February 11, 2004

2004 will in future be remembered as The Year Of Severance…

The appearance of the DreamWorks animation IPO in Variety is the sixth sign of the movie apocalypse. Variety doesn’t tend to print anything that will make a studio to upset, so the story turning up there indicates that it is probably a fate accompli. And what Variety won’t print, but everyone has to know instinctively, is that this IPO will mark the end of DreamWorks as a real studio. But more on that later…

The industry will, as always, resurrect itself with a lot of new ideas. And it will do just that in 2005 and 2006. But in the meantime…

SIGN ONE – The End of Artisan: This was a long time coming. The clock was ticking on this wannabe-Miramax since the day The Blair Witch Project opened, giving the company all the green rope it needed to hang itself by the neck. It wasn’t one of those clean hangings where the neck snaps. Artisan hung there gurgling for a good long time.

The pick-up of Artisan by Lions Gate makes Lions Gate the only real indie major on the planet. You could feel the deep breath of power and hubris from Lions Gate’s Tom Ortenberg & Co. as they took an earnest shot at The Oscars this year. The company’s aggressive move in planning a summer release for Open Water is a sign of a company that is ready to push harder than ever.

Newmarket has aspirations and mad skills, but it isn’t really close at this point. They just don’t have enough funding. The Passion Of The Christ will be a big win and IFC will go wider on Touching The Void, but last weekend, the widest indie release from someone other than Lions Gate was still 46 screens for ThinkFilm’s The Gospel of John.

There are four Dependents that are not really in the production/primary funding business: Fine Line, Paramount Classics, Sony Classics and United Artists. United Artists, for all intents and purposes, is dead. (More on that later.) Fine Line, at this point, is little more than a brand extension for New Line that releases HBO Films movies. Paramount Classics brings prestige and daring to the Paramount lot, but is too underfunded to compete on a truly even playing field with the bigger dependents. And Sony Classics is the senior member of this part of the art house family, led by Barker & Bernard, who have avoided Artisan’s fate (or Miramax’s) by putting the cash bonanza from Crouching Tiger, Hidden Dragon in their pockets instead of in new, more expensive films. SPC will swing for the fences at times and they do spend more in P&A than any of the others in this category.

The two current Production Dependents are Focus Features and Fox Searchlight. Both studio arms are now funding multiple movies on an annual basis with eight-figure budgets. (Sony’s Screen Gems arm could be included in this category, but it really is more of a mainstream genre division than an arthouse dependent.)

Interestingly, the leadership of both of the current Production Dependents and the largest of the other Dependents are all in the unique position of having “fuck you money,” while the other three companies are operated by well-paid, well-fed, well-respected employees. The leaders at Focus Features made their walk-away money from the same film as the men of Sony Classics, Crouching Tiger, Hidden Dragon. The Focus folks made the film before Focus existed and SPC distributed. Everyone won. At Searchlight, Peter Rice may not be sitting on a personal gold mine (or he might… what do I know?), but he is considered a virtual Murdoch family member... perhaps the brightest light among the new generation.

But even the growth of Lions Gate has some downside to the overall indie distribution picture. With six Dependents, besides Miramax and Warner Indie, the competition for screens is as intense as ever. And while occasional events can happen for the other true indies, the disparity between the haves and the have-nots is getting greater.

You may be wondering where I have hidden Miramax and newcomer, Warner Indie. Well…

SIGN TWO – The Creation of Warner Independent Films: It seems unfair to be hanging black crepe for a company that has yet to release its first picture. But my concern about the company has nothing to do with Mark Gill and his eager new team and everything to do with the fact that Warner Bros.’ decision to get into the indie business is a good sign that it is time to get out.

I’m only kinda kidding.

The foundational question of “What does Warner Bros. want with an indie arm?” still hasn’t been answered in a clear way. Yes, we all know that lower budget films have the chance of being hit out of the park for big profits. But so far, it looks like Gill’s group will actually be given the room to act independently of WB. But is that necessarily a good thing?

The lesson of Miramax is that selling art movies like mainstream films can be very profitable. Miramax has changed its trajectory significantly, but that’s a different sign of the movie apocalypse. My point is that what Warner Bros. really seems to need is a marketing group, besides their normal one, that knows how to release genre films with a more limited target demographic than the studios higher budget fare. Gill’s team should know how to do that, but it doesn’t seem that WB will be able to take advantage of that. Just yesterday, Section Eight announced that they’d be producing Ted Griffin’s directing debut and releasing through WB. Why not Warner Indie? Lots of good reasons, I guess.

Do we really need an eighth Dependent… one that plans to produce half a dozen projects or more in house every year with another half dozen pick-ups on a $100 million annual budget? Lots of people think that Searchlight, Miramax and Focus all overpaid for films at Sundance this year. Maybe they did and maybe they didn’t. But as Warner Indie gets rolling, will the bidding wars intensify and continue to raise the stakes beyond all sensibility? You betcha.

SIGN THREE – Miramax 2003: Miramax released eighteen films in 2003. How many broke the $10 million mark? Two. Both of those cost well over $100 million to produce and distribute. If things go well, City of God will become the third 2003 release to break the $10 million mark… of course, that can only happen in 2004 for the January 2003 released film.

The company’s Dimension arm released just four films in 2003. All three passed $10 million, including the disastrous and oft-delayed My Boss’s Daughter, which finally got an Ashton-loving release and managed $15 million, even with critics using their air sickness bags mid-movie. Perhaps for that reason, the genre arm has 13 films currently scheduled for 2004 release. Oy!

Harvey Weinstein has been in an open war against Michael Eisner, apparently hoping that Eisner would be taken down by Roy Disney and Stanley Gold. Eisner has cut back severely on Miramax’s annual budget as well as holding a tighter grip on the autonomy of the Brothers.

If you think the battle over Pixar made a lot of headlines, just wait for the battle over the future of Miramax. The Brothers Weinstein have just about two years left on their employment contracts with the studio. It is hard to imagine them walking away from their parent-named company as well as the library that defines their legacy, as Disney will own it all unless the Weinsteins somehow buy it all back. So killing off Eisner before the negotiations start must seem a much happier way of moving forward.

Miramax currently has 11 films with 2004 release dates and another 17 films sitting around waiting for dates (including the Bridget Jones sequel). Once again, only a handful seem to be likely to hit eight figures: Jersey Girl, Ella Enchanted, Kill Bill, Vol. 2, Shall We Dance?, and An Unfinished Life. The good news is that the budgets have been contained on all of these titles and Miramax’s involvement on bigger budget, higher-profile titles The Aviator and Cinderella Man have relatively minor cash outlays involved. This could be Miramax’s most profitable year for new releases in years.

Still, Miramax’s exit from anything recognizable as the independent business and their battles with Eisner mean that by 2006, Miramax could be under new management and the Weinsteins could be considering whether they want to launch a new company or to retire in wealth. Or perhaps Eisner will be pushed out…. ah, the devil you know…

SIGN FOUR – MGM Shuts Down… Again: In the late 90s, MGM pretty much went out of the production business. Anxious to sell the company yet again, Kirkorian & Co. released three titles in 2000: the 1999 holdover disaster Supernova, the ethnic comedy 3 Strikes and the moderately successful Return to Me. But the “Out to Lunch” sign in the window wasn’t drawing any buyers. So in 2001, there were eight titles with two winners – Legally Blonde and Hannibal. In 2002, another seven titles with two more winners, Barbershop and Bond. Last year, eight releases led to one winner – Agent Cody Banks.

So with the Legally Blonde franchise legally dead, Kirkorian’s crew is taking Barbershop, Bond and a back-to-the-future list of revival franchises and putting out the “Who wants a library?” sign on the front door again, finally figuring that the commodity that other studios want to buy is not losing value and that throwing good money after bad development

Much as DreamWorks has announced its demise (oops… getting ahead of myself) by planning an Animation I.P.O, MGM signaled trouble by dumping Bingham Ray – their second United Artists leadership dump in five years – and announcing that they were looking for a way to keep the U.A. brand alive without spending any money at all.

I’m happy that MGM wants to blow their horn about Barbershop, Beautyshop, the next Bond, the Steve Martin version of The Pink Panther, etc. But the future is so bright that they have to wear asbestos suits as this legendary supernova finally flames out, now destined to become nothing more than a classics division of a surviving major.

SIGN FIVE – Paramount Spins Its Wheels: The story of Paramount might include Billy Friedkin’s unusual relationship with the studio his wife runs. But that’s small change, really. The reason that The Hunted failed was not Billy Friedkin… it was the unsellable idea behind the film and a lack of box office draw talent. No one knows whether it was badly directed… no one saw the thing… or wanted to.

The real issue over there right now is now that Sherry Lansing has fed John Goldwyn to the lions and proclaimed a new day was dawning for the studio, how will they get the sun to rise?

Bringing Donald DeLine in to lead the production team under Sherry was quick and efficient. Replacing Arthur Cohen, head of marketing, has been much harder. What is it about Paramount that has ended up with everyone approached for the job turning down the seven-figure position?

The two leading theories are that:

1. Sherry Lansing will soon be buried under by embarrassments like Against The Ropes and Twisted, her one summer movie (a sepia-tone pick-up called Sky Captain & The World of Tomorrow whose trailer looks so unbelievably cheesy that one almost wonders whether it will somehow turn out to be a work of genius), The Questionable Remakes (The Manchurian Candidate and The Stepford Wives) and she may not even make it to the hard-budgeted Lemony Snicket.

And 2. That none of Rob Friedman’s historically same-level colleagues are ready to come into Paramount and work for him.

But there is also this in some of the cases… severance. Hollywood’s parachutes of gold are beautiful indeed. (A shout out to the great Chris Pula, now retired to a big house in New England after a painful, but massive payout by Disney.) And even people in precarious positions (with contracts) at precariously leaning studios (that will get bought out) seem to be ready to take advantage of a great opportunity to get something for doing nothing but waiting. Of the at least half dozen top marketing names who have been offered the Paramount job and passed, at least two of them may lose their jobs via shut down within 18 months. Loyalty, settlements and fear take precedence over one of the so-called Top Six major marketing gigs in the entire industry.

One rumor, now floating aggressively around town, is that Paramount has gone to the unexpected step of considering a replacement for Rob Friedman in order to get the right person atop a food chain desperate for a change of perception. Without commenting on Friedman himself, it is an interesting strategy. If Paramount can bring in a currently employed executive who has a job on a higher level than marketing chief, that would be as major an internal reshuffle as Lansing herself stepping down. The power of that hire could push Lansing past her current expected date of expiration, since instead of simply hiring a bright mind that can improve the marketing of bad movies by 10%, the change would suggest a real sea change and a certain rethinking as significant as Lansing promised. Of course, Rob Friedman would pay the price, receiving his own massive payoff but losing a job he doesn’t want to lose. But if Lansing doesn’t survive – and that is what she has to look in the mirror and analyze clearly – he’ll be going down with her anyway.

Wait…is that Bill Mechanic’s phone ringing?

SIGN SIX – DreamWorks Animation IPO: Next to last (who knows what’s next?), but surely not least, DreamWorks SKG sold off G’s music division and is now going to set K’s animation division off on a raft. That leaves S’s live-action feature division, which was once called Amblin’ before this studio of brothers idea came to pass.

Moreover, there is a repeating theme in all the coverage of the potential IPO… that the IPO will allow DreamWorks investors to finally get their money out. Well my little chickadees, why would anyone want to get their money out now if there is an ongoing concern of great value?

And there is this… DreamWorks got an additional $1.5 billion in financing about 18 months ago, but if you look at this year’s slate and the current investment in the animated films that are in various levels of production, 2004 will see at least $1 billion spent. (Not to mention the 5 of 6 run of flops in 2003.) Of course a significant portion of that will come back to the company, eventually. But unless the hits are numerous and major, the cash flow of the company has to be tightening yet again.

I can’t really be clear enough here… I harbor no ill will to DreamWorks. I am not rooting for its disappearance. But three of Hollywood’s great builders seem to have halted construction. Mike DeLuca is already heading out the door. Walter Parkes and Laurie MacDonald have been the subject of exit rumors in recent weeks. And the new president of production, Adam Goodman, has been described by a number of producers as a guy who is really smart, really pleasant and not really the kind of builder personality to be a production chief with a long-term vision… far more the kind of guy who can make sure that the machine will operate efficiently as possible in the midst of a war. And based on the 2005 schedule (one live-action holdover from this year, Elizabethtown, and two animated IPO films), the war is here and the old mill is being closed.

Think of it. Disney, NBC/Universal, News Corp, Sony, Time Warner, Viacom. All six surviving majors. All four major networks. Most of the major cable networks. All but one of the major distributors, mainstream and art.

TOMORROW: What will Hollywood look like on New Year’s Day, 2006? A surely blurry look into the crystal ball.

E ME: What do you see in the future?