The Loews Santa Monica Beach Hotel, one of the AFM venues

Kristin here-

The 2008 American Film Market started yesterday. Like the film festivals at Cannes, Toronto, and, increasingly, Berlin, the AFM is one of the major places where independent and foreign-language films get sold. Distributors from all over the world come to sell their products and to buy the films that they will release at home. It seems a good occasion to look at what effect the folding-in of New Line Cinema into a unit within Warner Bros. early this year has had on the international independent film market.

The good old days

In my book The Frodo Franchise, Chapter 9 dealt with the impact of The Lord of the Rings on the film industry. There I discuss what effects the trilogy had on New Line and its parent company Time Warner. I also analyze the rise of the fantasy genre, the technological advances, and the boost given to the depressed indie market internationally. The 26 international independent distributors that financed a substantial portion of the film’s production through presales—with commitments to all three parts, sight unseen, at very steep prices—grew dramatically as a result of its success.

In 2001, an international slump in independent and foreign-language cinema started. The causes were complex, and I detail them in the book; they included a sag in advertising, the dot-com bust, the September 11 attacks, and the American dollar’s high exchange rate. With perfect timing, The Lord of the Rings: The Fellowship of the Ring came out in December of 2001. Its theatrical and DVD earnings in 2002 poured money into the market through the 26 companies’ ability to buy new product when other distributors were still strapped for cash. By early 2004, the market had substantially recovered. Rings wasn’t the only factor aiding that recovery, but it was a major one.

That section of Chapter 9 is one of the parts of the book I’m proudest of. Most people interested in film knew something about most of the topics I covered. They were probably at least vaguely aware of the video games and other tie-in products, the highest successful internet campaign, the growth in filmmaking and tourism in New Zealand, and so on. But the fact that this massive blockbuster was an independently financed film, sold on the independent market, and highly beneficial to that market was something completely unknown except to specialists within the industry. I cottoned onto it only because there were a few references to these distributors’ unusual buying power during the coverage of the 2003 Cannes Film Festival and AFM in Variety and The Hollywood Reporter.

Beyond those brief discussions, there was really no way I could research the topic without talking to people involved. That meant interviewing some of the executives of those 26 companies and someone very expert in the international indie market. A very helpful source was Mads Nedergaard, then of SF-Film, Copenhagen, who provided marvelous information for my major case study in that chapter. For the expert, I decided upon Jonathan Wolf, then and now the Managing Director of the AFM. Luckily he agreed to be interviewed. During our conversation Jonathan remarked that he had been very struck that I understood that Rings was an independent film and that it had had a positive impact on international markets. I gather that’s why he agreed to the interview, during which he furnished me with valuable insights. Those two interviews really made that part of the chapter possible.

Despite the huge success of the trilogy, New Line continued to function as an independent, financing its films through presales of distribution rights and of licensing fees for ancillary products. It continued to sell them at events like the AFM, as well as having regular output deals with some of the same overseas companies that it had been dealing with for nearly a decade. New Line was one of the main U.S. firms supplying such distributors. Its growing success ultimately became part of what got the studio into trouble.

What had worked so well for Rings continued to work until the blockbuster fantasy trilogy that had been touted as the successor to Rings. The Golden Compass was financed in the same way, with special rights pre-sold to foreign distributors, many of them the same ones that had handled Rings. The problem was that Compass did tepid business in the U.S. but was a distinct success abroad. That money stayed with the foreign distributors.

Absorbed into Warner Bros.

The Compass problem coincided with the promotion of Jeff Bewkes as CEO of Time Warner at a time when the conglomerate’s stock price was low. The real problem was the encumbrance of AOL, but that was a problem that would take time to solve. New Line’s lack of success with its big Christmas release made it a target. Bewkes could slash the company as a signal to stockholders that he would streamline Time Warner. On February 25, he announced that New Line would be folded into Time Warner, to become a production unit specializing in the sort of genre fare that had sustained New Line for so long, such as the Nightmare on Elm Street series. It would also continue to produce the occasional major film, such as The Hobbit.

The point of absorbing New Line into Warner Bros. was largely to downsize the former by eliminating its distribution and other departments that could be handled by Warners. With Warners distributing New Line films abroad, the income would return to the studio rather than remaining with foreign distributors. Receiving financing from Warners, New Line would no longer need to finance films through presales.

For Time Warner, this made sense, but it was a blow to the overseas distributors with regular output deals with New Line. New Line and Miramax had provided steady product to these companies, which otherwise would have to compete in the open market on a film-by-film basis. With the departure of the Weinstein brothers from Miramax, that firm had dried up as a source, leaving the burden on New Line. Now New Line was disappearing as well.

What now?

In the 7 March 2008 issue of Screen International (the online version is subscription only), Mike Goodridge discussed where these distributors might be able to turn after the expiration of their New Line contracts. He pointed out, “The distribution partners had good years and bad with New Line. None were thrilled with The Long Kiss Goodnight or The Island Of Dr. Moreau but for every flop, there was a Seven or Austin Powers, a Mask or Rush Hour.” He also confirms my claims about the Rings trilogy’s impact on its international distributors: “The success of the three films for the international partners cannot be overestimated. Nor can the fact that they, more than anybody involved, took a huge risk on the trilogy. The risk paid off. The Greens at Entertainment [the U.K. distributor], the Hadidas at Metropolitan [the French distributor] and others genuinely shared in the profits of one of the box-office phenomenons of the last 20 years. It was the international buyers’ dream. Instead of losing money on studio cast-offs, they had a hefty piece of a trilogy which grossed nearly $2bn outside North America.” New Line’s disappearance as a source of hit films “brings a dramatic sea change to the complexion of the global business,” according to Goodridge. These independent firms “will be competing for an increasingly small number of tentpole pictures available to them.”

Where have these distributors turned for films? In some cases their contracts with New Line, which predate the studio’s absorption into Warner Bros., are good through 2009. That means, however, that those distributors are already looking ahead for releases after the contracts end. At Cannes this year, New Line had a much-reduced presence. Camela Galano, one of the executives who had been in the studio’s international sales wing for years, was promoted to being its president in May. She brought only Journey to the Center of the Earth. Galano told Variety, “We just won’t be selling movies … but we’ll be doing what we normally do with our outputs, which is go through the lineup, releases and materials.”

A number of firms at Cannes stepped up to fill in the void left by New Line’s withdrawal from distribution. One up-and-coming firm, QED, was selling Oliver Stone’s W, the sci-fi film District 9 (produced by Peter Jackson and due out in the U.S. next August 14), and the Milla Jovovich thriller A Perfect Getaway. Gary Michael Walters, co-president of Bold Films, commented that he saw an opportunity presented by Warners’ takeover of New Line’s foreign distribution. “We see a sweet spot in that niche of $10 million-$30 million smart but commercial pictures.” Similar rising firms include IM Global, formed by the former head of Miramax International, Stuart Ford. (See Variety‘s summary here.)

John Hazleton analyzed the impact of New Line’s withdrawal from the international market for Screen International just before Cannes (May 9, 2008 issue). Hazleton harks back to the impact of Rings and other New Line franchises:

Many sales executives, in fact, go further and suggest that by boosting the fortunes of the distributor partners with which it had ongoing output or package deals—companies including the UK’s Entertainment, France’s Metropolitan, Australia’s Villege Roadshow and Spain’s Tri Pictures—New Line effectively elevated the independent international industry as a whole. Other sellers benefited, for example, when the New Line distributors reinvested profits from The Lord of the Rings and Rush Hour movies—or from last Christmas’ The Golden Compass—in the acquisition of non-New Line films.

No wonder, then, [that] the decision by parent Warner Bros to turn New Line into a stripped-down genre label whose films will (once current deals expire) be distributed worldwide by the studio is having such an impact in the independent arena. Filling the New Line void has suddenly become a pressing need, or an enticing opportunity, for all sorts of independent players.

One such player is Hyde Park International, whose president Lisa Wilson told Hazleton, “We’re certainly seeing an uptick in interest from distributors who previously didn’t need as much product because they were secure in having the New Line output. They’ve been making more of an effort than usual to meet us before Cannes.” Another is The Film Department, selling two films under production, Law Abiding Citizen, a thriller starring Gerard Butler, and The Rebound, a Catherine Zeta-Jones vehicle.

Hazleton identifies two major independent films suppliers that are stepping into the supply gap left by New Line’s departure:

Leading the field of remaining big picture suppliers are Summit Entertainment and the combination of Lionsgate and Mandate formed when the former acquired the latter last September. Crucially, like New Line, each group now has its own North American theatrical distribution operation, giving international buyers assurance that films will get a domestic theatrical launch and allowing the co-ordination of domestic and international release dates.

Summit is new to the domestic distribution business. But it is a company with vast international experience that plans to handle 10-12 films in the $15m-$45m budget range a year. Its Cannes slate includes Terrence Malick’s drama Tree of Life, starring Brad Pitt, and it already has output deals for its own productions in France, Germany, UK and Scandinavia.

In Lionsgate, Mandate has a well-proven domestic distribution outlet that last year scored three $50m-plus box-office hits and this year has a bigger market share than any independent or studio specialty division.

As the combination’s international arm, Mandate—which will be in Cannes with titles including Whip It! featuring rising star Ellen Page, and family animation Alpha And Omega—handles around half of Lionsgate’s domestic slate plus titles from third-party producers.

New Line’s withdrawal, says Helen Lee Kim, president of Mandate International, “just puts us in a better situation, because you can count on one hand the independent companies able to bring studio-level product to the marketplace.”

Hazleton also points out that “Studio-owned sales operations Paramount Vantage and Focus Films International [a Universal subsidiary] will be another alternative source for buyers.” In general, though, the Hollywood studios’ recent retreat from art-house divisions means that they will have less to contribute to foreign distributors.

Summit and Mandate are both participating in the AFM as well. Another major firm is Relativity Media, a rapidly expanding production-distribution independent responsible for such recent films as 3:10 to Yuma, Atonement, Baby Mama, and Pineapple Express. Relativity had expanded into international sales this year at Cannes. In October it offered $150 million for Universal’s Rogue Pictures and will gain the 40-50 projects that genre division has in the works. As the AFM began, it had just signed long-term output contracts with nine foreign distributors. Finally, Relativity has, according to Variety, “partnered with sales company Mandate Intl. to oversee sales in non-output territories as well as provide worldwide servicing of the slate.”

Other sales firms at Cannes included Odd Lot and Essential, and new companies debuting at the AFM this year were FilmNation, Exclusive Film Distribution, Icon Entertainment, and WestEnd Films. Some of these companies will grow, others won’t. But gradually they will absorb the market position formerly held by New Line.

So does all this mean that the impact of New Line’s glory days is over? Not entirely. I believe that although the distribution of The Lord of the Rings has receded five years into the past and New Line has now disappeared as an independent entity, the trilogy’s impact still lingers in the international industry. Steve Bickel, president of The Film Department, commented to Screen International shortly before Cannes, “The loss of any independent or independent-spirited company is a loss to the industry. New Line provided a great service to all of us because they helped make strong companies that we’re now able to sell to.”

Last Modified: Thursday | March 10, 2011 @ 09:03    open printable version

This entry was posted on Thursday | November 6, 2008 at 11:48 am and is filed under Festivals, Film industry, Global film industry, Hollywood: The business. Responses are currently closed, but you can trackback from your own site.