Distribs' strategy to limit liability include buying on spec, splitting grosses
Considering Bob Berney’s long-running love affair with the specialty biz, many were surprised by the news that his and Peter Schlessel’s new company will focus on commercial wide releases.
The company’s decision to steer clear of the arthouse is emblematic of the new market forces governing the buying and releasing of indie films.
Many folks concluded that the flurry of deals at the Toronto Film Festival this year was a barometer of the improved health of independent film. And, indeed, the volume of business was the best in several years — at least 16 U.S. distribution deals were inked during and just after the fest. But that volume was driven largely by a dramatic drop in prices, and dealmaking now hinges on mechanisms aimed at minimizing distribs’ risk.
“The people advising the sellers are much more realistic now. If there’s an offer on the table for $1 million for U.S. rights, they are telling their clients to go for it. It used to be that you paid north of $2 million and sometimes far more,” says one veteran acquisitions exec.
In addition to lower prices, there are other fundamental changes in the dealmaking process: Outside financiers are putting up marketing money for some films, lessening the outlay a distributor has to make. And multiterritory deals are on the uptick as another way of minimizing risk on the part of a distributor.
Some distribs aren’t even making minimum guarantees. Rather, they’re striking gross corridor deals, whereby they agree to split grosses down the middle with the filmmakers.
Focus Features struck such a deal for Christopher Plummer-Ewan McGregor drama “Beginners,” agreeing to put up $2 million in marketing with no minimum guarantee.
The market correction was needed to jump-start the acquisitions biz. Even in recent years, buyers had justifiedhigher acquisition prices, thinking they would recoup in homevideo and other ancillary markets. But with the decline of the DVD market, the model no longer worked.
Also, when crunching the numbers to see if an acquisition made sense, a distrib would sometimes start with the assumption that a film would cross over to a mainstream aud — a risky proposition even in healthy times.
There’s much more caution now, as the biz adjusts to lower box office grosses for specialty titles. There’s money to be made, but the margins are more modest.
Most pricetags at Toronto hovered at $1 million or lower, excluding marketing commitments.
Only two titles sold for north of $3 million, and one of those, “Dirty Girl,” was a multiterritory deal. The other was the Will Ferrell drama “Everything Must Go,” which went to Roadside and Lionsgate. It features Ferrell in a role his usual fans might not embrace.
And not even big stars can demand top dollar anymore.
“Rabbit Hole,” toplining Nicole Kidman and Aaron Eckhart, went for just north of $2 million to Lionsgate, which was looking for an awards contender.
Lionsgate also pacted with Roadside Attractions on Robert Redford’s Abraham Lincoln assassination drama “The Conspirator,” starring Robin Wright and James McAvoy. But outside financiers will put up a chunk of the marketing coin, minimizing Roadside’s outlay.
In the past several months, Roadside has made several distribution deals that come with marketing coin attached. Smaller distribs could come to rely more and more on outside prints and advertising money to make deals worth their while.
Multiterritory pacts are another way to minimize risk for U.S. distribs like the Weinstein Co., Lionsgate and Focus Features, all of which have international sales divisions.
The Weinstein Co.’s deal for Toronto pic “Dirty Girl” covered rights for the U.S., U.K., France, Australia, New Zealand and South Africa. The deal was engineered by Weinstein Co. chief operating officer David Glasser, an experienced exec who took the post earlier this year after running the company’s international sales arm. His aim: Make the kind of smart acquisitions that distinguished the company in its early days.
Also at Toronto, Focus Features Intl. prexy Alison Thompson arranged a multiterritory deal for “Beginners”: Focus has foreign rights everywhere except Canada, France, Australia, Scandinavia and Benelux.
Many had hoped there would be new buyers picking up titles out of Toronto, but so far, that hasn’t happened.
Berney and Schlessel attended a number of screenings, but FilmDistrict has yet to make a festival buy. Neither has Relativity, which recently acquired distribution operation Overture Films.
Consolidation continues to be the trend, with longtime indie producers Ted Hope and Anne Carey announcing recently that they will shutter This Is That Films. They’ll continue to produce films, but couldn’t justify maintaining a formal shop.
Clearly, while the fall fest acquisitions signaled a degree of growth, it remains a business of diminished expectations.