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Indies Prep for Big Landing in Cannes

With midlevel pics sizzling, bizzers predict a Croisette teeming with commercial fare

Though Berlin is barely in the rearview mirror, and Cannes doesn’t kick off until May 15, the rousing recent success of such indie films as “Looper” ($166 million in worldwide box office) and “Hunger Games” ($686 million) has producers and sales agents looking forward to the Croisette with unbridled optimism over a market that figures to offer a far wider array of commercially attractive projects.

While Berlin delivered strong sales for a few commercially targeted pics with stars, Cannes promises bigger deals, greater budgets — and more complicated financing.

“Cannes is the Olympics,” notes Jere Hausfater, chief operating officer of sales-financing banner Aldamisa. “There was a paucity of high-end projects at Berlin, although anyone who did have the right film did great. Managers, agents and producers understand timing, so if you don’t have it ready to go at Cannes, you’re going to have to wait until Toronto or AFM.”

Last year on the Croisette, Lionsgate began making international sales for “Catching Fire,” the second title in the “Hunger Games” franchise; Megan Ellison closed a deal for the “Terminator” sequel rights; and Foresight Entertainment offered foreign rights on a pair of studio-style films — “2 Guns,” starring Mark Wahlberg and Denzel Washington; and Peter Berg’s “Lone Survivor,” a drama about a Navy Seal team hunting a Taliban leader.

The indie sector has become populated with success stories such as IM Global, FilmNation, Exclusive Media and Sierra/Affinity, which have all greatly expanded far beyond the role of traditional sales agents and into production and financing.

Randall Emmett and partner George Furla are probably the most prominent indie financiers. Backed by $525 million from Envision Entertainment since 2011, Emmett/Furla produced “2 Guns” and “Lone Survivor.” Emmett is expecting an active Cannes. “There’s a real thirst for quality, high-concept films,” he notes.

Emmett asserts that the key to the indie sector’s success, with the majors opting to stay away from midbudget films, is its ability to identify strong material and hold down costs. He’s most pleased with “End of Watch,” produced for less than $15 million, and gives kudos to Relativity’s “Safe Haven” for achieving box office success on a budget of less than $40 million.

“I feel a real sense of community within the indie sector when I see films where the quality is up and the costs are down,” Emmett says.

He’s expecting to bow at least two high-end Emmett-Furla projects by the time Cannes starts.

Laura Ivey, president of sales company the Exchange, notes that while there was less new material at Berlin, the market still had a healthy deal flow.

“Buyers were very selective, but very willing to come onboard,” Ivey says. “I think Cannes will be huge. You’ll see lots of packages coming together.”

Ivey is heading the Exchange’s new partnership with Denver-based Grand Peaks Entertainment — the Exchange Peaks fund — with plans to finance and produce four to six movies annually. It’s already bankrolling marriage drama “The Last 5 Years,” directed by Richard LaGravenese and starring Anna Kendrick; and “Swelter,” toplining Jean-Claude Van Damme.

With the big six Hollywood studios making fewer pics and focusing more and more on tentpole franchises, the independent sector has a clear-cut opportunity to expand. Marc Schipper, chief operating officer at Exclusive Media, notes that his production-sales banner was selling gangster saga “Black Mass” with Johnny Depp, and crime thriller “Dark Places” with Charlize Theron at Berlin.

“We announced ‘Dark Places’ Wednesday at Berlin and she was there Friday,” Schipper says. “Berlin is a good market to launch sales, and we’ll finish those at Cannes.”

“Dark Places” is the fifth project teaming Exclusive Media and Cross Creek Pictures. At last year’s Cannes, the companies launched a three-year deal to co-finance, co-produce and co-develop at least two features per year with budgets up to $65 million, starting with the long-in-development thriller “A Walk Among the Tombstones,” starring Liam Neeson and directed by Scott Frank. Production on the pic is just starting.

“We are shooting ‘Tombstones’ for a fraction of the price that a major studio would need,” Schipper says. “Studios have to hit the broadest audience; each and every film is an event, because of their giant overhead. We are more disciplined. We’re OK with using breadcrumbs to make a loaf.”

Mike Medavoy, who counts “Black Swan” as one of his more than 300 credits, says the majors’ strategy of relying heavily on tentpoles, sequels and remakes as the most reliable investments is one that perhaps bears re-thinking in the light of the success of distinctive fare such as “Silver Linings Playbook” and “The Best Exotic Marigold Hotel.”

“There’s an older audience out there that wants to see those kind of films and will support them,” Medavoy says. “I don’t mean that the studios shouldn’t do big movies, but I think that it’s important to do films that you really believe in.”

Aaron Kaufman, president of Robert Rodriguez’s Quick Draw Studios, has a pair of titles coming out later this year — sequels to “Sin City” and “Machete” — that have the look, feel and cast of studio films. Making those kinds of pics when the budget goes beyond the $20 million range is difficult, Kaufman notes.

“The stakes are really high,” he says. “The Rolodex on funding for $15 million to $20 million is deep, but there are a lot less of them at $30 million and up.” Christopher Woodrow, CEO of production at financier Worldview Entertainment, says he saw strong sales at Berlin on such titles as Eli Roth’s “Green Inferno” and Nicolas Cage starrer “Joe.”

“Berlin was very successful for us,” he adds. “It was more quality than quantity. We’re hoping to announce two studio co-financing deals before Cannes, and we think this will be the biggest Cannes ever.”

But along with success, financing has become more complicated. Producer Keith Kjarval says nailing down the money on David Rosenthal’s “A Single Shot,” starring Sam Rockwell, Melissa Leo and Jeffrey Wright, required achieving a level of commitment in concept and casting that wasn’t required a few years ago.

“You really do have to build a case for a movie,” he says. “It’s not about Svengali-ing one investor any more. You get the gap to handle about 30% to 35%, and the tax credit for 20% to 25%. Some investors want to replace banks in gap financing, and there’s definitely more flexibility in financing structure.”

Reps for City National Bank attest to the growing flexibility — and complexity. The bank will help finance films as low as $2 million up to about $70 million, but will typically play in the $15 million-$25 million range.

“These deals, even though they’re fairly good transactions for banks, have become more complicated,” says Daniel Zbojniewicz, manager of City National’s Entertainment Division, “The deal used to be you just had one or two contracts the bank would finance. Now it’s become much more convoluted, and takes a different skillset from the bankers’ standpoint.”

Christa Thomas, managing director within SunTrust’s Private Wealth Management Sports & Entertainment Specialty Group, focuses on corporate and structured lending, which often pays for large slates of films. She says gap financing has been making a comeback.

“There are parties who are coming in between the traditional senior debt and the pure risk equity, so in some sort of a mezzanine or preferred position. In some cases they would be looking for a financial return in the movie ahead of the pure equity,” she says. “For example you could have a film where the senior debt is financing or monetizing the presales; there are some portions of those sales that have not been made, that have been estimated. And that investment is coming in to take that gap risk.”

Comps and reputation of the sales agent are extremely important when considering such financing, Thomas adds.

Michael Benaroya, who saw video-on-demand success on “Margin Call,” believes that the indie sector is seeing rising optimism thanks partly to VOD emerging as a significant revenue stream — particularly since it doesn’t carry the capital outlay in production and sales that DVD does.

“There’s a better ratio between costs and revenues,” Benaroya says. “It’s so much less expensive, and there’s not a lot of risk.”

Also making things better for indies, according to Benaroya: shrinking film budgets.

“Fees for talent are tightening up, so you have a lot of projects that are being made for a sensible amount,” he notes. “With directors, obviously their first choice is to go with the largest fee, but if they can’t get those, they will take an indie (project and fee).”

One of the new financiers on the scene is Los Angeles-based Solar Pictures, which launched last spring prior to Cannes, and has since received better than a script per day. It closed its first output agreement at Berlin with Italia Film covering the Middle East, Turkey and Greece.

Solar CEO Chris Taylor says the company’s production goal remains at four to five movies a year with budgets up to $40 million.

In October, Solar announced it had closed deals to finance and produce several movies, including “Jet Black” and “The Girl Who Knew Too Much,” which will shoot this year.

“We’re looking over a lot of material,” says Andrew Robinson, who heads the financing unit. “We’ve gotten 300 scripts in the past nine months, so people know that we exist and have money. It’s not surprising that happens when you have a new company that’s well-capitalized.”

Another financier that launched last year, Demarest Films, has backed Neil Jordan’s “Byzantium” and romantic comedy “Two Night Stand.” It came onboard two films last year at Cannes — Anton Corbijn’s “A Most Wanted Man” and Robert Luketic’s “Paranoia,” a high-tech corporate espionage thriller with Liam Hemsworth, Harrison Ford, Gary Oldman, and Amber Heard.

Demarest partner Sam Engelbardt said the banner had explored entering two high-profile Berlin titles, “Vampire Academy” and “Kill the Messenger,” due to their strong scripts and cast.

“One big change from the past year is that we will be doing more equity and less gap,” says Englebardt. “Banks are lending more, and we get more from equity. We are not looking to be passive investors.”

Englebardt says he’s hopeful the number of films on Demarest’s slate will quadruple over the next three to four years. “We are going to commit to at least 15 (titles) like ‘Paranoia,’ ” he says. “The challenge will be finding them.” n

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