Yari Group crisis emblematic of tough times
A new definition of success is materializing in the indie world: Just making it through the end of the year, much less to next month’s Sundance Film Festival.
In recent weeks, Peace Arch and First Look, distribs with significant libraries, announced big staff cuts. Next came Yari Film Group, which also set significant layoffs due to a Chapter 11 filing for its release arm. And David Bergstein’s ThinkFilm officially closes its doors this month after the release of “Good,” leaving behind a small Gotham staff and a trail of lawsuits and rancor.
Many tag these companies’ problems as casualities of the financial crisis. Yet in many cases, the economic downturn was the final word for already troubled enterprises.
The writing was on the wall for Toronto-based Peace Arch, which let go 23 staffers. The publicly traded company’s stock has been in steady decline for a year, plummeting from $1.62 in December 2007 to its current level of 6 cents. Trading of shares on the Toronto exchange was briefly halted Dec. 4 after the company disclosed an audit of past results.
As a part of the audit, the company had to announce a $25 million write-down on film assets for the fiscal year ending in August. It also disclosed that sub-distribution deals covering several international territories “may not have been appropriate” or accounted for correctly. At issue is about $6.7 million in revenue from fiscal 2006 and 2007.
The tepid release of Peace Arch’s Jean-Claude Van Damme comedy “JCVD” and the debut of the second season of “The Tudors,” the Showtime series that the company owns, have not turned things around. Peace Arch describes the layoffs only as the first step in an effort to save $2.4 million.
First Look Releasing, which at one time had a deal with Peach Arch, fared a bit worse. Though it scratched fewer positions from its staff list, the company has been fighting litigation on both coasts. Sales agent Celluloid Dreams is suing in L.A. for $720,000 it claims it is owed for the sale of “Sukiyaki Western Django.”
In New York, the producers of the Heather Graham starrer “Miss Conception” have filed to collect their $250,000 minimum guarantee after First Look released the pic last summer.
“Their system was broken before the crisis,” said one exec with knowledge of the company. “And if you don’t have the infrastructure to support the library, the library is not going to work for you.”
Avi Lerner, whose Nu Image/Millennium bought First Look in early 2007, has worked to reorganize the company’s debt and is said to be looking for a buyer, no easy task in this climate. “Now they have to sleep in the bed they made,” said the exec.
Yari Film Group’s releasing arm has been hit by a series of events, and began what it calls a series of substantial layoffs . Facing the wrath of four creditors, producer/financier Bob Yari was forced by a court order to put his releasing outfit into Chapter 11 bankruptcy reorganization, although he said his separate production operations were not affected by the filing.
Yari says the company also got hurt by the implosion of payroll provider Axium. “It took about $6 million out of our accounts,” he says. “We had three films in production. We wired them the payroll and it disappeared. So we had to use additional resources to cover that. It was a bad hit.”
Yari, using the phrase preferred by Tribune topper Sam Zell and a range of other dazed execs, describes all of the factors and marketplace conditions as “the perfect storm.”
“We lost our P&A,” said Yari. “It’s not a question of product. We have six films that were waiting to be released.”
“The Maiden Heist,” starring Morgan Freeman and Christopher Walken, and “Assassination of a High School President,” with Bruce Willis, are among the group of pics now looking for other homes.
Yari’s lawsuit against the PGA and AMPAS for credit on “Crash” was thrown out, but he still has an eye on a prize. He is moving forward with limited award screenings of “What Doesn’t Kill You” and “Nothing But the Truth.” Afterwards, those orphaned films will be shuttled to other outfits.
The spate of bad news hitting the indie sector comes just weeks before the 25th edition of the Sundance Film Festival, which promises to be a somewhat leaner, meaner affair. Many of those standing on more solid ground in the indie trade describe the struggles of Peace Arch, First Look and Yari as a positive — in a Darwinian sense.
“There has been a liquidity bath in independent film — too many companies wanting to distribute too many films,” as one company topper describes it. If the herd gets culled, the thinking goes, individual pics will have more breathing room at the B.O.
Still, don’t count out the troubled companies or their toppers just yet.
David Bergstein, whose Capital Films owns Think, is reportedly mobilizing a new distribution setup for Capital in L.A. And Yari still has hope of reforming his distribution arm.
“It’s what I would love to do,” he says. “Today there are not a lot of studios that have the patience for specialty films. The whole skill set doesn’t even exist. Unfortunately it’s an extremely capital-intensive side of the business, and without the proper capitalization I wouldn’t attempt it.”