Specialty hits scarce as film sales soar
As the Sundance Film Festival kicks off this week, the specialty-film world is hoping a frenzy in the snow covers up the bloodbath of the fall.
It has been a brutal year at the boxoffice for indie distributors and studio specialty divisions. Business is down 11.9% from 2006. Most divisions have enjoyed only one so-so hit for every three or four movies released, among the most disappointing ratios since the specialty units were created in the 1990s to bridge the indie and studio worlds.
At the same time, the film sales market over the past few years has exploded. And the early buzz on this year suggests Sundance '08 could be one of the hottest ever.
That adds up to a vexing question: Are the prices being paid on the indie sales market justified by returns?
As the industry descends on Park City, some believe the business is facing what longtime producer and sales agent Jonathan Dana describes as "an apparent paradox."
In a sense, it's the classic problem of a distribution bottleneck. The fertile festival market is offering many tempting acquisition possibilities, but the pipeline through which to release them is getting clogged.
"Microeconomics says we need product and we need to go out and overspend. Macroeconomics says there are thousands of others doing the same thing," says Focus Features topper James Schamus. "Macroeconomics always wins."
Of course, Sundance acquisitions represent only a tiny fraction of studio specialty releases. But the movies bought at last year's festival have been at least as afflicted as original productions.
Of the eight movies that went for more than $2 million at Sundance '07, only one, Fox Searchlight's "Waitress," has earned more than
$3 million, the bare minimum most would have to make to be profitable given P&A costs. (Three films, Paramount Vantage's "Son of Rambow" and "How She Move," and Fox Searchlight/Weinstein Co.'s "Under the Same Moon," have yet to be released.)
This fits within the larger trend. With the notable exceptions of Fox Searchlight's "Juno" and Miramax's "No Country for Old Men," this fall's specialty releases have largely gone unnoticed by moviegoers. By one unofficial count, more than 35 films have been released by indie distributors and specialty divisions over the past four months. Only about a half-dozen can be called even moderate hits. At least one film from most divisions has brought a decent return, but many more have faltered.
The calendar has been stretched like an Olympic gymnast. Paramount Vantage took a release wide in June ("A Mighty Heart"); Focus went early in the fall ("Reservation Road"). Neither strategy worked.
The mood among specialty execs has gone from lip-biting ruefulness to zen resignation. "I'm not sure anything can be done about it," Fox Searchlight topper Peter Rice says. "It's just the world we live in."
Yet even in this bearish climate, there are signs that Sundance will once again yield a bull market. While it's impossible to predict the state of a festival, already projects from the likes of Robert De Niro ("What Just Happened?") and Tom Hanks ("The Great Buck Howard") are drawing the attention of acquisitions execs, along with comedies like the Steve Coogan starrer "Hamlet 2," the Ben Kingsley stoner pic "The Wackness" and the genre pic "Donkey Punch."
Leery of seeming too hungry, execs are nonetheless privately spreading the word that they're willing to open their wallets for at least one or two films. If that happens, it could be sufficient to drive prices through the roof.
On its face, the market shouldn't support lavish spending. In fact, there should already be a retrenchment. Take Warner Independent. The unit made a big gamble when it bought "Introducing the Dwights" for a reported $4 million last year. The movie earned less than $1 million at the domestic boxoffice.
In most industries, an increase in failure could lead to a comparable reduction in risk. But like nearly every other specialty division, Warner Independent could be on the front lines at Sundance again this year. As long as there is money available and execs with mandates, the movie business tends to double down. And like the rest of the biz, the fest world continues to operate independent of (and even indifferent to) market trends.
Even if some of this year's star-driven movies play smaller than expected, it might not matter. Last year saw widespread complaints about the scope of the Sundance films, but that didn't stop sales from totaling more than $40 million. And this year the market could heat up even further as new players like Overture Films and Summit Entertainment join the party. While all have reasons to stay out of the fray, expect one or more of these companies to be in the thick of a bidding war come next week.
"Every year we say the studios might be more cautious, and then every year we just sit back and watch them spend more money," says publicist and Sundance veteran Jeff Hill.
Then there's the most transformative variable of all: the strike. The WGA's ongoing work stoppage has frozen the development process and torn a potential hole in studio slates. Already rumors have started of studio execs flying into Park City to outbid the competition for movies that could play big and prop up an otherwise wobbly '08 or '09 slate.
Even with so many variables in play, the question now might not be "Will there be a shakeout?" but "What will be the consequences, and who's best positioned to survive one?"
Most immediately, sales prices could actually begin to go down. Already the prevailing wisdom says not to be surprised by a possible adjustment, even this year. "You go into Sundance, and there's a lot of talk that it's going to be a hot market," says Big Beach Films principal Peter Saraf, who has the offbeat drama "Sunshine Cleaning" at the festival. "But you just don't know how people will respond to the films."
Saraf should know. Big Beach found itself at the center of this new wave of big buys when the shingle's "Little Miss Sunshine" went for about $10 million two years ago.
Endeavor's Graham Taylor, who will be selling buzz titles like the Paul Schneider dramedy "Pretty Bird" and the Elle Fanning coming-of-age saga "Phoebe in Wonderland," also cautions against making too many predictions, noting how the Toronto market this year failed to live up to the prefestival hype. "I think my mother in Portland, Ore., knows as much as a lot of us know about what a festival will look like," he jokes.
Taylor believes documentary buyers in particular might be more careful after the soft performance of several of last year's acquisitions. Buyers will be "looking more for a marketing angle and not just if they like the subject matter," he says.
On the acquisitions side, smaller distributors may need to be more judicious than ever, since their margin for error is narrower. And new companies without the benefit of a library to fall back on may also be vulnerable.
But there's also encouraging news. Even with the costlier tags, the bubble in festival prices has actually been modest compared with other parts of the market. On average, prices of the most expensive Sundance movies rose between 10%-20% last year over 2006. But studio production costs are widely thought to be rising at a faster rate. Even when including P&A commitments, that means many Sundance films still are a relative bargain.
And there's always the possibly of an uptick in the specialty biz. After waiting out a consternation-filled fall season, Fox Searchlight scored a rare hit with the December release of "Juno," which, at at press time, has posted a phenomenal $71.3 million at the boxoffice.
While the Jason Reitman film was a project Fox Searchlight joined in preproduction, it grew out of a festival relationship: The studio acquired Reitman's first film, "Thank You for Smoking," at Toronto three years ago.
And there might be other good news on the specialty-division side. The robust release pipeline might be what saves that market.
Most specialty divisions are about a decade old (though companies like Paramount Vantage and Miramax have been partly torn down and rebuilt in that time). They might be releasing too many films, but their long histories, deep slates and robust libraries could help them weather boxoffice downturns like their studio cousins.
"The market has evolved in a direction that means companies with deep pockets have the wherewithal to sway with the breeze while small companies have more trouble doing that," producer/sales agent Dana says.
In this star-crossed era, that just might pass for a bright spot.