Sellers and buyers both have modest hopes

There’s a new reality at Sundance: dramatically tempered expectations.

Amid a tough economy, a veritable decimation of specialty-film divisions and a run of less-than-stellar returns for last year’s crop of Sundance faves, sellers are coming in with much more modest hopes than in other recent editions. And buyers aren’t looking to disabuse them of that outlook.

“We’ve all been to ‘Happy, Texas,’ ” says Focus Features CEO James Schamus of the much-hyped 1999 entry that sold for some $10 million and grossed under $2 million upon its release.

Last year’s most-ballyhooed Sundance sales found no glory at the domestic box office: Focus Features’ $10 million worldwide acquisition “Hamlet 2,” Searchlights $5 million “Choke,” Overture’s $3.5 million “Henry Poole Is Here,” Paramount Vantage’s $1 million-$2 million “American Teen,” and two Sony Pictures Classics pickups, ‘The Wackness” and ‘Baghead” (which were bought for under $1 million). Overture will finally open its $2 million ’08 pickup “Sunshine Cleaning” on March 13.

The success stories of last year’s Park City confab turned out to be docus “Man on Wire” and “Trouble the Water” (both made the early cut for Oscar’s doc competition). Micro-budget neo-realist dramas “Frozen River,” starring Melissa Leo, and Lance Hammer’s “Ballast” also fared well with critics, although theatrical revenue was modest. Rookie director Hammer released “Ballast” himself, setting a new model for others unable to make the right deal.

Now, with the economy in freefall, it’s tough for filmmakers to hold onto the usual fantasies of getting scooped up by a deep-pocketed specialty distrib like Focus. While a plethora of films were made at the end of the financing bubble, only four studio distribs are still standing, plus five or so mid-size indies.

Groundswell’s Michael London has experienced the swings of the erratic indie market over the past year. Overture’s “The Visitor” was a hit, but Miramax made no money on Sundance pre-buy “Smart People.”

Last year London left Sundance without having sold “Mysteries of Pittsburgh,” starring Peter Saarsgard.

It took another year to make a deal with small distrib Peach Arch for a limited theatrical release.

“We made it on an outmoded business model,” says London. “It’s impossible to spend money on a quality drama — without big foreign pre-sales — in order to sell for a profit or cover your investment at a film festival. The market is too flooded with good movies, and distributors don’t want in unless you have big stars or a marketing hook.”

“Mysteries of Pittsburgh” wasn’t the only film to leave Sundance empty-handed last year. Other notables to pack up without a distrib deal in place included “What Just Happened?” and “The Great Buck Howard.”

And there will be plenty more without a deal this time around. Putting distribution together can take months.

Last year, producer Lynette Howell (“Half Nelson”) went into Sundance 2008 with high hopes for “Phoebe in Wonderland,” which stars Elle Fanning as an imaginative girl who adores “Alice in Wonderland.”

“People were still expecting the trends of the last few years of big sales,” she says. “It was frightening when over the first few days nothing sold. It took a slow burn. If you need to get a $5 million sale you have to be ‘Little Miss Sunshine.’ ”

When “Phoebe” didn’t land a one-stop buyer, Howell’s husband, Endeavor agent Graham Taylor, who was repping the movie, got creative. He raised $3 million by selling exclusive TV rights to Lifetime Network, non-exclusive DVD and streaming rights to Netflix’s Red Envelope, and a reduced minimum guarantee from theatrical and DVD distrib ThinkFilm.

“Our investors were able to recoup,” says Howell, “and we reached a broader audience than we expected going in.’

But even last year’s flex approach is less possible this year. Since then, Lifetime has shuttered its film label, Netflix has closed Red Envelope and ThinkFilm is a trying to restore confidence under ex-New Line exec David Tuckerman, who plans to release “Wonderland” on March 6.

Fingers crossed, Howell says.

This month, Howell faces a similar challenge with competition entry “The Greatest,” written by rookie helmer Shana Feste. Her screenplay about a family dealing with the loss of their son and the unexpected visit of his girlfriend arrived out of nowhere, says Howell, who lured to the film Pierce Brosnan and Susan Sarandon and vet lenser John Bailey. Howell and Endeavor easily raised $6 million from Bavarian Film Group and debt lender Oceana.

Howell did not finance against foreign pre-sell estimates, although Sidney Kimmel Intl. did sell a few foreign territories at Cannes.

“We are holding out on most of them,” she says. “You get bigger numbers if you have a distributor.”

But even if the movie plays like gangbusters, that does not mean Endeavor will land a distrib.

This year, people are fiscally conscious about the few movies that work, Howell says. “I’m taking it to the fest and hope it finds support and a home.”

Another wrinkle in this year’s acquisitions mix: At least one major studio may not allow its specialty arm to acquire films shot under a SAG waiver while the Guild lacked a contract for seven months.

Usually, a new contract will supersede the waiver, but there’s no contract in sight, and some studios are in no mood to be helpful to SAG (though others are not concerned about this issue.) If a major’s specialty wing refuses to buy SAG waiver films, that could take the biggest potential deals off the table and cede the field to the likes of Summit and Overture, which are hungry to buy.

“I Love You Philip Morris” was completed under the old SAG agreement, but hot sale title “Brooklyn’s Finest” was not.

Having survived last year, Howell must weigh paying back her “Greatest” financier against wanting the film to play theatrically: It isn’t always the best exposure for the film. Most smaller distribs offer limited New York and L.A. releases geared toward a DVD release. And sometimes a direct TV sale is the best deal. “If it doesn’t sell at Sundance,” adds Howell, “it’s not the end of the world.”

London is relieved to be taking a year off from the fest.

“Sundance is a unique and wonderful way to get immersed in the real dreams coming true of indie filmmakers,” he says. “But that little piece of social and creative connection, and discovering movies and filmmakers, has been overwhelmed for me by this shopping mall for movies. Maybe when I return people will go up not to buy or sell, but to watch.”

And for filmmakers and would-be sellers keen to keep the old Sundance dreams alive, there’s always the remote prospect that a buyer will take to a passion project, and damn the tough times.

“I’ve lost money on movies I’ve loved and acquired and made money on movies I’ve loved and acquired,” says Focus’ Schamus. “I’ll overpay this year if I feel like it.”

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