EXCLUSIVE: Slumping distributor-producer-financier Broad Green Pictures this morning will shutter its production division, a move that will mean layoffs of about 15 of Broad Green’s 75 employees, along with the exit of most of about 50 development projects being kicked back to filmmakers to be set up elsewhere. CEO Gabriel Hammond confirmed this to Deadline, but despite rumors to the contrary, stressed that he and his brother, Broad Green Chief Creative Officer Daniel Hammond, are not beating a retreat from the movie business. Instead, Hammond said, they are hitting the reset button after enduring a period in which they’ve been unable to buy a real breakout hit despite high investment in prestige, mainstream, genre and festival films. Hammond said he expected a reconfigured Broad Green 2.0 to launch early next year, though his acquisitions team will be looking at titles at next month’s Toronto and other festivals.

The move comes on the heels of failure for the genre film Wish Upon, whose gross matched its $12 million budget, a terrible tally in the lucrative genre space. Matt Alvarez, the Straight Outta Compton and Ride Along producer who came over from Relativity to head production, will likely leave after his contract expires later this year. But along with the exiting production staffers who’ll leave eventually, he will first help with the transition of projects back to the producers who set them at Broad Green. About 50 development projects will be jettisoned, and some of the high-profile ones include the L.A Riots film by Oscar-winning 12 Years A Slave scribe John Ridley; and Entering Hades, a drama that has Michael Fassbender attached. Right now, Broad Green is looking to keep some projects — Just Mercy, 1974, Eli and The Vessel were mentioned as likely — and the Hammonds will stay on as producers of projects that go elsewhere.

Broad Green

The independent movie sphere is an illogical and perilous business in the best of times, with results often difficult to forecast. That is evidenced by how unheralded Girls Trip out-grossed the $180 million budget Valerian And The City of A Thousand Planets on their opening weekends, or that heading into this weekend, Kidnap — a Halle Berry woman-in-jeopardy movie that sat on Relativity’s shelf for years — is tracking stronger than Detroit, the well-reviewed film by Oscar-winning director Kathryn Bigelow that launches the distribution arm of Megan Ellison’s Annapurna.

Broad Green has borne the brunt of that unpredictability, not helped by the idealism and naivete of founders who have been learning on the fly and who underestimated the difficulty. The Hammonds are movie-loving brothers who came to town armed with acumen from a financial business that made them wealthy. They figured to transfer that success to movies, and built an expensive infrastructure to facilitate what they figured would soon be a booming business. Unfortunately, not nearly enough of the films have worked. Hammond is remarkably blunt in assessing Broad Green’s performance since he and his brother started the company in 2014 with the resources from the sale of Gabriel’s mutual fund management startup SteelPath MLP Funds to OppenheimerFunds.

“Given the abject failure that was Wish Upon, there is not a positive story that can be written about the company right now,” Gabriel Hammond told Deadline. “It super saddens my brother and I because we have worked really hard these past few years. But it is time to re-examine what we are doing, own up to the mistakes we have made and come up with a plan for moving forward. The rumors of our demise, which have been circulating for a year and a half, are greatly exaggerated. We will completely retool the production division. We need a new way to source films. My brother and I take full responsibility for the failure to put together a department that can deliver, and this is 100% on us for not bringing in the right people and giving them an opportunity to thrive. Unfortunately, that department cannot continue like this.”

Hammond’s assessment of the situation at Broad Green makes this a very different narrative than the recent demise of Relativity, in two substantial ways. Hammond takes full blame for their company’s futility and its inability to generate enough hits. The Hammonds are also fully funding Broad Green themselves, as opposed to using investor money like Relativity did. That means the brothers can continue to operate for as long as it takes to turn things around, or for as long as they can withstand the pain and the depletion of their own resources for salaries, headquarters, production budgets, P&A and other costs.

While they are re-examining, the Hammonds will stop greenlighting movies. They are bullish on the other part of Broad Green, their distribution/marketing team, which they feel is poised for success with Dylan Wiley as head of marketing and Richie Fay head of distribution. Broad Green turned the festival acquisition A Walk In The Woods into a 2015 sleeper prestige hit that grossed $37 million, and Hammond feels strongly they have a chance to again hit a seam in the marketplace with the Ron Shelton-directed Villa Capri, with an ensemble cast headed by Morgan Freeman, the late Glenne Headly, Tommy Lee Jones and Rene Russo and a November 22 release date. But Hammond acknowledges that festival diamonds in the rough like A Walk In The Woods are few and far between, and the acquisition market for finished films is as pricey as it is risky. What the brothers have acknowledged is that they need a more reliable way to source movies for Broad Green’s distribution/marketing pipeline. That means opening themselves up to spending greater sums to invest in bigger budget mainstream fare, with more experienced and reliable hit-making filmmakers and producers.

Melinda Sue Gordon / Broad Green Pictures

The company early on got in business with elite prestige filmmakers, but they failed to generate breakout hits. That included a multi-pic relationship with director Terrence Malick. While a storied filmmaker and artist, Malick’s movies don’t perform reliably at the box office, as evidenced by Broad Green’s $566,000 gross turned in by Knight Of Cups despite a cast that included Christian Bale, Cate Blanchett and Natalie Portman. Despite strong reviews for Michael Shannon and Andrew Garfield, the $8 million budget 99 Homes, which Broad Green bought in a $3 million U.S. rights deal, grossed just $1.4 million. A foray into mainstream comedy production brought the $26 million budget Bad Santa 2, which grossed just $17 million worldwide. Beyond the genre film Wish Upon, there was the Nicolas Winding Refn-directed Neon Demon, which grossed just $1.3 million worldwide.

“We started with a focus on the independent side, with a desire to create something bigger,” Hammond said. “But we made some poor decisions and too many of the films were not economic winners. We were going to move toward the wide release business but there have been problems borne from being ignorant and overly ambitious while we were making that transition. Our grandiose plans were bigger than what we could support. We overestimated and made errors. The bottom line is, we’ll be letting our production team go, including physical production. Matt is going to hang around and help us figure out what to do with the projects. We envision this as a short-term hiatus, but we don’t want to put the talent and producers at disadvantage by holding up their films. We will get those projects into the right hands so filmmakers aren’t left hanging in the balance.”

Key to Broad Green 2.0 will be figuring out where the movies will come from in the future. Broad Green saw glimpses of what is possible in films it handled for Amazon Studios, but that company is evolving toward a self-distribution pipeline and Broad Green will need to look elsewhere.

“We see there are big former executives from places like Sony and Fox that are raising money for slates,” Hammond said. “We need to find someone with the experience we lack, and team their creations with our distribution and marketing department.” Those conversations have already gotten underway.

As they eye involvement in bigger budget fare, the Hammonds will at least for now leave the prestige film business in the rear view mirror. “The main theme is larger scope and budgets and less genre and niche,” Hammond said. “To compete in today’s marketplace you need a level of production value and storytelling and scope to compel consumers to leave their homes and their 70-inch televisions, and we need to bring something more substantial. It is very tough to make money in the independent space. I can’t tell you how many people I congratulated for their films during the last Oscar season, only to hear them grouse that even they didn’t know if the films were going to end up making any money. So even when you win, you might not make money.”

As for the speculation that the Hammonds have lost their taste for the movie business, the Broad Green CEO said that is not close to being true.

Broad Green

“This is painful and humbling, and the whole thing has been quite an experience,” he said. “My brother and I have learned a tremendous amount not just about film, but about managing people, building a business, and planning. This has been an eye-opening experience for both of us. My brother was in every school play, drama and musical, since he was 7 years old and I went to see every one of them. We always dreamed that long term, we would make careers out of film and art. Despite some tough setbacks, this has been a dream come true, and we love working together. This is tough for me to talk about, and there is not much to say here that is positive. But the truth is the truth.”