The strategy of streaming services is destroying the financing of independent cinema – The Hollywood Reporter

Genre films like The Avenue’s action flick ‘Land of Bad’ remain popular with streamers, but are harder to make at the box office.

Avenue

The European Film Market is off to a good start, buoyed by post-strike optimism and a truly impressive list of projects on offer in Berlin this year, including independent films available with A-list stars such as Margot Robbie and Dave Bautista. , Scarlett Johansson and Will Smith. After a strong Sundance and better box office numbers in both the US and Europe, hope seems to be slowly returning to an independent film industry that seemed to be on the brink just six months ago.

But many EFM sellers still see a cloud on the horizon with the unresolved problem in the home entertainment market, particularly the all-important one-time payment window. Ancillary revenue has always been the real driver of the independent market, but as streaming comes to dominate post-theatrical exploitation and the largest platforms are reducing the number of independent films they buy, many are wondering how independent films can make the numbers work.

“We’re all increasingly beholden to streamers for additional revenue, and those licensing fees have dropped dramatically,” says one veteran seller. “If you’re building a financial model for an independent film, today the return on that one-time pay window is probably going to be a third of what you would have expected just a few years ago. “There is simply not enough revenue from domestic markets to cover the production costs of most films.”

Deals that make headlines, such as Netflix’s acquisition of Greg Jardin’s horror thriller for $17 million. It’s what’s insideor Amazon’s purchase of Megan Park’s comedy for $15 million my old assboth at Sundance this year, don’t make up for, marketers say, the broader loss of single-payer revenue as streamers overall buy fewer independent films.

It’s no surprise that most active indie buyers, like A24 and Bleecker Street, have pay-per-production deals (with Warner Bros. Discovery and Paramount Global’s Showtime Networks, respectively) that guarantee ancillary money for their entire slate.

“The future state of streaming platforms and their acquisition strategies are critical to the survival of independent film,” says JJ Caruth, president of domestic marketing and distribution at The Avenue, the US distribution arm of Highland Film Group. “Without having that lump-sum revenue, financing independent films becomes much more difficult.”

Caruth also sees a divide between streamers’ demand for mainstream genre films; he points to the action thriller The Avenue. land of bad guys starring Liam and Luke Hemsworth alongside Russell Crowe, as “exactly the kind of content streamers are looking for” – with the “unique, edgy indie fare” – think Celine Song. Past LivesJustine Triet Anatomy of a fall or Wim Wenders perfect days – that are attracting audiences in theaters “but don’t necessarily work as well for the platforms.”

“Those kinds of generic action movies are great for Netflix and Amazon, but they no longer have value as a theatrical movie,” says one Europe-based packager and seller, pointing to the Liam Neeson film. Revengewhich earned just $7 million domestically for Roadside Attractions, or Millennium Media’s Spend4bleswhich grossed less than $17 million at the domestic box office for Lionsgate, by far the worst performance of the Supply Expendables franchise.

But Joe Lewis, CEO of Amplify Pictures, sees new opportunities in the streaming market as platforms move away from their walled garden approach of global all-rights deals and begin to “enter an era of non-exclusivity that It’s super exciting… Now you can release your stuff on multiple VOD platforms and you’ll see that the numbers don’t cannibalize each other; in fact, they may be additive.”

Instead of a one-size-fits-all deal with a streamer—“essentially a cost-plus deal, where you give up all global rights forever”—Lewis says independent producers can get creative with window rights, “ collecting money from different sources. “to allow “the value of a project to better correlate with its success.”

Caruth agrees, noting that the recent strategic shift by streamers, “where they are starting to license and display content” and be more flexible with rights deals, makes her “cautiously optimistic again.”

But, given the increasingly vital importance of streaming revenue for independent films and the growing dominance of a handful of vertically integrated production and distribution platforms, a long-term solution to the one-stop-shop payment problem remains. out of sight.

“I’m going to say something that will probably ensure that I never get hired by one of these streamers, but without some kind of regulation, like they have in Europe to require platforms to buy a certain amount from independents, it’s going to be very difficult for independent producers and films survive,” says Caruth. “But for streamers, regulation is a four-letter word.”