The state of indie films (cont’d)

The other day I posted this, citing Steve Zeitchik (24 Frames):

The offbeat family dramedy “The Kids Are All Right” comes closest to earning the crossover crown — it’s grossed just over $19 million since being released in early July. For a $5-million acquisition of worldwide rights out of Sundance, that’s not a shabby investment for distributor Focus Features. But it’s hardly the blowout success of “Little Miss Sunshine,” a movie to which “Kids” has been compared but which grossed nearly $60 million, or even the quirky breakup dramedy “(500) Days of Summer,” which grossed $32 million last summer.

In only one other summer in the past decade did a specialty movie not crack the $20-million mark (it happened in 2007, when “Waitress” just missed the cut). “The Kids Are All Right” will probably make it to $20 million, but barely. And the Lisa Cholodenko film is actually the exception — there isn’t a single other specialty movie so far this year close to it. Many years there are multiple films. And sometimes there’s even one blowout one, a “Napoleon Dynamite” or, all the way at the upper end of the register, a “My Big Fat Greek Wedding.” This year the well is dry.

Lack of quality product? The economic recession? Or perhaps this:

But it’s the simplest explanation that may be the truest: The number of financiers and distributors that might have produced and pushed these films are no longer doing business. The brothers Weinstein — who regularly churned out counterprogrammers earlier in the 00s, have been laying lower this year. Miramax and Bob Berney are off the scene. So are a lot of indie financing instruments. Sure, Fox Searchlight and Focus Features are still here as well-funded, infrastructure-heavy producers and distributors, but they’re increasingly the exception. Searchlight also took a rare pause form its usual crossover dominance this year as it released “Cyrus,” which grossed just over $7 million. (It did have the urban romantic comedy “Just Wright” gross $21 million, though that doesn’t fit the typical definition of a specialty film.)

That prompted this comment from Luke:

I used to work in indie distribution and I have to disagree with the assessment that it’s a lack of well-funded distribution companies rather than a lack of marketable product causing this supposed “summer slump.”

If this were true, it would imply that there are a bunch of indies out there capable of grossing $20M that simply weren’t picked up. If that’s the case, which films? We know what’s out there — just scour the major festivals of the past year. I can’t think of a single film that “would have” done big business but was ignored because there aren’t enough studio specialty divisions any more.

The reason the studio divisions shuttered is that indie box office has been steadily declining, and this summer is just further evidence of that. And, more importantly, whether there are one or two or three breakout indie hits a summer is not an accurate gauge of the indie box office as a whole.

The real question is why the indie box office has been declining in general, and this article says nothing about it. I’d argue that articles like this, that take one summer or one year and try to make an empirical argument about a “trend” in the film industry are usually pretty far from accurate.

My own cynical opinion is that Americans are just getting stupider and therefore want more simplistic entertainment. Sophisticated indie films just can’t compete with Hollywood blockbusters and reality TV. I’d even argue that the indies that do cross over aren’t really representative of sophisticated independent filmmaking — are “My Big Fat Greek Wedding” or “Slumdog Millionaire” or “Little Miss Sunshine” really that different from typical crowd-pleasing Hollywood fare? Not in my opinion.

Which reminded me of this Edward Jay Epstein article in Gawker: Can indie movies survive?:

To be sure, even before the phenomenal success of Avatar, the Big Six studios were shying away from smaller movies despite their potential profits. Consider, for example. the sad story told to me by one of the most successful indie producers in New York. In 2009, he brought a major studio a $20 million project packaged with a hot director and two stars. After running the numbers, the studio estimated that its potential box-office in America at $100 million, which would yield it, just from its 30% distribution fee and a locked-in output deal with HBO, a 100% profit on its investment. But it turned down the project. One of the studio’s top executives told the producer, “We don’t do films that do not have a projected box-office of at least $150 million.”

The reason for this rule is that a studio has only a limited number of slots for its releases at multiplexes and it has to fill them with projects, whether profitable or not, that generate maximum revenue, since the slice it takes off the top in the form of distribution fee pays the studio’s overhead (which includes the executive’s six-figure paycheck). This means worldwide grosses — almost 75 percent of Avatar ticket sales is from foreign audience — and indie films even if they are profitable, cannot be counted on to do that job.

Unlike a studio producer, an indie producer rarely, if ever, has a U.S. distribution deal in advance of shooting. To raise the money to shoot a film, he or she must either find an outside investor, an equity partner, or get a bank loan. What made loans possible, at least up until recently, were the availability of pre-sales agreements. These odd devices, which had been the backbone of indie financing since Dino de Laurentiis invented them in the 1970s, worked as follows: an indie produced would sell the distribution rights in foreign territories and then use the contracts as collateral to borrow from banks. Foreign buyers were willing to sign pre-sales deals because they assumed the film would get U.S. distribution since up until 2008 there was no shortage of smaller distributors specializing in indie films, including Miramax, Fox Searchlight, Fox Atomic Films, Paramount Vantage, Warner Independent Pictures, Picturehouse, New Line, Fine Line Features, Focus Features, Sony Pictures Classics, Lionsgate, the Weinstein Company, and Summit Entertainment.

Since the cash flows from indie films tends to be erratic, these smaller distributors had come to rely on advance output deals with three pay TV channels — HBO, Showtime, and Starz — to pay their overhead. In return, the pay channels got the exclusive rights to show their new movies. In 2008, for example, the $80 million that New Line Cinema received from HBO paid its annual overhead and development costs. Bob Weinstein, the co-chairman of the Weinstein Company, not only described output deals as “the bedrock of the business,” but said in 2008 “not one company in this business could survive and succeed without one.”

His words soon proved prophetic. When the pay-channels found they needed fewer movie titles to retain subscribers, and began cutting back on their output deals in 2008, the “bedrock” crumbled within a matter of months. By 2010, most of these indie distributors and mini-majors were effectively out of business including New Line Cinema, Fine Line Features, Picturehouse, Warner Independent, Fox Atomic, and Paramount Vantage.

It’s a combination of financing, distribution, and as Luke suggests, dumber audiences. Although with some of us, it’s not a case of being dumbed down, but rather worn down by so many mediocre movies and so few movies aimed at the — for lack of a better word — ‘thoughtful’ crowd.

Speaking of thoughts, how about yours? Do you actually go out to theaters to see indie films anymore? Or have you pretty much given up?

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