Indie film on a roller coaster to AFM

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It's Tuesday, and a Boston terrier named Dawkins is wandering freely through the crowded offices of Nu Image/Millennium, tennis ball in mouth, looking for a game of fetch.

Clutter is everywhere, from the film canisters on the floor to the boxes of promotional materials by the elevator. People carry on conversations that can be heard clearly inside the office of co-chairman Avi Lerner. But Dawkins is out of luck because nothing can distract the gray-haired vet from closing yet another deal.

"Tell them to stop playing games," the 66-year-old Lerner says with his famously thick Israeli accent. He's flown in from New York the night before and looks exhausted, but his tone is matter-of-fact. "They agreed already. He called me and said, 'I will do it.' Yesterday."

A few years ago, deals like this could have been done in seconds, scrawled on napkins in restaurants and international hotels. That's when the market was flush with cash. Today, it's another matter. If Lerner's hair is gray and the jowls on his face seem more prominent than they once were, that's hardly surprising.

The indie film business has taken a battering. Distributors that provided a crucial release path in the domestic market have closed; others have been financially defanged. Finance and sales companies that were once regular visitors to markets like this week's American Film Market have faded away, their executives rarely spotted anymore.

Lerner's take-it-or-leave-it, no-bull attitude has helped Nu Image/Millennium survive in this game longer and stronger than anyone else. Since he founded the company in 1992 with partners Danny Dimbort, Trevor Short and Danny Lerner, it has churned out more than 200 features.

But he's one of the lucky few. Men and women he has worked with for years are finding it tougher than ever before -- even the most talented ones.

"If I could put a gun in your hand ..."

Across town, Andrew Ruf, the head of Paradigm's motion picture finance group, is receiving some good news.

In the wood-paneled second-floor library of the agency's historic Beverly Hills, marble-floored offices -- which half a century ago housed MCA during its days as a tenpercentery -- Ruf, 38, is hearing good news from Bill Johnson, co-founder of the production/distribution outfit Inferno Entertainment.

Inferno's recent remake of "The Women" might not have been a hit with critics or filmgoers, but they're still in the good graces of their creditors. Johnson says they just closed a $50 million equity fund, and another line of credit they had with failed hedge fund DB Zwirn & Co. has been picked up by Citibank.

"As they were going down, (Zwirn) started laying off all their paper at Citi," Johnson explains. "And Citi saw that we were performing well on our loans and so they said, 'Hey, do you want to just move the facility over here?' "

Ruf, one of the brightest finance agents in the business, seems surprised by the scenario. But he also knows this is an exploratory meeting, not an audit.

He deftly then turns the discussion to his client RGM, a Singapore-based management and production company looking to partner with producers like Johnson, then bring the projects into the studios with full financing in place. The company needs to make three or four films a year. They're sitting on $75 million in equity ("with additional money behind it," says Ruf), and they don't get more money unless they spend it.

"They've got to keep that flowing," notes Ruf. "And part of the reason why we're working with them is to provide that deal flow."

Ruf's personal deal flow has been close to capacity today. Business kicked off with an 8:30 a.m. motion picture finance group meeting, where subjects included the AFM lineup for their Belgium-based client Corsan Prods. That was followed by a 9:30 a.m. motion picture group meeting, where agents quizzed him about "managing the expectations" of the acting and directing clients who are looking to launch personal passion projects through his division.

When he started out as a talent agent, all he had to worry about was finding his clients work. But now he has the full weight of all Paradigm's indie filmmakers on his shoulders.

Back in his office a while later, Ruf is going at it nonstop.

He has his standard-issue agent phone headset on as he does some late-stage expectation management of his own in a series of calls with producer-star Andy Garcia, writer-director Raymond De Felitta -- both Paradigm clients -- and producer Lauren Versel, who all have slightly different notes on the fine cut of their film "City Island." He'll be meeting with them in their editing suite at Departures Post in Hollywood in a few hours to see if they can have a copy ready to screen for Sundance Film Festival senior programmer Trevor Groth the next day. Ruf is so confident that Groth will like what he sees, he's already telling staffers to book a venue in Park City for a party celebrating the film's Sundance bow.

"We put together seven films last year on the structured finance side and sold (them)," says Ruf. "And every time a film would go into production, my wife says, 'What's going on with "City Island"?' It's really that good of a script ... in the 'Little Miss Sunshine' vein."

Ruf got the movie off the ground, but now he has to find a buyer. That battle still needs to be fought, and he knows just how hard it will be.

"It's not a particularly strong foreign title," he says, "because, as I said to Andy, somewhat jokingly, 'If I could put a gun in your hand or we could get a girl naked, we're all good at 6 or 7 million dollars.' Without that, it's a dark family comedy, which is much more difficult."



"It is what it is ..."

A more foreign-friendly title on Ruf's plate is RGM's "Point Break Indo," a sequel to the 1994 actioner "Point Break" that's set to roll in Southeast Asia in January with Paradigm client Jan de Bont ("Speed") at the helm.

The foreign sales for "Indo" are being handled by Essential Entertainment, a company founded in January 2007 by industry vet Jere Hausfater and Jim Kohlberg, head of the private equity firm Kohlberg & Co.

Over the last 20 years, the 50-year-old Hausfater has done the rounds at Disney, Miramax and Intermedia Films, overseeing worldwide sales, marketing and distribution divisions. Today, he's lunching with Essential president of international sales John Fremes on the patio of the Rainbow Bar & Grill, the notorious rock 'n' roll hangout across the street from their offices on the sixth floor of the 9000 Building on Sunset Boulevard. It's not their preferred walking-distance lunch spot (that would be nearby Talesai, currently under renovation), but it does allow Hausfater to indulge in a few American Spirit cigarettes.

So far, Essential has operated primarily as a sales agent on such films as Clive Barker's "Book of Blood"; "Fireflies in the Garden," starring Julia Roberts; the adaptation of the Bret Easton Ellis novel "The Informers"; and Ed Zwick's "Defiance." But Hausfater has bigger visions for the company as a production entity. It has been developing a slate of its own projects, he says, and it has the wherewithal to do some of its own financing.

Does he want to follow in the footsteps of Summit Entertainment, which morphed from a foreign sales agent into a full-on studio and domestic distributor with access to a reported $1 billion in funds?

"I would love to," he says.

Of course, that might be wishful thinking. The kind of hedge fund financing that allowed many rich indies to get off the ground has gone; foreign financing is also skittish. And even when the money is there, the banks that put the deals together are wary of each other, not to mention the notoriously fickle film business.

None of this seems to faze Hausfater.

"You can't really compete with studios in big action movies or special effects," he says, "and it's difficult to compete with them on casting. Where you can compete is with material. And we like getting the material to where it's the best it can be."

Back in the Essential offices, which offer a panoramic, on-top-of-the-world view of Los Angeles, Hausfater and Fremes are reviewing the company's slate of AFM offerings in their conference room. Hopes are high for the centerpiece of their presentation -- "Solomon Kane," an epic 17th century adventure/fantasy adapted from a series of books by Robert E. Howard ("Conan the Barbarian").

Then, just as their hopes are mounting, reality intrudes. An assistant pokes her head into the room and tells Hausfater there's an urgent phone call from "Kane" producer Sammy Hadida in Paris.

"I don't think I'll have a movie ready to screen (at AFM)," comes Hadida's voice from the speakerphone. The score isn't finished. Neither are the special effects or the sound. "You see the monster, he growls and he doesn't make a sound."

Visibly deflated, Hausfater gamely attempts to roll with it.

"We're obviously disappointed," he says, "but it is what it is."

Back in his mid-Wilshire office, Lerner is philosophical.

"Very few companies survive this business," he observes. "It's tough from the first day that you make a decision to make a movie. Even if you make the movie and the thing is commercially successful, like 'Righteous Kill,' you still get the critics to kill you."

Over the years, the star power of the company's films has mirrored the improving quality of Lerner's Lakers seats, from nosebleed at the Forum to courtside at the Staples Center; from David Bradley in 1994's "Cyborg Cop II" to Robert De Niro and Al Pacino in "Righteous."

Presently, the company averages 15-18 films a year -- more than the output of many of the major studios. And Lerner doesn't have to answer to stockholders, a Rupert Murdoch or a Sumner Redstone, only his partners. The downside is he's working within much narrower margins. Forget about a "Speed Racer"-sized flop: Going more than slightly over budget on a film is simply out of the question.

"We used to make a movie from 1 million to 2 million dollars, and now we're making movies from 30 to 50 to 60 million dollars," Lerner says. "Big change. And that's basically because the markets need those kind of movies. A lot of companies stopped making them."

This is the indie film world on the eve of the American Film Market 2008: Risks are higher, competition is greater, certainty is all but nonexistent. For the best and the brightest -- as all these men are -- the business is getting tighter.

"For us, an extra $10 million is the end of the company," notes Christian Mercuri, 35, Nu Image/Millennium's president of international sales and distribution, who joined the company six years ago as Lerner's assistant. "One mistake, we survive. Two mistakes, we survive. Three mistakes, I don't know."

Adds Lerner: "If I had to decide again, I'd never make movies."
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