EXCLUSIVE: Anticipating swelling ranks of distributors that now include TV interlopers Netflix and Amazon, sellers arrived at the 68th Cannes Film Festival armed with promising fare in the form of finished films, sizzle reels and scripts with star attachments.
U.S. distributors hungry for film fare give the festival, which launches today, the potential to be as lucrative as last year’s edition. That was when Paramount spent a remarkable $20 million to pre-buy the Denis Villeneuve-directed science fiction film Story Of Your Life with Amy Adams, and big deals followed every day. Already this year, Focus started things off days early by making a near-8 figure commitment for North American rights to The Coldest City. John Wick helmers David Leitch and Chad Stahelski are directing Charlize Theron as a super spy, right after her turn in Mad Max Fury Road. And Lionsgate got things started on day one of the market today by sealing a near $4 million U.S. rights deal for Genius, the prestige picture that stars Colin Firth, Nicole Kidman and Jude Law.
Sellers are bringing enough sexy projects like these, indicating that Cannes 2015 will be as robust as last year. The trend already has been set, as every recent festival from Sundance to Berlin, Toronto and even the recent Tribeca have been sellers’ markets, with splashy deals by distributors filling slate slots. Consider that the last time fashion magnate Tom Ford came to a festival with a movie, it was 2009 Toronto and his acclaimed debut, The Single Man, was lucky to squeeze out a $1 million minimum guarantee from Harvey Weinstein, the only picture to be sold that entire festival as the indie business took a terrible nosedive.
There’s likely to be much heavier bidding this time around for his follow-up Nocturnal Animals, an adaptation he scripted of the Austin Wright novel Tony And Susan, with Jake Gyllenhaal and Amy Adams starring and George Clooney and Grant Heslov producing. It should be sold long before he shoots a foot of film.
Despite the potential for high-profile deals for prestige product, this festival marketplace also brings many challenges.
Among them: A stronger U.S. dollar against weakening local currencies could reduce appetite for product and the money paid for it. That may create shortfalls in the way these pictures are put together in the traditional theatrical release model. Another variable is the increasing influence of TV — evident in Netflix’s Ted Sarandos paying big dollars to entice film financiers to bypass the traditional theatrical model, as well as Amazon Studios’ veteran indie producer Ted Hope is luring filmmakers and financiers with films that can have their standard theatrical run. In the scenario Hope has been presenting to sellers, Amazon would then stepping in front of the pay TV phase in the traditional movie revenue waterfall.
THE TELEVISION FACTOR
In our conversations with buyers and sellers up and down the Croisette, many brought up television as a growing influence — both positive and negative — on the independent film business. There are numerous ways that TV is playing a spoiler role, starting with the drain on talent, especially writers, from cinema to TV. That trend is even more heightened when it comes to attracting the handful of A-list actors who can push the needle for financiers.
“There’s a dearth of bankable and available actors now because they’re all doing Star Wars and Marvel movies or epic TV series,” says Protagonist Pictures’ Mike Goodridge. “Independent film doesn’t seem to be top on the list anymore. In the past, indie films were a way to stimulate careers. Now the world’s greatest actors see they can get that through TV.”
FilmNation’s Glen Basner cites the “deadline of the marketplace that forces talent to commit” as a reason many of the major agencies and sales agents weren’t sure even last week exactly what projects would come together in a form solid enough to sell. “Writers, actors and directors are doing other things, including TV. So now there’s not twice as many films, which is not necessarily a bad thing.”
Yet another way the influence of TV is being felt: Some of the biggest players on the Croisette are obsessed with it. That starts with The Weinstein Company, often the most prolific buyer of films at Cannes. TWC’s in talks to sell its TV division to ITV in a deal that would finally return some capital to its investors, and give TWC a foreign distribution apparatus that will fortify its expansion into animated series programming and more ambitious scripted and reality efforts. In the U.S. alone, there are over 50 places you can set a TV series. Why deal with the volatile indie film business when in recent years the downside risk of television has been lower and the payoff often higher?
It’s catching on. Several indie companies have hung TV shingles including Wild Bunch, Fortitude and distributor A24, which is kicking off with a Channing Tatum-produced comedy. IM Global announced a multi-project TV slate the week before Cannes and Ex Machina producer DNA has re-calibrated to make TV the driver thanks to a first-look deal with Fox Networks.
Says Wild Bunch co-founder Vincent Maraval, “The economy of television is safer and less arbitrary in terms of exposure to risk. Television today offers greater creative freedom than film. Studios only want box office so it’s challenging for directors to find films that aren’t formatted. The economy of cinema is fragile and this type of film is disappearing. Wild Bunch still does it because that’s our raison d’être, but other companies,” are being force to go the formatted route.
THE NETFLIX FACTOR
Amazon Studios is just getting underway with Ted Hope at the helm of its movie aspirations. As for how far Netflix has gotten in a very short time, consider that Netflix COO Ted Sarandos will give a keynote speech to Cannes market attendees this week, and he will be introduced by Cannes Film Festival chief Thierry Frémaux. That’s pretty remarkable: A digital TV exec being welcomed with open arms by one of the world’s most strictly cinema events. It’s also a sign Cannes is recognizing “a need to understand what’s going on in the marketplace,” says Sony Pictures Classics’ Michael Barker. “We are in a time of transition in so many ways.”
Sellers tell us that Netflix is determined to spend large for ambitious feature product to fuel its global streaming expansion. And while small theatrical penetration in a few dozen markets can be part of those Netflix deals in the U.S., the streaming service has expressed a willingness to buy out the backend of what a film would have realized going the traditional theatrical route. Netflix has proven that with acquisitions of the Cary Fukunaga-directed Beasts Of No Nation with Idris Elba, and Jadotville, starring Jamie Dornan, whose star launched as the title character in Fifty Shades Of Grey.
Though it has made early movie deals with the likes of Spike Lee, Terry Gilliam and Jim Jarmusch, Amazon is too new to assess. But you can see how this emerging alternative to traditional theatrical is already turning the business on its ear. The streaming service deals so far appeal most to financiers looking to cover downsides and to make money on their investments quicker than waiting for a movie’s risky revenue run, where so many things can go wrong. This will still be a sore spot with some filmmakers and stars who want their work on the big screen — that hampered the growth of multi-platform releasing after the success of Sundance hits Margin Call and Arbitrage — but it is a big topic of conversation. After Netflix’s stunning success with series like House of Cards, Bloodline, Daredevil and Marco Polo, the question has to be asked: what would happen if Netflix or Amazon gets hold of a film that wins Best Picture?
Buyers and sellers are all over the map in their assessments of Netflix’s encroachment on their turf, with the expectation that Amazon will soon follow.
In its splashy pre-buys so far, Netflix has paid up to 130% of the budget in getting financiers to bypass theatrical as its port of entry. It has created a new business model for producers and financiers: all upfront and no upside. How viable that strategy will be in the long term is the question, particularly when the entire 1+1=3 logic of the independent film business is built on striking theatrical gold.
“Look at something like Buena Vista Social Club,” says Mister Smith’s David Garrett, who is handling sales on the sequel to the blockbusting music docu. “That film made $7 million in Germany, Austria and Switzerland alone. You don’t want to miss out on overages like that. If you do a Netflix deal, essentially you’re consigning your film to the small screen. It works for some films, but not all.”
Sniffed one European sales agent, “They want the world or nothing, and they’re overpaying to take things off the table.” Said another exec: “Distributors are increasingly pissed off. Netflix says ‘we’ll buy from you, we’re your friend’ and now they’re trying to get films directly from producers and agents and carve out their own window.”
Others look at the streaming incursion with an opportunistic attitude. They say Netflix and Amazon will have to start out being used as a stalking horse by sellers looking to ratchet up prices for films. But those streaming services present a viable landing place for tweener product that might otherwise get lost in the mix. It seems clear that if you have a movie with big elements and a chance to success on the big screen, you will take that deal, at least until Netflix or Amazon Studios have success that changes the decision making process. It certainly did happen quickly with television programming.
“It’s always a new guy showing up and now it’s Netflix,” said a U.S. exec who has observed the ebb and flow of deal making over the years. “They’ve got stupid money to throw around, they’ll learn very quickly.”
THE CURRENCY CRISIS FACTOR
The currency crisis has exacerbated problems already in evidence last year, when Russian buyers were offering just $10,000 for top titles. The ruble has dropped precipitously and that’s been bad news for Hollywood because it’s typically been one of the best offshore box office markets for not only studio movies but also indie film.
Elsewhere, the high dollar and volatile European markets remain a cause of concern, even if buyers and sellers are used to the ups and downs of the market. “Every export business is confronting it,” says Sierra/Affinity’s Nick Meyer, whose Oscar-winning Whiplash has had a strong offshore run and was a smash in Korea. “We have to manage it, and it is part of the conversation. W’re working with our partners through a really challenging time.”
France, Germany and other Western European territories are also down as TV channels’ declining appetite for feature films leaves distributors with less leeway to offset the level of MGs. For the record, the U.S. is currently up and back in the pre-buy business thanks to new well-capitalized and ambitious entrants such as A24, Broad Green and Bleecker Street, to name a few.
At least one bullet has been dodged — for the time being — with the long-awaited publication of the European Commission’s plans for a Digital Single Market. Months of apocalyptic predictions from some of Europe’s highest profile directors warned of an end to the independent film business as we knew it by some who had feared an end to windowing and, most damagingly, an end to territorial licensing, thereby eliminating the pre-sales business overnight.
What emerged instead was 16 initiatives,that proposed the establishment of a unified and borderless regulatory framework for the Internet across Europe, which preserved territorial licensing but definitely inches towards a borderless digital world.
Ironically, who stands to benefit the most from such a move, if it does ever materialize: Netflix. The company’s all-rights/all-markets policy places it in prime position to take advantage of that change.