Indies Show No Rush To Reinvent Carolco

The movie business loves a good sequel, but finding a follow-up to free-spending Carolco Pictures is proving a tall order.

Like mutant throw-offs of the late Jurassic period, megabudget films from ostentatious indies dominated the box office during the late ’80s. Spawned primarily by Carolco and its top exec, Mario Kassar, indie blockbusters such as “Rambo III,” “Total Recall,” “Terminator 2: Judgment Day” and “Cliffhanger” fed on behemoth budgets that could gag major studios.

Today, after straining its resources nearly to the breaking point for its currently lensing $80 million pirate epic, “Cutthroat Island” – and backing off at the last moment from the $100 million Schwarzenegger epic “Crusade” – Carolco sits exhausted on the sidelines. Gone after its 1993 restructuring is the company’s private jet, gone the luxury yacht at Cannes where fabulous parties raged, and gone are many of Carolco’s staff, including most recently its chief financial officer, William Shpall.

Today’s high-profile indies, including Andy Vajna’s Cinergi, Arnon Milchan’s New Regency, James Cameron’s Lightstorm and others, are preaching relative austerity in the face of spiraling budgets and a changing marketplace. Although such independents will continue to make big-budget pictures, all are taking a more cautious approach. None has a corporate jet.

“It’s a changing of the guard,” says Lindsley Parsons Jr., head of International Film Guarantors, the completion bond company that specializes in blockbuster deals.

Maybe not. Kassar’s track record and staying power may keep him in the game. And even if Carolco should disappear, the worldwide audience appetite for “event” movies will still be fed as long as major studios can lay out the big bucks.

But the odds against any independent film company making successful big movies are, well, big.

One big obstacle is the limit on how much money can be raised from foreign pre-sales. That may change with the opening of new markets in Asia and Eastern Europe. But for the moment Carolco may have hit the wall somewhere between “T2” (just over $60 million in pre-sales, sources say) and “Cliffhanger” (about $40 million).

But even before the problem of raising big money comes the problem of putting big indie movies together.

Epic scripts that attract top talent come with big price tags. Big stars want big paydays and are booked by big studios years in advance. The sizable and seasoned staff needed to conduct the business of large-scale filmmaking, akin to a military campaign, means bigger overhead than most indies can bear.

Pre-sales of foreign distribution rights are an arduous undertaking; collections are even more Herculean. Big bank loans require completion bonds, which are becoming more difficult to get in advance of a picture’s start date. Almost as a rule, big equity is needed to jump-start production until the bank loan falls into place.

Given the big problems, why would an independent company want to make a big-budget picture?

“It can be about maintaining relationships with stars,” says one producer with big-budget experience. Buying big talent is one way to raise the profile of a company, a gambit to become a serious Hollywood player, and one of the few weapons an indie can wield in the battle with majors for worldwide screens.

Another reason is that big-budget pictures attract an international audience, says Adrian Scrope of the Films Group, a banking consortium that has put together financing for Carolco’s “Cliffhanger,” “Stargate” and “Cutthroat Island,” as well as “The Crow” for Edward Pressman Films. He adds, “That is difficult to do with smaller, parochial pictures.”

Then there’s the machismo theory. “It can be about ego,” says another producer.

But is it about making money?

Theoretically, with big stars and an international audience, a big-budget film’s chances are quite good. The danger, of course, is the big budget disappointment, such as Warner Bros.’ recent “Wyatt Earp” or Columbia’s “The Last Action Hero.”

Studios have theme parks, rights libraries, TV arms and many other movies in release to cover their flops. But for indies, even success can have a downside in big-budget movie-making. “Terminator 2,” at a cost of around $100 million, grossed $520 million worldwide. Carolco would not comment and the figures are disputed, but sources say Carolco’s profit was between $45 million and $50 million. A 50% return may be sweet, but much sweeter still was the return for “T2’s” domestic distributor, TriStar, which walked away with $70 million on its $15 million investment.

Carolco made no money on “Cliffhanger,” which grossed $260 million worldwide. The indie put up one-third of the picture’s $60 million budget; TriStar put up half – and walked away with the proceeds of the film’s North American rights, including theatrical, home video and TV, plus many foreign territories including France, Germany, Australia, and New Zealand.

With “Cutthroat,” Carolco was forced to pay production expenses in cash for the first eight weeks of shooting by, among other emergency measures, taking advances on sales from its foreign investor/distributors. Although sources insist “Cutthroat” won’t be another “Cliffhanger” when it comes to the company’s bottom line, thanks to a better distribution deal with MGM, it remains to be seen whether the pirate pic, starring Geena Davis and Mathew Modine, has box office appeal.

The big-budget concept in itself is controversial in some sectors of the film industry. “It corrupts the dialogue,” says a veteran producer, arguing that top directors and stars have come to expect salary levels and budget expenditures beyond what can generally be afforded, even by most studios, let alone independent film companies.

Some argue that it is now more difficult to make pictures at the $40 million-$45 million level (considered mid-range) since the biggest stars and biggest directors are either booked, or staying available for, only the big-budget movies.

Opportunities still knock

Even so, big-budget veteran Peter Hoffman, head of Cinevisions, sees some opportunities ahead. “The growth of the international marketplace, particularly in Asia,” he says, will allow greater funding sources to emerge.

But who among today’s independent film companies is willing to step forward and take up where Carolco left off?

Milchan’s New Regency, though aligned with Warner Bros., can finance up to 80% of its pictures. It paid more than $6 million for the rights to John Grisham’s first novel, “A Time to Kill,” hoping to launch another “Pelican Brief.” But nothing in Milchan’s game plan suggests a willingness to engage in super-high-budget filmmaking.

Savoy guaranteed Stallone a $20 million payday, which could turn out to be the futuristic “Kilobyte,” and big-budget helmer John McTiernan is attached to direct “Without Remorse,” written by Tom Clancy, whose novels have been the basis of several big budget pix. But none of its present slate of films is budgeted over $25 million, with the possible exception of big-pic scribe Joe Eszterhas’ “Foreplay,” which won’t be ready until next year.

Director Cameron’s $100 million-plus “True Lies,” distributed domestically by Fox, was one of 1994’s big box office events, bringing in nearly $146 million at the domestic box office alone. His Lightstorm Entertainment could conceivably make a claim to the big-budget crown. But Cameron’s company has other plans, according to Lightstorm president Rae Sanchini.

“We’re really not looking to fill Carolco’s shoes,” says Sanchini. The company has output deals with several foreign partners, as well as Fox for domestic and some overseas territories. “Naturally, all of our partners are intent on getting that kind of picture from Jim, but we didn’t want to be limited to that. So we negotiated output deals for films at varying budgets.”

A dark horse candidate is the Edward R. Pressman Film Corp., best known for such quirky fare as “Bad Lieutenant,” “Reversal of Fortune” and “True Stories.”

Pressman’s “The Crow” and “Street Fighter” indicate a new direction for the company. Pressman said a $15 million infusion three years ago from the Japanese Ascii Corp. has enabled his company to go after bigger films, but only hand-in-hand with other companies.

Pressman developed “Judge Dredd,” the $80 million futuristic actioner starring Stallone, but the film is being produced in partnership with Cinergi.

“It’s ironic that our company is in that business now,” says Pressman, although he is quick to point out that one of his early films was “Conan the Barbarian,” starring Arnold Schwarzenegger, and shot on a $20 million budget.

Pressman vows, however, to continue with lower-budgeted pictures such as “City Hall,” starring Al Pacino, and a project with low-budget director Abel Ferrara.

Cinergy’s energy

Then there’s Cinergy Pictures, headed by Carol co co-founder Varna. Big-budget event movies from Cinergy this year include “Die Hard With a Vengeance,” an $80 million pic starring Bruce Willis that is targeted for the Memorial Day weekend. If “Die Hard” clicks, it could dominate the box office until the July 4 opening of Cinergy’s “Judge Dredd.” Then the $50 million Demi Moore starrer “The Scarlet Letter” arrives in the fall.

Like Carolco, Cinergi finances its pictures through pre-selling foreign distribution rights. Like Carolco, Cinergi is a publicly traded company, but unlike Carolco, Cinergi has its future before it – unless its big 1995 pictures turn out to be big bombs. But don’t count out Kassar just yet.

Industry observers say they would not be surprised to see Kassar re-emerge in the near future, esconced in a new company, perhaps producing some hot properties siphoned away from Carolco, such as “Manhattan Ghost Story” or “Spiderman.”

One final contender has already made its presence felt at Carolco’s fire sales: cash-rich French textile and media giant Chargeurs. Having bought “Showgirls” and “Lolita” from Carolco already, Chargeurs – with its close ties to Kassar as well as to Carolco creditor Credit Lyonnais, its distribution outlets in Europe and possible designs on MGM – may be the likeliest candidate yet to become Carolco redux.

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