How Publishers Bolster Their Bottom Line by Retaining Film Rights

 Brunoilo

This story first appeared in the March 2 issue of The Hollywood Reporter magazine.

Sharp-eyed moviegoers at the Sundance Film Festival in January might have noticed an unfamiliar title card before the Bruce Willis comedy Lay the Favorite: Random House Films, the movie production arm of the venerable book publisher.   

Get used to it. While books long have been prime source material for movies (six of this year's nine best picture Oscar nominees started as books), publishers traditionally have not participated in the development process or shared in the profits. Scholastic and Little Brown, for instance, make money from Harry Potter and Twilight only through book sales, not their billion-dollar box office.

But that's changing. Facing financial pressures from everything from the rise of self-published e-books to Amazon's move to become a publisher, Random House and another "big six" publisher, Macmillan, have set up in-house film divisions to bolster their bottom lines.

"Why wouldn't [big publishers] jump in?" asks Brendan Deneen, who serves in the dual role of book editor at Macmillan imprint Thomas Dunne Books and head of its nascent film group. "Content is king," he says, and developing content is what publishers do best.

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These film divisions operate just like producers, acquiring theatrical rights independent of their sister book imprints. The companies believe that by integrating the publishing and development process, the whole will be greater than the sum of the parts. Millions in producing fees and backend profits are just one side of the equation. Functioning as producers, they hope, will give publishers a voice in the marketing of films that could yield higher book sales.

Random House, whose film division is run by veteran TV writer and novelist Peter Gethers (Kate & Allie), began its producing effort in 2005 by partnering with Focus Features to develop and co-finance modestly budgeted adult-oriented films. RHF's most successful project to date, One Day, was a 2009 novel that became a 2011 movie and grossed $56.7 million worldwide on a budget of about $15 million. From Random House's perspective, having Gethers involved as an editor and a producer streamlined development after it acquired the movie and book rights simultaneously. The book's debut was timed to the start of filming, and it sold about 1.5 million copies (including 750,000 of the movie tie-in edition, a strong performance given the film's $13.8 million domestic gross), turning writer David Nicholls into a recognizable brand.

The Focus deal, however, required Random House to invest capital (up to half the cost of a film's budget) in movie production, a strategy the company has since reconsidered. "The Focus model is really solid," says Gethers, with two films likely to go into production in 2012. "But after five years, it's clear it's not enough to justify the investment."

So RHF is going out on its own, developing material itself and bringing packages to top producers and studios. It teamed with Likely Story and Emmett/Furla to adapt gambling memoir Lay the Favorite, which The Weinstein Co. bought at Sundance to distribute in the fall. And in October, RHF partnered with producer Joel Silver and Warner Bros. to develop Ross Macdonald's classic detective Lew Archer into a new movie franchise. In contrast to the Focus deal, Random House is not investing its own money. It will receive a producing fee and a share of the profits. And with Gethers serving as an executive producer, it still will have a voice in creative development and marketing.

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Macmillan Films' highest-profile project, the young-adult time-travel novel Tempest, shows the impact of having an executive function as editor and producer. When Deneen first acquired the project it had a different title and structure, but he saw crossover potential in the premise. After he guided author Julie Cross through an intense reworking, Summit Entertainment pre-emptively acquired the revised manuscript a year before publication. The movie deal gave the book visibility that boosted sales when it was published in January (a sequel is on track for 2013), and a script is in the works. By developing the movie and book simultaneously, Deneen is trying to compress the process that took Twilight and The Hunger Games more than three years to go from best-seller to big screen -- and Macmillan now has a financial stake in the Tempest movie.

Both companies also are looking to TV, which Gethers calls "a natural extension," to develop the company's broad catalog.  Macmillan is mimicking the model Alloy Entertainment has used for such book-to-TV hits as Pretty Little Liars and Gossip Girl: Refine concepts in-house, find writers to execute that vision, and own the intellectual property.  In January, Macmillan announced plans to publish Prep School Confidential, which finds a Gossip Girl-like character chasing murder and mystery at a New England prep school, and a deal for a TV spinoff is being finalized. Also in the works is SEAL Team 666, a supernatural spin on the popular Special Ops team.

Random House and Macmillan aren't the only publishers branching into film and TV, of course. Magazine publisher Conde Nast (The New Yorker, Vanity Fair) hired former CW network head Dawn Ostroff in October to launch Conde Nast Entertainment to develop film and TV projects based on material in the company's publications. And the rest of the "big six" are watching closely. But Deneen cautions that the film and TV efforts shouldn't distract publishers from their core business. "The number one priority above everything else is a great book," he says. "If it doesn't start there, then you're looking at it from a cynical and wrong point of view."

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