Tenacious toppers work to keep shingle profitable
Named after the mythological archer, Alcon Entertainment may not necessarily hit the highest B.O. targets, but, more often than not, it strikes the profitability bull’s-eye.
Founded in 1997 by Andrew Kosove and Broderick Johnson, who met at Princeton while studying economics in the early ’90s, Alcon was born out of luck and tenacity. The lucky part was a fortuitous meeting with FedEx tycoon Fred Smith, who agreed to bankroll their operation based on an extensive 220-page business plan. But it was their perseverance that kept the company going after a rocky start: Their debut picture, 1999 David Spade comedy “Lost & Found,” flopped, grossing just $6.5 million.
But their second film (and to date, their most profitable), “My Dog Skip,” a family film made for $7 million, turned things around for the duo, grossing $35 million and helping them land a 10-film worldwide distribution pact with Warner Bros. in 2000. They just signed a new put deal with the studio for 15 films over the next five years. In May, as part of a ramping-up period at Alcon, the company also closed a $550 million production and P&A facility, raised via CIT Bank, JPMorgan Chase & Co. and Lehman Bros., among others.
Kosove, Johnson and their backers credit their endurance — in the increasingly shaky world of nonstudio production — on their practical and prudent business sense and their ability to roll with the punches.
“The best thing that’s happened to us is that we’ve had to fight through bad times to get to the good times,” says Kosove. “We have a pretty good stick-to-itiveness. So we don’t pick up our ball and go home.”
“More relevantly,” Kosove continues, “Fred Smith is a very determined businessperson and understood that the movie business is a portfolio business, and that some of these films will work, some of them won’t, and hopefully your wins will offset your losses. Fortunately, that’s happened.”
Kosove and Johnson acknowledge they’ve had some rough patches — 2004’s “Chasing Liberty” lost a lot of money, and “The Sisterhood of the Traveling Pants” and “Racing Stripes,” while marginally profitable, didn’t do much to put them back in black. They also concede they’ve never had a headline-grabbing blockbuster — their biggest domestic grosser is thriller “Insomnia” at $67 million, followed by Hilary Swank starrer “P.S. I Love You,” family adventure “Racing Stripes” and comedy “Dude, Where’s My Car,” which each cumed around $50 million Stateside.
But box office numbers don’t tell the whole story — even their duds have overperformed in ancillary outlets, they say. “We have been a company of singles and doubles,” Kosove explains.
As Alcon chairman Smith tells Variety, “The film industry is plagued by those who look only at the revenue side of the financial equation without examining the cost side of the ledger.” Smith says he has consistently stood by Kosove and Johnson because they do an “excellent job at producing and marketing high-quality theatrical films at below-the-studio industry average.”
“We’re small businessmen,” says Kosove. “We try to watch every dollar we spend, and to the financial community, that’s very meaningful.”
Richard Ingber, the company’s longtime marketing consultant who was hired fulltime in June as prexy of worldwide marketing, says Alcon’s campaigns are always “sensible (and) targeted. I try to develop an efficient way of spending marketing dollars in today’s difficult economy, and I’m careful about not taking buckshots at advertising.”
While Alcon receives a small overhead allocation from Warner Bros., Kosove and Johnson say their studio arrangement works because the overriding financial risk lies with Alcon, not its studio partner.
“As a general rule, we finance, they distribute and they collect a fee, so they get to win all the time,” Johnson explains. “They get to make money and it takes relatively less of their time and puts less wear and tear on their organization.”
Warner Bros. production head Kevin McCormick, who has worked closely with Alcon for the last decade, says the company is the “perfect complement” to the studio in the ability to take on smaller projects that don’t fit Warner’s economic model, but that WB still wants to get behind, such as “Dark Knight” director Chris Nolan’s “Insomnia.”
“It was the perfect combination of their resources and our desires,” McCormick says, adding, “They are the most thorough, prepared producers that I think I’ve worked with the entire time I’ve been here.”
Reciprocally, Warner’s influence is handy. When Alcon needed to get the sequel to “The Sisterhood of the Traveling Pants” off the ground quickly, the studio was helpful in getting the original cast onboard.
Kosove adds that Warner Bros. president Alan Horn is a huge supporter, and he also credits McCormick and distribution topper Dan Fellman, in particular, for giving “P.S. I Love You” an ideal pre-Christmas release date. It “gave the movie the unique and rare opportunity to find its audience,” he says. “If it had been released at another time of the year, with the kind of opening weekend we had, we would have had a completely different economic result on that movie.”
Ultimately, however, the fate of Alcon’s projects rest on the shoulders of Kosove and Johnson. “We have the final say,” Johnson says. “That gives us the flexibility to be collaborative when necessary, but the truth is (the studio) is very respectful of the fact that we’re putting up the money and we have to live with the result.”
Alcon has options when it comes to the overseas releases of its films. “When we arranged our current financing, one of the key things we told everyone up front is that we didn’t want to forfeit the flexibility to manage our risk by either preselling or going worldwide (through Warner Bros.) in certain instances,” Johnson says. When not tapping studio pipelines overseas, Alcon works with foreign sales companies, such as Summit, to find other distrib partners.
It’s that distinct middle-ground identity that gives Alcon an edge in other areas as well. “It’s a nice alternative to the studio, because you have the benefits of the studio, but at the same time it’s one-stop shopping — marketing, creative, budgets,” says Edward McDonnell, who produced “Racing Stripes” and “Insomnia” with Alcon. “I don’t have to go to five people; I don’t have five opinions.”
This combination of studio and independent spheres has always defined what Kosove and Johnson wanted Alcon to be. “It’s the way we still run the company,” says Johnson.
Even now that Alcon is rising with the new capital infusion, Kosove and Johnson don’t want to change what isn’t broken. While they may pursue more co-financing arrangements with Warner Bros. and “take a little more risk on certain movies,” per Johnson, they continue to stand by their humble, small-business philosophy.
“One has to keep a very even keel, going through every single day,” Kosove says. “Usually, things are neither as great nor as bad as they may seem.”