Midsized players get more traction for action

Perhaps “Black Swan” and “The King’s Speech” weren’t flukes after all.

With the Cannes market just around the corner, hope is rising that the indie film business outside the six majors is finally back on track. Already this year, there have been impressive performances from “Limitless,” produced by Relativity Media and released via its new distribution operation, and “Insidious” from FilmDistrict, a mere seven months after Graham King and Tim Headington unveiled the operation.

Relativity and FilmDistrict are coming to Cannes along with another new-ish distrib — Open Road, the joint venture by exhibition giants AMC and Regal Entertainment. All are focusing on midrange-budgeted wide releases meant to fill a void left by studios now concentrating on tentpoles.

“It’s a sign of a healthy business that these new entities are recognizing the opportunity,” says Nick Meyer, head of newly minted sales-production outfit Sierra/Affinity. “?’Limitless’ is a big win for Relativity.”

Meyer noted that on a recent weekend, half of the top 10 films — “Scream 4,” “Insidious,” “Source Code,” “The Lincoln Lawyer” and “Hanna” — had been sold to indie distributors.

“It really shows that the model isn’t broken after hitting a nadir in 2009,” Meyer notes. “So you have a combination of an under-supply of these films and people taking advantage of an opportunity. It’s a good time to be in the independent business.”

The kinds of films being financed are those with experienced directors attached, with a good script that can be made for less than $25 million, notes a source at an agency.

“CBS Films, the Weinstein Co., Paramount and perhaps Universal are buying, along with Relativity, Open Road and FilmDistrict,” the source says. “There’s a great demand for commercial films that can be acquired, because’s there’s still good box office to be mined. You’ve had ‘The King’s Speech,’ ‘Black Swan,’ ‘Paranormal Activity,’ ‘Insidious,’ ‘District 9′ — projects done outside the studios for a price — so it no longer feels like an anomaly. It’s frankly a sellers’ market for the right kinds of projects.”

FilmDistrict CEO Peter Schlessel says that the distrib’s first two films, “Soul Surfer” and “Insidious,” have overperformed.

“We’ve exceeded what we were expecting with the first two films, which is kind of rare in this business,” he notes. We were hoping for $75 million combined, and we’ve already done that.”

Schlessel says that FilmDistrict is able to take advantage of the fact that theater owners want more product.

“They have 39,000 screens, and they’d rather have something in its first week rather than something in its fourth week,” he adds. “Studios can’t be as opportunistic — they need 18 to 24 months to get a film into theaters. We’re buying product that others are producing. We bought ‘Insidious’ with Sony at Toronto and already have it in theaters.”

Both Relativity and FilmDistrict have also struck multiyear pacts with Netflix for Web streaming of their feature films, bypassing a traditional pay cable output deal. Deals provide for the streaming of releases during the traditional pay TV window, about 11-12 months after a title’s theatrical release.

The first FilmDistrict titles that will be offered by Netflix include Ryan Gosling-Carey Mulligan crime actioner “Drive” (set for a September theatrical release) and Luc Besson-produced sci-fi adventure “Lockout,” starring Guy Pearce and Maggie Grace, opening in February.

“Two years ago, you could not have gotten a pay deal for a second-level distributor. That’s 15% of your revenue stream, and now that’s changed,” Schlessel notes. “Now my $50 million in box office is going to look like a studio’s $50 million. We’re able to compete on the distribution side.”

FilmDistrict’s already planning on releasing “Lockout” and “Don’t Be Afraid of the Dark” on more than 2,000 screens. “We can’t compete with a ‘Spider-Man’ or a ‘Batman,’ but we can compete on reasonably priced films,” Schlessel adds.

Ryan Kavanaugh’s Relativity Media made the leap into distribution last summer by absorbing Overture Films’ distribution and marketing operation from Starz. That move transformed Relativity into a full-fledged minimajor by adding distribution capabilities to its financing and production business; its first titles emerged early this year with “Warrior’s Way” and “Season of the Witch.”

As for Open Road, it’s still six months away from launching its first title. At the helm is former Lionsgate and Weinstein Co. prexy of theatrical Tom Ortenberg, announced six weeks ago as Open Road CEO.

Ortenberg says he sees a clear opportunity in the marketplace for the company.

“We’re going to be aggressive on the acquisitions front,” he notes. “People continue to want to go to the movies, so we’re going to be in the business of bringing the best films to consumers and hopefully market them in compelling fashion. And there wasn’t an ‘Aha’ moment for us, because the business has always been there — it has been there, it is there and it will continue to be there.”

In private conversations, “Black Swan” is cited again and again as a rebound indicator for the business.

“Here’s the thing,” another Big Four agent notes. “It didn’t project to taking in more than $40 million, and it was still worth backing.”

Jonathan Wolf, longtime exec VP of the Independent Film and Television Alliance, contends that the marketplace has been improving following the implosion in 2008 and 2009.

“We’re starting to get to the stage of rationality following the irrational exuberance of the middle of the decade,” he says. “You can tell because there’s an appetite for pre-buys again.”

Wolf contends that there were more movies being made in the middle of the decade than at any other time in last 30 or 40 years. There were titles based not on demand but availability of capital — and he points to 540 titles at AFM in 2007, while the usual number is 400.

That meant the pricing curve got inverted. Pre-buys usually are less expensive because they’re riskier, but the price of the finished film had become less expensive because the market was flooded, so the presale market collapsed.

Indies are still facing problems of piracy and global consolidation, along with the uncertainty of the DVD market, with local distributors looking for another goldmine — aka the “Twilight” franchise, handled by Summit domestically.

Mandate Intl. president Helen Lee Kim believes that her banner will be able to find plenty of traction at Cannes. She’s heading sales for Meryl Streep vehicle “Great Hope Springs” along with “Silent Hill 3D,” “Cobu 3D” and Eva Mendes starrer “Ansiedad” with Pantelion.

Kim says the overall market had started to solidify three months ago at Berlin. “If you had something ready at Berlin, the buyers were buying,” she adds. Cannes will also see the emergence of another player — Indomina Group, which bills itself as a vertically integrated independent studio. Its debut domestic theatrical release, opening May 13, is Yuen Woo Ping’s martial arts feature “True Legend,” starring Vincent Zhao, Zhou Xun, Michelle Yeoh and the late David Carradine.

Los Angeles-based Indomina promises it will have four more titles out this year.

“I can’t think of a better time to be in the business,” notes Bruce Kirkland, Indomina’s head of releasing. “We need something in place that lines up with the way consumers consume. People are consuming entertainment more than ever, so we want to be all things to the fanboy/fangirl audience. So if there’s a great Romanian love story, we’re probably not interested.”

Cannes will see another new player in W2 Media, which acquires completed films for domestic, international and/or worldwide distribution and also pre-buys rights to projects that have or are likely to have meaningful theatrical distribution in the U.S. Its sales slate includes Lucky McKee’s horror title “The Woman,” which had its world premiere at Sundance, Alexandre Rockwell’s ensemble comedy “Pete Smalls Is Dead,” the opening night screening for Slamdance; and drama “Shadows and Lies” starring James Franco, Josh Lucas and Julianne Nicholson.

“‘Black Swan’ is a really good example of a challenging film that can succeed,” notes Julie Sultan, president of international sales at W2. “A lot of our big clients are tantalized by the big studios, of course, but you now have a lot of the indie films speaking to the European audience, which is very sophisticated.”

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