The Turmoil in the Industry: Part One

Nostalgia

Nostalgia .. yeah, we do it.

After over 100 conversations and meetings with industry leaders here in New York, I have not come up with a paying job, but have come to some pretty interesting preliminary conclusions. The independent film industry in New York City is on life support, and it has been since even before our current economic crisis–and the problem is distribution.

In this three-part posting, I will cover the difficulties the film industry faces and what I see as the future of our distribution model. Read on to discover the big-deal problem with indie filmmaking, and the big-deal solution I have.

To start, here’s a quick primer on how things work in Los Angeles: the studio system (Universal, FOX, Paramount…) is a vertically integrated movie production machine. They buy films, usually in the form of scripts, pay for the production and marketing costs, and reap the lion’s share of whatever profits come in. They often employ entire production houses, like Marc Platt Productions [IMDB] where I interned, to develop and pitch ideas – a good idea is worth so much to them that they expend massive resources to get it.

Contrast this reality with the predominant model for indie film creation. An independent filmmaker’s greatest obstacle is raising money, and for good reason. Such a tiny fraction of films make their money back that financiers are often required to sign a statement saying they probably won’t get anything. Financing an independent film is patronage of the arts, with practically zero returns.

In this context, the studio model seems remarkable. They’ve found a magical formula to turn a costly, low-return industry into a sustainable money-maker. They do this by a fanatical obsession with marketability and audience appeal. (In fact, very few studio films make money – budgets are paid by the few big hits they get. They can’t tell quite which films will be the hits, which is why they put out such a high volume.)

In contrast, there is not what you would call a model in the world of indie film. In an endeavor so difficult, whichever way works is the right way to do it. Some filmmakers get lucky and meet an “angel investor” who pays for the movie out of a love for the arts and a desire to be a part of something. Successful pseudo-indie producers like Lakeshore Entertainment (Million Dollar Baby, Runaway Bride, Underworld) often sell distribution rights to foreign markets like Italy and China and get a bank loan on those I.O.U.s. Then, they can pay a studio upfront for the use of its resources.

Both these models are floundering as well – today’s investors would probably jump on another Ponzi scheme before financing an independent feature, and foreign sales aren’t what they used to be.

But the greatest loss is that of the distribution deal. In the early 2000’s, distribution companies like Miramax and Focus Features would scoop up the winners of Sundance and other festivals for millions, put a massive marketing campaign behind the films, and turn a quick profit without taking as much of a risk – after all, it’s much easier to pick a good film than to bet that a film will be good before it’s made. This would only happen to a few films, but it was an opportunity that did not previously exist, and was the reason for the recent rebirth in independent film.

A few things happened to kill this model. The distribution companies realized they were overpaying for these films — there is simply so much independent cinema out there of decent quality that many millions is a bit much to pay. A lot of these companies died or, like Miramax, turned into production companies and stopped distributing. Finally, studios realized that they could make their own movies on super low budgets, call them indies, enter them into film festivals, and get all the street cred with more of the control.

So the major problem is financing a film, and as we can see financing is intimately tied to the question of distribution. So where does the Internet come into play here? What are the chances for a return of independent cinema? Read my analysis and then predictions for the future in parts two and three!

Read on! The Turmoil in the Industry Part Two –>

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7 Comments to “The Turmoil in the Industry: Part One”

  1. Filmmakers Corner: The Turmoil in the Industry: Part One http://bit.ly/10xLnO

  2. Filmmakers Corner: The Turmoil in the Industry: Part One http://bit.ly/10xLnO

  3. The Turmoil in the Industry: Part One http://bit.ly/hPITc

  4. The Turmoil in the Industry: Part One http://bit.ly/hPITc

  5. Julie Flynn 12 June 2009 at 2:47 pm #

    Mike – I really appreciated this post. As someone new to LA, I found your simple, “in-a-nutshell” breakdown of just how the film industry works very accessible and helpful.

    Your explanation of how the short-lived distribution frenzy of independent films created a mini rebirth was quite interesting as well.

    It seems to me that independent film is really in trouble. Unless film makers find some way to make their work profitable for investors, they will be forced to rely on philanthropic gift-type funding from foundations or grants. Films would have to be viewed almost as academic pursuits, supported by fellowships, stipends, grants, etc. That type of revenue flow is challenging in this economy where corporations and foundations are forced to scale back on philanthropic giving. And, even if indie film makers could find a way to make their art profitable, that might not even be a good solution anyway. Inevitably whenever art is tied to profit, “investors” and stake holders will want control over content and artistic direction. Is it worth the trade off?

    Maybe if there were higher demand in our culture for artistic and experimental film things would be different. For now, I hear The Hangover is tearin’ up the box office.

  6. […] bemoaned in the past the challenges of film in the distribution sphere and my thoughts on the exciting places the industry is going, […]

  7. […] a three part series that you absolutely must read, Mike has laid out how indie film landed in its current […]


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