Value Of Hulu/NEON ‘Palm Springs’ Deal Is Actually $22 Million; How Streamers Ruled 2020 Sundance

Palm Springs

EXCLUSIVE: In a development that is a fitting epitaph for a 2020 Sundance Film Festival acquisitions market dominated by streamers, Deadline hears that the fest’s biggest sale title — the WW rights deal for Palm Springs — was actually worth substantially more than what was reported last week by winning bidders Hulu and NEON. Sources familiar with the heated multi-bidder auction said that the value of the deal was actually closer to $22 million, far and away the biggest Sundance deal of all-time. That’s much larger than the $17.5 million and 69 cents Hulu and NEON said they paid to slightly beat the $17.5 million Searchlight Sundance record for The Birth of a Nation. That reported number reflected the acquisition fee, but there is a built in bonus structure that I’m told guarantees the $22 million. Insiders acknowledged that the bonus structure was not fed to the press. Since most of the value of the bid has to do with the Hulu streaming service, this is not some pie in the sky number that can only be earned if the stars aligned. It was the price paid for the movie, quite a premium for a comedy with a modest budget, around $5 million.

It was that kind of Sundance.

Palm Springs was only one of the big deals made by Hulu, the Disney-owned streamer that certainly announced itself as a major festival player. Hulu separately paid $8 million for Bad Hair, the scary satire directed by Justin Simien, the writer/director of Dear White People, the 2014 Sundance award winning film that he is turning into a TV series for Netflix. Apple teamed with A24 to break the festival record for documentary with the $12 million deal for Boys State, which eclipsed last year’s $10 million record set by Netflix for Knock Down the House. Just now, HBO Max announced it bought the troubled Russell Simmons documentary On the Record, the one Oprah Winfrey bailed on as exec producer, taking with her an Apple + distribution deal.

We are all going to have to get used to this streamer stuff, me included. When I called WarnerMedia today saying I heard HBO bought the Russell Simmons docu On the Record and I wanted to break it, I was flatly told, not true. Just now, after they announced HBO Max bought it, it became clear to me they consider this upstart streaming arm to be completely separate, which is why they didn’t feel the need to do me the courtesy of clarifying. While I might now look out the window to verify, if this particular PR person tells me it is dark outside, I should have asked about both. Clearly, I need to get used to this streaming world we live in now, just as much as everyone else at Sundance. Because this time, streamers took over and became the most important deal makers. This was great for the sellers, but more than one traditional theatrical distributor said they expect they will all have to stop relying on Sundance to fill out slates: the prices paid were too risky for them when their models are all about box office performance and a bad bet could be disastrous.

Among some of the other streamer deals, Netflix is wrapping up a mid-to-high 7-figure deal for The 40-Year-Old Version, the Radha Blank-directed autobiographical comedy that has widely been cited as one of the festival’s bright spots. Amazon so far has closed two deals: the Alan Ball-directed Paul Bettany starrer Uncle Frank, and the Phyllida Lloyd-directed Herself. Uncle Frank, which Deadline revealed was a $12 million worldwide rights deal, was the only one that came close to the sums that the streamer paid last year when it set precedent on the films Late Night, The Report, Brittany Runs A Marathon and Honey Boy. While some questioned the wisdom of the big spends on the first three of those, Amazon Studios head Jennifer Salke told Deadline that even in hindsight those were smart deals because of how much they boosted Amazon Prime, now more a priority than box office receipts.

If there were doubts about Salke’s logic at the beginning of the festival, everything she said made a lot more sense when the streamer deals started dropping after the first weekend. While Netflix was comparatively quiet because it now makes enough of its own movies to have launched 10 in Park City last week, it became clear that if a coveted title finds its way into future┬áSundance slates, theatrical distributors that don’t have a parent company prioritizing an OTT streaming service are now at a decided disadvantage.

Sundance used to be a place where those theatrical distributors came to fill out slates and hitch their wagons to young promising directors in hopes of starting a long relationship with the next Quentin Tarantino. But the streamer infiltration will only get more intense by 2021 Sundance: all the upstart streamers will be a year further in their pitched battle for streamer subscribers, and Comcast’s Peacock service will be added to the bidders. How is the traditional theatrical release crowd supposed to compete?

The best chance: find a way to pre-buy Sundance-bound films, as Sony Pictures Classics did with the Anthony Hopkins-Olivia Colman-starrer The Father. Or do like NEON and A24 and team up to handle the theatrical component of a title mostly paid for by streamers like Hulu or Apple.

There were few bright spots for the theatrical distributors, which now will win auctions if they go beyond their comfort zones or if a filmmaker/star insists on seeing their films on a movie screen and taking the traditional theatrical deal. Searchlight Pictures paid $12 million for world rights to the David Bruckner-directed thriller The Night House, a Rebecca Hall-starrer that was pursued by multiple theatrical distributors and streamers before it became the first big deal of the festival last Sunday. The Palm Springs deal was wonky as well. When I broke it, the number whispered to me was $15 million. Then came the humorous press release from Hulu and NEON which seemed to reflect the humor of star Andy Samberg, and not the actual number.

Numerous theatrical distributors came away a bit demoralized by how much this interfered with their usual process. Like always, they watched films, ran models of estimated revenue vs projected P&A costs, and then prepared to bid. This time, they were disappointed to see that streamers blew them out of the water with bids that would leave a theatrical distributor hard pressed to match, based on the modest sums that Sundance films often realize at the box office.

“We just have such different goals, objectives and realities and valuations and we simply cannot compete with the streamers at these price points,” said one dejected theatrical distributor.

In truth, those price points amount to drops in the bucket for conglomerate-backed OTT services looking to line streaming service slates in this competitive moment. Maybe this will change eventually if these streamers make as many of their own movies as Netflix does now. But in the near term, streamers that owned 2020 Sundance will likely drive the acquisitions market for festivals with finished films going forward.

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