Equity money is still pouring into Hollywood, but the utopian fantasy of a new, freer, Hollywood has turned out to be wishful thinking.
Only a year ago, it seemed like a no-brainer for producers: No more fighting studios for a greenlight! Greater control over the moviemaking process! But the ardor has cooled as reality has sunk in.
Producers have discovered that outside money comes with as many headaches as studio coin, if not more. The movies aren’t necessarily better and distribution isn’t assured.
“Chronicles of Narnia” producer Mark Johnson admits to equity envy — “I feel like everybody’s doing it” — but he’s also taken aback over how long it takes to line up such deals and the resulting restrictions.
Heavyweight producers such as John Davis and Jerry Bruckheimer have flirted with equity funding but walked away from it. Scott Rudin thinks he shouldn’t have to do it. And Imagine went public from 1986-93, but decided it wasn’t worth it. Brian Grazer and Ron Howard felt their work suffered as they concentrated less on filmmaking and more on dealing with investors.
But for the next tier of producers — the ones with studio deals — outside funding is still an option, as they simultaneously pitch projects to their studio.
The money’s still plentiful — Cannes was awash in bankers this year — but the mood is far more cautious among money seekers.
As these equity-funded films have debuted, they have often created logjams with studios’ release schedules. What’s worse, many of the films are truly terrible because they were made for the wrong reasons: The money was in place, the star was available and the backers were eager to get started — even though there was no time for script development.
Producers have learned other hidden costs of “free money”: They have to explain decisions to stockholders or run creative decisions by a gantlet of money men bored with hedge fund riches. Or they may have to arrange parties with beautiful starlets.
There are plenty of cautionary tales about the perils of equity deals. Joe Roth got the money for Revolution but found it difficult to keep the pipeline filled with quality fare, and even Michael London — the shining example of a specialty producer who “jumped the fence” to create a company outside the studio system with equity funds — has said he would think twice about launching Groundswell knowing what he does now.
But to others, equity is appealing for three main reasons:
- Most studio deals aren’t as plentiful or as generous as they were a few years ago, as the big six studios focus more and more on tentpoles and niche product.
- There’s plenty of money available from hedge funds.
- Having easy access to equity gives midlevel producers some badly needed leverage in getting projects set up.
So now the options include supplementing studio pacts with such deals.
“Everybody is wrestling with it,” says Albert Berger, who explored equity financing with partner Ron Yerxa before entering a studio deal with Warner Independent. “We like working with studios and what it entails, but it’s not a mutually exclusive idea, either.”
Berger and Yerxa struggled for years to get the box office winner “Little Miss Sunshine” off the ground, but didn’t get it made until another producing team with deep pockets stepped in, supplying the $8 million needed.
Michael Shamberg and Stacey Sher have also explored equity financing as a way to produce movies studios don’t want to make or fund fully. The duo had studio pacts at Universal under the Jersey Films banner with Danny DeVito, and are now at Paramount with their Double Features Films shingle.
“For us to do both would be great,” Shamberg says.
He says he prefers working under a studio deal — “a strong studio relationship just makes life easier for movies we like to do” — but maintains it’s not realistic to depend solely on those arrangements.
“It’s no longer one size fits all,” he says, citing the reduced number of majors actively buying projects. “Nobody can survive just using a studio deal these days.”
But there are no guarantees with the equity money. One producer, with a mix of commercial and specialty fare under his belt, thought he was thisclose to an equity deal before Cannes. But by the time the fest was over, he had moved on to another studio deal.
Equity lust makes perfect sense to Mike Medavoy, an industry vet who ran several studios before founding Phoenix Pictures in late 1994 with the backing of equity funds, among other investors.
“People pay attention to people who have money,” he says, noting that producers with equity coin are a boon to studios looking to offload some risk.
“It makes it easier to get the process going, but not every producer can make it work,” Medavoy adds. “The money’s out there. There’s a lot of hype, but there are some that get it done.”
Certainly the equity deals can still seem attractive.
Says one indie producer: “At a studio, you can’t really call the chairman, and you’re often not sure who to call. Having the first-look in exchange for covering a bit of overhead isn’t that attractive when there’s so much equity available outside the studios.”
Certain producers prefer to deal with financiers on a case-by-case basis, pocketing their producing fee upfront. With the emergence of Sidney Kimmel, Overture, Summit and countless other financiers eager to spend, there are more opportunities to sell projects than ever.
“I always joke nobody ever made a lot of money in Hollywood and went to Wall Street, but there are sure a lot going the other way,” Shamberg says.
Whether some of these films deserve funds is another matter. Some are getting made even though there’s no aud for them — MFNs, or movies for nobody, in the Hollywood argot — and they may not, in fact, ever be seen by anyone other than the filmmakers.
Ultimately, Shamberg says, he would take five good scripts over buckets of money any day.
“You can always get the money if the material is good,” he points out.