Indie Films, Part 3: The $1 Billion Opportunity

Updated.

By Adam Leipzig

There were some surprisingly hefty deals announced at Sundance, but despite major media reports that indie films are making a comeback, the overall news isn’t that good.  If we meet back here in a year, we’ll learn that some of those films were sold for too much money,* and if some of them underperform we can expect next year’s headlines to read “America Loses Interest in Indie Films” instead of “Indie Films Come Back.”

And no one will remember the 3,775 movies that didn’t get sold or distributed.

That’s right.  3,775.  About forty of the 3,812 finished feature films that were submitted to Sundance this year got picked up, although some will only get minor DVD distribution, and only about a half-dozen will get a full-scale, nationwide theatrical release.  That still leaves 3,775 movies you won’t even be able to find on Netflix.  To give you a sense of scale, let’s assume, conservatively, that each film cost $300,000 to make (some cost way less, but many cost way more).  Those 3,775 films represent an investment of over $1 billion.  If we assume that 30 people worked on each movie (of course most films engaged even more people), those unseen movies will represent the efforts of more than 100,000 people – two and a half times the size of Park City’s entire Sundance Film Festival-swollen population bulge.

As I’ve said before, indie films are being made.  They’re just not being seen.  The flurry of interest in them from a handful of distribution companies does not, as yet, amount to a genuine business change.

It’s one thing to make a product and discover people don’t want it.  But it is quite another thing to make a product and not even offer it to consumers. That’s exactly what’s happening with indie films: each year, more than $1 billion of “product” isn’t even being put before the public for sale, all because there are not enough – or the right kind – of distributors.

Did somebody just say “Market Opportunity”?

Timing’s ripe for new distribution companies.  Fox Searchlight and Sony Classics can’t significantly increase their current output.  Recent players like Summit Entertainment don’t release indie films.  Others, like Apparition, never got off the ground.  There are some small distributors, like IFC and Magnolia, but their business model doesn’t give indie films a strong nationwide release. (IFC acquires indie movies inexpensively, to feed their cable channel, and gives them a theatrical release primarily to get some reviews that will promote their channel’s offerings.)   So, despite the thousands of independently-made films each year, there is no viable theatre distribution for most of that creative effort.

Until some new players enter with a viable, alternative distribution strategies, indie movies will be all dressed up with no place to go.  Funny thing is, we all pretty much know what the viable strategy will be: Lean overhead, not built on the studio model; fair deals for films and filmmakers; reinvented marketing and audience-community building using available technologies and social networks; distribution to every possible screen and device.   Plus plenty of ready cash, to make quick moves and acquire companies and platforms as well as movies.

While there are a few people working on these approaches, I’ve been surprised at how long it has taken them to get their companies going.  Part of it is inertia, because it’s hard for some well-paid executives to leave their comfortable “consultant” gigs and try being entrepreneurial.  Part of it is investor fear, which seems irrational to me, because it is so much safer to invest in a portfolio of films being distributed, instead of bankrolling a single movie.  Many investors won’t take the time to understand how and why distribution makes sense; they think it is so much more glamorous to produce a movie. As most of these single-movie investors will soon discover, their movie will never be seen – because there are so few viable distribution companies.

For example, I’m aware of one investor who ponied up $20 million to bankroll one picture.  It will not get distribution, and his entire investment will be a write-off.  For that same $20 million, he could have financed a distribution company with a hefty P&A credit line.  With a new distribution company, he might have brought 100 movies to audiences over the next five years. Why didn’t he do that?  He would have had to give over managing authority to professionals who understand the business, be prepared to build the new company over time, and not see his name onscreen as “Producer.”

You may be thinking, “Lots of those unsold Sundance films aren’t good enough for people to want to see them.”  You’re probably right.  But enough of them are good for specific audiences to find them worthwhile.  If only 10% of those movies could find their audiences, that’s another 300 viable films each year where artists would have their work seen, and be able to connect with their public.

The revolution will arrive when a critical mass of new distribution companies enters the scene.  For that to happen, entrepreneurs will need to get bolder, artists will need to get vocal, and audiences will need to express their dissatisfaction.  Because now, entrepreneurs are missing their chance, artists are seeing their work go to waste, and audiences are being force fed a diet of films that is only a fraction of what should be, and could be, available.

*For example, here’s some math.  The Weinstein Company reportedly paid $7.5 million plus a $15 Million P&A guarantee for The Details (pictured above).  Their “settlement rate” – the amount they get from each theatre ticket sold – will be 42% at most.  So to clear their investment entirely in the US theatrical run, the movie would have to gross $55 million.  However, TWC bought worldwide rights, so they will get some revenue from selling the film internationally, plus they will generate additional income from domestic home entertainment and cable TV deals.  So let’s say that they’ll break even at about $22 million domestic theatrical gross.  That is possible, but it means The Details will have to be in the top 20% of box office earners, and achieve results better than movies like The Kids Are All Right and The Ghost Writer.

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Filed Under: FILM + VIDEO, TECHNOLOGIES

Comments (9)


[...] Link: Indie Films, Part 3: The $1 Billion Opportunity | Cultural Weekly [...]

Cotty Chubb

January 31st, 2011 at 5:36 PM    


Yes, well said. Wish I had the $20MM you mentioned! There's opportunity for a new model, no doubt.

Deryn Warren

January 31st, 2011 at 7:06 PM    


Wow! I read all three posts in a row and now I am sending the link to every film maker I know. Good job, Adam.

Stephanie Wilson

January 31st, 2011 at 8:25 PM    


Be careful, Adam! If too many people read this, we may have 3,775 distribution companies, and no product to distribute! On the other hand, hmmm…..

Garner Simmons

February 1st, 2011 at 5:57 AM    


Adam — As always, a provocative, brilliantly logical, carefully reasoned examination of what is — and perhaps always has been — wrong with this business. Greed and opportunism trumping talent and self-sacrifice. But if you're doing it for money, you're in the wrong line of work. Independent filmmaking is not about turning a profit. It's about turning your passion into images that arrest the imagination of others. And if you happen to make enough to pay the rent and make another, you're way ahead of the game. Do we need a better, fairer distribution system? You bet. But given the world we live, you've got to play the hand you're dealt or get out of town.

Take a look at John Cassavetes' Faces or Haskell Wexler's Medium Cool or John Sayles' Passion Fish or Jacques Audiard's The Prophet… just to pick four at random. Each reflects the filmmaker who made it. Each film deserves to be seen by far more people than actually ever will. But that's the way it goes. Life is filled with choices. And not every film will be worth your time. You need some less-than-perfect way of helping pick and choose. Word of mouth…? A critic whose insights you value…? A mesmerizing trailer that sticks in the mind…? The Sundance selection committee…? or some Twittering nabob whose unfortunately got your number by hacking your Facebook account…? Like it or not, you need help. But if you've got to trust someone's judgment, you might as well make it your own. Will you miss some great films? Probably. But you'll also see some you'll want to screen more than once — and that's the true sign of a great film.

As you say — let's do the math. There are 24 hours in a day, 365 days a year. Which means if you attempted to actually see each of those 3775 films that didn't make the cut at Sundance this year, at a rate of ten films per day (assuming an average length of 90 minutes each, that's 15 hours/day non-stop) all day, every day between now and Sundance 2012, you'd still come up 125 films short. So the question becomes: do you really want to spend every waking minute seeing all these films? I think not. Even if you could download them to your iPhone and didn't need a job or have a family or care about real flesh and blood relationships, the fact is, you still couldn't see them all. And that's not such a bad thing.

In the end, it all comes down to a kind of cinematic natural selection. Independent films need our support. Do your part. Seek them out. See the ones that seem like they might touch you in some visceral way. Watch them. Attempt to feel the emotions the filmmaker was trying to engender in you. See them again if they really move you. But don't spend a nanosecond beating yourself up over all the one's you'll miss. It's just not worth it.

In the end, deciding to spend your life in film is like making a totally illogical bet on yourself. To believe you can win despite the odds and the crooked croupiers and the stacked house. I came to this town with a quarter in my pocket and if I leave with 75 cents, I will have tripled my money and had a hell of time. What more could anyone ask?

Adam Leipzig

February 1st, 2011 at 5:13 PM    


Garner, your math experiment is a good one. It's true. We don't have enough hours in the day to watch everything. The good news is that we do not have to. That's the power of new technology, but it has not yet been harnessed for movies. In the next generation of distribution companies, it will be. Look at television as an example. Years ago, TV was "broadcast" and we had a handful of national networks. Today, TV is "narrow-cast" and we have 500 cable channels. Viewership for each channel may be small, but it is highly specific and targeted. Movies need to do the same thing, and that will right-size marketing budgets.

Garner Simmons

February 2nd, 2011 at 1:43 AM    


Your model is intriguing. Essentially, set up a parallel distribution system that is non-theatrical, capable to delivering films on demand to a self-selected audience via downloadable content. In fact, it already exists via the Internet.

A couple of years ago, two of my sons collaborated with four friends to make a micro-budgeted movie called Special Dead (logline: Zombies invade a camp for Special Ed — as politically incorrect a film as it is possible to make. The poster is a stick figure in a wheelchair with a chainsaw). Horror being one of the few bankable genres, the script had been written by Jared Tweedie, one of the six. Sean, our middle son, co-produced, co-directed and acted as 1st AD. Owen, our youngest, who works in camera and lighting, provided all the necessary gear, camerawork and gaffing. Another, Mark Fenlason, did special FX make-up, etc. etc. Together they put up the money — total: under $20K — bartered a location (i.e., agreed to shoot several commercial spots for the owner in exchange for use of the property on weekends). Cast was paid SAG low budget minimum. And over a month and half of exhaustive all-night weekend shoots on HD they produced an 85 minute feature. The other co-director then cut it on Pro-Tools, and they were in business. Simultaneously they formed an LLC for self-protection.

Once they had a film they felt they could show, they four-walled one of the theaters at the Sunset 5 and screened it on a weekday night inviting everyone they knew in the industry and telling them to invite their friends. Using the Internet, they managed to start a groundswell of buzz including the co-directors doing interviews on several Horror websites.

The night of the screening, they filled the theater. The film, an outrageous send up of the genre, had the audience in stitches despite terrible projection problems. Among those in attendance was a VP of acquisitions for New Line. Recognizing they had something, he pitched it to his bosses and met with the filmmakers. The proposal was: New Line would buy the film and the underlying rights from the filmmakers; remake the film with a realistic mini budget somewhere close to $1M; do a short commercial run and go to DVD including the original version as one of the add-ons. Great win-win proposal. It should have gone.

Unfortunately, timing is everything. While these negotiations were going on, Warner Bros. decided to make New Line a wholly owned subsidiary and merged it with the studio. Thus Special Dead and probably others like it, were tossed under the Warner Bros. bus.

Undaunted, the six filmmakers set up a website that included a way to either buy the DVD outright for $22 or download it for $10. Having gained an underground rep, the film has sold well enough to repay their initial investment and put them in the black. It continues to sell. It has also helped each of their careers. Sean, who wants to write and direct, has now attracted an agent. Owen, who is a founding partner in Lightspeed Grip & Lighting (check out lightspeedla.com), and a member of IATSE Local 728, continues to shoot his way into the camera Local 600. The writer, Jared Tweedie, immediately got an agent, etc.

At the bottom of all this is the American entrepreneurial spirit and passion to overcome all odds. So I agree, Adam, what you have proposed is a viable model. It simply depends up the ingenuity and drive of independent filmmakers willing to sacrifice and do whatever it takes to get their work to the screen — any screen, large or small. And the irrational conviction that there is an audience out there willing to seek you out. To all those reading this who aspire to make great independent films, take heart. Despite what you read, independent filmmaking, like the zombies who roam your imagination, cannot be killed. Good luck.

erik

July 5th, 2012 at 6:27 PM    


Adam-

Excellent article as you continue to hit head on what many seem to not mind “overlooking”

jonath

May 2nd, 2013 at 3:38 AM    


So, How many films are now going to be made in 2013? the number is ballooning!

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