It’s no secret that the major studios have reduced their output over the past decade, focusing on fewer—albeit larger—tentpoles with the international marketing power of pre-existing concepts and merchandise appeal. Yet the audience has seen no shortage of critically acclaimed, unconventional films with compelling characters and challenging subject matter—the kind of risk-taking projects that the studios don’t finance or produce anymore. Clearly, there will always be space in Hollywood for edgier, non-traditional storytelling, but who’s footing the bill? Enter the rise of independent financiers, dynamic players seizing the opportunity to produce exceptional material outside of the studio system.
The industry landscape didn’t change of overnight, but it did have to adapt to the global shift in box office power. Until the 1980s, the domestic box office accounted for the vast majority of a film’s total revenue—upwards of 80 percent—while today, foreign receipts generate over 70 percent of revenue. It was inevitable that branded properties with global appeal would come to dominate the studios’ slate, giving short shrift to chancier, non-mainstream material. That shortfall led, in turn, to the rise of independents seeking, both creatively and financially, to make the kinds of films the studios became reluctant to back. The emergence of the independents continues to gather steam each year. In fact, from 2002 to 2011, the number of movies released by the Big 6 studios and their affiliates dropped by 43 percent, (169 films in 2011, down from 296 in 2002) while the number of releases by independent producers jumped by 74 percent over the same period (469 films in 2011, up from 270 in 2002), according to MPAA reports.
It’s not just the number of releases that’s expanding, but the caliber and even budgets of today’s independent films bear little resemblance to the small, off-beat projects with limited art house distribution. To the contrary, more and more independent producers are seeking expressly to make the kinds of films that came from the majors in the past, including high-profile projects with sizable budgets and top-tier actors and directors. Many of these films ultimately end up with studio distribution, offering them the possibility of critical acclaim and award nominations without the expense of development and production. However, there is a downside for the studios in these arrangements: If the film becomes a box office hit, the studio doesn’t keep the lion’s share of the profits.
Take, for example, Lincoln, nominated for the Best Picture Academy Award and which Steven Spielberg spent over a decade developing for the big screen. Even with his blockbuster name attached, the dialogue-heavy, distinctly American historical drama still wasn’t a sure bet since it would need to be profitable both domestically and internationally. In the end, Lincoln was distributed domestically by Disney/Touchstone Pictures but co-financed with DreamWorks and other partners, including Participant Media. Other independently funded but widely released films of 2012 were Wes Anderson’s Moonrise Kingdom, nominated for a Best Original Screenplay Academy Award, released by Focus Features but independently financed by Indian Paintbrush, and another Academy Award Best Picture Nominee Beasts of the Southern Wild, distributed by Fox Searchlight but funded in part by a non-profit foundation.
Audience appetite for more non-commercial stories, geared for adults, has presented a tempting investment opportunity for the growing number of independent finance and production companies. Following are six of the most prolific firms, all of which have emerged over the past decade.
Participant Media, founded by Jeffrey Skoll in 2004, was created for that very niche that Lincoln fills: stories that are both socially conscious and commercially viable. The company has a formidable track record in this arena, including The Best Exotic Marigold Hotel (Fox Searchlight), The Help and The Soloist (both Disney), Syriana and Contagion (both Warner Brothers), and forthcoming films Promised Land (Focus Features) and Snitch (Summit). Participant is co-financing The Fifth Estate, based on the true story of WikiLeaks founder Julian Assange in conjunction with Dreamworks Studios. The company currently has a non-exclusive distribution agreement with Lionsgate (formerly Summit) through 2013. It recently formed the PanAmerican Film Initiative with plans to develop and co-finance 10 to 12 films for the Latin American Market. Expanding beyond the film world, Participant will launch a cable network later this year expected to bring its socially relevant stories to over 40 million subscribers.
Another artistically ambitious independent production and finance company is GK Films, launched in 2007 by Graham King and Tim Headington, which releases much of its projects through major studios. The company holds impressive awards clout, having co-financed the Academy Award nominated Argo (Warner Brothers) as well as having produced Hugo (Paramount), The Town (Warner Brothers), the Academy Award-winning animated film Rango (Paramount) and the forthcoming World War Z (Paramount). GK is currently in an exclusive first-look deal with Warner Bros. through September 2013.
Independent film production and finance company Cross Creek Pictures hit the ground running with its first production, the Academy Award-nominated Black Swan (Fox Searchlight). Cross Creek, run by president Brian Oliver and CEO Timmy Thompson, has been a financier to watch since its 2009 inception. The company is currently in a three-year deal with Universal Pictures, which will distribute at least six pictures that Cross Creek produces and funds. The first release from this deal will be Rush, directed by Ron Howard and co-financed and co-produced by Exclusive Media.
Exclusive Media, founded in 2008 by Nigel Sinclair and Guy East, holds a minority stake in Millennium Entertainment and recently launched a U.S. distribution company, Exclusive Releasing. The company has a co-development and co-production deal with Cross Creek Pictures, a pact that has created The Ides of March (Sony) and The Woman in Black (CBS Films). Exclusive Media also produced End of Watch (Open Road), co-financed and produced the upcoming Snitch (Summit) and A Walk Among the Tombstones (Universal), and financed the JFK drama Parkland, now in prep.
Media Rights Capital (MRC), the independent financing powerhouse founded in 2003 by co-CEOs Modi Wiczyk and Asif Satchu, boasts prominent investors like AT&T and Goldman Sachs. The company financed the runaway blockbuster Ted as well as The Adjustment Bureau (both Universal) plus the upcoming Elysium (TriStar Pictures). Since 2011, the company has been in a deal with Universal Pictures to distribute up to 20 of its films through 2016. MRC scores bonus points in the TV world too: This is the company that brought to Netflix its game-changing original content with House of Cards.
The newest production-and-finance player to watch, Annapurna Pictures, was founded by Megan Ellison with a mission to produce the type of elegant, adult dramas that have largely been abandoned by the majors. The company fast-tracked its way to critical acclaim in 2012, producing and financing The Master (The Weinstein Company) and the Academy Award Best Picture nominee Zero Dark Thirty (Sony), Lawless and Killing Them Softly (both The Weinstein Company) and the upcoming, yet-untitled feature from Spike Jonze.
Representing a widening pool, these firms are among the newest players to have seized opportunities born out of the studios’ economic imperatives and content deficits. Expect these names to continue to gamble on—and nurture—unconventional and challenging films. And stay tuned as more companies emerge to take on Hollywood’s ever-changing landscape.
Next up in the series: Studio Output Deals: The Unsung Heroes of Hollywood and Beyond the Big 6: Mini-Majors Gain Momentum.