Indies treat top-level talent like investors

As harsh economic realities force indie filmmakers to lower budgets and salaries, producers are finding a way to attract stars and other top-level talent to films budgeted at less than a star’s typical fee: Treat them like investors.

“It’s become much more common for actors to start participating the moment the investment is recouped,” says UTA Independent Film Group co-head Rich Klubeck, who packaged the CBS Films pickup “Salmon Fishing in the Yemen” and reps its indie-friendly star, Ewan McGregor.

Stars have long been willing to cut their fees or work for scale in return for backend pay on labor-of-love projects and low-budget genre fare. But after decades in which investors often received returns and profits before actors began participating, Klubeck says the new timetables allow actors to feel they’re making fairer deals.

Gray Krauss Stratford Des Rochers partner and production counsel Jonathan Gray calls it “in-kind equity participation,” and cites Fox Searchlight’s reported $3 million Sundance pickup “The Art of Getting By” as one success story for several of the film’s principals. “It was a profitable film, and they were able to receive participation from the very first dollar that flowed to the investors,” Gray says.

Such deals have been among the reasons for a boom in low-budget films, from prestige pics to horror fare, also because they’re being made for even less money than similarly made pics of a few years ago.

The mid-2000s yielded a bumper crop of mid-budget films often leveraged via backend deals, offering some stars a way to earn a decent payday, if one not comparable to their studio paychecks. But many more of these titles failed to snag major distribution or, when they did, tanked at the box office, erasing hoped-for profit participation.

Other films went straight to DVD at a time when the DVD market began a drastic decline. And while international box office and ancillary venues began expanding around this time, many successful American indies simply don’t translate well overseas.

But as digital technology has caught up with the indie film marketplace, much higher quality movies have been able to be made at drastically lower budgets. Moreover, the SAGIndie Modified Low Budget Agreements on theatrical features with budgets of less than $625,000 (or $937,500, if casting diversity requirements are met) began being increasingly used to bring most of a film’s actors aboard for $933 a week, with one or two leads making approximately $65,000, allowing many traditonally small-budget films to shrink to the mid-six/low-seven figure range.

Stars’ acceptance of backend deals on such films has grown due to several factors: the lower threshold for profitability, quicker payout timelines for top talent and what Gray calls more “transparency” in dealmaking, where all the main players are privy to the budget details.

Not that convincing the talent’s reps is always an easy task. “There’s often resistance, insofar as there’s a lot of work going into making these deals without any real money upfront,” Gray says. “I have sympathy for the lawyers and agents who put (in) an enormous amount of time and may be stepping off a $70 million film to a $700,000 film. The net result from a financial perspective for them — let’s call it four weeks at $933 a week — is the agent making $300 and the lawyer making $150.” That’s one reason agents and managers would rather not discuss these deals on the record. Another is the reality that many films aiming for even a high-profile festival like Sundance often don’t provide a big payout, even when profitable.

“The deals on labors of love have improved over the years, but I haven’t seen them be markedly more aggressive in the same way the genre microbudget film deals have been,” says one top agent.

Genre fare (such as the $1.5 million “Insidious” and $1 million “The Devil Inside,” which each scored more than $53 million theatrically) can earn solid payouts for key name talent. One manager says his star earned a big payout on a recent genre hit using the low-budget/quick-return model.

“It was a film designed to be made for a very modest budget, yet in a super-commercial genre. The upside was very real,” he says. “When they’re good, the deals make a lot of sense, because the actor is prepared to work in exchange for a meaningful share of the film’s success and they’re treated like an equity investor.”

Given the financial unpredictability of filmmaking in general, several agents and managers interviewed agree with producers Jay Van Hoy (“Beginners”) and Alicia Van Couvering (the John Krasinski-toplined “Nobody Walks”) that most-favored-nation clauses are the most important factor in getting big talent to work for SAGIndie scale.

“I find almost every star is willing to work for scale, but only if everyone (else) is working for scale,” Van Couvering says. “If it’s a romance, I can say those two leads are the only people getting (SAG) Schedule F ($65,000). Once you upset that balance, you lose your leverage.”

Van Couvering adds that an agency is more open to a small movie and worth their client’s time if it thinks the film has a chance to succeed — an assessment based on a filmmaker’s track record and festival cred.

Several reps say the greatest concern they and their clients have with low-budget films is that the project will even get distribution, and add that assurances of a certain degree of professional courtesy (such as not placing a dressing room in a moldy church basement, as Van Hoy half-jokingly says) give the talent more confidence the final product will turn out well.

What makes the model more than just a hedge for producers against financing fees and above-the-line expenses is a pic’s potential to strike it rich — but the right backend deal has to be in place.

“On movies like ‘Black Swan,’ if it makes $100 million, you want to make sure no one’s agent or lawyer is going to get fired because the actor didn’t make money if everyone else did,” says producer Anthony Bregman (“Lay the Favorite,” “Eternal Sunshine of the Spotless Mind”). “I think the lawyers call it ‘schmuck insurance.’?”

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