ANALYSIS: Buyers and sellers of acquisition titles walked away from the Toronto International Film Festival exhausted from the all-night haggling sessions, but fully energized and cautiously optimistic. (See my take on the buyers below.) They feel the prolific deal making is a sign the specialty film biz has corrected a course of drunken dealmaking by studios that raised stakes to unreasonable levels before retreating. The Toronto fest’s primary role will always be as an awards season platform, and as a cost-efficient way to fly in junket journalists and Golden Globe voters for screenings and marathon press conferences. But this year, Toronto re-established itself alongside Sundance as the two most important festivals to secure distribution for finished films. Does all this mean specialty film is back?
After discussions with buyers and sellers all weekend, the answer is a qualified yes. At least it’s back to before studios set up divisions, overspent and elevated the economics to ridiculous levels. The game has been returned to the grinders happy to scratch for domestic grosses that don’t often pass $10 million. The flood of hedge funded movies that never should have been made has been flushed. This year’s crop reflected the course correction: I didn’t see a bad movie out of the dozen or so I watched, and most were shrewdly made and reflective of the economic reality. I counted two deals with north of $3 million minimum guarantees, Dirty Girl and Everything Must Go. There were a bunch more that just crossed 7 figures. While dealmakers said they couldn’t recall a Toronto festival with as many closed deals as this one, the money was a far cry from the years when, say, Thank You For Smoking, Trust the Man and Dave Chappelle’s Block Party all sold for north of $6 million. Or other fests where $10 million was spent for Hamlet 2, and $10.5 million for Little Miss Sunshine. Those are cautionary tales in this marketplace. This time, nobody made a deal where they will lose their shirts.
Rabbit Hole was originally a $10 million proposition, but that was cut in half, the perfect price for a movie with a career performance from Nicole Kidman. Everything Must Go was around the same price, despite starring Will Ferrell. Twilight producers Marty Bowen and Wyck Godfrey wrote that check, but it was a reasonable risk. The $3 million supplied by Lionsgate and Roadside Attractions, plus foreign sales, will make them whole. Movies like the Robert Redford-directed The Conspirator, rumored to have a budget a bit over $20 million, and the Terrence Malick-directed Tree of Life, are under greater pressure to perform domestically.
Agents packaging these pictures said that the days when foreign presales underwrote budgets is gone, but the new economic models can work. Films can still be built for profit if budgets are modest, and if soft money opportunities are maximized. Rebates as high as 60% are possible if you shoot in certain European locations. So are smart domestic, foreign and ancillary distribution deals that include a VOD component which can now mean high six-figures to a film. Oh yeah, and you have to make a deal with a distributor that doesn’t flake, as happened to fest films I Love You Phillip Morris, Casino Jack, and Happythankyoumoreplease.
“This sector never died, the audience for these films never stopped turning out for them,” said one acquisitions exec who made several major Toronto deals. “What crashed and burned were these studios that chased a mirage, hired 80 people with $10 million in overhead to staff divisions, spent too much acquiring and making movies and then blew $30 million on marketing. The implosion of DVD brought them all down. The remaining players are realistic about what these films can do, and we are excited by factors like VOD, or Netflix taking on the pay channels and paying real money for pay TV windows when Showtime and HBO weren’t. We’re all taking our shots conservatively, based on a lot of different models.”
I was pessimistic going in. It was my second fest and, last year, besides writing about Harvey Weinstein’s deal for A Single Man, I sat in the hotel mostly writing about Battleship, Real Steel, and other big studio deals because nothing happened. This time, buyers came to Toronto feeling there was no movie they had to have, and the festival got off to a slow start. But, suddenly, pics were selling competitively in the wake of premiere screenings. IFC responded to the raucous crowd reaction at the midnight premiere of James Gunn’s Super and outbid rivals, paying 7 figures. Then Harvey Weinstein paid north of $3 million to win Dirty Girl hours after its premiere. Buyers accustomed to waiting for sellers to take low offers were losing properties. The floodgates really opened on Wednesday when Sony bought James Wan’s Insidious, Weinstein bought Submarine, Lionsgate and Roadside Attractions teamed for the Robert Redford-directed The Conspirator, Anchor Bay Films bought Beautiful Boy, and IFC bought Werner Herzog’s 3D docu Caves of Forgotten Dreams. All but the docu brought 7-figure minimum guarantees, I’m told. Read More »