Wednesday, December 23, 2009

Hollywood busts the plan

Show business rarely adheres to rules
"Paranormal" crashed through the $150 million barrier recently, promptly inspiring its distributor, Paramount, to announce a new program of micro-budget pictures. The dubious conceit: That Hollywood can replicate the "Paranormal" phenomenon (its budget was $15,000).

Meanwhile, the exuberant reception accorded "Avatar" prompted its auteur, Jim Cameron, to reveal that he is prepping a program of films designed to exploit "Avatar's" breakthrough technology. Cameron did not specify whether the follow-up movies would aspire to "Avatar's" budgetary heights (Cameron's production cost totalled somewhere between $300 million and $400 million, depending on which accounting rules you follow).

If Avatar achieves something close to "Titanic"-like success, it will further reinforce the unique role that technology has played in Hollywood filmmaking. In most industries, technology has brought extraordinary cost savings, while in Hollywood it has created giant cost overruns.

One reason is that filmmakers have been incapable of curbing their appetites for effects that are "bigger" and "better." Another is that studio managements have proven extraordinarily inept about managing effects budgets or the outside contractors who violate them. Testifies the producer of one of the year's hit effects movies: "Dumb strategies by studio management added $35 million to my final costs."

Whether or not "Avatar" and "Paranormal" ever appear on a double bill, the two films dramatize the polarization of the Hollywood agenda. Studios are trying to nurture either very pricey franchise films or very inexpensive projects, often to the neglect of the "tweeners" that have racked up surprising numbers this past year. Executives find comfort in the fact that a conventional disaster movie like "2012" can gross almost $700 million around the world (two thirds of it from foreign markets). Its success reinforces basic corporate business strategies.

On the other hand, how do you account for a $460 million blockbuster like "The Hangover," a movie without star-casting or special effects or even an entirely coherent plot? Surely, "The Hangover" will go unrewarded with an Oscar, since comedy has traditionally been ignored by the Academy. But its success cannot be ignored by the studios for this key reason: It's a vivid reminder to the conglomerates that Hollywood has always defied efforts to come up with a business plan. Hits happen at any budget. And the double bill from hell will happen, too.

Saturday, December 12, 2009

New Paramount division will think small

I hate to say I told you so, but.............

The as-yet-unnamed unit will concentrate on developing only movies with a production budget of less than $100,000.

By John Horn

December 11, 2009

Fresh off the stunning success of "Paranormal Activity" -- a $15,000 thriller that has grossed more than $107 million in domestic release despite little paid advertising -- Paramount Pictures is set to launch a new production business for movies budgeted at less than $100,000.

The as-yet-unnamed division's initial plan is to finance as many as 20 "micro-budget" movies annually starting in 2010, Adam Goodman, president of Paramount's film group, said Thursday.

Funds for the movies -- about $1 million annually -- will be part of Paramount's existing production budget. The division does not plan to acquire completed movies at film festivals and markets, as traditionally has been the case with studios' specialized film divisions.

The move comes as studios wrestle with spiraling production budgets -- Dec. 18's "Avatar," made at a cost of at least $310 million, is Hollywood's costliest movie ever -- and escalating marketing expenses just as DVD income is plummeting.

Some of 2009's most profitable movies have been modestly budgeted works that grossed huge multiples of their costs, including "Paranormal Activity," "The Hangover," "District 9" and "The Blind Side."

Moviegoers, having grown accustomed to viewing YouTube videos, are no longer put off by the shaky camera work and low production values typically associated with inexpensive films. January's Sundance Film Festival is launching a programming category, called Next, dedicated to movies made for less than $500,000.

"I feel very strongly we need to be contrary in our thinking," Goodman said. "Everybody has the ability to create content right now."

Not all the micro-budgeted movies will be released theatrically.

Instead, the division will operate much like a studio's development slate, where screenplays are purchased, rewritten and in some cases turned into movies. Paramount plans to target both established filmmakers and newcomers with its micro-budget pitch. A current Paramount executive will run the business, but the selection has not been revealed publicly.

Some of the movies may end up serving as "calling cards" -- a showcase of a novice director's storytelling talent for a future project. A handful of films may contain enough good ideas to merit a bigger-budget remake. And another group may rise to the top of the heap, getting a theatrical release. While some of the movies will be horror and thriller titles, there is no specific genre directive, Goodman said.

Because thousands of theaters are now equipped to show digital movies, the micro-budget productions can be distributed without the added expense of striking film prints, which can cost more than $1,000 apiece. Paramount also believes the films can be marketed without costly television commercials, print advertisements and billboards, instead relying on the grass-roots word-of-mouth that helped propel "Paranormal Activity" to its huge profit.

Some of Paramount's micro-budget movies could be released in just a handful of midnight screenings to gauge audience interest before a wider (and costlier) national release.

Paramount is not the first big studio to try to play in a smaller sandbox. 20th Century Fox launched (and recently closed) Fox Atomic, a division dedicated to genre films that struggled with such releases as "Turistas" and "Jennifer's Body." Universal Studios also just exited the business, selling its Rogue Pictures ("Doomsday," "The Return") to Ryan Kavanaugh's Relativity Media.

"Paranormal Activity" has spawned other movies inside Paramount. The studio is developing a sequel to the spectral demon movie from director Oren Peli and producer Jason Blum. The Viacom-owned studio recently bought Peli and Blum's next movie, "Area 51," a drama about three kids who sneak into a government-run alien storage facility, for about $7.5 million.

Wednesday, December 9, 2009

With challenge comes opportunity.

Execs seek opportunity in challenges
With challenge comes opportunity.

That was the mantra at Variety's Future of Film Summit in Santa Monica on Tuesday. Panelist after panelist invoked the aphorism in between talk of broken business models and the need to trim costs accordingly.

"We are in the middle of a seismic revolution, not evolution, in the film business," said Paula Wagner, now an indie producer with Chestnut Ridge Prods., during her keynote conversation with Variety prexy Neil Stiles.

Wagner stressed the need to rein in development and marketing costs to adjust to the new realities of distribution. "We're in that place that we knew was coming," she said of the technological changes transforming Hollywood.

She said mid-tier movies have an especially tough time breaking through the clutter of entertainment choices and therefore require sizable marketing expenditures. "If it's not a brand or franchise, youmight be spending as much if not more on marketing," she said.

"The economic model isn't changing fast enough to enable movies to be made across the broader spectrum," concurred Morgan Creek Prods. chief operating officer and co-chairman Rick Nicita in the game changers panel later in the morning. The exec, a longtime agent and spouse of Wagner, observed that smaller movies and bigger tentpoles have been able to succeed in this climate, but "movie economics have malfunctioned in the middle."

The problem, he said, is that it's impossible to quantify marketing campaigns. There's no way to tell whether extra coin poured into marketing made the difference. When in doubt, studios do not cut marketing budgets, he observed; they make them bigger. "It's fear," he said. "CYA -- cover your ass."

Nicita, who nonetheless remains committed to mid-tier films, predicted that there soon would be an all-platform day-and-date release of a major title. Comcast's acquisition of NBC Universal should speed that up, he added.

IFC exec veep Lisa Schwartz noted that there was a lot of resistance to the company's day-and-date strategy when it began releasing movies on multiple platforms simultaneously four years ago, but filmmakers have grown more accepting. The company distributed more than 200 pics, many of them with smaller budgets, last year over its various platforms. Five of them ­ -- including "Che," "Gomorra" and "In the Loop" -- generated more than $1 million at the box office.

"Four years ago we saw things were changing and frankly were a little broken on that sort of film," Schwartz said.

The problem with simultaneous VOD, however, is that many investors and filmmakers still insist on a theatrical release as an indication of quality. And major exhibitors resist such simultaneous releases.

Schwartz's co-panelist Oren Peli admitted he refused VOD and home entertainment distribution offers because he believed in the theatrical potential of "Paranormal Activity," a movie that cost him $15,000 to make.

"After I saw how the movie played on bigscreen at festivals, I rejected those offers," said the writer-director, who's now busy on his second movie, "Area 51." "We pushed really hard to get a theatrical release."

Peli naturally felt vindicated since his movie, once slated as a direct-to-video release, has made more than $100 million at the domestic B.O.

Panelists outlined a chicken-or-egg scenario with financing and domestic distribution. Without domestic distribution, it's difficult to get financing, but financiers want to know that the project has that distribution before they fork out coin.

"Without having that domestic guarantee, you have a lot of questions," said Rena Ronson, co-head of UTA's independent film group at the afternoon session on overseas markets.

"The biggest challenge right now is the domestic theatrical piece, which has become a really empty, funky place," said Groundswell Prods. founder and CEO Michael London in the finance session.

Bill Block, founder and CEO of QED Intl., noted there are 25-30 big projects now in production with major movie stars that don't have domestic distribution. He said the indie community is rooting for Bob Berney's Apparition Films and Mark Gill's Film Department to pick up some of the slack now that studios have scaled back their specialty arms.

The key to survival, Block reiterated, is to cut those costs.

"If there's any path for all of us, it's bringing those costs down," Block said. "The revenue has come down. That's OK. We'll bring costs down."

In case of "District 9," he points out, Weta did not do the special effects even though the project was backed by Peter Jackson. "It was too expensive."

He said that producers must "give talent a fair shake with a real transparent backend. We need to find our way to a better model that rewards today's box office performance."

Adding to the financial pressure: Foreign coin has dried up due to the economy and shift toward local productions. According to Stuart Ford, founder and CEO of IM Global, international coin that once would have made up 40%-50% of box office now accounts for 10% "on all but the most slamdunk commercial movies."

"I think for the last five years there were a lot of free lunches," said Ashok Amritraj, chair and CEO of Hyde Park Entertainment, alluding to Wall Street coin that pumped biz coffers for a spell. "But that has stopped."

He said international companies are afraid to step up with "stupid money." And they've gotten choosier about which projects they will buy in pre-sales.

"We would like foreign companies to come in," he said. "We love it when a 'Twilight' happens, because it keeps the foreign guys happy and in business."

The good news, panelists said, is that agents and talent have become more aware of how different the environment is today and have reduced expectations accordingly. The growth of VOD domestically and internationally was also cited as an encouraging sign by financiers.

"The toughest moment was six to eight months ago, when there was a lot of denial about what was going on out there," London said. "Now there are a lot of green shoots out there."

London said indie producers and financiers are "all scrambling to find out what whether the answers lie in VOD or home entertainment."

"As all that happens, the movie business will move back to much more rational process," he said. "Audiences are still really hungry for good movies," he said.

Separate panels touted technological advances in 3D and home entertainment delivery as other developments that will energize the business.

The 3D format "provides us an opportunity to reinvigorate the experience in the theater," said Ed Leonard, chief technology officer of DreamWorks Animation. "3D done well is an incredible tool for our creative teams -- not as a gimmick, but as a vehicle to really pull you into the story."

(Cynthia Littleton contributed to this report.)

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Tuesday, December 8, 2009

CBS Films takes 'Vengeance'

'Taken' writer Robert Mark Kamen sets action pitch
CBS Films has made a preemptive deal to acquire "Vengeance," an action pitch by scribe Robert Mark Kamen. Erwin Stoff will produce.

While material sales are few and far between in the waning days of 2009, CBS Films prexy Amy Baer stepped up to the chance at an action genre entry with a modest budget that is very much in the vein of "Taken," the 2008 sleeper hit Kamen wrote with Luc Besson.

"Basically, it's a contemporary revenge love story -- what happens when violence meets love," Kamen said. "The main characters are 20 and Italian, and there are themes that echo films like 'The Godfather.' It's about family loyalty and how much someone owes their family and the past. It's not set in the gangster milieu but just outside it."

Kamen, who said he and Besson have scripted a sequel to "Taken" that will get made based on star Liam Neeson's availability next year, is working with Stoff for the first time since they started out together with the intention to become writing partners.

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Hollywood's get-rich-quick era is over

Paula Wagner gives keynote at Future of Film
The get-rich-quick era in Hollywood is over, Paula Wagner said during her keynote Q&A at Variety's Future of Film confab at the Sheraton Delfina hotel in Santa Monica.

"It's not the time to come in to the movie business to get rich quick," Wagner said during the conversation with Variety Group prexy Neil Stiles.

Wagner, the former head of Cruise/Wagner Prods and former head of United Artists, said that compared to the 1980s and '90s, when creative talent could count on rich upfront paydays on projects, the new ethos of austerity calls for talent to work more "on spec" in exchange for participation in success.

"Big dollars are not flowing from the creation of product" anymore, she emphasized. The dealmaking and development process needs to change and become much more collaborative with the goal of getting the best possible product on the screen.

"Let's make movies, not deals," Wagner said. "Let's write movies, not scripts."

One of the toughest aspects of the biz these days is what Wagner, who recently launched her own shingle, Chestnut Ridge Prods, called "the middle" tier of pics.

"Studios are about brands - safe, comfortable - only hit movies. They don't want to touch the middle," she said. "Studios will make a movie out of Tide (laundry soap) if they think it'll work."

A big problem for a pic budgeted in the $35 million range is soaring P and A costs.

"If it's not a brand or a franchise, you'll spend probably more money to market it" than on production, she said, adding that everyone involved in film needs to "scrutinze" marketing costs.

As an indie producer, Wagner said she's very focused on finding the best way to deal with the exponential growth in distribution options for pics.

"The real issue now is distribution channels," she said. "We need to know what size screen we're working for."

The movie biz has always faced dynamic changes - from the dawn of talkies to the 1948 breakup of the majors and their exhibition holdings - but the transformation underway in the present day are staggering, Wagner said.

"We are in a seismic revolution in the movie business," she said. But the good news is, as domestic B.O. approaches the $10 billion mark, the aud's appetite for movies shows no sign of slowing down.

"More people are going to the theaters," she said. "Something is being done right."

Thesp Joe Pantoliano was among those in the aud for Wagner's chat. He got a laugh out of the room in asking why studio execs aren't taking pay cuts at a time when actors are facing huge drops in income compared to just a year ago. Wagner reiterated her earlier statement that "everyone" in the film biz needs to get used to more modest paydays in order for the biz to thrive.

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Saturday, December 5, 2009

The costs of Hollywood spending

Who benefits when filmmakers raise the tentpole?
James Cameron was quoted in the Wall Street Journal not long ago arguing that "when a studio goes crazy and spends a lot of money, it's the consumer who benefits."

Translated, that means that if Jim Cameron decides to reinvent the lexicon of filmmaking in a mind-bogglingly expensive movie like "Avatar," the filmgoer will enjoy the thrill ride -- and won't pay more for it. Much more, anyway.

With the world awaiting "Avatar's" release, we shall soon see if Cameron has performed that re-invention. In any case, having poured $300 million into the movie (or $400 million if you run the numbers differently), it's Fox that's waiting nervously to find out whether "the King of the world" again will earn all the ka-ching in the world.

Whatever the outcome, I would argue that the move to ever bigger and more extravagant movies will hurt the filmgoer long-term, not benefit him. Here's why:

Fueled by burgeoning foreign grosses, the studios are intent on making fewer movies at more grandiose budgets and at the same time diminishing their investment in "risky" low and mid-range dramas. The result: A numbing succession of tentpoles that may all but drive indie-style films out of the multiplexes.

Further, the era of the "big spend" will increasingly contaminate the few dramatic movies being made. "Lovely Bones," the Paramount-DreamWorks Christmas release from Peter Jackson, is an intimate film that cost almost $100 million to produce. Will the massive special effects improve or diminish the impact of the basic narrative? One key reason for the setbacks suffered by both Miramax and Paramount's Vantage division was the impulse to pump up spending both in production and marketing.

I remember the off-the-cuff commentary of Mike Nichols some years ago in describing the budget crunch on arguably his best picture, "The Graduate." When a young director finds his budget shrinking, recalled Nichols, he is compelled to not spend more, but invent more. The result often is a better movie.

In an economy where the big companies are under pressure to cut costs, filmmakers paradoxically feel the pressure to amp up their budgets. Audiences overseas want big-canvas action pictures that offer more effects and less dialogue. Simultaneous releases around the world may diminish piracy, but they expand marketing costs. The distributors demand instant gratification and are willing to pay for it.

I hope "Avatar" is a big hit and that the always modest and understated Cameron once again proves his techno-smarts. Even if that happens, however, the average filmgoer will still emerge the long-term loser.

Is Tom Cruise overpaid?

Like most people, I've always been intrigued by Forbes' lists of the "wealthiest" and "most powerful," but I've never figured out quite how they line up with their numbers.

Now, however, Forbes has a list I can relate to -- the most overpaid stars in Hollywood. The individual rankings, Forbes says, are based on a return-on-investment formula involving each star's compensation and each movie's gross. Forbes, of course, believes it has reliable data on star paydays, even though those numbers remain obscure to the rest of us.

The upshot: Will Ferrell, Eddie Murphy, Ewan McGregor and Tom Cruise are on the top of the "overpaid" list. Inclusion of Murphy and Ferrell is understandable, but Cruise apparently is vulnerable due to "Lions for Lambs." As for poor McGregor, he's apparently made too many classy movies like "Trainspotting" and thus represents a bad buy compared with, of all people, Shia LaBeouf, who by Forbes standard is the best buy for the buck among actors. Go figure.

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Tuesday, December 1, 2009

Magical 'Creatures' at Warner Bros.

Studio looks to LaGravenese for another wizard franchise
With Harry Potter ready to graduate from Hogwarts, Warner Bros. has gone back to the cauldron to stir up another coming-of-age wizard franchise.

Studio has acquired "Beautiful Creatures," the first of a five-novel series by Kami Garcia and Margaret Stohl that's being published todayby Little, Brown. Richard LaGravenese is set to write the script and direct the film.

Erwin Stoff will produce.

In the first book, high-school student Ethan Wate meets and becomes bewitched by Lena Duchannes, a 16-year-old whose family has moved to the small South Carolina town where he lives. The two must confront a curse that has haunted her family for generations as she comes to grips with her powers.

While LaGravenese has written-directed several female-centric films, including "P.S. I Love You," this is his first film foray into the magical-mystical realm.

"I love supernatural stories that have well-drawn mythologies, and I liked that this book has all the basic elements of a classic first love story with a supernatural layer over it," LaGravenese said. "So the first time they hear the words ‘boyfriend' and ‘girlfriend,' they accidentally overhear each other telepathically. Their first kiss comes after he saves her life, and their first date is part of a bigger adventure that leads to the unraveling of the mysterious curse that haunts her family."

LaGravenese most recently scripted "Water for Elephants," an adaptation of the Sara Gruen novel for Fox 2000 with Francis Lawrence directing and Reese Witherspoon attached to star, and "Liberace," the Steven Soderbergh-directed pic that has Michael Douglas and Matt Damon attached. Both films are on track to begin production next year.

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