As the Sundance Film Festival marketplace gets underway this morning in frigid Park City, here’s the forecast from buyers and sellers: strong accumulation of deals, low minimum guarantees, and potentially an avalanche of multi-platform sales. There is much to be excited about here, even if buyers say they won’t let the thin air get to them and nudge them to spend drunkenly.
Here’s what’s encouraging:
* New buyers led by indie stalwarts like Bob Berney and Daniel Battsek, joining companies like A24 and LD that were new last year and come back hungrier. Add them to the perennial players who all have holes in their release schedules this year and especially 2014. That includes The Weinstein Company, whose Sundance appetite often dictates whether a festival sales market will be boring or dazzling. “We are looking for a film or two for all three of our divisions, TWC, Dimension and Radius,” said TWC COO David Glasser. “We’ve come to buy, if the right product presents itself.”
* Spectacular success stories from last Sundance: Beasts Of The Southern Wild was a home run in the traditional theatrical release space; Arbitrage was so successful as a multi-platform release that it has made that release strategy no longer feel like a consolation prize.
Largely unheralded as the 2012 fest opened with no stars and a first time director and a $1.8 million budget, Beasts is the breakout success that Sundance filmmakers dream of, grossing north of $11 million and Oscar-nominated for Best Picture, Best Director, Best Actress and Best Adapted Screenplay. Arbitrage is that $12 million-budget film with seasoned but not hot actors, the kind of film that once fell into that no-man’s land between theatrical distribution and straight to video. Released simultaneously on VOD and in theaters, Arbitrage grossed $8 million theatrical and a whopping $12 million on VOD. Once all the receipts are counted, Arbitrage should get close to $50 million worldwide in its first revenue cycle, its writer-director Nicholas Jarecki told me.
Related: Sundance: Five Directors To Watch
These positive factors collide with the very thing that makes Sundance a singularly special festival: the films here rarely fit anyone’s definition of mainstream, and the filmmakers are a defiant bunch, tackling dark, squishy subjects and caring far more for art than commerce (give them time).
So while you have up-and-coming star Joseph Gordon-Levitt making his directing debut in a film he stars in with Scarlett Johansson and Julianne Moore, Don Jon’s Addiction casts him as a porn addict, torn between two women; Like Crazy‘s Drake Doremus is back with Breathe In, with Guy Pearce, Amy Ryan and Felicity Jones, in a story about a teacher falling for one of his young students; Lovelace has Amanda Seyfried and Peter Sarsgaard in a true story about a woman forced by her manipulative boyfriend to degrade herself and become the biggest porno film star in the world. And there’s The Necessary Death of Charlie Countryman, with Shia LaBeouf so smitten with a woman that he comes back for more and more when her violent ex-boyfriend regularly pulverizes the romantic rival.
Thee is also the sobering reality that only a handful of Sundance films in the past five years have been breakout hits that exceeded $10 million in domestic grosses. That means one, maybe two per festival will justify the 7-figure marketing spends distributors will gamble on theatrical releases.
Does that mean filmmakers here should be anything but upbeat? Of course not. Most have scratched and clawed to make films that cost $1 million or less. Last Toronto left sellers disappointed that not many deals went for more than $2 million, but those pictures cost a lot more. Landing a number like that for a Sundance film would mean a windfall. And most of the filmmakers here are so new they don’t know what to expect.
“What I hoped for coming into Sundance, at best, was to be able to see the film play in a Film Forum type theater for a week,” said Beasts Of The Southern Wild director/co-writer Benh Zeitlin. “What happened was unfathomably beyond our expectations. Breakouts have stars, or corporations backing them. We made our films completely outside of the industry. Even after the film premiered, I didn’t think we’d get distribution.”
The reality of all this is that by Monday, several of the showcase premieres will have splashy deals if distributors fight over them, and riskier pictures will settle for six-figure upfront payments. But there is a palpable difference in the attitudes of sellers I’ve spoken with. It demonstrates another healthy step forward in the indie recovery that came after the collapse five years ago. Even last year, sellers came in hoping buyers would bite. This year, all of the major agencies come in with as many as a dozen pictures, and they are confident they’ll sell out the inventory. But the emphasis isn’t that as much as it on choosing the right distributor, who’ll squeeze every drop out of the release. That’s because the days of getting rich on upfront payments are gone. The pot of gold comes at the end of the road, if the film plays. In the deals being made now, filmmakers and distributors are essentially revenue partners taking the risk together. If distributors are lazy or fall out of love with a film and dump it, it will have been a dream-crushing waste of time.
“The movies that succeed will do so largely on their marketing and the decisions made by distributors,” said CAA’s Micah Green. “The challenge for us is not selling films; everything will sell because there are more buyers than last year. It’s about giving the film a chance to be a success story in its own release, and that comes down to choosing a distributor willing to invest the resources and work necessary to try and break it out.”
There are no guarantees on that front. Last year, Fox Searchlight spent about $1 million for Beasts, and buyers and sellers express unanimous admiration for a release and marketing campaign that hit the mark. Same studio made the biggest buy of the same festival, paying $6 million for The Surrogate. Retitled The Sessions and released in a marketplace flooded with unexpectedly good, adult-themed studio Oscar films, the film hasn’t grossed its sale price yet. Searchlight heads Nancy Utley and Steve Gilula are as good at this as anybody, and they take risks; but sometimes it’s just very hard to gauge which films will hit with audiences when you are evaluating five a day and when you are swept up along with the crowd. Would it have been better to rush into the marketplace last winter, using the momentum of festival plaudits and rave reviews, and playing them up while kind of concealing the film’s subject matter? It seemed painful to me to watch Helen Hunt on talk shows, playing up the fact she was buck naked all through the film, because how else do you sell a polio suffering guy’s quest to lose his virginity?
“We are still glad we picked up The Sessions,” Utley told me. “It received significant awards recognition but financially it deserved to do more business. I think it suffered from the 127 Hours syndrome, where people anticipated a difficult viewing experience. The movie is uplifting and I think people will discover that over time. As for Beasts, we debated that one for 36 hours, trying to figure out what we could do with it. It was not obvious who it was for, how much it could do, what time of year to put it in. We were honest with the filmmakers, about not having a blueprint, but they felt our passion. From the opening sequence, there is an emotionality and a visceral connection you feel with that little girl, and there is an originality that just bursts through your consciousness and makes you feel something. You read all these lists of what the hot films are going to be at Sundance. Well, we come in with our own list, and we leave with a very different one.” Utley, like most of the major indie distributors I spoke to, has some room in her release schedule and hopes to head home with a film or two.
CAA is here with 12 (including jOBS, which got set at Open Road in advance of its closing night premiere), WME Global has 10 and UTA 11. There is a lot of co-repping going on between those and the other agencies. All the agents have similar mindsets as the find homes for these films.
“The filmmakers are pretty realistic and open to deals that bring results in how the film’s perform,” said UTA’s Rena Ronson. “It depends on their financial needs, of course, and some will depend on the press and audience reaction. If it’s a crowd-pleasing broad comedy, maybe there will be bidding wars. For us, perhaps that’s Drake Doremus or Lake Bell. Our job, though, is to be realistic and some successes, like Beasts, show there is upside that is not limited to a big upfront deal.”
Cinetic Media comes in with nine films, and vet John Sloss echoes that it is the buyers who might need to do the sales job of why filmmakers should gamble on them and their small upfront offers. “People just aren’t paying as much anymore and gone are the days where you got $4 million and crossed your fingers,” he said. “The backend waterfall deal is what you’re playing for, and you’re trusting they’ll do their jobs in what is becoming more of a creative partnership. Everyone is smartening up and understanding the new revenue streams and monitoring them more closely to looko where overages will come from. If you know where the bodies are buried, you negotiate out things that siphon off revenues. And there is increasing upside in multi-platforming.”
Ask any filmmaker, and the dream is a $25 million P&A commitment for a wide theatrical roll out. Short of that, the multi-platform sector has never seemed like such a strong second choice as it does this year, and and Sundance has played a large part in that. The first seminal success was Margin Call, and despite a reluctant star in Kevin Spacey (and who can blame a two-time Oscar winner for wanting his movie to play in wide release?), that film got an Oscar nomination and did not disappear. After engineering that success, Lionsgate and Roadside Attractions went one better with Arbitrage, which has become the biggest multi-platform release ever. Radius, the upstart multi-platform division that Tom Quinn and Jason Janego started for Harvey Weinstein, went a different way with the Sundance acquisition Bachelorette. While Arbitrage went day and date in theatrical and VOD, Bachelorette opened on ultra VOD first, at a higher price point. Arbitrage did $8 million at the domestic box office while Bachelorette grossed less than $500,000; but the latter turned in close to $8 million in VOD revenue for a film that was probably too nasty to ever expect a wide theatrical rollout.
There is still much debate over this release platform, but I expect VOD-centric deals to dominate this festival; there are many titles with stars familiar enough to be catnip for VOD, in films that won’t have the breakout worth the 7-figure P&A spends. Established distributors are still not totally sold, and they have impediments that keep from jumping into the fray like Weinstein did. Studio-affiliated indie distributors don’t want to cross the major theater chains which hate multi-platforming, and the strategy doesn’t match up the pay TV deal structures that are made lucrative only if films reach theaters. Also, some are suspect of the accounting in this fledgling sector, and are waiting to hear whether or not filmmakers have actually gotten windfall payments, because most of the companies involved are private and don’t have to report hard numbers.
To WME Global’s Graham Taylor, this negativity misses an important point.
“It is always about barriers to entry, and there are now so many more options and it is getting better every year,” Taylor said. “There are more tools to enhance the viability of self or virtual distribution, from P&A funds to crowd funding, to laying some rights with a third party and hanging onto others. We are allies in that process, and it’s much better than licensing your film, closing your eyes and hoping something happens. I’m optimistic about a future where technology continues to tear down walls, and the filmmaker gets so much closer to the consumer than was the case five or ten years ago. We have analytics that make it easier to pinpoint audiences; it takes you 30 seconds to find out how many Truffaut fans are out there and what theaters and places you can reach them. This business is back with a different face and while peole spend time bemoaning what they feel are disruptive changes. This business should be disruptive and it all goes back to the consumer. They want better art, and they want to have easy access to it.”
How do the filmmakers behind Bachelorette and Arbitrage feel?
“I grew up loving those films that rolled out in the 90s and built word of mouth like Reservoir Dogs and Swingers and before that sex lies & videotape, and this is close to the way those films built their audiences and allowed people to discover them,” said Bachelorette director Leslye Headland. “Being part of breaking through this new wall of distribution was sexy to me. And look, this movie was a deliberately divisive, my version of Heathers (which also bowed at Sundance). Some people were going to love it and others were going to hate it. It is hard to roll that out into theaters. As an artist, I was really happy with what Tom and Jason did.” As for her cast feeling slighted by not seeing themselves in the TV ads, Headland said that was helped by Kirsten Dunst having been through multi-platform success with Melancholia and All Good Things: “Kirsten and I high-fived when the film became the number one download on iTunes, and we understood we made history. This is the future, and someday somebody’s going to look back and see we played a part.”
As for Jarecki’s film, Arbitrage broke new ground because its star Richard Gere bought into the release pattern and worked as hard or harder to build awareness as he does on any theatrical release. “Going into Sundance, I had no idea how the film would play,” Jarecki recalled. “Was it an art film? Would it be received well at Eccles? After that screening I could tell from the reaction that we’d touched a nerve. I met with a couple companies, and Lionsgate’s Jason Constantine and Roadside’s Howard Cohen had a solid plan. It became clear nobody was going to do a wide roll out; Richard’s recent films hadn’t performed that strongly in the U.S. Could we have gone on 1200 screens? I didn’t know back then, but the irony is, the way we did the release, the film ended up being more profitable.”
The film grossed $12 million VOD, even though the price point, $6.99, made it cheaper than a theater ticket. “Those guys pioneered this model and I feel we got the theatrical gross equivalent of $20 million on a minimal marketing spend,” Jarecki said. “Let’s say 2 to 2.5 people watched the film at home per order. The theatrical amounts to 1.1 million people and the $12 million VOD means another 2 million. That’s 1% of the population watching the movie, and Howard felt that it would have cost us maybe $15 million-$25 million in marketing costs to get that in the traditional way. We spent low seven-figures. And we get 70% of the revenues from cable operators, as opposed to the 50% from the theaters. You have to say that’s a home run. It’s opened the traditional route in the rest of the world and we’ve grossed $18 million with five major territories still to open. My projections show we could end up at $25 million to $30 million foreign, which could get us close to $50 million on the first revenue cycle between theatrical and U.S. VOD.
Jarecki gives the credit as much to Gere as the distributors.
“A lot of this is due to “The Richard Factor,” Jarecki said. “He was unbelievably committed to this release strategy. We’re going back to Europe to conclude our media tour, and what star does that at this point in the film’s run? He went to L.A. five times, he’d do press conferences in Europe that would last hours. His willingness to promote the film, to do 15 or 20 days of press, was a huge factor. If you don’t have a lead who’s willing to go there, it’s much more challenging to make this work.”
There is one aspect of this new model that is similar to the age old one in Hollywood. Jarecki is still waiting to get his investors paid back.
“Would you believe at those numbers, I’m still trying to make sure we break even, I’m still checking with my sales agent to see when we’re going to see money from TV sales,” he said. “I’m waiting to get my investors back to even, but I am confident. The target for a successful film investment is a 20% return and I feel confident we will hit that at least. From an investor standpoint, I feel like we hit Lotto. My investors would have been happy to get back half of their money and they will do much better than that.”