The Indie Film Business Tries on New and Old Business Models as Uncertain AFM Hits Las Vegas

As a seasoned industry insider with decades of experience under my belt, I must say the evolution of film distribution and production is akin to watching leaves change colors in autumn – beautiful yet unpredictable. The rise and fall of physical media, the emergence of streaming giants like Netflix, and now the impending launch of TIFF’s official marketplace – it’s a constant dance between innovation and tradition.

Over the past few years, it seems as if I’ve found myself navigating through a time period that echoes the ancient Chinese curse, “May you experience intriguing times.” And, indeed, the American Film Market, taking place from November 5th to the 10th at the Palms Casino Resort in Las Vegas, has felt the ripples of these dynamic times. Yet, amidst the changes, there have been some unexpected positives that have emerged.

At the height of the streaming era, it was common for Netflix, Amazon, Apple, and many established film studios to acquire global rights to popular content well before the American Film Market (AFM). In some cases, studios even prioritized domestic video-on-demand (VOD) releases over international cinema sales, reducing the profitability of these sales. This benefited the creators of projects, but it had a negative impact on smaller buyers and the AFM market.

According to Marc H. Simon, a partner at Fox Rothschild who works in the independent film industry as both an attorney and producer/director of films like “Nursery University” and “Unraveled”, the importance of the market decreased significantly when sales agents and content creators were able to directly approach streaming platforms such as Netflix. Previously, they had to arrange financing using the traditional model, but this wasn’t necessary anymore. Streaming giants like Netflix aimed to dominate the market, offering producers, filmmakers, and financiers a seemingly straightforward path (yellow brick road). However, that path has since ended, leaving the film market to create a new one.

In numerous aspects, the freshly built road mirrors the journey taken by movie producers, investors, and distributors during the era before streaming became prevalent.

Lisa Callif of Donaldson Callif Perez, an attorney focusing on representing independent producers and production companies, notes that they are returning to a self-governing financial model. This allows for the exploration of intriguing equity financing arrangements as people join in. The advantage is we have the freedom to design these structures without needing approval from Netflix, Apple, or any other entity.

The decrease in live theater audience numbers, often viewed as a major issue within the industry, appears less concerning for financiers of AFM-compatible independent films. These films historically haven’t relied heavily on theatrical agreements.

Approximately 10% of the 500+ movies and TV shows that Bondit Media Capital, led by CEO Matthew Helderman, has fully or majority funded throughout its 11 years in business, have been distributed to movie theaters.

Helderman notes that while some players remain committed to traditional theatrical releases like Focus and A24, this aspect is no longer a significant factor in the overall picture. Unless a distribution can effectively lure audiences away from their homes, few are keen on providing a theatrical release beyond a small simultaneous release for streaming purposes, which might be triggered by the film’s performance. As a result, the role of theatrical releases is diminishing further within the business model.

The Indie Film Business Tries on New and Old Business Models as Uncertain AFM Hits Las Vegas

For numerous individuals, a theatrical debut remains indispensable, as it offers significant promotional benefits and adds credibility to a production. This can be crucial for placing a project in contention for award seasons or inciting viewers to press the “watch now” button on a streaming platform.

JJ Caruth, president of Avenue, Highland Film Group’s domestic distribution division, points out that the success of their recent action-thriller ‘Land of Bad,’ starring Russell Crowe and Liam Hemsworth, had a significant impact further down the line. The film performed exceptionally well on Paramount for transactional sales before topping Netflix’s charts,” he said.

Sarah Lebutsch, a senior executive in sales and distribution at Protagonist Pictures, often follows a standard approach: debuting freshly finished films at the Venice and Toronto International Film Festivals during late summer. Her aim is to secure distribution rights for multiple significant territories, with North America being particularly crucial, followed by further marketing opportunities such as AFM, where deals are struck for other global regions.

Lebutsch mentions that some distributors are hesitant to join in their regions until they know who the North American partner will be,” he adds, as his company prepares to showcase Brian Cox’s directorial debut, “Glenrothan,” to potential buyers at AFM.

In recent times, purchasers tend to seek comprehensive rights, ranging from theater screenings to Video On Demand (VOD), for their specific regions. However, throughout most of AFM’s 43-year journey, the key factor driving deals was home video. As a producer, I could cast a B-list or C-list actor nearing the end of their career, create an eye-catching movie poster featuring them holding guns, and place it outside their hotel room. Over the course of a day or two, this tactic often secured enough pre-sales to cover the film’s production budget, and even turned a profit before a single frame was filmed.

The formula peaked during the height of DVD popularity, as production companies such as Avi Lerner’s NuImage/Millennium Films capitalized on this trend by producing direct-to-video action films in countries with low labor costs like South Africa. They would spend approximately $2.5 million on these productions and then sell them for $5 million to various territories worldwide.

However, in the latter part of the 2000s, the traditional business model started to vanish due to a significant surge in piracy as faster internet connections made it easier. This was accompanied by the emergence of commercial streaming platforms such as Netflix, leading to a dramatic decrease in demand for physical media. From 2006 to 2019, DVD sales plummeted by 86%, effectively bringing an end to the golden era for both home video and AFM (American Film Market), according to some.

In order to compete, companies began producing high-budget action films featuring well-known actors such as Sylvester Stallone in the Millennium’s “The Expendables” series. The initial release of this franchise in 2010 had a reported budget of $80 million. Although this may seem advantageous, this new approach results in narrower profit margins and numerous other complications. One of the most significant issues is locating distribution partners who possess substantial funds not only for purchasing territorial rights, but also for investing three to five times that amount on advertising and promotion for the film.

The Indie Film Business Tries on New and Old Business Models as Uncertain AFM Hits Las Vegas

In the streaming age, Bondit went through a pattern of growth, decline, and adaptation much like a rollercoaster, particularly with action films. This was evident when they jointly financed and produced fifteen low-cost Bruce Willis movies late in his career, such as “Apex.” The Exchange, acting as the sales agent, showcased this production at AFM’s virtual market in 2020.

According to Helderman, there’s no longer a strong interest in that type of film at home, but there is demand for a high-quality action movie starring a well-known actor, directed by someone more established, and with a higher production budget – something a bit more elite or upscale.

According to Helderman, the change was due to a combination of several influences. Two years ago, interest rates significantly increased following years of being almost zero, making it costlier for studios to borrow money as they invested billions in expanding their streaming content libraries. Simultaneously, Netflix experienced its first subscriber loss, which hinted to Wall Street that the era of unlimited growth within the streaming industry had ended.

Suddenly, these streaming services found themselves needing to operate more like traditional movie studios,” explains Helderman. Instead of acquiring as much indie film and television content as they used to.

Today, when it comes to the film market for independent genres, terms like “elevated” (for horror, action, thriller films) and, less often, “grounded” (in sci-fi) are popular among producers and distributors. However, dramas and biopics can be challenging to sell, unless they have a well-known director or prominent actors associated with them.

According to Caruth, when it comes to pitching projects internationally, it’s becoming tougher because people are more cautious. They prefer a well-written script that they can scrutinize carefully. To stand out, we need to offer something fresh and distinctive in our narratives. However, having star power remains crucial.

The potential stardom of AFM could be overshadowed by TIFF’s upcoming launch of an official marketplace in 2026, which is being supported with a $23 million CAD investment from the Canadian government.

Lebutsch comments that while TIFF has seen market activity before, the shift to an official market with establishment requirements adds complexity and cost. He ponders if it’s feasible for two such markets to coexist so closely. Will businesses choose one over the other, and which one might they prefer?

The unveiling of the TIFF marketplace might be more accurately interpreted not as a direct challenge to AFM, but rather as a reflection of their own challenges, given their role as a year-round film festival.

2024-10-31 20:20

The Indie Film Business Tries on New and Old Business Models as Uncertain AFM Hits Las Vegas

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