Independent producers & distributors

It's a heady time for the indie film sector, with a glut of product and available financing. But as the business gallops toward the future, the path remains unclear.

For independent film producers and distributors, the future never has looked more expansive -- nor the distant horizon more hazy. Even as many companies and filmmakers experiment with ways to navigate the digital future, the reality of the present can be downright harsh. "It's a sexy business to be in," Warner Independent Pictures acquisitions executive Paul Federbush says. "But it's not a business."

Worldwide film-festival attendance is burgeoning, but there exists a distribution bottleneck between the plethora of indie movies being produced and those lucky enough to be released theatrically. More indie films are being made than ever before because more equity investors are throwing money at production, but there remains a scary gap between when financiers place their bets on individual projects and the final results, which do not always pass muster with distributors.

"We're looking at (new films), but very few of them are good," Roadside Attractions co-president Howard Cohen says. "Look at the track records of any of these equity financiers; there's only one who is consistent: (Participant Prods. founder and CEO and former eBay president) Jeff Skoll, who makes movies in conjunction with the studios."

For filmmakers, gaining a theatrical opening to brand a movie remains the Holy Grail. Even among titles that make it to theaters, however, only a fortunate few screen in more than 10 U.S. cities. As exhibitors struggle to lure moviegoers who more frequently are staying home with their flat-screen televisions, Netflix DVDs and video-on-demand -- not to mention, and Xbox and other gaming consoles -- some are attempting alternative means to reach audiences.

That said, though, only a few small experiments in altering the movie-release paradigm have been conducted to date because no one is yet willing to risk serious money. The most high-profile forays have been Mark Cuban and Todd Wagner's day-and-date January release of Steven Soderbergh's "Bubble" in theaters, on Cuban and Wagner's high-definition cable channel HDNet and on DVD, and Google Video's January online streaming of Ben Rekhi's "Waterborne" for free, followed by downloads at $3.99 a pop and a February DVD release.

The net results for both of those films have been decidedly mixed. "Bubble" yielded a flurry of business stories hailing a new era in movie distribution -- but also a microscopic gross at the domestic boxoffice. With a cast of amateur actors and no visual scope, the film was "difficult to sell in a traditional manner and make the numbers work," Wagner admits. Banned by major U.S. theater chains, "Bubble" opened in 32 theaters, including 19 screens in Cuban and Wagner's Landmark Theatres chain, and grossed only $200,000.

As far as Wagner is concerned, however, "Bubble" was a hit thanks to its success on HDNet, presales to foreign territories and DVD sales, including transactions in Landmark theater lobbies. Magnolia Home Entertainment shipped 100,000 units of the title, Wagner says, and while declining to report final numbers, he is pleased with the DVD's sell-through performance.

Rekhi, a young San Francisco Bay Area indie filmmaker, embarked on his risky experiment in alternative distribution after passing up a low-six-figure offer for a limited theatrical and DVD release for "Waterborne," a high-def bioterrorism thriller. Google announced "Waterborne" as its first online movie release during January's International Consumer Electronics Show and free-streamed the video for 21?2 weeks, followed by downloads (charging $3.99 for high-def, 99 cents for low-def). Google split proceeds 70/30 with the filmmaker.

Rekhi admits that he has been disappointed by the net results. But, he says, "It was exciting to work with Google to try and help indie filmmakers find a democratic distribution process. I took a stand to hold on to my rights to the film -- online, TV, foreign sales. Too long, the power equation has been in the other court: Distributors put your back up against the wall and own your films for 20 years. That we can empower ourselves and circumvent that distribution method is amazing."

Meanwhile, as countless low-budget films still take the express train to Blockbuster, several alternative distributors are attempting to bridge the gap for filmmakers. Film Movement rescued Kristian Fraga's New Jersey documentary "Anytown USA" from Wal-Mart's remainder bins by anointing the title its DVD of the month for subscribers and giving it a three-theater launch to gain reviews.

In addition, Emerging Pictures, which specializes in releasing digital movies simultaneously at five East Coast venues, is looking to expand its horizons."I'm nostalgic for the days when you could make money on a film that grossed $1 million," Emerging president and CEO Ira Deutchman says. "We find ways to get films into distribution by cutting costs and using new techniques to get there. We're bringing a sense of community back to theaters."

But attempting to change distribution patterns can bring conflicting agendas. When IFC Films booked Caveh Zahedi's "I Am a Sex Addict" as part of its new First Take series to show simultaneously on screens and on IFC -- the latter via cable giant Comcast -- Cuban pulled the film from his Landmark theater in Berkeley, Calif. First Take is considered a loss leader for IFC as it seeks to build an audience and an identity as the movies-on-demand future approaches -- but IFC also needs Landmark to book First Take films because most major theater chains refuse to book day-and-date releases. Cuban objected to the "Addict" booking partly because he wants Comcast to carry HDNet. "We're both shaking up models to do what's best for the film industry," IFC Entertainment president Jonathan Sehring said at the time. "Day and date is here, and it's going to happen."

The problem many distributors have with day and date, though, is finding a way to brand a movie. In the end, says producer Jim Stark, "nothing beats five weeks in a theater."

Indie gold rush

A rash of indie-financed projects have had a considerable effect on film culture during the past year. The front line of studio specialty divisions harvested the best of the indie crop, and four specialty pictures wound up in the race for the best picture Oscar. Ang Lee's "Brokeback Mountain" was partly financed by baseball scion Bill Pohlad's River Road Entertainment. Bennett Miller's "Capote" benefited from investor Infinity Media. Cuban and Wagner backed George Clooney's "Good Night, and Good Luck" along with Participant, which has supported several other indie movies with sociopolitical agendas including Paramount Vantage's current docu release "An Inconvenient Truth."

"This money helps studios who normally wouldn't make these movies roll the dice and take the risk," says Federbush, whose label released "Good Night" in domestic theaters.

Oscar winner "Crash" reveals much about the pot at the end of the rainbow for those dogged entrepreneurs willing to scrap their way to the finish line, but cobbling together financing from many quarters can be unrewarding at best. Real estate mogul-turned-film financier Bob Yari is still squabbling with some of his partners, most notably producer Cathy Schulman, who was allowed by the Producers Guild of America and the Academy of Motion Picture Arts and Sciences to accept the best picture Oscar, while Yari was not.

If Yari had fully financed "Crash" instead of investing $900,000 in the film, points out Lionsgate president of theatrical films Tom Ortenberg, "it would have paid for (his entire slate of) movies. But he didn't do it, so it won't." (The race-relations drama scored $94.4 million worldwide.)

Still to come in 2006 are batches of films from Sidney Kimmel Entertainment, which sold the romantic comedy "Trust the Man," starring Julianne Moore, out of the Toronto International Film Festival last year to Fox Searchlight, and the Money Store founder Marc Turtletaub, who backed the Sundance favorite "Little Miss Sunshine," starring Steve Carell, Toni Collette and Greg Kinnear, which Searchlight also is distributing. Interestingly, while there was no hotter title going into the festival, no studio distributor was willing to acquire "Sunshine" until after it screened to rousing applause because the rookie writer-director team of Jonathan Dayton and Valerie Faris was unproven. Searchlight finally scooped it up for $10 million.

But these films are the cream that rises to the top. Many other movies are never picked up by the studio indies -- or anyone else for that matter. Because the numbers can favor self-distribution, Yari has opted to release some of his movies himself, even when he could have sold them to studios, including the upcoming period drama "The Illusionist," starring Edward Norton and Paul Giamatti. On the other hand, producer-distributor Bauer Martinez Entertainment is putting out its wide-release movies through MGM (which boasts a lucrative pay-cable deal with Showtime) -- including the Toronto pickup "Harsh Times," starring Christian Bale -- and releasing smaller films on its own.

Some of these movies were made because discerning investors were seeking high-quality projects that would make a profit. "These are institutional investors looking at whether a film represents a rational investment," Dana O'Keefe of New York-based Cinetic Media said during a recent panel discussion at the Seattle International Film Festival.

"Hollywood has had an inexhaustible supply of suckers; in the past, they've gotten involved and lost their shirts and left town. This is a different type of financier; they demand a level of transparency and scrutiny of deals before they get involved."

Imperial Capital Bank Entertainment Finance vp and managing director David Hutkin -- who has helped to assemble financing for such films as "Illusionist" and 2005's "Prime" and "The Upside of Anger" -- notes that more movies are being made on a film-by-film basis for less than $30 million, with real equity or hedge-fund money. Such investors are "looking for a return," he says. "It's healthy: There are more rewrites, more editing, and the product is chosen with more thought going into it."

Well-run companies like Participant and the involvement of the large talent agencies also help to improve the quality of such pictures, Hutkin adds. On "Illusionist," Yari presold the movie in foreign territories while retaining U.S. and ancillary rights.

The type of investor who throws money at a slate of low-budget pictures with a cast of name actors is "absolutely doomed to failure," warns Ortenberg, who nonetheless believes that smart investing in high-quality films should yield "a fair rate of return."

Many investors will not come back for more, O'Keefe adds, "if the rates of return aren't what they expected because they're sitting behind other profit participants. Certain people want to associate with talent; approach them with fully packaged projects, and they're willing to take calculated risks. The worst-case scenario: If it tanks (in theaters), you can slap faces on the video box and sell units."