AFM Executive Suite: Andreas Klein, Splendid Film

Andreas Klein - PR Head Shot - P - 2011

The head of German indie player Splendid Film on lessons learned from 34 years of film markets.

The term “roller-coaster ride” doesn’t even begin to describe the dizzying highs and sobering lows of Andreas Klein’s long career in the film business. Born into the industry as the son of Splendid Film founder Albert E. Klein, he went to his first market when he was 15, bought his first film at 17 - “$12,500. I remember the price, I don’t remember the title” - and lived through every boom and bust of the last 40 years.

After taking his company public during the stock market bubble of the late 90s, Klein jumped into the A-league, paying $65 million to finance Martin Scorsese’s Gangs of New York and producing the Agent Cody Banks films starring Frankie Muniz. When the market crashed, Klein gave up Hollywood to return to his hometown in Cologne and save the family business. After years in the video wilderness, Klein has climbed back up.  Speaking shortly after signing a major deal for I, Frankenstein at AFM, Klein took time to talk about being the best of times, the worst of times and why Splendid’s biggest days are still ahead of it.

Do you remember your first film market?

Yes. Cannes, 34 years ago. And since then I haven’t missed a single one. My first AFM was when the market had just moved from Sunset to Beverly Hills. There aren’t many around who can remember that.

Film is your family’s business. What did your dad teach you about this industry?

Everything. That’s the luxury of being in a family business – you know everything. There aren’t any secrets. You have full transparency, you learn every detail. The most important thing he taught me was that film is a dangerous business because there is no clear way of measuring quality. He told me not to be blinded by the fascination of this business. And he told me: the film business is an oligopoly. There are very few companies and they don’t change. Maybe their names change but the players remain the same. So don’t shit in your own garden. Something I took to heart. I pay my bills, I honor my contracts. Always.

Splendid Film became a real player in Hollywood after you took the company public and backed Gangs of New York. How did that deal come about?

I had bought half of Initial Entertainment Group (IEG) - Graham King’s company – I paid $4 million for Cindy Cowan’s stake – at a time when the company was almost bust. It had annual revenues of $5.5 million. Three years later, it was $280 million. We were trying to get into the business but it was frustrating. I go to agents and they’d blow the dust off the oldest scripts they had and say “here Andy, the hottest new thing!” I was angry and I was frustrated. Then the script for Gangs came to us. It had been around forever. Graham sent it to me and, no joke, in 24 hours we had greenlit the film. I read the script and said, I’ll do it: $65 million for all international rights. And I’ll tell you why. It wasn’t Leonardo Di Caprio, it wasn’t Scorsese. It was because I knew that every single big independent distributor worldwide would want this movie because it was their only chance to get this kind of major, studio-sized film.

The film went way over budget.

Yes but luckily we had capped our investment. Miramax had domestic rights and they didn’t want to do a completion bond so we said, OK but our investment is caped at $65 million for international rights, no interest. We lost creative control.  Thank God. The film came in one and a half years late and over budget. The interest alone would have killed me.

How did that movie change your life?

I transferred that $65 million in one go to Chase Manhattan Bank in New York. From that moment on my phone didn’t stop ringing. Suddenly I was in a completely different league. Not more old scripts and low-level agents. It was just head of agency. Every new thing come in, came to us first. It was so exciting I was really overwhelmed. Suddenly every door in Hollywood was open to me. Back then there were only three big players in the indie world: Barry Baeres of Franchise, Graham and me and Spyglass. Even Patrick Wachsburger of Summit, back than, he was second league.

I had a production company with Catherine Zeta Jones and through her we got Traffic. Then I moved to L.A., set up my production company, Splendid Pictures, and we did Agent Cody Banks, 1+2, we did the TV movie James Dean with James Franco, which won a Golden Globe. It was one success after another. But back home, the company was falling apart.

I had to decide: do I stay a producer in America or do I go home and save my German company? Everyone else would have stayed. It’s hard to explain to someone who isn’t in a family business. And it's expecially hard to explain to Americans. But I had to go back. It wasn’t about money. It was about honor.

What was it like coming back?

Like going from the Champions League to playing amateur ball. You can’t imagine – I had to do what I did 20 years earlier. The banks, from one day to the next, cancelled all our credit. We had to run things on cash flow alone. We needed to turn things around as quickly as we could. We didn’t have the money to buy big films so we looked to the niches. Fitness, horror, documentaries. And in 3 years we were the German video company with the largest output (in terms of titles) after Sony Pictures. We became masters of the niche.

It wasn’t easy for my team – bringing out exercise videos and splatter movies – but we made a virtue of our necessity. Now we have the largest library of fitness titles, of Asian films, of splatter and horror. We are the market leader (in Germany) in documentary films, with around 33 per cent market share. We are the biggest online film aggregator in Germany with more films on iTunes than anyone else.

The rough years were between 2005-2008. Then we started to breath again.

And you started to invest in big films again – and hit the jackpot with The Expendibles, a film many thought would be a flop.

I never understood that. I knew it would be a hit. Just like with Gangs of New York, I knew every big independent in the world would want this film. I only got it because I bought a package of 10 films from (Nu Image’s) Avi Lerner. It cost us about as much as our annual revenue at the time. But I knew it would work.

It’s not that I’m blessed or especially clever but I’ve seen this all before. I’ve been there from the start. I was there when VHS came in, I was there when commercial television started in Germany and we could sell our films to them. I was there for the DVD. And with each change you get a cycle. There’s a time when you need to be in the volume business and then a time comes when you need to get the big theatrical films.

So what’s the future hold for Splendid?

Our future lies in three things: maximizing our resources – something we learned during our period in crisis; moving more into big theatrical films, like I, Frankenstein; and the Internet. For the last two years, I focused almost entirely on the Internet. Our VOD platform, Videociety is one of the four largest VOD platforms in Germany, the second largest market in the world. Where the biggest companies are just planning where they want to go online, we, this little indie, are already there.

You are also going to get into the production business in Germany, something you’ve never done before. Why now?

I think looking at the market right now, to be an big indie in a territory you have to make local movies. I think in the next few years, local films will grow in importance. We can’t just rely on the American films. I have to think long term and when I look past 2015 I see I can only win market share if I move into local production. At the moment in Germany on the production side there is only Constantin, Constantin and Constantin. I think there’s room for a second big player in the German market.

You have a son. Is he going to follow in your footsteps?

He’s 18 and going to school in Vancouver. But he’s on holiday now and he’s down here with me. I’m teaching him the business. So he can take over one day – and take Splendid Film into its third generation.