Major alliances

Studios see value in ownership of indies

NEW YORK — The independent distributor is dead. Long live the studio classics division.

After watching Disney-owned Miramax Films, Time Warner’s Fine Line Features and Polygram’s Gramercy Pictures bring home the gold at this year’s Academy Awards, more than one studio decided that buying a specialized film company is a small price to pay for an Oscar.

Since then, Universal has acquired a majority interest in indie distrib October Films, MGM bought the assets of Orion and the Samuel Goldwyn Co. from John Kluge’s Metromedia, and Time Warner decided to take Fine Line parent New Line Cinema off the block.

Time Warner’s decision had more to do with a lack of bidders willing to pay its asking price for New Line (considered to be the original indie distributor) than with its desire to hold onto Fine Line’s arthouse franchise. Still, the $35 million grossed by “Shine” at the domestic box office and Geoffrey Rush’s best actor Oscar certainly didn’t hurt Fine Line’s stature within the Time Warner corporate family.

It’s not only the potential for Academy Award nominations that is luring studios into niche pics. Producing, acquiring and distributing specialized films gives them the opportunity to scout new talent and to reach new audiences.

Indie films also provide good bang for the producers’ buck. While the total gross of an arthouse film can be less than a studio pic takes in during its opening weekend, the return on investment can be greater because indie films are made on shoestring budgets. “There’s a huge profit margin in specialized films when things go right,” says Fine Line executive VP Jonathan Weisgal.

For a specialized film company, the benefits of hooking up with a studio are numerous. One of the biggest attractions is the ability to piggyback an international distribution system and meet the growing foreign appetite for American independent fare.

“Being at Fox gives me access to studio resources,” says Lindsay Law, president of Fox Searchlight. “I can make use of other Fox divisions like music, which helped get a great artist like Tom Petty for the ‘She’s the One’ soundtrack. I can get trailers for my films on studio releases, not just specialized pictures. I can also get trailers for my films on Fox Home Video releases.”

While studio honchos debate whether it’s better to buy (as Disney did with Miramax) or build (as New Line sprouted Fine Line), arthouse veterans say other factors will determine the success of the new generation of studio classics divisions.

“As long as studios remain passive bankers, it will work,” says Gramercy Pictures president Russell Schwartz. “If they start dictating product or passing along films that they don’t think are worthy of wide release, the whole thing will be over in two years.”

“If you try to create a miniature version of a studio with all the infrastructure, the costs will overwhelm the classics division,” says Amir Malin, who recently resigned as co-managing executive of October Films to join Live Entertainment as co-president.

Even before the Oscars led the mass media to herald the ascendancy of indie film, the studios were expanding their relationships with distributors and producers of arthouse fare.

During this year’s Sundance Film Festival, Sony Pictures Entertainment renewed its contract with its classics team of Michael Barker, Tom Bernard and Marcie Bloom, who previously worked together at Orion Classics and had been courted by Paramount to start a specialized film unit. Although the SPC triumvirate turned down the Paramount offer, that studio still is actively pursuing the formation of a specialty division.

Sundance has long been a hunting ground for arthouse distribs, but this year’s fest also saw studios emerging as active buyers. MGM/UA acquired Sundance’s most decorated film, Morgan J. Freeman’s “Hurricane,” while Paramount picked up Tony Vitale’s “Kiss Me, Guido” shortly after its Park City premiere.

While some question whether studios have the patience required to cultivate indie releases, others remember how Warner Bros. parlayed Michael Moore’s 1989 “Roger & Me” into one of the highest-grossing documentaries of all time.

Indie film guru John Pierson says MGM was motivated to buy “Hurricane,” which it will release under the name “Hurricane Streets,” because there was not enough product in the pipeline at sister studio UA.

Pierson speculates that Paramount’s purchase of “Kiss Me, Guido” was designed to build a relationship with its producer, Ira Deutchman, former prexy of Fine Line Features. Deutchman got his job at Fine Line after acting as a producer’s rep on Whit Stillman’s “Metropolitan,” which he sold to New Line.

Despite the presence of studios in the Sundance acquisitions derby, the specialized distribs did not walk away empty-handed. Miramax bought “The House of Yes,” starring Parker Posey as a woman obsessed with Jacqueline Kennedy Onassis, while Fox Searchlight acquired Miguel Arteta’s “Star Maps,” which has been touted as a “Midnight Cowboy” for the’90s.

The deals continued in the weeks after the fest as Sony Classics snagged “In the Company of Men,” Neil LaBute’s controversial look at corporate politics, and Cinepix Film Properties bought Jonathan Nossiter’s “Sunday,” which won the Sundance Grand Jury Prize.

More arthouse distribs are trying to get a jump on their rivals by securing titles earlier in the production cycle through pre-buys and co-financing deals. The exception to this trend appears to be Fine Line, where the pendulum has swung away from production and back to acquisitions.

Fine Line was an aggressive buyer at this year’s Cannes Film Festival, paying $10.5 million for North American rights to Woody Allen’s “Deconstructing Harry” and Barbara Kopple’s documentary about the European tour of Allen’s jazz band. Fine Line also nabbed Giuseppe Tornatore’s “The Legend of the Pianist on the Ocean” and Atom Egoyan’s “The Sweet Hereafter.”

With Universal’s acquisition of 51% of October and MGM’s purchase of Metromedia’s entertainment assets, the number of independently owned distribs of arthouse product has dwindled. MGM plans to release specialized films under both the Orion and Goldwyn banners at least through the end of the year, although it has laid off most of the Orion staff.

Ironically, some of the people who got pink slips were responsible for marketing and distributing Victor Nunez’ “Ulee’s Gold.” The Peter Fonda starrer has been a bright spot in an otherwise lackluster period for specialized films. “In the first few months of this year, no one’s movies seemed to be working,” notes Law.

Adds Tom Bernard of Sony Clasics: “Audiences are becoming more selective. Movies have to be edgier. So far this year, distributors haven’t been able to find the audience’s button.”

Arthouse distribs are confident the dry spell will be broken by films such as Miramax’s “Shall We Dance?” (which opened July 11) and “Mrs. Brown,” and Fox Searchlight’s “The Full Monty” and “The Ice Storm,” the latest film from “Sense and Sensibility” helmer Ang Lee.

There are also high hopes for Sony Classics’ “In the Company of Men” and “Ma Vie En Rose,” Fine Line’s “The Sweet Hereafter” (the Cannes Grand Prix winner), and Allen’s “Deconstructing Harry.” Gramercy’s big hope for this year is “The Big Lebowski,” the latest film by the “Fargo” team of Joel and Ethan Coen.

The first half of 1996 may have proved disappointing for most specialized film distribs, but not for CFP, whose star has been rising in the arthouse skies.

A Canadian-owned company with a U.S.-based distribution arm, CFP has been taking risks with edgier fare that its competitors have shied away from. It recently scored at the box office with Greg Mottola’s “The Daytrippers” and Peter Greenaway’s “The Pillow Book.”

“We’ve really been careful about when we release films,” said Adam Rogers, vice president of U.S. distribution. “We look for weekends where there isn’t much competition from other independents.”

As arthouse heavyweight Miramax has evolved from a niche-pic distributor to a full-fledged producer of both upscale and genre films, it has created a vacuum that some believe will be filled by a new generation of distribs.

“Miramax has become a studio. There is an opportunity for new companies to take the place of distributors who are being brought into the studio fold,” says James Schamus, co-founder of Gotham-based indie producer Good Machine.

With Miramax, Bob and Harvey Weinstein have created a model that other companies are trying to emulate. But the brothers have raised the stakes in the once-courtly arthouse biz by outbidding their competitors for acquisitions and outspending them on P&A. Their tenacity has allowed them to withstand periodic market lulls.

“This business will require real staying power on the part of the studios,” says Mark Gill, Miramax marketing prexy.

Still, Universal’s backing promises to give October the financial clout to give Miramax a run for its money. In a sign of its new aggressiveness, October already has raided Miramax’s executive suite by recruiting senior VP of motion pictures, music, new media and publishing Scott Greenstein — whose nickname was the “third Weinstein brother” — to replace Malin as co-managing director.

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