Specialty sector gravitates back to core values

The independent film universe isn’t collapsing; it’s just that the planets are realigning once again.

To be sure, the last year has been “very turbulent,” as one top exec puts it politely, or “a killing ground,” as another more bluntly describes it: Time Warner shuttered Picturehouse and Warner Independent, Paramount scaled back its Vantage division, and boutique distributor ThinkFilm faced a paralyzing cash crunch and lost its topper Mark Urman (who will now head distribution at Senator). Adding insult to injury, 2008 has not produced a single underdog smash hit to show the suits and the public that nonstudio pictures still have staying power.

But corporate expectations and public perceptions aren’t necessarily appropriate to the specialized sector, some executives suggest.

“We should stop setting our sights to compete with the blockbusters,” says Chris McGurk, CEO of fledgling distrib Overture Films.

Indeed, many execs cite a certain company’s extravagant ways as cause for the retrenchment. “To make movies with budgets that were two- or threefold what the sector was previously making and to spend on marketing two- or threefold what the sector was previously spending, it’s not surprising that doesn’t result in profit,” one exec says. “It was a little bit out of sync.”

Others blame the generous amounts of equity that flooded the market with product, a lackluster acquisition landscape, sales agents’ excessive asking prices, skyrocketing P&A expenses, flattening DVD sales and ever-wider-release studio juggernauts that eat up screens.

Whatever the causes, the business appears to be getting back to reality, and insiders say this is for the overall benefit of the industry. Today’s players pride themselves on business plans that are “efficient, cost-effective and streamlined,” as Rob Friedman, co-chairman and CEO of Summit Entertainment, notes.

“As long as we stay within our model, the ground is very fertile,” maintains Joe Drake, president of Lionsgate Motion Picture Group, citing the inherent opportunities with fewer indie competitors and with big studios continuing to focus on tentpoles.

Drake says Lionsgate also is taking advantage of the recent cutbacks elsewhere to refocus its own energies and aggressively go after freed-up talent. “Creative people are looking for new places to do their business now, and we’re very actively expanding our reach into the creative community,” he says.

Upside of downsizing

With fewer players, the release calendar also will eventually loosen up, and when it does, Fox Searchlight’s Steve Gilula says it will be a much-needed readjustment. “It reduces some of the pressure in terms of spending money to be visible and will be easier for the public to absorb.”

Still, Focus Features co-prexy James Schamus worries about the sudden absence left by his shuttered rivals. “It’s not like, ‘Wow, all my competitors are gone.’ It’s like, ‘Wow, there’s less input into the culture.’ If I was going out with a specialty film on Sept. 12, think about it: I have nothing to trailer on all summer long. They’re not going to theaters. And once people get out of the habit, you have to work hard to get them back. For me, I like a pulse. If I’m competing against corpses, I have to start checking my own pulse pretty quick.”

That said, the studio retreat from the sector has created openings for many films: A number of genre titles via Lionsgate, in particular, have picked up some of the bigger spoils; Picturehouse scored reasonably well with “Kit Kittredge: An American Girl” and “Mongol”; Overture earned a tidy profit on “The Visitor”; and Sony Classics has kept the German-language “The Counterfeiters” alive for more than 25 weeks.

Sony Pictures Classics’ Michael Barker refuses to buy the claim that “the day of the extended run is long past. It’s true that this may not be of interest to those companies only looking for the instant home runs. But independent film must adapt to an age that allows for many different distribution models, both old and new.”

New players on deck

And as quickly as old companies have exited the sector, new companies are stepping up to the plate. CBS Films is ramping up, ready to produce and release four to six movies a year. Vivendi has announced it’s in the U.S. theatrical releasing business. On the “indier” end of the spectrum, one of the summer’s sleepers has been the $3 million-plus word of mouth platform success of “Tell No One,” a French-language thriller, distributed by previously unheard-of Chicago-based outfit Music Box Films.

“We saw an opportunity,” says Music Box’s Bill Schopf. “The beauty of independent film is that it’s not about famous actors and multimillion-dollar marketing budgets. It’s about films that connect to the audience.”

Similarly out of left field, Roadside Attractions’ for-hire release of Tarsem’s “The Fall” earned a solid $2.2 million after more than 14 weeks in release, despite mediocre reviews. In a telling sign of the shifting mediascape, Roadside’s Eric D’Arbeloff explains: “Bloggers triumphed over mainstream critics. The Ain’t It Cool News crowd really helped put it on the map.”

While most execs still don’t see Web streaming and downloading as financially appreciable, many are optimistic about its future. “That’s going to happen, and it’ll keep us even,” says Overture’s McGurk. Many also take comfort in the new revenues of VOD and the fact that DVD sales aren’t dropping (only leveling off), as well as positive signs in the growth of Blu-ray.

Picturehouse topper Bob Berney, soon to be out of a job, is particularly revved up about the future of the business. “I see the correction as a huge opportunity to rethink how you do everything,” he says, “and not be tied into the old ways of thinking and get ahead of the curve to try something new.”

The indie business, meanwhile, anxiously awaits to find out what new things Berney will try.

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