Business Of Codependents

After Orion established the modern incarnation of the satellite production company with Warner in the late 1970s, one by one the rest of the majors gradually adopted this practice. Such deals generally involved a contract between producer and distributor whereby the latter provided the former with office space in the studio lot, staffing and development funds so that the producer could develop films which the distributor could option. Once a film was greenlit for production, the distributor would then provide the producer with the budget (or guarantee the bank loans) or, as has been the case more recently, ask the producer to secure part or all of the negative costs from outside sources in exchange for distribution in all media.

This type of arrangement between independent producers and major distributors became extremely common in the 1990s and continues to be so in the 2000s, especially as staggering increases in production and marketing costs have made co-financing deals essential. For producers, co-financing is almost always the only solution as very few production companies can afford the costs of a high-budget or even mid-budget film.7 For distributors, co-financing has also become extremely significant as the small number of films each distributor releases every year represents an extremely large investment even for a division of a conglomerate. For that reason distributors have been looking increasingly to reduce their financial exposure in the likely case that their films do not perform according to expectations. Such an approach to filmmaking has started affecting the American film market to such an extent that Screen International announced in 2001 that 'what we [had known] previously as studios and independents [were] all becoming co-dependents' while 'the traditional idea of what constitutes a studio and what constitutes an independent is being eradicated.'8 Table 8.19 contains a list of the production pacts between major and major independent distributors and independent production companies in November 2004. No less than 232 'independent' companies had such deals in place with the majors and their divisions.

A characteristic example of such a production company, which after a few years of attachment to a major distributor has returned recently to independence, is Phoenix Pictures. The company was set up in 1995 by former head of production for United Artists and Orion Pictures Mike Medavoy, and Arnold Messer. Since then it has produced a number of medium-budget films such as The People vs. Larry Flynt (Forman, 1996) and The Thin Red Line (Malick, 1998) and a small number of high-budget pictures including The 6th Day (Spottiswoode, 2000). According to Medavoy, once it became clear that it was not possible for his new company to be a producer-distributor but only a producer there were two basic models to follow: (1) obtain finance from non-US entertainment-related companies (a model that other successful independent producers of the 1990s like Franchise Pictures followed) or (2) set up partially financed output arrangement with one of the major players.10 Phoenix Pictures chose the second model and after arranging a distribution deal with Sony Columbia it joined the growing list of production outfits that became satellite companies for the majors.

To launch its operations Phoenix attracted a number of partners (including Sony) which invested in the company in the form of equity finance. With the size of investment reaching $74 million, Phoenix managed to secure approximately $600 million production financing and entered the production business with the intention of catering for the mid-budget market ($25-30 million) with director-driven films.11 For its first five pictures the necessary funds were raised through a deal that involved Phoenix 'borrowing money from a bank to fund a film and then buying an insurance policy to insure itself against any potential loss.'12 Although the

Table 8.1 Pacts between independent producers and majors/major independents and classics divisions

Distribution

No of pacts

Key production companies

company/major

Film Making

Film Making

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