CineTel Founder Paul Hertzberg on the 'Saw' That Got Away

A lot of indies have fallen by the wayside in the past 30 years, but CineTel has survived by making movies that meet the market demand at the time, working closely with its domestic and international buyers to provide them with what they need to fill screens or TV channel slots. CineTel founder Paul Hertzberg spoke with The Hollywood Reporter's Alex Ben Block.

The Hollywood Reporter: Tell us about your business model.

Paul Hertzberg: We are able to cover our overhead [through presales] and by controlling our costs. We've always been risk averse. And we tailor our business to what the market and our customers want. So when we do casting for a movie, our first thought is: Where is it going to air? Does the TV station overseas have a slot to play this type of movie? We try to minimize our risks by making movies people want to see, for networks that have an available slot.

THR: How many movies do you make annually?

Hertzberg: This year we are doing eight. That's probably our high-water mark. We're usually between four and eight. We've got eight [more] scheduled for next year.

THR: You stopped doing dramas because they didn't make money. How can you be sure the genre movies, even with presales, will do well?

Hertzberg: Take Dolph Lungren's "Killing Machine," one of the most expensive we've done [almost $5 million]. Even if the film doesn't work theatrically, it's still going to work on DVD and on television because there's a market for genre movies. You make a drama that doesn't work theatrically and you're dead because the after­market is not as strong.

THR: How have you managed to save money and control costs?

Hertzberg: We did the German [tax shelter] money. Then we stopped because we were doing TV movies with the German funds -- and the truth is, [given] the rate of return they needed, you can't get [that] from TV movies. You may limit your downside risk, but your upside is not going to be there. Unless you fabricated numbers, which we didn't want to do, we could never hit their projections. So after the first two packages we didn't do any more. We did one insurance deal [where investors are insured against losing money], "Rumor of Angels." Again, this was a situation where we had to show a return on investment. We flew to London and met with [a French insurance company]. We said, "This is a theatrical movie, so it has upside potential but also downside risk." They invested, knowing there was a risk, and that's why we ended up not having an issue when the movie didn't return all of its investment.

THR: What's your financial model today, with DVD sales down, foreign sales tough and the economy tight?

Hertzberg: We cobble together a combination. If we are doing a movie for Syfy, it's a prebuy. We go to the banks and finance it against their contract. We do [international] presales. And we shoot many [films] in Canada and get Canadian subsidies. The budgets are usually in the $2 million-$2.5 million range. With presales and subsidies, we put it together.

THR: What are the challenges now?

Hertzberg: Our margins have gone down because the marketplace has gone down. With advertising being cut back on TV stations, people buying TV rights are paying less. So you need to control productions costs. You have to stick to the budget. We develop our own scripts in-house, for the most part, so we make sure the scripts are tailored to fit the budget. Then you deliver the type of product needed to keep your buyers happy.

THR: Are you worried about what lies ahead?

Hertzberg: We have six Syfy movies to make, and we're really hopeful. We've got four we think have the potential to go out theatrically.

THR: You and Mark Burg, who produced the "Saw" franchise, share L.A. Clippers tickets. Is it true you turned down the chance to invest in the first of those films?

Hertzberg: We did talk after it came out and he said, "If I had said, 'Give me a couple hundred thousand to make this movie,' would you have?" And I said no. Many millions later, he was right and I'm an idiot.