STREAMERS VS THE INDIES

BY: Michael Arkin

If you think real estate and gas prices have gone wild, just take a look at what’s happening in the world of independent film. Records were shattered at this year’s virtual Sundance Film Festival when a streamer-fueled bidding war resulted in Apple Original Films paying $25 million for worldwide rights for CODA. Directed by Siân Heder, (Tallulah) the film about a hearing teenager, who is forced to choose between pursuing her love of music or helping her deaf parents save their family business reportedly cost $10 million to produce and bested the $18 million record (rumored to be as high as $22 million) that Hulu and Neon paid for the Andy Samberg and Cristin Milioti starrer, Palm Springs at last year’s festival.

 

One only needs to look at Palm Springs’ worldwide box office gross of $1,431,097 (as reported by Box Office Mojo) to understand the risk involved in acquiring independent films and that the long tail of Apple’s deal for CODA isn’t dependent on theatrical box office success. The implications of that equation are changing the face of the movie industry, and nowhere is that more apparent than in the world of independent films. 

 

Forged in the 60s and 70s by the likes of Cinema 5’s Don Rugoff and Dan Talbot of New Yorker Films, the independent film business was epitomized at the 1989 Sundance Film Festival when, 11 years after its founding, Steven Soderberg’s Sex, Lies and Videotape helped put the Park City-based festival on the map. Led by Miramax, Fox Searchlight, Sony Classics, and a handful of others, in the years that followed, the independent film industry grew to a $4.8 billion business, representing an 11% share of 2019 global box office. According to Consultancy UK, due to the pandemic 2020 year-end results indicated that indie box office revenue could drop as low as $1.4 billion. Coronavirus aside, the independents have always been a high-risk business.  As reported by Stephen Follows Film Data and Education, out of the 37,472 films made in the United States between 1999-2018, only 5.7% were made or released by one of the major Hollywood studios, which means that 94.3% were independents, and if you were to randomly select one made in the US during that period, there is only a 3.4% chance it was profitable for its backers.

 

With its history of finding and presenting off-beat crowd-pleasers, Sundance is not only the most high-profile market for independent films, it’s been the launchpad for Get Out, Little Miss Sunshine, Napoleon Dynamite, Four Weddings and a Funeral, Brooklyn, The Blair Witch Project, Precious, 500 Days of Summer and In the Bedroom, the first Sundance premiere to garner a Best Picture Oscar nomination. Many of these films sparked bidding wars at the festival, where an audiences’ enthusiastic response can lead to ‘Festival Fever’, the phenomenon that occurs when competitive film buyers are all sitting in a theatre at the same time, having the same experience, each one wanting to walk away with the prize.  

 

While the days of film buyers finding an uncultured pearl at Sundance, Toronto or Cannes aren’t over, they are becoming increasingly rare. Indie veteran David Dinerstein who served as President of LD Entertainment, Lakeshore Entertainment, and Co-President and Founder of Paramount Vantage, after stints at Fox Searchlight and Miramax put it this way: “It’s challenging to find widely appealing films at festivals that are finished and have commercial potential because so many of those have been either financed or presold to a streaming service or a studio at the script stage.” As a result, we’re seeing more independents like Neon and A24 jumping into the production end of films. The equation is complicated by the streaming services that were considered interlopers when they initially entered the indie market, but whose deep pockets quickly made them major players.

 

In order to be really successful in the streaming game you have to generate lots of new subscribers. Having figured out that they can’t do that on binge-worthy TV alone, the streamers needed event-worthy content. Movies deliver on that. So, the streaming behemoths upped the ante and their content budgets in order to produce and buy films. According to industry sources, Netflix, with a subscriber base of 207 million, will spend $17 billion on content in 2021. Apple+ is expected to invest $17.3 billion in order to grow its 200 million base while Amazon Prime, which also has 200 million subscribers, is reportedly eyeing a purchase of MGM for $9 billion and has earmarked $11 billion for content. With 100 million subscribers, Disney+ will lay out $8 billion for intellectual properties. Suddenly high-profile movies are like rotisserie chickens at Costco — loss leaders used to lure customers. In fact, Netflix recently announced that it plans to release a new movie every week. Cash-rich, these streaming bloodhounds were nipping at the behinds of the independents long before COVID wreaked havoc on moviegoing behavior.

Chances are if you’re seeing a new movie these days you’re watching it in your living room. It’s convenient, easy, and safe. You can do it in your underwear.  You like that. In fact, you like it so much that you’re reevaluating what it will take to get you off the couch and back into theatres. Putting aside pandemic-related health issues and the lack of the communal experience that in-theatre viewing provides, a lot of you are content to hunker down in front of your large screen TVs and pay a premium in order to enjoy the four quadrant movies you used to have to plunk down $60 for a family of four to see, or the esoteric fare that captured hearts at the Egyptian theatre in Park City. As a result, suddenly the streamers are the agenda setters. 

“Unlike independent distributors, the streamers don’t have any obstacles to getting the film into the marketplace. With abundant financial resources and the fact that theatrical is an afterthought to them, they’re in the position to dominate the festival world, at least for the moment,” says Ira Deutchman whose CV includes founding Fine Line Features and holding high-ranking positions at Cinecom International, United Artists Classics, Cinema 5 and being Professor at Columbia University School of the Arts. Mr. Deutchman believes that the streamers’ supremacy is transient. “I think festivals are going to have a more important role going forward in creating demand for movies and the ecosystem will come around to something like it used to be.”

Diane Quon, Academy Award-nominated producer of Minding the Gap emblematically speaks for many when she says, “The filmmakers I’m working with still want to see their movies in theatres. Even a small theatrical run is meaningful.” 

As one studio acquisition executive points out, “A theatrical campaign is one way the Indies can differentiate themselves from the streamers. The best way for them to compete is not in an open marketplace or buying films. Where they compete is by developing relationships very early on with filmmakers and becoming that filmmaker’s preferred home. Look at what IFC did making a commitment to Richard Linklater on Boyhood. That was a promise made to a creator of support and belief in their film. The problem is, I don’t know that an indie would make that commitment today.”

 

A lot of people say that indies have to finance films in order to get a seat at the table. The problem is that aside from the studio-owned specialty divisions like Searchlight, Sony Classics and Focus, many indies can’t compete financially. In a classic ‘if you can’t beat them, join them’ move, independent distributors such as A24, Magnolia, IFC and Neon among others, are entering into distribution partnerships with the streamers. 

The aforementioned studio acquisitions executive predicts, “You’re going to see more of these interesting bedfellows where you have indies providing a very early window of theatrical distribution to a streamer in order to differentiate themselves in the marketplace.”

When asked if the streamers will squeeze out the indies, Mr. Dinerstein said, “I think the streamers’ business model is to produce their own content and then acquire content on an opportunistic basis, to augment what they’re already doing on their platform. It does make it more challenging, but it also provides opportunities. I don’t think there’s going to be one way of doing things anymore, which is why I’m a big fan of bespoke distribution.”

“You could have asked me the same thing 10 years ago when talking about Fox Searchlight or Focus,” said Mr. Deutchman. “There’s always been the issue of independent film being co-opted by deep pockets. Whether it’s a major studio’s classic division or some new company coming into the marketplace or the streamers, there’s always somebody out there that skews the marketplace.”

“Things are very complex right now,” Dinerstein concluded. “No one knows where it will end up. We all knew this was coming one way or another. Covid simply advanced it. What used to take 10 years is now happening in one year.”

Copyright 2021 by Michael Arkin. All rights reserved.