Taming a bear market

Mifed mavens plan to ride out slump with big-budget or niche pix

LONDON — It’s a sign of just how bad things have become that a cheerless industrial park on the outskirts of Milan now feels right in tune with the mood of the indie film business.

In the boom times so recently departed, the drab concrete halls of the Fiera Di Milano seemed to contrast uncomfortably with the glamorous pretensions of the movies being sold within, and of the go-go companies selling them.

No wonder that for a few years, the tide turned toward the swankier environs of the London Screenings, where films could be shown in plush screening rooms and sold from ritzy hotel suites, and stars could be persuaded to rub shoulders with buyers at classy eateries.

But now penny-pinching pragmatism has replaced luxurious image-building as the order of the day. Intermedia, whose billion-dollar Neuer Markt flotation in May 2000 best symbolized the gold-rush years, was once one of London’s most profligate hosts. But with its stock price now down to a mere 1% of its high two years ago, the company is leading the charge back to Mifed, whose prosaic but efficient trading conditions have always been more to the taste of sales prexy Jere Hausfater.

“The trend at the London Screenings was to have some kind of grand, expensive lunch for everyone,” says Hugo Grumbar, formerly of Intermedia but now head of marketing at Capitol Films. “Intermedia used to throw a lot of money around, having lunches, but none of that converted into hard sales. It was just buyers coming over for a bit of a jolly, meeting the stars and having fun.”

Intermedia is one of many companies which have seen their flow of new product dry up, as the collapse in crazy Neuer Markt equity has been matched by the disappearance of the pre-sales business in several key European territories.

“Over the next few years, there are going to be far fewer films made,” says former Cobalt exec Peter Rogers, who recently headed back to Lakeshore Intl. as CEO. “There were films being supported that ultimately should never have been. If fewer, better films are made, then perhaps that’s for the best.”

Just about every mega-budget movie that was traded to foreign indies over the past couple of years, excluding the New Line slate, has been a flop — think “Ali,” “We Were Soldiers,” “K-Pax” or “The Mothman Prophecies.”

Budgets are shrinking across the board. What could be made a couple of years ago for $25 million must now be done for $12 million, or not at all. Films in the $25 million bracket that have fallen apart include “The Assumption of the Virgin” and “Edgardo Mortara.”

Neil Jordan’s “Borgia,” with a budget somewhere north of $50 million, is still theoretically scheduled to shoot in the spring, but its financing stubbornly refuses to get nailed down. Pic is still being shopped around by Initial Entertainment Group (now part of Intermedia), which stepped into the project after Myriad Pictures could not make the numbers add up at Cannes. But there’s little sign that IEG is faring any better.

“It’s a really expensive art movie, so it just won’t happen,” opines one rival sales agent. “Two years ago you could have done it, because there was crazy equity money about. Not now.”

“It’s been proven that the independent marketplace, with specific exceptions, has a hard time taking on very expensive product,” says David Linde, co-president of Focus Features. “There are fewer distributors about, and thus fewer that can pay the huge money.”

Consensus is that the business has polarized brutally around two types of surefire product — at one end, ruthlessly mainstream commercial propositions, typically with a star and a studio release in the U.S. And at the other, art or genre movies laser-targeted at an established niche audience, and budgeted to match.

“Yes, the market is tough for most projects, and it has forced all of us to be more selective,” says Joe Drake of Senator Intl. “It has narrowed the band of product that buyers are interested in, so the key is staying very, very, very close with your customers, and being sure what they want.”

As an example, Drake cites “The Boogyman,” the first script from Senator’s long-term deal with Sam Raimi to create horror franchises, which Drake is bringing to Mifed.

Mark Damon has survived through many ups and downs in the foreign sales business, but says it has never been this bad before. “This is exceptional. People say it’s cyclical, but I’m not sure the foreign market will ever come back. I’m told by lawyers and agents that independent production is down by as much as 70% since last year.”

The solution, he says, is to hunt down soft money in any country where it can be found. “In the good old days, you could get 70% from foreign sales, 50% from the U.S., cover your fees and be happy,” Damon says. “Now if you sell all territories — if — you might achieve 50%, and the domestic marketplace is more like 20%-25%, so you can cover the production cost from advances. You have to find some way of putting together soft money –German tax funds, British sale and leaseback deals, Canadian subsidies and the like.”

As a result, he says, “we are concentrating on two kinds of pictures. Those that cost under $8 million, with unique subject matter that can attract stars as passion projects. Or films over $25 million with really major stars that we can pre-sell.” Examples of the former include “11:14,” a thriller starring Hilary Swank, and “The United States of Leland,” starring Kevin Spacey. At the bigger budget end, Damon has “Red Lips, White Lips,” to be directed by “My Fat Greek Wedding” helmer Joel Zwick, with a $40 million budget, and “Higher,” directed by James Foley, closer to $50 million. But both of those depend entirely on nailing down big stars — “and if we don’t get them, we won’t make them.”

Fireworks Pictures prexy Daniel Diamond says his choice of projects has become much more “conservative.” Having previously backed quality low-budget dramas such as “American Rhapsody” and “The Believer,” he suggests that he would have to think twice before making such pics in today’s brutal market. “I have to do things that are a little bit more obvious, with a more clear marketing approach, a more clear genre sell,” he explains.

He cites his latest pic, “The Long Hello and Short Goodbye,” a heist pic produced by John Woo and Terence Chang. “I’ve been extremely cautious over the past 12 months, I didn’t greenlight a single movie because of the state of the market. But now I’m putting my wheels back into motion.”

He strikes a note of optimism. “In bear markets, there are more opportunities than in a bull market when the competition for projects is much stiffer. My choices will become more commercial, but I may also seize an opportunity because I’m the only one chasing it.”

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