Film Fund-amentals: Enough With the Obits Already

Like the old story about the reports of Mark Twain’s “death,” current news stories on the end of independent movies may be slightly exaggerated. Granted, it doesn’t look good and the damage has been absolutely gawd-awful, but indie film is not exactly dead, no matter what Time magazine says.

In an article printed in the Nov. 7 issue (and then fact-checked and corrected afterward), reporter Erin Davies pretty much administers last rites to the whole field. Actually, a lot of the article is pretty well done and has a valid point. Basically, the independent movie business has been creamed left, right and center by virtually every major studio, distributor and bank on earth (including Time Warner, the owners of… well, you get it). Heck, the indie business has taken more beatings this year than the paparazzi stalking Mike Tyson. Over the past several years, nearly 27 indie companies have folded. The major studios have pulled out of the business altogether (well, until next time) and most of the financial institutions have followed the majors in the ever brainless pursuit of fewer but bigger productions.

Of course, the Time magazine story gets a little carried away (hence the belated correction) when they added Focus Features to the list of the dead and dying. Focus is actually one of the few indie companies that is looking reasonably healthy. I suspect that Time made the mistake of only looking at the US box office figures for the company. If Focus only depended on the American audience, they would be dead, but their global box office is extremely good. In fact, their global box office is ridiculously good. Take for example the film Milk. Despite its critical acclaim, the movie only garnered about $31.8 million in its US release. But it added another $20 million internationally and achieved a nice, substantial total.

The global approach is the strategy that Focus hopes to win with in 2010. With a current slate of at least eight films due for 2010, Focus is looking to expand. As long as they can maintain the global track record, Focus should do OK.

But not according to Time‘s analysis. They conclude that the ability of American filmmakers to pre-sell their movies to foreign distributors is no longer feasible, as foreign companies retrench and now primarily bank on domestic products. Actually, Time magazine seems to have never heard of the international marketplace, which is how Focus operates (for example, their current production of Jane Eyre is being co-produced with the BBC). So basically these movies sort of become a domestic production of the co-producing country. Kind of a modern extrapolation of a pretty old idea.

They have a point that many American films are priced too high for the foreign market. Oddly enough, this is more a problem with bigger productions (who, by the way, have been driving costs up). This fact doesn’t seem to faze companies like Warner, but it is a fact. Likewise, the article correctly points out that indie films are being squeezed out of the theater distribution system. Odd. The major studios are the folks who are pretty much behind this squeeze. By the way, I bet it’s just a coincidence that they also own the magazine writing the obituary. Goodness, Warner is more full-service than a modern funeral home.

So let’s play a little game. Let’s compare the actual profit ratio of two films, one from Warner and one from Focus. They were both released during the fall of 2008. Each movie received a reasonable amount of critical acclaim. One is the Warner production of The Curious Case of Benjamin Button. The other is Burn After Reading. Hey, we even got the same actor in each flick. Does this comparison sound almost fair or what?

The Curious Case of Benjamin Button was produced for an estimated budget of $150 million (which means that the actual budget was probably closer to $200 million). Burn After Reading came in at $37 million (putting it on the high side for an indie production). Button took in a global box office of $328.9 million; Burn made $155 million. So which movie was more profitable?

Obviously, it was Burn After Reading. It made 76 per cent above its basic production cost, while Button only scored 54.4 per cent above core cost. Last week, I argued that small and medium budget movies are actually holding up the system at the moment. This comparison is what I am talking about. It should also be pointed out that they were not recouping cost on Benjamin Button through either the merchandising or the video games (the other hot advice given by Time magazine for the indie trade).

So what does this tell us? First off, the ongoing round of obits for the indie trade is a tad premature. Besides, some of the obit writers have possible ulterior motives. In the case of anyone associated with Warner’s, it’s a little bit like the Mafia whacking a guy by running him over and then accusing the stiff of jaywalking. The method being used by the majors for financial analysis is, at best, wrong-headed, and when used within the industry, it’s both misleading and wildly stacked in favor of the major studios. So who are they kidding (besides their own reporters)?

But the major studios have also failed to comprehend another important point, even while they’re busy attempting to bury indie movies. The small independent market is a bit like the proverbial canary in the coal mine. What’s happening within the independent market is also happening (and it is happening) to the majors.

Oh yeah. I forgot. Warner Bros. and the other majors are too big to fail. Oh yeah, you betcha (not).