Specialty distribs exercise caution to stay on course in stormy climate

Artisan | Fine Line | Fox Searchlight | IFC Films | Lions Gate | Miramax | Par Classics | Screen Gems | Sony Pictures Classics | United Artists | Universal Focus | USA Films

ARTISAN ENTERTAINMENT

After spending several months looking for a buyer or investor, Artisan Entertainment in June confirmed that it was in talks to buy rival independent producer-distributor Lions Gate Entertainment Corp. in a deal valued at $100 million-$150 million.

The acquisition would give Artisan the public listing it has wanted since it announced last year a proposed $140 million stock flotation that was scotched this March due to a volatile financial market and several potential bidders for Artisan.

Company, however, is weathering the storm of several box office disappointments including “Blair Witch 2″ and “Center of the World,” layoffs, cutbacks and managerial turmoil in the wake of the exits of CEO Mark Curcio, production head Jon Shestack, acquisitions topper Jeremy Barber and marketing chief John Hegeman, as well as persistent rumors that Artisan prexy Bill Block is negotiating a departure.

A film production slowdown at the company has seen also Artisan go from six or more pics a year to little more than half that number, as acquisitions have outpaced productions in the company’s eight-12-pic annual pipeline.

“Productions require a major investment of capital and time,” says Artisan Entertainment CEO Amir Malin. “We are going to take more limited bets on the production side, which will mean we will produce three to five films a year and fill the rest of our slate with acquisitions and co-productions.”

Artisan does plan to greenlight “Dirty Dancing II” — a co-production with Miramax –and the Marvel Comics-inspired “Iron Fist.”

Artisan also recently signed a three-year nonexclusive pay-per-view and video-on-demand distribution deal with industry leader iN Demand, the first for an indie studio.

Commenting on the impact of DVD on the indie sector, Malin says the format is “one of the great windfalls of the specialized market because DVD audiences tend to be more sophisticated and urban-oriented.

“Take Darren Aronofsky’s ‘Requiem for a Dream’ for example. We sold over 200,000 units on DVD. The incremental revenue from DVD is a great boon for us all and can be a terrific complement to its theatrical release.”

Company continues to make significant revenue from its 6,700-title library, including “Dirty Dancing,” “The Terminator,” “Buena Vista Social Club,” “It’s a Wonderful Life,” “The Piano” and “The Last Emperor.”

The company’s slate includes Jon Favreau’s directorial debut, “Made,” starring Favreau and Vince Vaughn, which bowed in its first weekend on three screens with a three-day estimate of $118,500, and docu “startup.com,” which has grossed $1.12 million.

Upcoming releases include “Novocaine,” a Steve Martin, Helena Bonham Carter and Laura Dern starrer slated for release Sept. 14.

FINE LINE

Although a round of AOL Time Warner layoffs rocked Fine Line Features and sister company New Line Cinema earlier this year, the leaner company, headed by prexy Mark Ordesky, remains committed to its core business of producing and acquiring upscale commercial arthouse fare, made up of inhouse productions from scripts and acquisitions, for the specialized marketplace.

The company has seen recent success with Palme d’Or winner “Dancer in the Dark”; the Oscar-nominated “Before Night Falls,” directed by Julian Schnabel; and David Mamet’s “State and Main.”

Fine Line is currently enjoying success with the digitally-shot ensemble comedy-drama “The Anniversary Party,” starring and written and directed by Jennifer Jason Leigh and Alan Cumming. Pic has grossed over $2.7 million.

Fine Line’s upcoming slate includes “The Sleeping Dictionary,” starring Bob Hoskins, Brenda Blethyn and Jessica Alba; “Ripley’s Game,” with John Malkovich and Dougray Scott; “Hedwig and the Angry Inch,” directed by and starring John Cameron Mitchell; Werner Herzog’s “Invincible,” with Tim Roth; and Todd Solondz’s “Storytelling,” co-starring Selma Blair, John Goodman and Paul Giatti;and Michel Gondry’s “Human Nature,” with Patricia Arquette, Tim Robbins and Rhys Ifans.

“The independent business is an increasingly difficult business and is very theatrically driven,” says Ordesky. “The struggle is to maintain your commitment to true arthouse cinema made by auteurs and singular vision filmmakers and ask yourself the question, ‘Can I find a way to release projects I’m passionate about that makes sense businesswise and that have a chance to make a return?'”

Commenting on the possible further consolidation of the independent distribution sector with a possible Lions Gate-Artisan merger and the Lions Gate-Trimark union, Ordesky adds: “It’s unfortunate because it means filmmakers have potentially even less number of places to go. Even with the birth of new distribution companies like Newmarket, there is still a net decrease in the number of U.S. independent distributors which always makes things harder for all of us.”

FOX SEARCHLIGHT

Approximately 18 months after taking the helm as president of Fox Searchlight, Peter Rice has firmly established the specialty label’s identity of niche pics with its trademark specialty fare, and put in place a subunit helmed by the triumvirate of Rice; president of marketing Nancy Utley; and distribution prexy Stephen Gilula, founder of the Landmark Theater chain.

Searchlight is planning to double its production slate to 12 pics via a blend of productions and acquisitions, all with budgets targeted at less than $15 million.

The company has been buoyed by the recent box office showing of “Kingdom Come,” the $7 million production starring Whoopi Goldberg and LL Cool J that has earned $23 million domestically, the third-best take in Searchlight history, and “Sexy Beast” has received heaps of critical praise and brought in a healthy $3.4 million on nine screens in its first weekend.

” ‘Memento’ and ‘Croupier’ have paved the way and we’ve followed in their path with ‘Sexy Beast’ by managing to get the film off the ground without TV advertising, by screening the film a lot, gathering press support and using newspaper advertising and publicity the old-fashioned way. It’s encouraging to see that if a movie is strong you can accomplish good results at the box office without having to spend a lot of money,” says Utley.

Upcoming slate comprises four recent acquisitions — Sundance fest favorites “Super Troopers,” to open Nov. 30; “Waking Life,” from helmer Richard Linklater and bowing Oct. 19 in New York and L.A.; “The Deep End,” which will bow Aug. 8; and “One Hour Photo,” which will open at the end of the year in initially limited release.

Three greenlit pics for production this summer are “28 Days Later,” from director Danny Boyle (“The Beach”); the semi-autobiographical “East of Harlem” from Jim Sheridan (“My Left Foot”); and Denzel Washington’s directorial debut, “The Antwone Fisher Story.”

“I am interested in making original, distinctive stories told by world-class filmmakers,” explained Rice recently. “That’s my main goal for the company.”

IFC FILMS

While IFC has been operating with a lower profile, that may not last for long. Films like current release “Jump Tomorrow” and the upcoming “Together” have received rave reviews, while the company has high hopes for the upcoming “Business of Strangers,” doc “Go Tigers” and the erotic Spanish-language coming-of-age pic “Y Tu Mama Tambien.” All told, IFC plans to release 10-12 titles annually.

However, in the year since its launch, senior VP of marketing and distribution Bob Berney’s biggest success to date has come from the arthouse smash “Memento.”

Prior to accepting the IFC gig, Berney agreed to oversee the release of “Memento” for Newmarket Films — a job that turned out to be a moonlighting assignment when IFC tapped him for its post in September.

Although the double duty ensured that Berney was run ragged, it was all in the family: the first film from “Memento” helmer Christopher Nolan, the 1998 “Following,” was produced by IFC financing arm Next Wave Films.

Among the additions to the IFC Films staff have been Greg Forston as VP of sales (formerly of Palm Pictures), chief financial officer Rob Schwartz (formerly of USA Films) and director of acquisitions Sarah Lash (formerly of Lions Gate). Berney says that he expects to add another four or five people over the next 12 months.

That staff will report to Berney in Gotham, where IFC Films is in the process of relocating its operations in order to be closer to its parent company, the Independent Film Channel. (Berney reports to IFC Films president Jonathan Sehring, who also oversees IFC Prods. and Los Angeles-based Next Wave.)

Of course, IFC’s ultimate corporate parent is Cablevision, which owns properties such as hockey team the New York Rangers and Madison Square Garden — synergy in the making.

“Utilizing those is an important part of our business plan,” says Berney. “I think we could have a great, great niche.”

LIONS GATE FILMS

Nearly a year after Lions Gate Entertainment closed its deal to acquire Trimark Pictures, the Canadian company has seen the exits of Lions Gate Films prexy Jeff Sackman — a veteran from the days of Cinepix Film Properties — and Gotham-based feature president Mark Urman.

Recently, Lions Gate made a bid for Artisan Entertainment, one that wasn’t particularly well received. In addition to Lions Gate stock and the acquisition of Artisan debt, the company offered $50 million in cash — a figure 50% smaller than what Artisan’s board wanted.

But what of the films? Lions Gate will release about 21 this year, about five more than the ideal annual target . In the mix are arthouse titles and what Tom Ortenberg, president of Lions Gate Films Releasing, calls “commercial” releases — films with breakout potential that will hit more than 1,000 screens.

“Indies cannot live on a diet of arthouse alone,” Ortenberg says. “There’s a business (in pure arthouse) but I don’t think there’s a growth business. At Lions Gate, we perceive ourselves as a growth business.”

Toward that end, Lions Gate plans to make one moderately wide release every quarter, a number that eventually will be raised to one every two months. Among those titles are “O,” a controversial high school-set adaptation of “Othello” that Lions Gate acquired when Miramax declined to handle the film, and inhouse productions “The Wash,” starring Snoop Dogg, and “Frailty,” with Matthew McConaughey.

Arthouse fare includes two pickups from last year’s Toronto Intl. Film Festival: Stephen Frears’ “Liam,” and “Vulgar,” which was exec produced by Kevin Smith.

“Each risk should really be a very well-educated guess,” says Ortenberg. “In this business, you can’t afford to be wrong very often.”

MIRAMAX FILMS

Miramax Films breathed new life into the spying game this year, turning in a stellar year at the box office thus far thanks to a pair of releases: Dimension Films hit Robert Rodriguez’s “Spy Kids,” which has grossed over $100 million, and Miramax/Universal’s “Bridget Jones’s Diary” (produced by Working Title Films), with both at one time jostling for the top box office slot.

In spite of a wave of dismissive reviews and the cynicism of many, Lasse Hallstrom’s “Chocolat” was slow and steady at the B.O. — racking up $71 million in the U.S. and approaching $150 million worldwide.

Meanwhile, productionwise, Miramax has been focused on its upcoming Martin Scorsese epic, “Gangs of New York,” which it will release domestically in December. Pic also led to a five-year extension of Scorsese’s production deal at Miramax.

Company also announced a first-look deal with its smaller New York neighbor Good Machine — contributing well over $1 million in overhead and discretionary funds per year to develop product that Miramax will get to see before other distribs.

Company also recently saw the exiting of its top publicity exec, Marcy Granata, president of publicity and corporate communications, in early July to be temporarily replaced by acting department head Janet Hill, who is based in L.A. Granata, a 20-year publicity veteran, had been with the company since 1994 and exited to devote more time to her family.

Miramax is still gauging the opening few weeks of “Scary Movie 2,” with over $9.5 million as of July 16, directed by Keenen Ivory Wayans. Foreign-language release “With a Friend Like Harry” has grossing approximately $4 million. Company is also seeing success with arthouse release “The Closet.”

Regardless of its stellar year, Mark Gill, L.A. president of Miramax, maintains that one of the hardest battles all independent companies face is the release of too many movies.

“Five years ago, 26 movies were released between May 1 and Memorial Day, in the last four years that number has grown to more than 70, which means many of those tiny, little films don’t last more than a week.”

PARAMOUNT CLASSICS

Paramount Classics, the specialty arm of Paramount Pictures, continues its cautious policy of betting on approximately six releases a year, largely geared to older, sophisticated audiences.

Lifted by the continued success of Kenneth Lonergan’s Oscar-nominated “You Can Count on Me,” which has grossed $9.2 million, company also hit box office disaster with “Company Man” and saw disappointing results from Bruce Beresford’s “Bride of the Wind,” though the film was still a financial success for the company as it was a straight distribution deal, with Par Classics working like a rent-a-system distribber for the title.

Company, unlike other indies, continues to rely mainly on acquisitions, an increasingly aggressive field with rival companies like Fine Line Features, Lions Gate, Fox Searchlight and Miramax all fighting for titles.

“Our films do not necessarily have to break box office records,” explains Par Classics co-prexy Ruth Vitale. “We are fiscally responsible and buy multiple territories on each film so we never get hurt and the filmmaker gets their movie shown.

“If we’re guilty of anything, it’s being too cautious,” Vitale explains on losing out to Newmarket Capital Group for distribution rights to “Memento.” “We thought on a good day it would do $12 million and it ended up doing $25 million.”

Upcoming releases include Edward Burns’ “The Sidewalks of New York,” skedded for release July 20; and the Karlovy Vary film festival opener “An American Rhapsody,” directed by Eva Gardos, and starring Nastassja Kinski and Tony Goldwyn; October opener “Focus,” based on the Arthur Miller, and novel starring William H. Macy, Laura Dern and Meatloaf; and Christine Lahti’s “My First Mister,” which opens Nov. 2.

Company is also betting heavily on Barbet Schroeder’s bold and controversial work “Our Lady of the Assassins,” to bow Sept. 7.

“It is Spanish-language, shot on high-definition video, is controversial and scary, and definitely pushes the envelope,” enthuses the outfit’s co-prexy David Dinerstein.

“We saw it, loved it and said why not buy it if we can make a deal good enough. David can market it, and when you can follow your gut like that, it makes it worth it,” sums up Vitale.

SCREEN GEMS

Two-plus years after Sony launched its specialty label, Screen Gems seems to have finally found its groove.

A genre division for low- to midbudget movies with a target audience, Screen Gems utilizes strategic marketing for wide releases. In other words, they pick genre projects with a pedigree and put the company’s low overhead to work in hopes of maximizing returns.

Most recently, the company oversaw the releases of Guy Ritchie’s “Snatch” and two low-budget inhouse productions: urban romantic comedy “The Brothers” and horror film “The Forsaken.” All told, the trio earned more than $64 million domestically — not bad for a label with just 12 employees, most of whom serve double duty in the ancillary-driven Columbia TriStar Motion Picture Group.

While Screen Gems is backed by a major studio that also handles the label’s distribution tasks, the company’s production and marketing activities are handled by a small, tight team. Exec VP of acquisitions and co-productions Clint Culpepper is company’s topper and works in concert with Valerie Van Galder, exec VP of marketing.

Van Galder’s staff is small: vice prexy of marketing Marc Weinstock and veep of publicity Tracy McArdle. Stacy Kolker was recently upped to senior VP of production, while Benedict Carver is on the front lines as vice president of acquisitions.

SONY PICTURES CLASSICS

Sony Pictures Classics, headed by co-prexies Tom Bernard, Michael Barker and Marcie Bloom, celebrated its 10th anniversary this year. Having established a reputation for an unqualified love for films and respect for filmmakers, they continue their long-term game plan: support new work from filmmakers around the world and be cost-effective in terms of release and spending patterns.

Company had the biggest hit of its 10-year history with the unqualified success of Ang Lee’s “Crouching Tiger, Hidden Dragon”– which earned four Oscars and a domestic gross of nearly $125 million.

But Bernard points out that those seeking to understand how “Crouching Tiger” changed the indie marketplace for foreign-language films are missing the point of the film.

“It was a love story, a fairy tale, it empowered women and understood the adolescent feelings of love and growing up and used the martial arts genre as a vehicle to tell this larger-than-life fairy tale. These successes have certainly seen a boom for all the sellers in Hong Kong.”

With the revving up of production by the studios over the last few months, Bernard says it’s difficult for a lot of indie films to get financing because of the lack of availability of actors; financing for such movies is dependent on cast to drive ancillary market sales.

As a result, Bernard suggests that the upcoming fall festival chiefs — Telluride, Toronto and Montreal — are finding it difficult to maintain the high quality of product seen in years past.

As with all the other indies, Bernard says the most difficult hurdle facing independent distribution companies is cost.

“The most significant financial hurdle is the price of the Los Angeles Times and New York Times print ads. For indie films, the main place you advertise is in the newspaper and smaller indie companies cannot afford to do the bulk rate and so are being forced out of the marketplace and not getting public attention for their movies. The overspending of the mini-majors dabbling in the art market has really hurt them.”

However, Bernard continues, one of the brightest spots in the indie scene over the last six months has been the return of Paul Richardson to Landmark Theaters.

“I think that is going to have a major impact on the marketplace in terms of more successful pictures,” says Bernard. “Adding marketing to exhibition is the essential formula for indie films to survive.”

SPC is currently seeing box office success with Tom Tykwer’s follow-up to “Run Lola Run,” “The Princess and the Warrior,” which has grossed $3.2 million worldwide, and the moving family drama “The Road Home,” from Zhang Yimou.

Upcoming releases include “Brother,” Takeshi Kitano’s first English-language pic, starring Omar Epps and opening July 20; the Polish brothers’ “Jackpot,” with Anthony Edwards and Darryl Hannah, and opening Sept. 14; “Grateful Dawg,” about the last days of Jerry Garcia, bowing in mid-October; the New York Film Festival opener, “Va Savoir,” from Jacques Rivette; and one of its Cannes pickups, the Belgian film “Pauline et Paulette,” coming in December.

On next year’s sked are the skateboard movie “Dogtown and Z-Boys,” Andie MacDowell starrer “Crush,” and the financing and producing of John Sayles’ “The Sunshine State,” co-starring Angela Bassett, Edie Falco, Timothy Hutton and Mary Steenburgen.

UNITED ARTISTS

For a company that doesn’t have a leader, United Artists is awfully busy.

At the moment, MGM’s specialty distribution division has a staff of two: Sara Rose, who serves as head of acquisitions, and Danny Rosette, who handles business affairs. (MGM long ago consolidated UA’s development and production team into MGM Pictures under Michael Nathanson.)

When UA’s de facto chiefs Larry Gleason and Gerry Rich — president of MGM’s distribution and marketing, respectively — were deposed earlier this summer, they were replaced with Bob Levin, who serves as MGM’s president worldwide theatrical marketing and distribution. That left UA without leadership.

In a sense, however, that state is nothing new for UA, which has been without an official head ever since former prexy Lindsay Doran stepped down in June 1999 to take a production deal at MGM — the same time that MGM repositioned UA as the studio’s specialized division.

At the moment, UA may be too busy to worry about it. Terry Zwigoff’s “Ghost World” debuted in limited release July 20 and will go wide Aug. 3. Also upcoming are the American Zoetrope horror flick “Jeepers Creepers” and the Bosnian title “No Man’s Land,” which Rose acquired at Cannes in May.

However, that free-floating state won’t last for long: MGM chairman and CEO Chris McGurk is currently seeking a topper to oversee the label. Among the top candidates are October Films founder Bingham Ray, who’s already in business with UA via his current gig as president of Crossroads Films, which has a deal with the company.

Whoever gets the top post will be charged with wrangling titles from UA’s impressive collection of production companies, which serves as the studio’s ad-hoc development team. In addition to the Zoetrope arrangement — a three-year distribution relationship in which Francis Ford Coppola has greenlight authority over a total of 10 films, all under $10 million — UA has development deals with Michael Stipe and Sandy Stern’s Self Timer, John Penotti and Fisher Stevens’ GreeneStreet, Michael Winterbottom’s Revolution Films and Scott Kalvert’s Fireball.

UNIVERSAL FOCUS

Universal Focus, the specialty arm of Universal Pictures, was created in June 2000 to develop and distribute niche titles in a move marking the phasing-out of a distrib arrangement with USA Films, which distributed the studio’s specialty films, essentially Polygram Filmed Entertainment titles, after Seagram’s acquisition of the company.

Division, headed by ex-Gramercy Pictures staffer Claudia Gray as exec veep and exec VP Mark Kristol, company saw the exit last month of Paul Hardart, senior vice president of Universal Focus to pursue other business interests. Hardart joined the division in September 1999 to supervise all of business, financial and operational functions.

Some titles acquired through Universal Pictures Intl. also will be handled through Universal Focus, as will films from Catch 23 Prods., an indie company created by Denver-based financier-philanthropist Robert Sturm and headed by prexy Jeremy Barber that has a first-look distribution deal with the division.

Game plan for Universal Focus is to release six to 10 titles a year.

Outfit kicked off with the release of “Billy Elliot,” which has grossed approximately $22 million in the U.S., making it the second-highest grossing limited release title of 2000. Aside from “Elliot,” company had major disappointments with “The Caveman’s Valentine,” “Loving Jezebel” and “Pavilion of Women.”

Currently on release through Universal Focus is Working Title’s English period drama “The Man Who Cried,” starring Christina Ricci, Johnny Depp, Cate Blanchett and John Turturro, and written and directed by Sally Potter.

Company’s upcoming slate includes the recent pickup of David Lynch’s “Mulholland Drive,” and the French box office hit “Brotherhood of the Wolf.”

USA FILMS

Two-year-old USA Films hit box office gold this year with Steven Soderbergh’s Oscar-winning “Traffic,” which has grossed approximately $124 million to date.

Meanwhile, USA Films is undergoing a restructuring of its senior management ranks after the recent exit of prexy Russell Schwartz to New Line to head its domestic marketing operations.

Meanwhile, USA Films N.Y.-based production prexy Donna Gigliotti is in talks to exit and segue into a first-look production deal with the company, and is likely to be replaced by DreamWorks exec veep Glenn Williamson, in negotiations for the spot with USA Films. Company is also interviewing replacements for Schwartz.

USA Films chairman Scott Greenstein says that in spite of the management changes the company remains committed to the film business, its strategy of releasing an eclectic slate of pictures from interesting filmmakers and the willingness to take creative risks.

“In spite of all the rumors and the kicking of tires, people have found we are very sound as a company and plan to be in the film business for a while,” says Greenstein.

Greenstein pinpoints the “biggest problem all independents face is the multiple number of movies released each weekend and the enormous P&A spend that requires. You can still make good movies for a price but you can’t spend P&A as efficiently as you used to. You have to spend a little bit more now if you are going to compete traditionally.”

Aside from “Traffic,” company saw disappointing box office returns from “Series 7″ and modest success with its Cannes award winner, “In the Mood for Love.”

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