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Tight market, money add up to a typical year for indies

There seems little point to bemoan the fact that the American independent film movement is in a precarious state. This fabulous invalid has worn the badge of the beleaguered underdog since the dawn of movies. The players and companieschange, the pressing dilemmas differ from season to season but the bottom line remains surviving through the current crisis and waiting for the next one to rear its head.

Jeffrey Konvitz of Odyssey Entertainment characterizes the landscape as “Darwinian.””There are certainly far fewer domestic buyers of product. That added into a pie that includes a shrinking number of lenders and diminished ancillary growth makes for a terrain that is very unsteady.”

Additionally, it’s becoming ever increasingly difficult to define exactly where the line is that divides the majors and the indies. By dint of history and little else, MGM and Orion cling to the former status. Miramax, recently purchased by Walt Disney, has, for many, shed its renegade status. New Line, celebrating 25 years of sheer tenacity, is — depending on who bends your ear — either the most stable force in the independent arena or the next major.

The old yardstick that tagged everyone outside the “seven companies” as indies doesn’t seem quiteso clear cut anymore. Newcomers on the scene such as Savoy and Gramercy appear to straddle both worlds. The same can be said of companies that includeMorgan Creek, Largo and Cinergi.

Today’s independents are a broad base of companies — large, small and minuscule — and individuals with methods, philosophies and structures that do more to separate one from another than the arcane elements that they commonly share.

New Line, for most of its first quarter century, was one step away from bankruptcy. Now it is unquestionably the most solvent and diversified company among the non-majors. It distributes as many or more films as a studio, operates a specialized theatrical division, a growing video label, an expanding foreign-sales operation and sundry other related divisions.

The only other outfit with the history and diversity of New Line is the Samuel Goldwyn Co. It has found a comfortable base from which to expand or draw in as the vicitudes of the marketplace demand.

There are wanabees like Tri-Mark, sales agents with and without production funding, distribution outlets, maverick producers who play in all arenas, foreign companies whose product has a keen appreciation for the U.S. market and myriad others to confuse the issue. But the big picture does appear to have common elements.

“If you had to pinpoint how life has changed for independents in the past year a couple of things factor in across the board,” says a noted film packager. “Almost everyone has been impacted by Credit Lyonnais virtually abandoning the field and there’s been a palpable void since the Completion Bond Company went out of business. We all know others will step in to fill their void but until that happens there’s a lot of heavy breathing going on.”

There’s general agreement that films are not being made because they cannot get a completion bond. But no one is quite sure what projects might be stalled–certainly anything with a high budget save the handful of films fueled by a major star.

“The failure of CBC and the dilemma of the bonding business is multi-fold,” says Tom Garvin, who has served as a sales rep for many foreign films. “People forgot that films had to be bonded for unanticipated factors like weather or transportation. Instead, it became to be perceived as budget insurance — specifically, something to hedge against overruns.”

As Garvin and others note, it became a game of hide and seek in which producers attempted to mask savings in one area while spending in others. Bond companies became the “investor of last resort,” or the involuntary investor.

But that business is rapidly changing, which is a relief to most. As attorney Michael Adler observes, competition in this narrow arena sent premiums spiralling downward with the companies having virtually no margin of profit.

“It was like the merchant who lost a dollar a unit but made up for the loss with volume,” he says.

German-based producer Bernd Eichenger, who’s currently making “House of the Spirits” with Glenn Close, Jeremy Irons and Antonio Banderas, insists its a trap to rely on a single method of doing business rather than adapting to current market realities. He’s scaled back to an operation that’s run on a picture-by-picture basis.

“The market for pictures is shrinking,” says Eichenger. “Nonetheless there’s always a need for strong, high-concept event pictures. That requires quality and that means higher budgets generally. It’s a very frightening, high-risk strategy that can only be somewhat relieved by pre-sales.”

He notes that one of the great ironies of recent time was the success of “The Crying Game.” Before its producer, Palace Pictures, could reap the rewards of its success, the company was bankrupt and out of business.

It’s perhaps this radical juxtaposition that has resulted in no noticeable positive impact for indies, according to producer Edward Pressman. Yet, he notes that the most conspicuous indie successes of recent note like “The Crying Game” and “Orlando” were financed off-shore. U.S.-based producers have tended to go for either home runs or base hits.

The latter type of success has now been severely cut short by the retrenchment of major video outlets, including Columbia/TriStar and Live Home Video, that pre-bought rights to films with budgets in the $ 1 million-to-$ 3 million range.

“It’s the maturation of the video industry which has had the most significant impact on companies like ours,” says Seth Willenson of IRS Media, whose recent efforts have included “One False Move” and “Gas, Food, Lodging.”

“Basically, that area has plateaued after years of dynamic growth and it no longer can absorb unlimited numbers of fundable titles,” adds Willenson. “Video does not rely on the success or failure of individual movies. It is a totally different business than theatrical exhibition.”

It’s an observation that is echoed by Joni Sighvattson, a principle of Polygram-owned Propaganda Pictures. She notes that while the major titles dominate the video sales and rental arena, a major percentage of the business centers on genre pictures of many stripes. The trick for independents is finding a project that can navigate through the waters dominated by the majors.

Willenson puts it more bluntly. He says indies have to realize that without ancillaries they cannot survive. His strategy has been to conceptualize their product as art films theatrically and commercial movies in the ancillaries. It requires two different campaigns, with the theatrical essentially fueling and adding the eventual value derived from other venues.

Sydney Levine, whose Film Finders provides a comprehensive service of indie production activity, notes that patterns, methods and genres of films have changed almost routinely every six to 18 months. “The ability to survive every marketplace fluctuation just seems to get more and more difficult,” she observes.

While she says there are always films being made by new talents as a calling card for more ambitious ventures, the current climate has spawned some new wrinkles in an old game. She notes that an increasing number of American independents appear to be casting name European talent to attract foreign pre-sales and using that money to secure more potent domestic marquee names.

On a pure business level, smaller companies, says Levine, are either eliminating the use of a foreign sales agent, or bringing them in only after they have secured several major territories. She reflects that it is indeed a shrinking market and that relationships and co-venturing appears to be one avenue which provides greater stability.

Adler adds that the indie bugbear remains the majors. The Hollywood studios by dint of location and a relative commonality of purpose have been able to consolidate in every significant revenue-producing area. The independents have few shared concerns apart from a need to survive.

“The stranglehold of the majors is almost imprudent,” says Adler. “Individually and collectively they have the money to advertise and market their pictures properly. Indies, even significant European companies, just don’t seem to have the wherewithal and have never been able to work together.

“I’ve told clients that it’s all very well and good to have the money to produce a picture that has the budget and allure to draw top talent. But at the end of the day, they still have to go to the majors for U.S.

distribution and cede ultimate control. If a consortium of European companies ever got together to distribute in the States, it could seriously change the landscape of exhibition and production.”

Caitlin Buchman, whose Film Strategies company works as a facilitator between companies, says most of her current work involves bringing together European and U.S. entities. “There’s a surprising naievity among many foreign producers which is hard to define.

There’s a perception of the American cinema as Hollywood and it’s a very slow process to educate people about the options they have in terms of talent, financing and co-venturing.”

Bridging that gap is part of the philosophy behind Odyssey. Konvitz says a great deal of what he is doing is bringing major players into the indie field. It’s been a difficult process, he says, because most of them have never put films together in other than a studio method.

“On ‘1492,’ recalls Konvitz, “wewere actually recommended by the banks. It was a very expensive, very complex financing package because the current situation makes it virtually impossible to secure true equity for such a large undertaking.”

Among the things employed by Odyssey was identifying trapped currencies that could be used from certain territories. Konvitz views the co-production route as an area that has been overlooked in recent time and, while it can be time consuming, provides an enormous potential for new production revenue.

A common refrain among indies is a need and desire for diversification. No one has been taking a business as usual attitude.

Roger Burledge of Trimark says his company is “always in an expansive mode.” In the past year that has meant everything from increasing its activities domestically and foreign in video, acquiring new partners on a project-by-project basis and stepping into the interactive arena.

“We had been fueled by genre titles but that will eventually limit you,” says Burledge. “So it just makes sense to get into developing your own product or to get into business with someone with a developed screenplay. Despite all the difficulties one encounters with access and financing there’s always that final hurdle, which is the product.”

Ruth Vitale, senior VP of acquisitions at New Line, says her job has evolved to a point that if she’s buying a new film, she’s not doing her job. More likely Vitale will acquire a film in script form. In a rare instance she has acquired remake rights to a completed film but stresses this is an area dominated by the majors.

New Line’s production chief,Michael De Luca, says the company remains largely driven by gut instinct and filmmakers. “I think the main difference between us and a major is the way we engage in market research. Its not something we do to decide what films to make because we’ve committed to something by that point. What we want to know is how to best capitalize on what we have.”

Rolf Mittweg, who runs New Line’s foreign division, adds that while the company always has an eye for films with attractive international elements, it’s not bound by the process. His experience has been that few films will work in all 15 major territories. The goal is to get maximum mileage whether you have an audience in one or a dozen countries.

In addition to a shrinking market, Garvin adds the recent development of a strong U.S. dollar. He points to the lira and mark, which have devalued in the past year, and how that has virtually eliminated pre-buys of any product that is not cast driven.

“It’s a situation that hurts the end user,” says Garvin. “Sales agents have had to scale back or readjust to keep them alive. You have to do it even if it puts a serious dent in your pocket book.”

For mavericks — a trait almost endemic to indies — Pressman puts it all in perspective when he says everything boils down to “what movies do you want to make and how do you finance them.”

“Those projects driven by a passion, any passion, are why we are in business, ” according to Pressman.

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