How CineTel Survived 30 Years as an Indie

The news was instant and irrevocable.

When CineTel founder Paul Hertzberg learned in May 2001 that HBO, the main buyer of his company's movies, was switching direction toward home-grown series, it seemed like a death knell. After all, HBO had been spending about $50 million a year to acquire independently made genre movies, the very core of CineTel's business.

But rather than collapse, as many other indies did, Hertzberg altered his course. What he did, and the steps he has taken to transform CineTel as the market has shifted over the years could serve as a model for other independents wishing to survive and even flourish in a perilous environment.

Back in 2001, "Everybody sat and scratched their heads saying, 'What are we going to do?' " recalls Marcy Rubin, who has headed CineTel's international sales since 1990. "Paul said, '[then-]Sci Fi Channel is making movies. We're going there.'"

"We went from action to more action/disaster films," Hertzberg recalls, beginning a relationship that has seen CineTel become a major supplier to the cable outfit.

Hertzberg would never claim to be a maker of art movies. After all, this is the company behind such titles as "Snakehead Terror," "Fire From Below" and "The Killing Machine." But his decisions -- along with partner Lisa Hansen's -- have been pivotal to CineTel's financial success.

Hertzberg first met Hansen not long after founding the company in 1980 as Chicago Teleproductions. Hertzberg had been publishing sports-related magazines in the Windy City when an opportunity arose to create programming for the emerging cable TV business. At that time, Hansen was working in the accounting department of Spectrum, a pay TV service, to which Hertzberg sold music and comedy specials.

"I was miserable in accounting," she recalls.

Within a couple years, Hertzberg, Hansen and company moved west to be closer to the industry and changed their firm's name to CineTel. Five years after Hansen started, Hertzberg made her his partner.

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It was soon after Hansen joined the company that it made its first change in direction. In 1984, Hertzberg was leaving for MIPCOM in Cannes to sell entertainment specials, when Hansen gave him a videotape sent by a filmmaker in Portland, showing the trailer for a low-budget slasher movie, "Courier of Death."

"Death" may not have been made by Kurosawa, but it did have the merits of featuring 26 separate individuals all being killed.

"We couldn't give away our music shows [at MIPCOM], but everyone said, 'What's this?' " Hertzberg recalls. "This was right at the beginning of the video boom. We couldn't sell it quickly enough. We said, 'We're in the wrong business.' That was our segue into feature films."

After a lukewarm attempt to distribute these films itself, CineTel stuck to production and left U.S. distribution to others. At first it was in association with RCA/Columbia home video, which flourished thanks to pictures like "Relentless" and its four sequels, and "976-EVIL," released in theaters by New Line.

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That early success inspired CineTel to do a number of more serious dramas, including "Where the Day Takes You," with an ensemble cast that included Will Smith in his first role. But dramas didn't draw big audiences, and from then on CineTel stuck to low-budget genre movies.

"CineTel doesn't pretend to be something it's not," Rubin says. "We are what we are."

What worked were remakes of movies initially made by others, like "Ghoulies 4," "Dream a Little Dream 2," "Excessive Force 2" and a series of sequels to "Poison Ivy." These movies' sales were helped by the expanding marketplace.

"When we started, it was video, and then the DVD market was strong," Hertzberg said. "You could come out with a piece of paper and art work and raise money to make a movie."

That began dropping after 1990, he notes. But as the bloom faded on one business, CineTel made up for it with another, moving into domestic syndication, starting by selling a package of films including "Bulletproof" and "Cold Steel" to the Samuel Goldwyn Co.

It also benefited from the growth of independent TV outlets worldwide, beginning in the late 1990s. "When privatization of international television started, you could make up for the declines [by] DVD in international TV sales," Hertzberg notes.

CineTel took advantage of every tax deal, incentive and soft money available to keep production costs down. There were insurance-backed deals, German tax money, Canadian subsidies and, for many years, a favorable exchange rate. While the pictures were usually made under a SAG low-budget contract, most of the time CineTel did not use WGA, DGA or IATSE workers. In Canada, it hired Canadian directors; their guild offered better rates than the U.S.

The company did try, but failed, to make movies in Romania and Bulgaria, but language and locale were problems. "Depending on the story, it doesn't look like the United States," Hansen says. "You can't afford to fly in a bunch of actors, so you wind up hiring locals that don't really speak English. Unless you have the right story, your film suffers."

What hasn't suffered as a result of financial pressures is the special effects that help many of CineTel's genre products. "As the budgets have come down over the years, the great thing is [that] the ability to put really cool special effects on the screen has come down in cost with us, with better quality," says Neil Elman, CineTel vp creative affairs.

Hertzberg and Hansen admit that, at one point, after the HBO shock, they considered selling their company, but instead just sold a library of about 105 titles to Echobridge in 2003. "It was time to cash out, but we didn't want to quit because we were too young," Hertzberg says. "So we said, 'Let's get rid of our debt and pocket some money and start all over again.' Which is what we did."

Seven years later, their library is up to about 72 titles and growing by six or eight movies a year.

Not only are the movies licensed for the U.S., but many of the NBC Universal and Syfy channels around the globe buy rights in advance, helping to guarantee a return before production starts. And CineTel keeps its costs down, aided by a lean and mean operation, with only 23 full-time employees working out of longtime offices on Sunset Boulevard in Los Angeles.

"We adapt to the marketplace," says Hansen, who oversees all production. "If we see we can't sell certain types of films, we're not going to make them anymore."

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