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Amazon and Netflix Are Just ‘Tip of the Iceberg’ for Indie Biz Changes

What will feature film sales look like five years from now, or even next year? As things change at a rapid pace with new streaming services, distributors such as Annapurna, Neon and STX appearing and windows shrinking, no one knows for sure, but some of the top players at this year’s Cannes Film Festival and other industry experts offer their best predictions.

“Amazon and Netflix are the tip of the iceberg in terms of what’s coming for the film business,” says vet producer/financier/sales agent Cassian Elwes, who will come to the Croisette with several new films, including first footage from the Keanu Reeves-toplined, IM Global-repped thriller “Siberia.”

“You’re going to have all these giant streaming internet behemoths — Apple, Hulu, YouTube, WeChat, Alibaba Group, you name it — coming at our business,” Elwes says. “Because their model is going to have to move towards IP to provide content that’s different from their competitors in order to draw eyeballs towards them.”

Bloom president Alex Walton, who’s repping the Diane Keaton/Jane Fonda/Candice Bergen comedy “Book Club,” notes that it’s already happening. “Verizon and YouTube have film acquisition groups now,” he says. “I know producers around town who are doing deals with them and a variety of other players who can offer a worldwide footprint.”

Rocket Science founder Thorsten Schumacher — selling the Michael Jackson biopic “Bubbles” — predicts that “during the next five years, each year is going to be different: the players, the models, the types of deals and the territories are all changing, and that’s mainly because of streaming. You can see distributors like A24 becoming global acquirers, and there’s nothing stopping national tech companies and telecoms from buying worldwide streaming rights. Netflix became a global distributor, and Virgin or Sky or Canal Plus could do the same. Why couldn’t Hulu or AT&T have the best picture Oscar winner next year … or Facebook? It’s very possible.”

Then again, Schumacher says, it could go in a very different direction. “There’s a concern among producers and distributors that while there’s a spike in [film sales] now, over time Netflix and Amazon will create a duopoly in a commodity market.”

International distributors’ rep Gordon Steel of The Steel Co. has already felt the impact of Netflix and Amazon on the Croisette, as they “acquire content and then [bypass] normal distribution routes, thus cutting product out entirely from the standard independent market pipeline.”

Indeed, the inclusion of two Netflix films in Cannes, “Okja” and “The Meyerowitz Stories,” has prompted the Federation of French Cinemas — a network of state distributors — to lash out, arguing that a streaming release of a big-screen feature threatens the integrity of movies, while raising the arguments surrounding windows and release dates.

The good news, says Sierra/Affinity founder and CEO Nick Meyer, is “the demand for premium content is at a really high point.” But in order to break through the tidal wave of films and TV shows and reach the right audience, “it’s incumbent upon us, who sit at the nexus of art and commercialization, to find the appropriate home and distribution partners for each of our movies.”

FilmNation senior VP of international sales Tara Erer agrees. “I don’t think there’s any issue in getting financing for films right now,” she says. “But so much content from TV and digital streaming has been so good, the bar for films has gotten higher, so it’s more challenging to find films that are great.”

And get stars to appear in them. IM Global president of sales Michael Rothstein, who’ll be repping the Johnny Depp-toplined “Richard Says Goodbye” and Brian De Palma’s “Domino,” starring Nikolaj Coster-Waldau and Christina Hendricks, says this is because “there are bigger names doing television, or they get locked into these tentpoles for six months to shoot the film and then do the PR.” This has turned projects that have traditionally come together at the last minute before Cannes into an even more hectic juggling act.

The most lucrative options producers now have are often to take the money and run with a worldwide Netflix deal (that may at best have a brief Oscar-qualifying run), or make a deal that guarantees theatrical with Amazon and its team of cineaste execs.

Yet “streaming may be worse than piracy for the industry,” says Ray Pride, news editor of MovieCityNews.com. “It devalues the perception of any individual production, [or can lead to] ‘Netflix fatigue’ once you’ve binged all the things you like. Consumers have come to believe that the history of cinema and television, and peak TV to boot, is valued at the absurdly minimal $9.95 a month. Sure beats the cost of an $11 movie ticket.”

“There are so many new models afoot, some movies that might have died due to the ratio between negative cost and P&A [don’t have] as much of an issue anymore,” says producer Michael De Luca, who’s recently been expanding his portfolio of studio films to include more indie fare. “If a provocative and challenging movie like [the $47.7 million-grossing] ‘Manchester by the Sea’ were coming from a mini-major or a Searchlight, the P&A might have been an issue, whereas with Amazon and their model, that kind of drama has gone on to live in that space.”

Radiant Films Intl. founder Mimi Steinbauer, who’s debuting footage from the YA thriller “The Changeover,” sees the streaming services as continuing to propel “a very rapid evolution in the sales marketplace. You have to stay current or ahead of the game: how do you sell other rights if you’ve sold out SVOD on a film? What are the pitfalls? How do you manage the dating of the windows? And if you have a good streaming offer, how does that play into your overall revenue expectations for a film? We all have to be petty flexible and on the ball about how things are changing.”

Canada-based producer-distributor Entertainment One is in strong favor of shorter windows. “We spend a significant amount of money on marketing to get people to come to the cinemas, and then there’s a quiet period before they can enjoy it on other platforms,” says CEO Darren Throop. “You’ve spend all that money up front and then the awareness wears off. I think a more focused approach probably benefits the industry in the long term.”

Producer Russell Levine of Route One Entertainment has tried both top streaming services on two of his dramadies, selling “Tallulah” to Netflix ahead of its 2014 Sundance premiere, and auctioning the Jenny Slate-toplined “Landline” to Amazon this year in Park City.

The “Tallulah” deal “was really great for all the financiers, talent and producers,” Levine says. “I think the director has mixed feelings because it only got a one-week qualifying theatrical run, but Netflix actually spent quite a bit of money all over the country marketing it, so that was a double-edged sword. Amazon bought domestic on ‘Landline,’ so we ended up doing a worldwide deal with BVI — if you’re going to get 500 to 1,000 screens from Amazon, for example, then you’ve got a strong case for foreign distributors.”

Sellers are also looking to new territories to expand their audience. “In Africa, you still have all the French, Belgian and Portuguese pay TV stations kind of dividing up that market at the moment,” notes Schumacher. “But you have huge populations rapidly moving [up] towards the lower-middle or middle class who are buying TV sets, mobile handsets. And while the value of content may be going down, you can reach a bigger market.”

Mister Smith Entertainment CEO David Garrett sees another upside to Netflix and Amazon: selling territories that might otherwise be difficult. “You could have a B action movie that fits very nicely in Asia, but it’s not really theatrical quality for Europe,” he says. “But Netflix or Amazon might be very happy to pick it up for a large swath of European territories. Or vice versa: something that’s great for Europe but, for whatever cultural reasons, isn’t that hot for the Asian market.”

Rothstein feels this year’s Cannes will reveal where the two companies will be “trying to grow their subscriber bases with exclusive content. We’re seeing it in quite a few larger territories like the U.K., France, Germany, Italy, Latin America and Japan, which, as you know, is typically not a big presale territory.”

But like many other execs, Garrett senses that the days of Amazon and Netflix as bountiful customers are waning. “They’re both commissioning more and more for themselves. So my guess is they’re going to be going out into the market less and less to acquire independent [films].”

Last month, after reportedly spending nearly $1.5 billion in 2016, Netflix announced that it would seek $1 billion-plus in foreign debt financing to help pay for original programming.

Roadside Attractions co-president Howard Cohen senses that streamers’ big buys, which have helped propel sky-high MGs, won’t be happening forever.

“I think that Amazon is probably getting more choosy — that would be my gut feeling,” says Cohen, who’s released several films with the company, including “Manchester by the Sea”; he and Amazon have Todd Haynes’ “Wonderstruck” in Cannes competition. “They’ve been through a year and three months of releasing movies and have had some amazing success, but they also had a few movies early on that didn’t work, because theatrical is hard. Indie film continues to be a bifurcated market, where the bigger movies really work and the smaller movies aren’t doing any business. So I think they’re going to be more careful.”

But the success of their non-star-driven films may indicate where the industry is heading. Financier-producer Tim Zajaros, co-founder of Armory Films (“Mudbound” and Cannes sales title “Arctic”), predicts a move towards material-driven projects. “We’ve seen so many major flops from studios because the material wasn’t great. There’s this assumption that, ‘We have this star and this IP, so it has to work,’ and that’s just not the case.”

Along with such sleeper hits as “Moonlight,” Zajaros cites the U.S. box office success of Pantelion’s “How to Be a Latin Lover” and Great India Films’ “Baahubali 2: The Conclusion” as two films that have tapped into underserved markets. And he sees other new programming that will keep audiences leaving their homes for a communal moviegoing experience.

“In the next five, especially 10 years, I think we’re going to see a lot more virtual reality, 4D and immersive theater,” he says.

And Elwes, who’s partnered with Zajaros on several projects, takes a much less-cautious view of Amazon and other online companies than some.

“Every five years, there’s some sort of overturn in the business, new money that comes in, and this is the new money — the internet money,” he says. “It’s massive, massive. To Amazon, buying a film for $10 million is peanuts. That’s probably what they make shipping detergent each week.”

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