Category Archives: Distribution

Interdependence Day

"118/365/year2 marionette" courtesy of "Riot Jane" aka Bethany

There’s been quite a bit of up-selling of independent pictures in Hollywood.

With the box office success of Slumdog Millionaire, indie films are the new darlings of the movie business after decades of being relegated to the wilderness of limited theatrical distribution and even more limited marketing budgets.

Seeking to capture greater market share, the majors absorbed distributors like New Line Cinema and Miramax years ago.

However, the studios never expected that their independent labels might produce pictures that would threaten to cannibalize their tent-pole productions.

Patrick Goldstein recently wrote in The Big Picture blog about Slumdog’s surprise performance and its likely chances of getting an Academy Award here. [Ed. Note: Goldstein’s post has since been removed but can now be found here].

After all, the irony of all ironies is that after giving “Slumdog” the bum’s rush, Warner Bros. spent millions running a best picture campaign for “The Dark Knight,” the highest-grossing film of 2008, which still ended up being largely ignored by Oscar voters, who failed to give it a best picture, best director or even a best original screenplay nomination.

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The sad truth is that most studios today don’t have the patience, the artistic desire or the skilled manpower to release a film like “Slumdog.” My guess is that Warners, having unloaded all of its specialty divisions, both Picturehouse and WIP, eyed its little gem (made for a paltry $14 million) and said–even if we put in months of painstaking work, it’s at best a double (industry parlance for a modest hit). Like most studios today, Warners is an assembly line, built to swing for the fences, eager to make mega-hits like “The Dark Knight” or “Harry Potter,” which not only make far more money but feed the studio’s valuable ancillary markets.

Warners is not alone. 20th Century Fox has little in the way of artistic ambitions, preferring to hire no-name directors, leaving the Oscar game to its Searchlight subsidiary. The same goes for Disney, which is happy to let Pixar take home a best animated film statuette and let its tiny Miramax subsidiary, which spends a fraction of the money it did when Harvey Weinstein was at the helm, play in the awards sandbox. Even Sony, which used to avidly pursue awards, has largely given up, preferring to pursue more commercial goals.

It’s a great article and I was with Goldstein until he wrote:

Of this year’s best picture nominees, only two were made at major studios: “The Curious Case of Benjamin Button,” co-financed by Paramount and Warners, with Paramount distributing, and “Frost/Nixon,” which is distributed by Universal Pictures. “Slumdog,” along with “Milk” and “The Reader,” were financed outside the studio system or by specialty companies. More importantly, if you look at the recent best picture winners, they are invariably made by fiercely independent filmmakers who rarely take their cues from the studio system.

The Coen brothers, who directed last year’s winner, “No Country for Old Men,” are so leery of Hollywood that producer Scott Rudin had to cajole them into even coming to town for a few glad-handing events. The same goes for Martin Scorsese, a lifelong New Yorker who directed “The Departed,” the winner in 2007. Paul Haggis, who directed “Crash,” the 2006 winner, lives here, but as a director operates just as far away from the studio system as Scorsese or the Coens. Clint Eastwood, who won in 2005 with “Million Dollar Baby,” is the ultimate outsider, making his movies with the same crew in the same quiet fashion, brooking little interference from any studio suit.

While I am pleased to see that American (and global audiences) are demanding more sophisticated fare, I demurred in the comments section of my client, Jonathan Wakeham’s blog on film @ mastersvo.com. I wrote that:

Although it may be true that these pictures were independently financed, such financing was likely based on the producers having US theatrical distribution in place prior to principal photography. US theatrical distribution essentially drives the value of foreign distribution rights up increasing the likelihood of financing a project.

For all their laudable (and at times, edgy) works, Scorsese, Rudin, Eastwood and even Haggis are part of the Hollywood establishment. Their involvement in a project can easily (relatively speaking) drive financing of a project. Saying that these pictures are truly independently financed . . . is like calling a wolf in sheep’s clothing a ewe.

While Slumdog is not a litmus test of what truly independent projects can accomplish given meaningful theatrical distribution and a real marketing budget, it does prove that audiences have a big appetite for original stories in an industry that insists on being increasingly derivative and increasingly risk-adverse.

And that’s a pretty happy ending in itself.

Grass Roots Licensing Of Youtube Fare

My kids turned me on to “Charlie The Unicorn” shortly after it made its debut on youtube several years ago. Like most user generated content, Charlie, a flash animated 2D short, was made on a shoestring and the production values reflect that. Still, the work is smart, funny and quotable in the vein of Caddyshack and The Simpsons.

Charlie has been viewed over 35 million times worldwide and spawned a sequel.

Still, I wasn’t really intrigued until I visited Hot Topic, a teen-oriented store in my local mall, and spotted Charlie merchandise.

Plenty of talented (and not so talented) folks make shorts and distribute them on youtube. Far fewer generate millions of views or eyeballs; and only a handful of those successfully make the jump to ancillary exploitation.

Whether Charlie’s creator is making meaningful revenues isn’t really the point (nor is the aesthetic value of such a work).

Charlie’s transition from youtube short to retail merchandise represents nothing less than a sea change in the ability of a single content creator to leverage the internet and its potential access to millions to build a following and potentially profit from ancillary and derivative exploitation of content without the need or prohibitive expense of traditional distribution channels.

It means that self-distribution is now a meaningful and sustainable distribution alternative and will become even more so as internet based distribution (e.g., faster downloads) matures.

It means that traditional distributors better figure out how to stay relevant (hint: content marketing not content distribution) or get out of the way.

Just ask the people who (used to) work in the music business.

The Film Industry Is In A Pickle

Pickle Magazine, a film industry publication based in India about all things Bollywood and now, Hollywood, recently asked producer and sales agent, Ron Lavery to interview me and ten others for its American Film Market edition. After reading all eleven interviews, it’s clear that none of us agree on what the long term and short term effects will be on the film business given the latest seismic shocks (and those to come) to the overall global economy. Here’s my take:

Lavery: How do you think the current economic situation will effect AFM business this year?

Me: The entertainment business, like most businesses runs on credit. Although there appears to be a credit thaw . . . if the financial environment gets worse or even if it continues to improve at its current pace, the credit freeze will definitely affect AFM business this year. With limited access to the credit markets, buyers will be less inclined to close deals and will have limited buying power in the short term. Over the longer term though – and I’ve already witnessed it first hand – private equity will step in to do more traditional debt financing (albeit at a premium) if the banks are unable to do so.

Lavery: Do you foresee any mergers between distribution companies?

Me: Yes. Although mergers are already a part of the overall trend towards the consolidation of the business, the current economic climate will only accelerate this process.

Lavery : Are there any news ways of financing films on the horizon?

Me: Over the last decade and longer, people have been and continue to try to build a better film financing business model as the economics of the film business shift. This process will likely [continue to] shift at a tectonic pace especially if credit remains tight, the costs of production continue to rise and equity sources dry up. With the Internet as a potentially new distribution platform with untested sources of revenue based on either a subscription model (which won’t work) and advertising (which might work if the revenues become more meaningful), Internet exploitation windows may become a more significant revenue source for producers and distributors.

This is especially true now that that the technology exists to “geo-filter” the exploitation of films on the Internet on a territory by territory basis.

Electronic sell-through of video units of films may increase the value of minimum guarantees since the Internet will allow producers to have greater access to mass markets for their films during the video exploitation window. In some cases, producers may be able to directly distribute their films without an actual distributor just as artists have in the music business, thereby saving on costs by eliminating the middleman.

What is even more interesting is that short films are rising in commercial appeal.

Long relegated to film festivals, new distribution opportunities have developed on the Internet and on mobile phone and Ipod technologies for shorts. As a consequence, producing shorts are good for business since they have lower budgets and can now attract marquee talent who view internet exploitation as a cutting edge business opportunity that provides potentially great exposure with minimal effort.

Lavery: Will the economic crisis effect government subsidies and tax credits?

Me: With the drop in income here in the United States (and a corresponding drop in tax revenues), each locality is looking for new ways to attract revenues, jobs and new industry to each of the States but [they are also] forced to contend with a corresponding drop in tax revenues by virtue of providing the tax subsidy itself.

Meanwhile India, the Middle East, Eastern Europe and China will continue to be appealing places to produce films which might not provide tax credits per se but . . . increase the potential bang for the buck.

Lavery: Any thoughts on the enormous impact Indian film companies seem to be having on American film companies?

Me: While the current economic climate is adversely affecting the global economy, India is viewed by many in the entertainment business as a potential source of new financing as opposed to talent. The good news for Indian film companies is that if India is the source of financing, then there might be increased leverage to utilize Indian talent in American films.

The other factor is the increased reliance on foreign sales of American films which right now hovers around 60-65% of the budget of the typical mainstream American film. This in turn requires . . . increased reliance on foreign talent in an effort to increase the appeal to foreign audiences.

Lavery: Any thoughts on Indian financing opportunities like the recent Spielberg-DreamWorks deal?

Me: The Spielberg-Reliance deal is viewed by many as the high water mark of Indian investment in film. The good news is that other film funds do not and will not require market capitalization to this extent. I expect the formation of several Indian and Asian based funds with more modest capitalization ranging from US$35 million to US$80million in the near term provided economic conditions do not seriously deteriorate.

Box Office

The Coen Brother’s Burn After Reading starring George Clooney and Brad Pitt is an awful movie that, despite being awful has been critically acclaimed (for the most part; my opinion notwithstanding). The budget for the picture was $37 million and as of this writing, has already grossed over $57 million during its theatrical release. The picture stands to make substantially more when (and if) it goes into wider theatrical release internationally and through ancillary exploitation on video and pay/free TV.

This disconnect of a mediocre film doing well at the box office got me thinking of my UK client Fred Hogge’s post on his blog cinelogic about how box office success builds audience interest regardless of the merits of a particular motion picture. With respect to the interest in the latest Batman sequel, Fred said:

The Dark Knight, just won big. Sure, it helps that they opened on over 4000 screens, but people are excited to see it. The reports coming back from those that have are overwhelmingly positive. So more people will go. And this is regardless of all the side-bar hype, largely focused on the late Heath Ledger, his death having, sadly, been turned into a marketing tool.

I responded that:

The general public follows weekend B.O. performance like a Wall Street stock index for one simple reason. People like horse races and the weekend box office is just that. This isn’t about quality pictures; it’s about “who’s winning now.” B.O. stats used to be restricted to Variety and other trade publications. Now they’re found in virtually every major news source around the world (at least those in countries that distribute motion pictures from the West).

To be sure, more people will buy tickets to a movie based on a horse race mentality because they “heard” the movie was good (just based on the initial B.O.). The fact that the horse race might be a fiction or, to be more charitable, of limited use as a barometer of [sic] quality picture is largely irrelevant to most of them.

There really is no accounting for taste. Which is why bad movies with “bankable” stars are easier to finance and distribute than high quality, material-driven pictures with little or no recognized talent attached. Indeed, that why Beverly Hills Chihuahua was – as Variety put it – “top dog at the box office” this weekend.

Then again, it might be really, really good despite the bad reviews. I’ll have to see it and get back to ya on that.