When the Jennifer Aniston-toplined comedy “She’s Funny That Way” had a private Toronto buyers screening last fall, there was cause for celebration: Clarius Entertainment snapped up U.S. rights for a reported $4.5 million and a $20 million P&A commitment. The new distrib did pay a sizable guarantee, according to a source close to the deal. But as two follow-up deadlines passed without further payments, the film jumped to yet another new name in the game, Lionsgate’s shingle Lionsgate Premiere. The film’s Aug. 21 day-and-date bow grossed $51,000 in 27 theaters on opening weekend, and its VOD revenue — as is all too often the case — was not released.
This screwball comedy’s screwball journey to theaters is yet another reminder of the shaky state of the indie film acquisition biz as this year’s Toronto Intl. Film Festival begins. While a few 2014 buys like “Love and Mercy” yielded good returns, several of the past year’s highest-priced fest pickups — “Me and Earl and the Dying Girl,” “Dope” and “The D Train,” to name a few — are among this year’s B.O. underperformers.
“Many times, the movies that went for the most money at festivals have had the least success,” says Sony Pictures Classics co-prexy Tom Bernard, who made a reported low-seven-figure acquisition at last year’s fest of “Still Alice,” which won Julianne Moore an Oscar. “Then again, people spent lots of money for different reasons — some to draw people to their venue, like Netflix, and some to prove they have a lot of money to spend.”
While new players in the feature film space like Netflix, DirecTV, Starz and Amazon will likely be driving up bidding wars alongside newer distribs like Broad Green, Alchemy, A24, the Orchard, Bleecker Street and Saban Films, many wonder if there’s enough gold at the end of the rainbow to support it all.
“(Ancillary) revenues have not thus far been sufficient to offset declining DVD revenues,” says Sue Bruce Smith, who oversees financing and distribution for U.K.-based Film4 Prods. Even last year’s biggest TIFF deal — Paramount’s $12.5 million worldwide buy of Chris Rock’s “Top Five” (which grossed $25.5 million globally and $1.4 million on domestic DVD/Blu-ray) — calls the economics of the marketplace into question with the studio’s reported $20 million P&A commitment.
“SVOD license fees for producers and distributors are around 15%-40% less than what they were even three years ago, because more content is available, more companies like Cinedigm are launching their own SVOD/OTT channels, and carriers like Netflix and Amazon are producing their own content,” says one entertainment attorney. “Carriers no longer have to entice independent distributors with higher output deals like they did when the market was emerging.”
Still, outfits like EuropaCorp (which an insider says won’t be affected by its joint U.S. distribution venture with Relativity, RED, that is not part of the latter’s bankruptcy filings) will be there in force. “While our primary focus is original content, we continue to look for films we are passionate about to augment our Europa slate, and festivals are a natural place to do that,” says EuropaCorp CEO Christophe Lambert.
Yet many distribs are still offering pre-theatrical VOD, compressed windows or even bypassing theaters altogether, but after some initial cautious optimism, sellers are becoming more selective with these options. “There will be a shift in the number of films sold for day-and-date release, as we’ve seen an excessive number of films coming out on VOD having a hard time reaching audiences,” says UTA Independent Film Group head Rena Ronson. “What we notice, however, is that films catering to the older audiences with established stars seem to stand out in this crowded marketplace.”
Producers face a confusing array of questions: Sell a feature outright to Netflix? License it to Amazon for North America and get a release through a partner theatrical distributor? Bring a traditional cable outlet into the deal? Try their luck licensing it to a new multiplatform film outfit like the Orchard?
One of the major studios is even partnering —discreetly — with indie distrib Vertical Entertainment on several day-and-date releases a year. “If we do the VOD and theatrical, and 30 days later they do the DVD (and other ancillary), we’re able to maximize the marketing dollars,” says Vertical prexy Rich Goldberg.
It’s just one example of how distribs are experimenting with heretofore-unseen alliances. Saban Films and IFC are among the companies that have teamed with DirecTV on feature distribution deals. Senior director of digital and emerging markets Hanny Patel says they’ve just closed a deal with another studio, and that their pre-theatrical VOD deal with A24 will continue. “We’re adding another window in front of the theatrical, while giving our 20 million customers who may not have access to these films exclusive access,” she says. “The films have been performing, and it’s a nice bump for us on the business side.” But as with most VOD outlets, no revenue figures have been released, and while one of the success stories she cites — A24’s Jake Gyllenhaal-toplined “Enemy” — did a respectable $1 million in theaters, two of its recent big-name pickups — the Charlize Theron-toplined “Dark Places” (acquired for a reported $3 million) and the Michael Fassbender-led “Slow West” — have struggled to pass the $200,000 mark at the box office this year.
Saban Films prexy Bill Bromiley says he aims for buys in the $1 million-$3 million range in a “purely acquisitions-driven” model. One way he hopes to address the market’s challenging economics is by filling 75% of his slate with premium VOD/day-and-date releases, where “the P&Aa isn’t greater than the (minimum guarantee). Sometimes we’re dealing with a financier who says, ‘Get as much money as you can upfront,’ and unfortunately the movie suffers, because we have a limited amount of money that we can spend.” With conventional releases and partnerships with other distribs, he’s open to higher P&A. That’s the case with his U.S. pickup of the Tom Hanks-toplined “A Hologram for the King”: Saban is splitting all costs evenly with Lionsgate, with Roadside Attractions handling theatrical.
The Sony Music-owned, independently run music distrib and tech outfit the Orchard recently expanded into features with the hiring of senior VP of film & TV Paul Davidson. He points out their strong ancillary connections and digital “dashboard” allowing producers instant access to “how their movie is doing in theatrical or digital, or what we’re spending against the P&A from its first day in release.” Orchard’s reported low- to mid-seven-figure Sundance buy of “The Overnight” may not have paid off in big B.O. but “it was important for us to make a statement about how aggressive we wanted to be in the acquisitions market,” he says. It also laid the groundwork for his recent seven-film deal with the Duplass brothers.
Another distrib, Millennium Entertainment, expanded and rebranded itself as Alchemy this year. Partnerships with ARC Entertainment and companies it has bought “are part of our strategy to become the one-stop shop for direct deals everywhere, and the largest independent aggregator across all platforms,” says VP of acquisitions Jeff Deutchman. In addition to several prestige Cannes pickups, Alchemy had one of this year’s biggest day-and-date successes in theaters, the quirky Kristen Wiig comedy “Welcome to Me.” The 2014 TIFF title has grossed more than $2 million in all of its first-window platforms, including a $600,000 theatrical take. “What we’ve learned from doing deals on smaller films is to negotiate splits from different types of media that let you benefit as best you can from downstream revenues,” says its Bron Studios producer Aaron L. Gilbert. He adds that the film should see a bit more revenue from Alchemy’s recent sale of the film to Netflix.
This year, a wide range of 2015 acquisition titles — from the Indian drama “Parched” and the Emma Watson-toplined suspenser “Colonia” to the J.G. Ballard adaptation “High-Rise” and the Jonas Cuaron-helmed thriller “Desierto” — face the same choices.
The future of some potential new homes for them in Toronto is still up in the air. A few producers have expressed interest in the new traditional indie distrib reportedly being formed by Tom Quinn and Jason Janego, who recently departed the Weinstein Co.’s multiplatform distribution arm Radius-TWC. Even more seem excited by the new studio STX Entertainment’s possible activity in Toronto, but according to an insider, STX is focused on producing, marketing and distributing its own growing slate.
As for Clarius, the original buyer of “She’s Funny That Way” last year in Toronto, chairman William Sadleir offered his take on their ill-fated acquisition. “We are enormous fans of Peter Bogdanovich and greatly appreciated and admired ‘She’s Funny That Way,'” he said. “But as we continued to analyze the film and marketing assets, we agreed it was preferable for the filmmakers to find another home for the movie, and we are glad they found willing partners in Lionsgate Premiere.”
The acquisition world will keep turning, and producers are looking at ways to get ahead of the game. “On some films, we are in early discussions with distributors to share in the upfront risk for a greater share of the back end,” says Film4’s Bruce Smith, who, despite her ancillary concerns, still sees big potential upsides in the market. “We’re currently talking with Amazon about possibly co-financing a film, and the list of very viable U.S. equity options such as Annapurna, Waypoint Entertainment and Black Label Media is happily increasing.”
Endgame producer Jim Stern notes distribs’ increased willingness to board projects earlier (as Lionsgate did from 12 minutes of footage on his TIFF premiere “Freeheld”). He’s also shifted his budgets from about $30 million to under $10 million. “We analyze the risks and what we call the ‘salvage value'” he says, “which is: What can you get out of the film if it doesn’t work?”