The Film Business

Indie Film is Alive and Well

To paraphrase Mark Twain, the reports of the death of indie film have been greatly exaggerated. For the first half of 2010, the domestic independent film box office is 5.3% of the same period last year.  Nevertheless, the naysayers were out in force during the same period implying that there was no point in making an independent film.

The independent film

Photo Courtesy of Geoff Edgers

The New York Times declared the death of the independent film market in January of this year, despite having published an article in January 2009 stating that film was starting to look like a conservative investment. This caused a barrage of musings in trade papers and on the Internet proclaiming that the end seemed near. Then, fortunately for us, on April 25th, the Times gave us all a reprieve with the announcement, A Rebuilding Phase for Independent Film.”  What really happened?

The truth is that reporters and analysts tend to look at the larger production and distribution companies as the entire indie film market. Even clients were saying to me, “All the distributors are gone!”  It is true that some larger integrated (production and distribution) companies may have gotten a little too loose with their checkbooks on either the budgets of their own films or the prices they paid for acquiring other films.  They also seem to have forgotten about the platform releasing style of distribution and begun to copy the studios with larger numbers of screens for opening weekend; and, consequently, much larger initial P&A spends.

As I am writing this, Relativity Media has just bought the distribution and marketing operations from Overture Films. Other companies have presumably seen the error of their ways and are adjusting their business plans to reflect the real world.  And while  Summit Entertainment and DreamWorks Animation keep the indie segment going on the higher budget end, it is easy to forget all the smaller films that help make up the 34 to 36 percent of the box office that indie films fill almost every week.

Investing in Independent Film

Photo Courtesy of Geoff Edgers

These films should be the true focus, as it is where film investors are putting their money. Since the economic turndown, equity investors have been moving money that otherwise would have gone into real estate or hedge funds into film which is widely regarded as a recession proof business. I’m not just talking about a filmmaker’s family and friends, but traditional institutional investors who were initially strangers to this market. These investors are choosing to stick their toes in the risky but thrilling waters of indie film rather than buying stock in larger full-service companies. Why? By betting on either new filmmakers or experienced filmmakers making low-to-moderately-budgeted films, they are likely to get a bigger bang for their buck. The chances of making a profit on films whose budget is dictated by real target markets rather than high budget films that need to bring in the entire audience of filmgoers are good.  In addition, investors believe that there is more financial transparency due to greater availability of information and lack of questionable accounting practices by large movie corporations.

As we move into the last three months of the year, indie films should look even stronger. It has been the practice for the past decade for distributors to release the films they believe to be Oscar contenders as close to December as possible. Credit for this practice is generally given to Harvey Weinstein who recognized in the ‘90s that a dollar spent on distributing a film doubled as Academy Award promotion money, if you spent it in December. This belief has been vindicated, especially since 2005, with almost all Best Picture nominees being independent films.

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