december 2312

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© Copyright Business Strategies December 2012 (http://www.moviemoney.com).

No reproductions without permission.

TFE THE FILM ENTREPRENEUR: A Newsletter for Independent Filmmakers and Investors

LOUISE LEVISON, EDITOR AND PUBLISHER

VOL 19. NO. 6 DECEMBER 2012

INDIE REVENUE MAKES HISTORY AT $4.5 BILLION!

The independent film market is alive and thriving. The independent box office in North America

in 2012 was $4.5 billion and 41.7 percent of the $10.8 billion total box office of all films. While

that is what you put in the Executive Summary of the business plan, I also have tried this year to

calm the naysayers by showing a different version for filmmakers and prognosticators.

Due to the number of higher revenue producing films distributed by studios, I have felt it

unlikely that the indie segment would ever be as high as 40 percent of the total. Logically, with

many indie films being in the low-to moderate budget range, we can’t really compete on a total

box office basis. Typically, the high-budgeted films distributed by the large indie companies

match films from the previous year in genre and style. The one film that I feel made the 2012

indie percentage an anomaly is The Hunger Games. With a $408 million domestic box office, it

earned $121 million more than The Twilight Saga: Breaking Dawn-Part 2 and $126 million

more than The Twilight Saga: Breaking Dawn-Part 1 (which earned $274.3 million of the total

in 2011). Without The Hunger Games, the indie percentage of the total box office would be 37

percent. From 2000 to 2011, it has averaged about 35 percent of the total box office.

Another interesting difference for the independent box office in 2012 is that the box office

remained higher in total revenue in comparison to 2011 throughout the year. In most years, the

current indie box office has been less than or equal to the previous year until summer. In either

August or September, it usually will begin to move higher as we get closer to the last quarter,

when revenues are driven by the annual Oscar hunt. Revenues in the first quarter generally are

driven by Oscar-nominated films released on Christmas Day or later in the previous year. When

we again look at The Hunger Games, however, the film was released in March and had earned

$403 million by the end of June. Of course, this discussion about one film does not take away

from the fact that 2012 was an extraordinary year for independent films, whether large of small.

It just gives us a better perspective for looking at the year’s results. The total domestic box office

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is up 6.14 percent from 2011, per www.boxoffice.com. Likewise, the organization estimates

tickets sold at 1,361,617, or up 6.01 percent. The international box office is estimated to have hit

a new high in 2012, growing 2 percent to an estimated $22.8 billion through December 31

compared to 2011’s record $22.4 billion. The official numbers for these totals will be validated

by the Motion Picture Association of America’s “Theatrical Market Statistics” report released in

February or March.

(Excerpted from Louise Levison’s blog on Baseline. For the rest of the discussion, go to:

http://www.baselineintel.com/research-wrap.) ◙

TORONTO FILM FESTIVAL The 38

th edition of the Toronto International Film Festival (TIFF) opened on September 6, 2012

with 372 films, 289 features and 83 shorts, compared to 337 films in 2011 (269 features and 68

shorts ). As with Sundance and Cannes before it, the number of films submitted films has not

slowed down. Of the 4,143 submissions, 3,191 were international and 952 Canadian compared

to 3,461 films (2,502 international and 959 Canadian) in 2011. The official TIFF press release

reported that 29 films were picked up during the festival but did not enumerate all of them. For

example, Sony Classics were said to have “picked up a couple of small titles.” FilmDistrict and

other distributors left by the weekend without initially acquiring any films. There is no way to

know what those titles were, although they certainly would be of interest to readers of this

newsletter. FilmDistrict and other distributors left presumably without picking up anything at

that time. Prices were the same as at other markets and festivals during the year. “The lesson is

that the market is back and the ecosystem is healthy,” one dealmaker told Mike Fleming of

deadline.com. “There are buyers for the smaller movies that didn’t exist a year ago. But we are

never going back to the place where those tiny films sell for $5M.” The biggest deal that was

reported was $3M paid by Focus Features for The Place Beyond the Pines, featuring an

impressive cast headed by Ryan Gosling, Eva Mendes and Bradley Cooper. Directed by Derek

Cianfrance (Blue Valentine), it is a “multigenerational, multicharacter epic drama,” Focus CEO

James Schamus told The Wall Street Journal. While theater owners are looking for films shorter

than Pines’ 140 minutes running time, Schamus told the Journal that only the director would

decide if it should be cut. While multi-platform is now a part of most distribution, theatrical still

appeared to be part of the mix for the acquired films. The best comment was from the wrap.com,

which pointed out that the TIFF “is where you go to win an Oscar,” as each of the past five Best

Picture winners screened at the festival.

Acquisitions from the festival are on the next page.

http://www.boxoffice.com/

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FILMS ACQUIRED FOR U.S. DISTRIBUTION AT TORONTO

FILM DISTRIBUTOR TERRITORY PRICE

Aftershock Dimension U.S. $2M

Byzantium IFC Films U.S. $2M

Clown Dimension U.S. $2M

Frances Ha IFC U.S. n/a

Imogene Roadside/Lionsgate U.S./International $2M

Inescapable IFC U.S. n/a

Lords of Salem, The Anchor Bay U.S. $2M

Midnight’s Children Paladin/108 Media U.S.

Much Ado About Nothing Roadside/Lionsgate U.S./International n/a

Place Beyond the Pines, The Focus Features U. S. $2.5-$3.0M

Reluctant Fundamentalist, The IFC North America n/a

Still Samuel Goldwyn U.S. n/a

Stories We Tell Roadside U.S. n/a

Thanks for Sharing Roadside/Lionsgate U.S./International n/a

We and I, The Paladin U.S. n/a

What Maisie Knew Millennium Films U.S. n/a

Writers Millennium Films U.S. n/a

◙

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BUSY, BUSY AMERICAN FILM MARKET The 2012 American Film Market (AFM®) presented by the Independent Film & Television

Alliance (IFTA) in Santa Monica (CA) experienced an upward trend buying companies with

more than 120 companies from 23 countries making their Market debut – a record high. Total

buyers rose 6 percent to 1,616 ― or 97 more than a year ago ― with 35 more buying companies

than in 2011 for a total of 753. AFM also reported that that attendance by Latin American

executives climbed 17 percent, followed by a 14 percent surge in Asian buyers. Jonathan Wolf,

AFM Managing Director and Executive Vice President of commented, “The healthy growth in

new buying companies is the most important metric for us. It shows that the global marketplace

for independent film is continuing to expand.” Overall, the market drew more than 7,749 people

in attendance.

Although initially sellers worried about the effect of Hurricane Sandy on the East Coast as AFM

was about to open, buyers reported strong sales and high prices demonstrating the strength and

resourcefulness of the independent sector of the film market and the continued role of

independent film worldwide. Buyers reported asking prices for the top titles were high,

particularly for Latin America and China. 2012 brought a new era in relations between U.S.

product and China. In an interview with The Hollywood Reporter, Jean Prewitt, President and

CEO of IFTA, said that shortly after she came on board ten years ago and Jonathan Wolf started

running the market, they “established a relationship with a full-time government relations firm in

D.C. and…have active involvement in a number of U.S. government negotiations and trade

committees. The most recent high-profile example was this year’s U.S.-China film agreement.”

The market had the usual mix of high concept, star-driven product with lower-budget, story-

driven product. While the “usual suspects” held forth on the “sweet spot” for a budget being in

the $15m-$35m range, lower budget films still were picked up. Buyers did appear to want to

take their time in evaluating product. Whereas many felt the need to refill the distribution

pipeline in 2011 after the two previous years of economic downturn, they were looking ahead to

sales in 2014 in some cases. FilmNation’s CEO Glen Basner told screendaily.com, “In good

times and bad times, the film has to make sense…If films do not definitively make sense, the

people will wait and see.”

QED’s Bill Block told Variety, “We are taking a filmmaker-driven approach,” he adds. “The

key is finding projects with a clear audience target.” As for investing in films yet-to-be-made,

Marc Schipper, CEO of Exclusive Media said, “If you’re an investor with a lot of money, the

film industry has a potentially high rate of return,” says. “Investing in films gives them a bit of

diversification in their portfolio.” He was referring to companies like Emmett/Furla and Cross

Creek Pictures; however, it is the same for the individual investor.

The AFM Conferences, which launched in 2011, spoke to large audiences of more than 700 in

attendance each day. At the film finance panel, which discussed how social media, new

distribution windows and good scripts are all helping indies gain ground in a changing media

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landscape, there seemed to be agreement that while we have new systems of distribution, when it

comes to forecasting what will be, screenwriter William Goldman’s quote still applies: “Nobody

knows anything.” Open Road CEO Ortenberg noted that day-and-date multiplatform releases

were fine for some films but would find others “cut off at the knees” if they wanted to expand

theatrically; however, “Not every picture should go through a wide theatrical release. Do I think

there will be shortened windows in the future? Yes, I do. Do I know what those windows will

be? No. Nobody has a crystal ball.” In a later VOD conference, Jason Janego, Co-President,

Radius-TWC, said, “VOD in Hollywood used to be a dirty word, a bottom feeder. There is a

stigma that exists that we are trying to eliminate because it is a great platform for the future.”

And Todd Green, General Manager, Tribeca Film, said, “There has to be improvement of the

user interface on cable. We need search-ability and a social element. If we get that, VOD’s

perception is going to go up.”

There seemed to be one common agreement over all the conferences. First, you have to have a

good film. WME Global head Graham Taylor said, “You have to be very precise about how you

are putting a picture together. Distributors are much more savvy. The strength of the script has

become so important.”

DIGITAL FOR THE INDIE

The cost of digital conversion will spur more deals. The National Association of Theater

Owners has estimated that 10-20 percent of U.S. theaters won’t be able to convert and may close.

In other cases, private equity firms are at the end of a typical three-to-five year investment cycle.

There was an unofficial estimate of more than 1,000 non-digital screens in specialty theaters at

the end of 2012. For an interesting article on the subject, check out the indiewire.com reprint of

an article by Ira Deutchman, Managing Partner at Emerging Pictures and Chair of the Columbia

University Film Program at:

http://blogs.indiewire.com/thompsononhollywood/ira-deutchman-on-indie-theaters-face-digital-

mayhem. ◙

JOEL SILVER GOES FULLY INDIE Welcome Joel Silver to our world, along with his new banner Silver Pictures Entertainment.

As he ends a 25-year relationship with Warner Bros., the studio will pay Silver $30M for the

rights to more than 30 of his films produced under the Silver Pictures banner. The unusual

agreement prevents him from collecting any future revenue from hit franchises like The Matrix,

Lethal Weapon and Sherlock Holmes. It also represents the latest example of Hollywood shifting

under the feet of the industry’s veteran filmmakers. As studios focus more on their bottom line,

Daily Variety points out, they have been forced to give up rich overhead deals and adapt to a

more corporate way of making movies. Most of Silver’s films were financed by Warners, with

Silver financing smaller films through Dark Castle. Silver was reported to be closing a five-year

distribution deal with Universal, but Silver has to find financing for those films himself.

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Distribution for two future films is set, with Emmett/Furla Films financing Dark Castle’s Motor

City and StudioCanal agreeing to pay for Non-stop, Silver’s first project at Universal. ◙

VARIETY AND DEADLINE.COM NOW PUBLISHING SIBLINGS Penske Media Corp. completed a deal Oct. 9

th with Reed Business Information to acquire the

107-year-old trade paper Variety. Since my publisher, Focal, was sold by Reed to Taylor and

Francis in June, I can attest to the fact that Reed has been moving away from much of its trade

book and advertising-dependent businesses. PMC chairman-CEO Jay Penske, whose focus has

been on digital media, purchased Nikki Finke’s online news service Deadline in 2004 and added

TVLine, Movieline and HollywoodLife over the years. The new Publisher is Michelle Sobrino-

Stearns, a Variety veteran. Her most recent position was as Associate Publisher. The future of

the print Daily Variety may be in doubt, however. With fewer than 30,000 subscribers, including

this reporter, he may scrub the daily and keep the weekly as the only print version. Thanks, Jay!

It is an addiction I could not quit on my own. ◙

COMINGS AND GOINGS Robert L. Johnson, the founder of Black Entertainment Television and Chairman of JLJ

Companies, has acquired Image Entertainment and Acorn Media Group for his new company

called RLJ Entertainment. The focus will be on exploiting the aggregated library of more than

5,000 titles across digital, VOD and DVD platforms. The Image Entertainment catalogue

contains more than 700 urban titles and distributes the Criterion Collection, while UK-based

Acorn is a drama and mystery specialist that owns a majority stake in the Agatha Christie library.

“RLJ Entertainment’s goal is to become a pre-eminent distributor of “content to all media

platforms, including DVD and Blu-Ray, digital downloads, digital streaming, and broadcast and

cable,” Johnson told screendaily.com.

Lionsgate has started a micro-budget feature division, with longtime production exec John

Sacchi tapped to head the operation. The micro-budget arm is seeking horror and comedy

projects with a price tag of up to $2.5 million.

Beijing-based Galloping Horse and India’s Reliance MediaWorks (RMW) have formed a joint

venture to buy bankrupt U.S. visual effects studio Digital Domain for $30.2M. The joint

venture between RMW and a U.S. subsidiary of the Chinese media company outbid other

companies in a bankruptcy court auction in early September. Galloping Horse owns 70 percent

of the joint venture and RMW, a division of Mumbai-based giant Reliance ADA Group, owns

the remaining 30 percent. The acquisition covers all of Digital Domain’s assets, including its

studios in Los Angeles and Vancouver and a co-production stake in the feature Ender’s Game.

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Entertainment One (eOne), which has a library of more than 35,000 titles, has completed a

transaction to acquire Alliance Films in a deal worth $228M. The film distribution powerhouse

now has reach across Canada, the UK, Benelux, Australia, the U.S. and Spain. The combined

companies create the largest independent film distributor in Canada and the UK. The eOne

library now has more than 35,000 titles. “This acquisition delivers on eOne’s long-term growth

strategy to invest in content, maximize rights ownership and expand our international footprint,”

said Darren Throop, President/CEO of Entertainment One.

Participant Media is launching its own television network in summer 2013. The company has

purchased the Documentary Channel, distributed on satcasters DirecTV and DISH, and has

entered into an agreement to acquire the distribution assets of emerging cable network Halogen

TV from The Inspiration Networks. Participant will combine and rebrand the assets to target

millennials, reaching an estimated 40+ million subscribers on cable and satellite. The new

network will carry Participant’s brand of socially relevant entertainment with a slate of original

and acquired programming catering to adults 18-34. Participant CEO Jim Berk said, “After

nearly a decade of telling compelling, entertaining stories on the big screen, a television channel

allows us to build upon our existing film, digital and social action resources to create a

continuing conversation with an audience that is interested in staying connected and engaged

with the world around them.”

Hollywood’s IM Global and Mexico and L.A.’s Canana, headed by Gael Garcia Bernal, Diego

Luna and Pablo Cruz, are teaming to launch Mundial. The Mexico City-based joint venture will

focus on the financing and worldwide sales of Latin American movies, IM Global CEO Stuart

Ford, Cruz and Canana CEO Julian Levin announced May 27. Run by Canana VP Cristina

Garza, its former distribution head, Mundial will rep 8-10 titles a year, sourced from all over

Latin America, including Canana productions.

New funding enterprise Outsource Media Group made itself known at the Toronto Film

Festival by acquiring North American rights to the Mike Newell-directed Great Expectations.

The film, which stars Ralph Fiennes, Helena Bonham Carter, Jeremy Irvine, and Holliday

Grainger, was sold before its Gala Premiere. Partners Elizabeth Karlsen and Stephen Woolley

produced the film. Outsource Media Group will make a deal with distributors for North

America, and the financier will put up P&A for theatrical releases through a fund it intends to

use to build an acquisition slate of finished films and pre-buys. In other words, a new indie

buyer has entered the scene.

Primal Screen, a genre division of Screen Media, made is its debut as a horror label at the

Toronto Film Festival. “Under our Screen Media Films umbrella, we are excited to launch a

branded line of horror titles in this still quite profitable genre,” President Suzanne Blech said.

Screen Media’s horror titles that have had a domestic release include Night of the Living Dead

3D: Reanimation, FDR: American Badass, Below Zero and Inkubus. ◙

http://www.deadline.com/2012/12/participant-media-acquires-documentary-channel-and-halogen-tv-will-combine-services-to-launch-network-for-millennials/

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NUMBERS! NUMBERS! NUMBERS!

LOW-BUDGET INDEPENDENT FILMS ($8.5M and under)

FILM DISTRIBUTOR REVENUE COST

thous. $ thous. $

2016 Obama’s America Rocky Mountain

Pictures

9,347 2,500

Beasts of the Southern Wild* Fox Searchlight 9,090 1,500

Bernie Millennium 9,206 6,000

Celeste and Jesse Forever Sony Pictures Classics 3,095 850

End of Watch* Open Road 40,808 7,500

Girl in Progress Lionsgate 2,609 8,000

Hit and Run Open Road 13,749 1,300

Holy Motors* Indomina Releasing 511 5,400

Insidious FilmDistrict 54,009 1,500

Magic Mike Warner Bros. 113,197 7,000

Middle of Nowhere (2012)* AFFRM 123 200

Nitro Circus: The Movie 3D* ARC Entertainment 3,297 7,000

October Baby IDP/Samuel Goldwyn 5,357 800

Other Son, The* Cohen Media Group 1,161 3,900

Raid, The: Redemption

*

Millennium Ent. 4,105 1,100

Sessions, The* Fox Searchlight 5,562 1,000

Sinister* Lionsgate/Summit 48,080 5,000

Sleepwalk With Me* IFC Films 2,263 1,200

Undefeated* The Weinstein Co. 561 1,000

Words, The CBS Films 11,495 6,000

Your Sister’s Sister IFC Films 1,597 125

*Still in North American distribution as of December 31, 2012. Revenue figures are from Variety, Box

Office and boxofficemojo.com. Negative costs (production prior to prints and ads) are approximate,

based either on conversations with filmmaker, production company or industry estimates.

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MORE NUMBERS! NUMBERS! NUMBERS!

HIGH-BUDGET INDEPENDENT FILMS (Over $8.5M )

FILM DISTRIBUTOR REV. COST

thous.

$ $

thous.

$ Amour* Sony Pictures Classics 220 9,900

Anna Karenina (2012)* Focus Features 11,077 49,700

Best Exotic Marigold Hotel, The Fox Searchlight 45,827 10,000

Django Unchained* The Weinstein Co. 82,835 83,000

Hunger Games, The Lionsgate 408,011 80,000

Intouchables, The* The Weinstein Co. 13,142 12,600

Killing Them Softly* The Weinstein Co. 14,857 15,000

Lawless* The Weinstein Co 37,399 26,000

Lincoln* The Walt Disney Co, 137688 65,000

Looper* Sony/TriStar 66,486 30,000

Man With the Iron Fists, The* Universal 15,634 20,000

Master, The* The Weinstein Co. 15,966 30,000

Moonrise Kingdom Focus Features 45,509 16,000

ParaNorman* Focus Features 56,001 83,000

Perks of Being a Wallflower, The* Lionsgate/Summit 17,377 12,000

Pitch Perfect* Universal 64,499 17,000

Red Dawn (2012)* FilmDistrict 43,641 65,000

Rise of the Guardians* Paramount

ks

93,711 145,000

Salmon Fishing in the Yemen CBS Films 9,025 13,900

Seven Psychopaths* CBS Films 14,998 15,000

Step Up Revolution 3D* Summit/Lionsgate 35,705 33,000

Taken 2* Fox Searchlight 139,039 45,000

Twilight Saga: Breaking Dawn-Part 2* Summit 287,405 120,000

Zero Dark Thirty* Sony/Columbia 1,636 45,000

Note: Same references as Low-budget table.

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LARGE FORMAT FILMS

FILM DISTRIBUTION REV. COST

thous.

$

thous. $

Air Racers 3D

3D Entertainment 1,310 5,000

Aliens of the Deep BV LSF 8,969 5,000

Apollo 13: The Imax Experience IMAX 1,737 n/a

Bugs! SK Films, Inc. 18,114 9,000

Cirque du Soleil: Journey of Man Sony Pictures

Classics

15,628 9,000

Deep Sea 3D Warner Bros. 44,493 1,000

Galapagos: The Enchanted Voyage IMAX 18,096 7,000

Ghosts of the Abyss Buena Vista 17,041 13,000

Haunted Castle nWave 13,652 n/a

Hubble 3D Warner Bros.

30,086 n/a

Magnificent Desolation IMAX 34,109 3,000

NASCAR 3D Warner Bros./IMAX 21,337 10,000

Ocean Wonderland 3D 3D Entertainment 11,035 3,000

Roar: Lions of the Kalahari Destination Cinema 2,166 n/a/w

Roving Mars Buena Vista 10,408 1,000

Sea Monsters 3D: A Prehistoric Adven. National Geographic 23,746 n/a

Sea Rex: Journey to a Prehistoric

World

3D Entertainment 6,097 n/a

Space Station 3D IMAX 86,366 1,000

Thrill Ride Sony Classics 18,795 9,000

To the Arctic 3D* Warner Bros. 9,122 n/a

T-Rex: Back to the Cretaceous IMAX 53,323 14,500

U2 3D National Geographic 10,362 13,000

Under the Sea 3D Warner Bros. 30,322 n/a

Wildest Dream: Conquest of Everest National Geographic 898 n/a

Wild Parrots of Telegraph Hill Shadow 3,058 n/a

Wild Safari 3D nWave 16,621 4,500

Young Black Stallion Buena Vista 6,751 n/a

Note: Same references as Low-budget table. ◙

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Need Money for a Movie? Don’t Go in Empty-Handed. Have a Business Plan.

The benefit using a reliable business plan to raise financing for a film is for the investors and the

filmmaker to gauge the potential success of a film. A polished business plan with projections

based on the worldwide results of other films and with clear explanations about the industry,

markets and production personnel attached to the film is better than an uninformed effort.

Contact Louise Levison at [email protected] to find out how you can put her more than 20

years of experience as a Film Business Consultant to work creating a business plan for your film.

Louise Levison, President of Business Strategies, specializes in creating business plans for film

and consulting on other aspects of independent filmmaking and distribution. Levison is the

author of Filmmakers & Financing: Business Plans for Independents (Seventh Edition, Focal

Press ). The sixth edition of this book is available in a Chinese edition published by Hindabook

(www.hindabook.com) in Beijing, China. She also is publisher/editor of The Film Entrepreneur:

A Newsletter for the Independent Filmmaker and Investors. Levison’s clients have raised money

for low-budget films such as The Blair Witch Project, the most profitable independent film in

history, and for companies raising as much as $300 million. Among other clients’ projects are

The Prophet (an animated film based on Kahlil Gibran’s book), Unlimited (Nathan Frankowski),

Redemption (Clayton Miller), Moving Midway, Redemption Road, Haunted (2012), High School

Sweethearts, The First of May, The Open Road, Aluna, Yak: The Giant King, Visual Acoustics:

The Modernism of Julius Shulman, My Father and the Man in Black and Michael Winslow Live.

Among her corporate clients are Danny Glover’s Louverture Films (2008 nominee for Best

Documentary Academy Award Trouble the Water) and his Louverture Film Fund I, The Pamplin

Film Company (Hoover), Hurricane Film Partners, LLC and Tokuma International Ltd (Shall We

Dance, Princess Mononoke). Among other entertainment companies is The Lifton Institute of

Media Arts and Sciences (Los Angeles). Levison is an affiliate of the Berlin-based consulting

company Peacefulfish (peacefulfish.com) and writes an industry blog for Baseline Intelligence

(www.baselineintel.com). Levison is an Instructor in the Extension Program at UCLA. She also

has been a Visiting Professor at the Taipei (Taiwan) National University of the Arts, Chapman

University (Orange County, CA) and the University of Montana (Missoula). She has presented

seminars and/or been on panels at festivals and markets around the world. (Additional information

is available at http//www.moviemoney.com).

THE FILM ENTREPRENEUR is published by Business Strategies

Louise Levison, Editor

Faryl Saliman Reingold, Assistant Editor

Office: 4454 Ventura Cyn. Ave. Suite 305

Sherman Oaks, CA 91423

Phone (818) 990-7774; E-mail: [email protected] ; http://www.moviemoney.com

Have your scripts professionally read and analyzed by TFE’s Assistant Editor Faryl Saliman Reingold.

For more info, e-mail her at [email protected].

mailto:[email protected]

http://www.baselineintel.com/

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http://www.moviemoney.com/

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