Ted Hope partnered with James Schamus and David Linde in Good Machine, the prolific director-centric indie company behind Crouching Tiger, Hidden Dragon, Y Tu Mama Tambien, In The Bedroom, Brokeback Mountain, Happiness, The Ice Storm and The Brothers McMullen. In this excerpt from his new book Hope For Film (Soft Skull Press), Hope writes about that seminal moment when the indie business changed and larger companies looked to swallow the prestige film factories. The principals all went in exceptional directions after Good Machine was swallowed by Universal Pictures back in 2000: Schamus ran Focus Features with Linde before the latter became Universal Pictures co-chairman; Hope formed This Is That with future taste making producers Anne Carey and Anthony Bregman. Here, Hope, who is currently CEO of film streaming platform Fandor, describes the feeding frenzy for Good Machine, and how the principals tried to better capitalize a company while navigating the collision between indies and studios. — MF
Participant Re-Ups CEO David Linde In Multiyear Deal
Time was running out.
The film business was changing. We could try to keep going the way we had for years, but I suspected that soon, we’d hit a wall.
Ang Lee’s Crouching Tiger, Hidden Dragon had a huge impact on me, my partners James Schamus and David Linde, and Good Machine, to such an extent that we considered selling the business to Barry Diller’s company, USA Films, in 2000 on the understanding that he was then going to flip it to Universal Studios. One of our final steps was a sit-down with Diller. It was an intimidating meeting. Here was this infamous media mogul, and we walked into this big boardroom, and he was the only one sitting at this colossal table. On the way up in the elevator, James, knowing that the whole meeting was a formality, told David and me that he wanted to ask Diller one question.
In the middle of the meeting, James finally looked Diller in the eye and said, “We want to ask just one question.” And Diller agreed, but being the consummate dealmaker, he insisted that he get to ask one too—but we had to go first. So James asked, “Why do you want to go into the art film business?” And Diller answered something like, “Film is more than just a business. I love the art of it, and there is a real potential to create great culture and good business.” (You can tell how much he was committed to that statement by what he subsequently did in the specialty film business. Nothing at all.)
But then it was Diller’s turn to ask us a question: “How the fuck did you guys make so little money on Crouching Tiger?”
The answer was, essentially, the independent model.
Over the years, some nine different companies had made offers to buy Good Machine. The eighth company was British mogul Nigel Sinclair’s Intermedia. We were close to a deal with them, but the negotiations eventually broke down. Intermedia was then a public company on the new German Media Stock Exchange and wanted to have everything structured to drive a profit, which meant that if our projects weren’t generating lots of profit, we would lose control of them. This new stock exchange also looked to be weakening at the time. What we thought we were going to get paid wasn’t necessarily what we would get paid; as the price was based on stock, there was little opportunity to fix it in place (or incentive to do so). We ended up killing the deal in the final hour after both sides had gone through a grueling due-diligence process.
But one of the key things that allowed the Universal deal to eventually go through, particularly as fast as it did, was that we had all of our financial and legal books in shape, thanks to Intermedia and all those other offers. By the time Diller and Universal came knocking, we were ready. Our bookkeeping was in order, James and David were eager to go on to the big leagues, and the model as it was working for ambitious independent films no longer seemed so functional without a guarantee of U.S. distribution in place. And most importantly for me, I was ready to focus on a new method that would put the movies first. Although they would be lifted by the business, they’d be driven by our individual passion. I thought I had a way that would support a more sustainable and creative indie film industry. (It proved not to be that easy.)
Fortunately, it turned out that as fast as things were changing, the old models for making, financing, and distributing movies would exist for some time—longer than I suspected, actually. And in the interim, there were some wonderful movies to make. But the traditional ways of indie film, as we all knew it, were coming to an end.
When it became clear that Good Machine was finally going to be sold, a number of my colleagues told me they wanted to keep working together. There was Diana Victor, our business affairs person; Anne Carey, our development executive; and Anthony Bregman, one of our producers.
I’ll never forget the day Anthony first walked into the Good Machine offices with a photograph of the Angelika Film Center marquee. When he realized that Good Machine had something to do with most of the films playing there, he wanted to become a part of our enterprise. He offered to be my assistant and said he would work for free for five months. At that very moment, my current assistant had accidentally blown up the office cappuccino machine, sending froth splattering all over the place. “Okay, you’re hired,” I told Anthony.
Anthony’s first major assignment at Good Machine was to retrieve a Nagra reel-to-reel sound recorder that a Coney Island hoodlum had liberated from our equipment truck. We had gotten a call demanding a ransom. Not only was Anthony brave enough to make the journey, but he somehow managed to return with the equipment and all the money we gave him to retrieve it. We knew from then on that Anthony would make a great producer.
When Anthony, Anne, Diana, and I talked about what we hoped to build together, it quickly became apparent that we all wanted the same thing: We didn’t want to have huge overhead, so we wouldn’t be forced to take jobs simply for the money. We wanted to work only with people we liked, and we wanted to work only on movies that we loved.
In the early 1990s, I remember having lunch with legendary film scion Samuel Goldwyn Jr., the son of one of the founders of Metro- Goldwyn-Mayer (MGM). We had just sold The Wedding Banquet to his film distribution company.
Right off the bat, he asked James and me, “Let me understand some- thing. Are you guys artists, or are you businessmen?” That was his conversation starter.
And I responded, “Can’t we be both?”
He paused and said no.
Through much of my professional career, I’ve tried to reconcile both sides of that line, and This is that—my new film production company— was our attempt to resolve the contradiction. It may be a more financially sound business model to build a slate of films, raise financing for the entire set and make a bunch of movies than it is to go from movie to movie. But you need a lot of money to finance a slate, and that takes a hell of a long time. Plus, movies are perishable goods. I would never say to a filmmaker, “We’re going to wait on your movie until I get another five million for more of the slate.” If I’ve raised money for a movie, I’m not going to want to wait around—even if waiting might turn out to be better business. Not waiting is a decision for that particular movie and that particular filmmaker. It’s a good decision for the art. But it’s not necessarily good business.
Likewise, when you meet a one-of-a-kind filmmaker, it’s good business to stay in business with that one filmmaker. Sometime early in my career, around the time of Ang Lee’s Eat Drink Man Woman, James had said we should only produce Ang’s films. We could see his budding mastery, and James was asking, “Why would we want to work with anybody else?” Ang is a great guy and an adventurous spirit. What more did a producer need? That might have been fine if I had felt like I knew everything and I was comfortable with the world as it was—but that wasn’t me. I knew that I was learning a lot by working with a mixture of directors and at a range of different budget levels, and I didn’t want to give the variety up. That’s how I’ve learned my craft, by mixing it up and taking on movies where I know I’m needed—where I know I’m not just another producer. It can’t just be about getting the job or getting the movie made; I want to keep learning every step of the way.
So our new production company was formed on many of these principles: keeping our expenses lean and working only with the people and the movies we were passionate about.
Eventually, This is that became official: three of us producers, pooling our fees, figuring out how to bankroll the movies we loved, and focusing on films budgeted from seven to twenty-five million dollars. Keeping our budgets in this range gave us both the most production value and creative freedom that the industry allows. At under twenty-five million, we wouldn’t be as tightly scrutinized by the studios and could still be daring in subject matter. And seven million was the minimum to manage a six-week shooting schedule, dress the sets, elevate the costumes, and enhance the shots and lighting—the stuff that makes up production value. We could aim more for a niche audience than a mass market. And we could make movies that both meant something and made money.
But the sale of Good Machine to USA Films/Universal signaled, at least to me, that independent producers’ days were numbered. It would become harder and harder to finance a film solely around international sales and the prospect of U.S. distribution. Everything had to be secured in advance, and all the distributors recognized this fact. Furthermore, the notion of independence was over, because the studios now owned the majority of the specialized distributors. Even though my former partners were in charge of one of them, it still felt like everyone was driven primarily by profit.
Despite these ominous signs, we were in a privileged position at This is that. At Good Machine, we had established a reputation of delivering high-quality yet artistically ambitious work and discovering directors of the highest order. And we had fear on our side, in that distributors would be afraid that our next film might be even better than the one before it. With fear on your side, you could enter into long-standing “output deals” with international distributors, where they agree up front to take every movie you make for a fixed percentage of the budget. And that’s exactly what we did with companies like Village Roadshow in Australia and New Zealand, and Svensk in Scandinavia, all of which committed to buying the rights to our projects. We also had a first-look deal for all other territories with my former partners at Good Machine under their new corporate home, Focus Features. The first-look deal meant that Focus’s own international division had first dibs to any of our projects, excluding Australia, New Zealand, and Scandinavia. This deal helped with the perception that our films would always have a home. As long as these factors stayed the same, we felt our model would work.
The deal I helped to structure with Focus Features would definitely keep This is that going. But unfortunately not by much. When we got our first overhead deal at Good Machine with Universal around the time of Ride with the Devil, it was incredibly lucrative, with $1 million to cover overhead costs, salary advances for James and me, as well as a discretionary fund to buy the rights to material and develop projects. By the time we formed This is that, we received around $350,000 to cover our annual expenses, which was the industry norm at the time. No development funds; no advances. With $350,000, you could run your company and staff your office, but on that kind of budget, it was difficult to take any creative risks. We couldn’t afford to take on projects that wouldn’t get made. But if your slate becomes full of films that you feel are definitely going to be produced—often, anything that can be positioned as a thriller, a horror film, a comedy, or anything with a rising popular actor attached to it—they are not necessarily the movies that you have the greatest ambitions for. These other projects need nurturing; only time can make them whole. And as much as you want to make the most amazing films possible, you are often not getting paid to work on those. You need to have some movies that you trust will go into production quickly and are likely to pay the bills.
Anthony Kaufman contributed to Ted Hope’s book Hope for Film.
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