Cash-strapped micros channel alternative rev streams

Flexibility crucial to keeping up with market

Despite escalating marketing costs for specialty pics, the smaller distribs are in fact making a business out of keeping costs low and picking through the wide array of films passed over by the larger indies, many of which have turned their attention to in-house production and star vehicles.

With patience and low-cost marketing plays, companies such as IFC Films, IDP, Lot 47 Films, First Look Media, Manhattan Pictures, Strand, ThinkFilm, Magnolia, Cowboy Pictures, Arrow Releasing, Wellspring, Zeitgeist, Urbanworld, Kino Intl. and Artistic License are finding their niche and profit margins.

Some of these companies have as few as two releases a year and are still managing to fit the bills. What is their key to survival?

Knowing that the theatrical release is the most necessary and risky part of their business plan, the micros have established other revenue streams. These include buying vid libraries, creating inhouse vid and DVD labels, entering into the arthouse exhibition business and exploring digital exhibition.

Some of the companies also benefit from joint marketing and distribution efforts, as in the case of IDP, the joint venture of Fireworks Pictures, Goldwyn Films and Stratosphere. Others, such as Cablevision-owned IFC Films, have the advantage of synergy: a pic can be cross-promoted on the congloms’ Independent Film Channel or Bravo Networks.

But many reps for micro shingles say it all starts with the film and knowing just what you can afford to pay for it.

“You can’t overpay for a film,” says Kino’s Don Krim, who expects to take the controversial “The Piano Teacher” to crest $1 million in the coming weeks, off of 25 prints. “And you certainly can’t go crazy with p&a. You need to monitor how a film opens.”

Cowboy Pictures prexy John Vanco says, “More and more of our business model is outside of the theatrical arena,” noting the advantages of the revenue streams from the company’s recent purchase of the classic Janus Films library.

Reinvention a necessity

“We’re definitely thinking of ways to reinvent what we do,” says MJ Peckos, president of First Look Pictures, which released Oscar-nominated pic “Elling.” “You need to be flexible and quick on your feet, and to respond to what the market is telling you.”

Sande Zeig of Artistic License says her company’s key to survival is offering producers service deals in which no upfront money is paid, and “in this economy, going back to playing artfilms in cinematheques and museums, which is a strategy we always used in the past.”

The micros learn that they can’t swing the bat for the biggest upside. At festivals, their business model requires that if they like a film they wait to see whether the larger companies pass on it. But it all starts with the film.

“The indie film is a business of idiosyncrasies, a business of the exceptions to the rules,” said Eamonn Bowles, prexy of Magnolia. “I think when people start to systematize that it’s counterproductive to what people go to films for. The key to success is 85% the film itself.”

Adds Greg Williams, CEO of Lot 47: “It’s a game of patience for the smaller guys like us. You’re going to see a film like ‘Tadpole’ go to someone else — and it might be something that you really want to do, but it’s a completely different kind of game when you have the mini-majors bidding. Their economics are completely different than ours are.”

But while the micros can’t justify large upfront fees, they specialize in carefully monitoring grosses and knowing when to expand a film or increase the p&a spend. “You need to figure out how not to buy large ads in the New York Times,” says Williams, whose company is among the specialty shingles that have taken to placing ads on the popular personals Web site Nerve.com, and to co-hosting parties with Nerve.

Mark Urman, who runs distribution for ThinkFilm, says, “It’s no secret that you can do a bang-up job for hundreds of thousands of dollars. Our films are publicity and buzz driven, not driven by money. … Marketing is not just about spending, it’s about building an image for a movie. If you have the good fortune to have a Jodie Foster in one of your movies, which we did, it gets you the David Letterman show and it costs me an airline ticket.”

First Look has started its own vid and DVD division, while increasing its number of releases, including Cannes pickup “Don’t Tempt Me,” starring Penelope Cruz. Wellspring does inhouse international and domestic TV licensing, vid and DVD distribution and is also in the vid direct-response business. In addition, the company has a 500-plus title library that includes most of the films of Rainer Werner Fassbinder and Francois Truffaut.

The latest trend among the micros is to buy and open its own theaters. Madstone Films has yet to release its first film, “Rhinoceros Eyes,” but it has already launched its theater chain, with venues in Denver; Cleveland; Albuquerque, N.M.; and Raleigh, N.C.; already operational and another eight theaters planned by year’s end. And Madstone recently absorbed New Yorker Films.

Launched last fall, Magnolia Pictures has opened theaters in Dallas, Denver and Boulder, while its first releases have quietly reached arthouse theaters with considerable success. Company’s first two releases are “Late Marriage,” which is expected to gross over $1 million, and “Read My Lips,” which was the highest grossing arthouse screen in Gotham on its opening weekend.

Ira Deutchman, president of Emerging Pictures, hopes other micros will look toward exhibition of the digital variety. Eyeing venues in museums, performing arts centers and other under-utilized auditoriums around the country that have their own existing marketing systems, Deutchman sees digital exhibition as one of the most economical ways for micros to get their films to a wider audiences.

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