Mini indies raise the stakes

Smaller distribs increase budgets to keep pace with studios' specialty arms

At last week’s Gotham Awards, three tables in the center of the room whooped and shouted louder than everyone else.

ThinkFilm execs and “Half Nelson” cast members applauded as their addiction drama won for best feature, director and breakthrough actor. The kudos came just a day after the movie earned five noms for the Film Independent Spirit Awards, including one for best feature.

IFC and First Look also received best feature Spirit noms, helping to turn it into a red-letter season for both companies.

But the limelight comes just as these companies’ business models are poised to change.

Traditionally, indie distributors make many low-budget wagers with modest B.O hopes. But Think, IFC and First Look have declared their intentions to, essentially, move into the hit business.

And who can blame them? Marketing and other costs continue to escalate, while access to private-equity money is easier than ever. There’s a growing temptation — and pressure — to go bigger.

So indies are spending more (budgets sometimes above $10 million), boarding projects earlier and seeking more stars, all in the hope of a breakout.

In other words, they’re playing the specialty division game.

“The argument is that there’s a level underneath the Fox Searchlights because the specialty pictures have gotten so much bigger. There’s a $7 million-$12 million stratum to look at,” says Jonathan Dana, executive producer of “You Kill Me,” a Ben Kingsley mob comedy from John Dahl that is IFC’s first push into the territory; company boarded the $10 million movie while it was in post-production, buying all U.S. rights.

Of course, it’s a risky model. Even specialty division pics can be risky. And indies are without the deep pockets and marketing muscle of a studio.

The indie distribs say they won’t abandon their traditional models; even in the few months since they’ve announced their plans, IFC has made smaller buys like the New Zealand feature “Out of the Blue,” and ThinkFilm has said it will continue to make the usual type of pick-ups, like the recent purchase of the Matt Ruskin docu “The Hip-Hop Project.”

Still, their ambitions run deep.

Under new owner Henry Winterstern First Look has locked up an $80 million credit facility with Merrill Lynch for what it hopes will be an annual slate of six to 12 movies. It recently entered a heated race with Focus for global rights to the Fernando Meirelles project “Blindness.” (Focus won.)

First Look is also trying to succeed where studios have failed, reviving a “Three Stooges” project that Warners once developed with the Farrelly brothers.

Meanwhile, under new ownership that joins it with U.K. sales and financing shingle Capitol Films, ThinkFilm hopes to release between two and four movies per year in the $5 million-$10 million range, and make more pre-buys financed with global presales.

The company that released “Murderball,” “Spellbound” and “Born Into Brothels” strenuously wants to avoid being known as “the documentary distributor.”

And even as IFC begins filling its First Take label with boutique, sub-$1 million fare, the Rainbow Media division has announced it will release as many as six movies per year budgeted from $4 million-$10 million.

“You have a decision whether to go smaller or bigger,” says IFC Entertainment prexy Jonathan Sehring. “We decided to do both.”

These moves are also motivated by lean times in the finished film market. As the studios board projects earlier, film festivals become fallow ground for those seeking projects with breakout potential.

“I don’t want to be at the mercy of the marketplace,” says Mark Urman, ThinkFilm’s U.S. distribution chief. “I don’t want to have to worry that if I come home from Toronto without a film I fell in love with I have nothing to release.”

Still, bona fide hits are never easy to come by. Despite solid word-of-mouth, critical raves and growing awards buzz, “Half Nelson” has earned a modest $2.7 million at the box office. And the studio’s specialty shingles seem to take up more oxygen every year.

Focus is deep in production on several big projects after a banner 2005. The Weinstein Co. is on a slate-building buying spree. Fox Searchlight is expected to be in growth mode after the runaway success of “Little Miss Sunshine.” Paramount Vantage and Warner Independent have been going through ambitious revamps.

History shows that ambitious indie companies can find themselves struggling — or scrambling to find cover behind a niche. After pursuing a similar model in the ’90s, Lionsgate was perceived as financially vulnerable before it hit on the “Saw” franchise and the horror niche.

The goal — “to be a specialty division without a parent company,” as Urman puts it — is easier said than done. Studios have large homevid arms and pay TV deals to take the burden off box office. Indies generally don’t.

Still, each will try to use its particular strength. Sehring notes that IFC is a part of a company larger than several studios. Think now has more of an option for foreign pre-sales. And because First Look is involved in production — its first big project is Tommy O’Haver’s “An American Crime” — it can wind up with a larger stake in films.

But the realities of what’s needed to compete aren’t lost on the indies.

“The arthouse divisions at the studios will always beat us if we go head-to-head,” says First Look Pictures prexy Ruth Vitale, who should know as a veteran of the specialty divisions.

“But we’re still going to try to get the next Fernando Meirelles picture.” She pauses. “Or we’ll just find the next Fernando Meirelles.”