Gross Behaviour - by Leonard Klady

No More Report Cards Ever … Almost!

I like to think that it was Oscar Levant that said: when you strip away the phony tinsel of Hollywood, you find the real tinsel underneath. However, something in my craw keeps saying that I'm misremembering. Something I do know is that for decades the market share of the non-majors has almost consistently been 5%, give or take a percent. With the advent of studio specialized divisions, it's been increasingly take a percent and in 2003 the sliver of the pie that the majors and their affiliates didn't consume amounted to 3%. Still, in a $9 billion marketplace that's about $290 million or a little bit less than MGM domestic revenues last year.

If you're turning in late, I knocked off Lions Gate a couple of weeks back and its portion of that 3% is by far the greatest. The company accounts for about 19% of true indie revenues with the next largest share going to the now defunct Artisan (8%) that was absorbed by Lions Gate.

THE TRUE INDIES

In 2002, the nascent IFC - an adjunct of the cable channel - had the good fortune to be involved in My Big Fat Greek Wedding. I say involved because IFC agreed to distribute the film for a fee as it was dubious about the film's commercial prospects and, like everyone else, was unprepared to step up and acquire the completed movie. That fee nonetheless proved to be more profitable than any of the films it financed or bought that year and that would also apply to its 2003 releases that included the Sundance competition Camp and John Sayles' Casa de los Babys. IFC's priorities have been cutting edge American independents and features that it can program on cable. However, lacking the financial resources of a half dozen studio specialized divisions, that leaves them with meager prospects in both production and acquisition and its options boil down to taking a big gulp and stepping up its risk or abandoning the theatrical arena altogether.

The success of Greek Wedding resulted in two of the companies involved in its production _ Newmarket and Gold Circle - branching out into distribution. Gold Circle discovered that lightning rarely strikes twice with its Poolhall Junkies and appears to have folded up the plans on further distribution activities. Newmarket, which also was involved in Memento, has considerably brighter prospects and in 2003 rode Whale Rider to a significant $20 million domestic gross. The albatross around its neck (and every other niche player) is that all films are measured against the Greek anomaly and Newmarket found itself drawn into that trap when it opened its doors in 2002 with Real Women Have Curves. It also discovered that selling a foreign-language film, even one with pristine critical credentials like Lilja 4-Ever, is brutal. But the company appears more savvy and tenacious than other true indies and is currently proving that an effective marketing campaign can fuel good box office results for Monster.

The only other company with a significant profile and slate is IDP that nursed Raising Victor Vargas to a respectable $2.1 million box office and had several other $1 million plus grosser including The Crime of Padre Amaro, I Capture the Castle and Mambo Italiano. Originally set up as a distribution arm among a number of companies, it's now almost completely fueled by films from the Samuel Goldwyn Company. What it needs really is a conspicuous success. The history of the sector is littered with hundreds of companies that bled themselves dry from revenue streams that couldn't quite keep up with basic overhead costs.

The dozens of other companies in this arena exist for reasons that span the spectrum from love to desperation. It is a miracle that Zeitgeist and Strand have operated without a name change, amalgamation or new financial backer for more than a decade. In 2003, Zeitgeist had its first, comparatively speaking, blockbuster with the Oscar-winning Nowhere in Africa. Still it wasn't a life altering hit and Zeitgeist and Strand only have a slight edge because their respective longevities have resulted in a small catalogue that generates modest ancillary revenues. That's also been an asset for Wellspring, New Yorker and Kino and appears to be part of the game plan for Palm Pictures and to a lesser degree Rialto which has largely restricted itself to reissues of vintage movies. However, they are the exceptions and the norm for such newcomers as Magnolia and Manhattan that could claim 2003 niche hits with Capturing the Friedmans and The Secret Lives of Dentists is to have at least one movie a year that pays the bills and leaves a little extra to buy the next set of movies to cover the following year's expenses. It's the equivalent of the guy who made $1 million a dollar at a time.

SUNDANCE: THE SERIES

The idea was clearly to replicate the Shooting Gallery experience of five years ago and what can be said about adopting a formula that didn't work and contributed, in part, to the demise of its author. Whether its selections were secondary to marketing and sponsorship decisions cannot truly be weighed. The series of four films (playing two to three week engagements exclusively in Loews Cineplex venues in 10 U.S. cities) included the exceptional In This World but its best performer, the campy, gay-themed Die, Mommie Die! topped out at a little less than $350,000. The idea of a movie club hasn't really worked in three decades and limiting one's financial risk by finding underwriters could not be off set by the generally inferior screens willing to participate. A Sundance spokesman said the organization was committed to a second round but, as yet, there's been no indication of titles acquired or under consideration.

LARGE FORMAT

A couple of years back, there was a hiccup of interest in large screen venues and product. Imax, Disney and several others in the arena including McGilivrey-Freeman announced plans for ramped up activities but the torrent quickly became a trickle and the most conspicuous new titles last year were the James Cameron Titanic documentary The Ghosts of the Abyss and Toronto-based SK Films Bugs! Disney which has also produced and reconstructed several animated films for large format (and the current The Young Black Stallion) is tiring of the patience required to make these films commercially successful. Films can play for years and several have grossed more than $100 million globally but that's of little solace to companies accustomed to generating that sort of lucre from blockbusters in 10 or fewer days.

The theater business aspect itself has had the sort of stability that begs the question of how to make it even better. And, for the moment at least, the answer has been to work with the studios to create versions of big, popular that conform to the actual dimensions of the large format screen. That paid off handsomely for the two 2003 Matrix movies not only with playdates that grossed multiple times conventional theater box office but had engagements that often continued months after those films lost primary screens. While most venues operate on schedules akin to retro houses, the marriage between original programming dominated by 40-minute non-fiction eye-poppers and Hollywood effects laden features is still working itself out and nowhere near celebrating a milestone anniversary.

THE CANUCKS

The old saw that starts: What did the picture do in Canada?, ends with "just divide by 10. The actuality isn't really that radically different as last year's overall Canadian box office revenues climbed to roughly $954 million compared to a U.S. only figures of about $8.26 billion or 11.5% of the domestic market. The percentage drops to 8% when the Canadian dollar is adjusted.

The dilemma in the Great White North is best exemplified by the situation at Alliance Atlantis. In 2003, Alliance Atlantis's distribution arm with a 23% market share led all other companies operating in Canada. Second place went to Buena Vista with a 13.3% slice of the pie. However, though AA had such home grown hits as La Grande Seduction and The Barbarian Invasions (respectively grossing $8 million and $6.4 million) the majority of its $220 million tally came from distributing films from New Line and Miramax. And despite numerous government incentives, the company has been divesting and downsizing production activities including shutting down Salter Street films, the producer of Bowling for Columbine. It's not even pretending to be involved in making indigenous movies and that's worrisome to filmmakers that view it as perhaps the only distributor that can compete with the American majors on home turf.

An unprecedented five of roughly 27 theatrically released Canadian productions or co-productions grossed more than $1 million in 2003. The handful were all produced out of Montreal and only Mambo Italiano was shot in English. Together those films translated into a 3.3% market share and the Canadian government has set a 5% goal by 2005. Telefilm Canada has been a budget boost with new emphasis being placed on marketing dollars. The industry was paying particular scrutiny to the homegrown comedy caper film Foolproof that opened in 204 screens in October with an opening week of $340,000 Canadian and promptly fell 67% in its sophomore session. Odeon, Alliance Atlantis's specialty arm, handled distribution and was unable to secure an American sale.

Whether Alliance Atlantis continues to step up to the plate as an investor in the future has yet to play out but even if such Canadian-based companies as Lions Gate and Thinkfilm fill some of the inevitable void, neither has remotely the distribution clout of the Canadian giant. Thinkfilm already has had a spectacular loss with The Statement, produced by company partner Robert Lantos who was a principal architect of Alliance and fostered the careers of David Cronenberg and Atom Egoyan.

VERY SPECIALIZED CIRCUITS

It's been more than a decade since films from Hong Kong and Mexico supported a chain of theaters across North America. While both circuits experienced erosions as a result of second and third generations more interested in American movies, the largest factor in their respective demises were national cinemas rocked by problems that sent annual film productions spiraling down to fewer than a dozen films annually.

Today, the only circuit of significance catering to immigrant enclaves is India's Hindi-language Bollywood movies. Five years ago it was not uncommon for the most popular imports to gross $1 million from the 50 or so venues that regularly programmed such fare. However, in the ensuing years business has gone from annual revenues of $25 million theatrically to a current level just shy of $10 million with just three of about 2003's 40 releases grossing more than $1 million. While it's generally acknowledged that it was not a banner year for quality films, the biggest bites have come from the arrival of DVDs - both legal and pirated. Illegal copies of current movies are generally available no later than three days after a picture's opening and international efforts to sink the pirates have yet to reverse the trend. The movies have unquestionably grown in stature and influence with Western filmmakers but, as with the earlier Hong Kong films, efforts to develop even a niche audience have largely sputtered with the exception of the crossover hybrid Monsoon Wedding.

The other current curiosity is an explosion of morally lofty films produced by religious organizations or individuals. In truth few overtly push theology and have ranged from Talking Bible's The Gospel of John, the crossover success of Luther and the more stealth successes of Utah-based HaleStone Productions that routinely generates $1 million plus grosses for films such as The R.M. and its current The Home Teachers but is unlikely to secure a spot in the state's Park City film event. The Billy Graham Organization still fitfully produces features but it and many others place considerably greater emphasis on DVD sales. The next hurdle for this sect is unquestionably Mel Gibson's Passion of Christ.

Part III: 20th Century Fox, Warner Bros., Universal, Searchlight
Part II: Lions Gate, Miramax, New Line, Paramount
Part I: Focus, MGM, DreamWorks and Buena Vista