunite With Melissa McCarthy for 'Happytime Murders' at STX

The Future of STX

Even as Watts was withdrawing from STX, the company was moving forward on with its many media divisions, to varying degrees of success.

Last November’s “Bad Moms Christmas” grossed only $72 million domestically, and “Valerian and the City of a Thousand Planets” — which STX distributed for EuropaCorp — was a costly flop. The studio has multiple movies on deck for 2018, including “Gringo” starring David Oyelowo in March and “Adrift’ starring Shailene Woodley and Amy Schumer’s “I Feel Pretty,” both in June.

The company’s TV division has been mostly quiet, producing Katherine Heigl’s short-lived NBC “State of Affairs” and lining up a few cable projects, including Matthew Carnahan’s ’90s tech-boom drama “Valley of the Boom” at NatGeo.

Also showing little traction are the company’s digital and VR ventures, including the VT company Surreal it acquired in 2016 on the strength of interactive content for YouTube stars and live events like the 2016 Emmy Awards. According to two individuals familiar with the operation, it’s mostly thought of as a value add for big-name talent looking to diversify the platforms on which fans receive them. (The division took meetings with Mark Wahlberg to entice him to sign on for the STX thriller “Mile 22,” one insider recalled.)

Despite the spotty track record, John Malone’s Liberty Global invested an undisclosed amount of money last November and placed an executive on STX’s board. And recent reports have suggested that STX may be close to an initial public offering on the Hong Kong Stock exchange.

How the departure of Sophie Watts may bear on all this remains to be seen, and the company’s reticence to shed light on the situation, along with her excision from its history, leaves more questions than answers.

“I think she believed that [with] a married straight guy, she could use his affections to get what she wanted,” said one of the former employees of Watts’ relationship with Simonds. “And at a certain point probably, whatever temptations she led him into, I’m sure it got out of control.”

Matt Donnelly contributed to this report.

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STX President Sophie Watts Exits Over CEO Robert Simonds' Alleged Harassment (Exclusive)

STX Gets Investment From John Malone's Telecom Giant Liberty Global

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