After nearly 30 years of producing films, both as a studio executive and as a successful independent producer, Allyn Stewart projects a disarming equanimity about an industry known to be punishing for the faint of heart.
“You have to realize that 15 no’s don’t mean anything. You get told no most of the time. It doesn’t even matter how successful you are. I’ve had monster hit movies, and the next project I’m starting over again.” This, Stewart explained, is because the stakes are so high. Movies are expensive to make, and they are a single product issuance. Sometimes a movie’s fate is sealed by midnight of its opening night. “It’s not like you can amortize your investment,” she said. “And I’ve had it happen where you spend a year making something, and all of a sudden you wake up and think, ‘Uh, oh.’”
While Stewart may have had her share of “Uh, oh” moments, she has had a remarkably successful career that began in her early 20s working on “Chariots of Fire.” She was a studio executive at Warner Brothers and Columbia, producing films such as “Driving Miss Daisy,” “Dangerous Liaisons,” “Friends At Last,” “Bliss,” “I Dreamed of Africa,” and “Man of the House.”
Four years ago, she started an independent production company, Flashlight Films, with Kipp Nelson, a fellow Ketchum, Idaho, resident and former Goldman Sachs partner. Stewart and Nelson have eight projects ongoing, all at varying stages of development.
STORY, STORY, STORY
While there are any number of critical paths to making a successful movie, few are as important as the development of a compelling story. For Stewart, this means answering two key questions. First, is there an audience for the movie? It is difficult to get films financed in today’s industry because, as Stewart pointed out, “audiences have their eyes on a lot of stuff.”
Consider the number of movies released in a given year. According to the Motion Picture Association of America (MPAA), in 2013 there were 659 films released, which is a 35 percent increase over the past 10 years. Then there are cable TV productions, network television shows, pay-per-view series, DVD releases, streaming content, YouTube videos, video games, and the list goes on.
In evaluating a market for a film, a producer has many ways in which to parse the potential audience. One traditional, though crude, approach is to divide the world among those under 25 and those over 25, as well as by gender. A film aimed at just one of those four segments is going to have a tougher time getting financing than is a film targeted at two or three of those markets. While a “Transformers” movie may not appeal to 55-year-old women, it will probably attract a good chunk of the men and women under 25, and perhaps a decent number of men over 25.
Beyond audience, Stewart looks for stories that offer a “transformational experience. Is there a journey? I look for archetypal story and some sort of visual adventure deserving of being on the big screen.”
A case in point is a film project that Flashlight Films is developing about the great American rower Jack Kelly. Kelly was a poor, Irish-American bricklayer from Philadelphia at the turn of the century who decided he wanted to join the gentlemen’s sport of competitive rowing. Kelly essentially taught himself to row, then was sent off to fight in World War I. After returning slightly injured, Kelly went on to become the most successful rower in the history of the Olympics. What’s more, he ultimately married and became the father of film star and eventual Princess of Monaco, Grace Kelly.
When Stewart and partner Nelson bought the script, they knew it was a great story, but it was a bit old-fashioned in the way it was presented. “It’s always a task,” she said, “how to tell a period story in a way that has a contemporary feel.” This led to two years of rewriting and story development. Paul Tamasy and Eric Johnson, both of whom worked on the screenplay for the 2010 Academy Award-winning film “The Fighter,” wrote the current version of the screenplay, which Stewart loves.
Jeff Rose is an entrepreneur and independent producer who worked at Miramax in the early 1990s, a time when the independent film industry was booming. Currently developing a film project with a screenplay by John Musero, Rose said that successful projects come down to the same metrics as the real estate business—location, location, location—in this case, it’s “story, story, story. And not just what happens and where it happens. In any great movie the story is about characters, and, for me, I like films that touch your emotions in some way.”
Today, stories for movies come from any number of sources besides the traditional screenplay. They might be novels, magazine articles, even comic books. For example, Flashlight is developing the book “Highest Duty,” which is about the emergency landing of flight 1549 in New York’s Hudson River by Captain Chesley “Sully” Sullenberger. Another project in the works stems from optioning the rights to a New Yorker article about death-row inmate Cameron Todd Willingham.
GETTING TO GREEN
One of the advantages of owning the story in the movie business is that it buys one some independence. If a studio owns the script, it determines when the movie is made, how it is made, who is involved, and, perhaps most importantly, what the budget is going to be.
For Stewart, with a quality script in hand for “Kelly,” she can now seek out the director she thinks would be best for the project. Having a director “attached” to a project is critical when it comes to finding financing. “You have much greater success finding the money if you can create a package,” she said. Ideally, Stewart would have a proposed lead cast in place, too, but agents will often balk at projects that do not have the financing lined up first.
Because the studios are focused on producing tent-pole movies—big-budget productions of known brands such as “Transformers,” “Fast and Furious” and “Spider-Man”—the majority of films released today are being made independently. The big studios may distribute and market the films, but the actual production costs of the independent films are covered through a myriad of financing methods.
One common approach is to leverage both foreign sales and equity financing. To raise cash for production, a producer might sell off rights to foreign box office sales, which can be substantial. To wit, in 2013, total U.S. and Canada box office receipts were $10.9 billion, whereas overseas receipts were $25 billion. Depending on the amount of capital needed, a producer can selectively sell off rights country by country. Another variation of this approach might be to use the international sales rights as collateral for a bank loan to finance production.
Equity financing of a film entails selling equity in the project itself (and forfeiting a percentage of profits, if there are any) for cash up front. Depending on the size of the proposed film budget, any number of domestic private equity or hedge funds might participate in a given project.
According to Rose, a number of independent financing companies such as Legendary Films and Relativity Media have become very successful over the last 10 years or so financing productions for the big studios. This success has enabled them to expand into production and distribution services, ultimately becoming “studios themselves.”
Given the foreign interest in the sport of rowing and the fact that Kelly’s daughter, Grace, became the Princess of Monaco, Stewart anticipates that 70 percent of “Kelly” might be financed with foreign sales, and 30 percent with domestic equity. But, as she repeatedly pointed out, every movie is different.
To understand the complexity of logistics in making a movie is to begin to appreciate how the costs of films today can skyrocket. Granted, the budgets of films vary dramatically. Production costs for the 2014 release of “The Amazing Spider-Man 2” have been estimated at $220 million. By contrast, last year’s “American Hustle,” which garnered 10 Academy Award nominations, cost approximately $40 million. And plenty of movies have been made for less than $1 million. Still, it is hard to ignore the observation that costs seem to scale exponentially with the complexity of a film.
In his authoritative book “Making Movies,” director Sydney Lumet describes the logistics of shooting on location for one of his low-budget films, “Running on Empty.” Some of the basic needs on location included a truck for grips (lighting technicians), truck for electrical equipment, truck for generators, truck for makeup and hair, campers for actors, transport vehicles for actors, buses for extras, portable toilets truck, Teamsters personnel, security personnel, cops to control traffic, makeup crew, lighting crew, rigging crew and caterers. Lumet points out that the crew for a large action film can easily get into the hundreds. This doesn’t even factor in the cost of the cast, or permits to shoot on location, or money needed to compensate businesses that must close during filming.
On the movies Stewart has made, which haven’t been big-action films, the average cost to shoot was between $150,000 and $200,000 per day. Part of the producer’s job, she said, is to “make sure you shoot your days. The villains of your day can be bad weather, or equipment malfunction, or an actor is upset and won’t come out of his trailer. You are very aware of the fact that if that happens for a few hours, it’s $50,000 out the window.” A typical film might shoot for 55 days, so it is easy to see how an even modest film can get expensive very quickly.
While “Kelly” is technically set in Philadelphia and on the Schuylkill River, Stewart and Nelson will look at their options and choose the cheapest location for shooting. One frontrunner will likely be England, because, “it’s easier to make a period piece in England,” she said.
In addition to managing this cash-devouring beast of a production team, the producer’s job, according to Stewart, “is to know the essential goal of the story you want to tell and then fight for it every day—and also to know that certain shifts take place. But you have to make sure that there’s nothing you compromise that really hurts the film.”
Rose explained that if a producer has a property that he really believes in, his job is “to make sure that not only does the writer’s vision stay true to what was written, but it becomes better with the addition of a director and actors—a better story, better for the audience.”
Of course, shooting the film is just one phase of production. There might be three months of pre-production, which includes rehearsals, scouting locations, planning shoots, building sets, sourcing costumes and arranging permits. After shooting, there is the post-production, which might take five months if all goes well. The film has to be edited not only for content quality but for tempo and overall length. A musical score will be developed, along with sound effects. Finally, the various audio tracks—dialogue, music, sound effects—are mixed and balanced, then integrated into the film.
Naturally, things don’t always proceed as smoothly as planned. Actors and directors may drop out, financing can fall through or current events might even alter the market environment and complicate the release of a film. Stewart said that she developed “Forrest Gump” for eight years.
For independent films—those made outside the big six studios (Walt Disney Studios, Paramount Pictures, Sony Pictures, Twentieth Century Fox, Universal City Studios, and Warner Brothers)—the marketing and distribution deals producers can strike with the studios are critical to their financial success. And that deal typically specifies the number of theaters in which the film will open and the dollar amount of advertising the studio will spend to market the film.
It is not uncommon for the marketing budget of a film—whether a studio release or independent film—to be comparable to the production costs. For example, the marketing costs for “The Amazing Spider-Man 2” were approximately $180 million; production costs were estimated at $220 million. For a $30 to $50 million independent movie, a decent ad buy would be $20 to $25 million, Stewart said. But the producer has to fight for it, she added.
The other piece of a distribution deal is the release date and number of theaters in which to open. In addition to all of the TV, Internet, print and social media advertising that $180 million will buy, “The Amazing Spider-Man 2” had the advantage of being released in 4,324 theaters, which is considered a “wide” release.
When a studio needs “product” will help determine when a film is released. “Part of it is you want their sole attention,” Stewart said. A given studio may agree to release a film in 2,500 theaters in July. However, if the same studio is releasing another movie the next week, it may start bumping the first one from theaters if it’s not performing at the box office. That’s why the opening weekend is so important. More to the point, opening poorly can doom a film’s chance at profitability—the studio will start yanking the film from theaters to make room for another one that may deliver more sales.
There is, however, a ground shift occurring in the film industry with the advent of film-on-demand, streaming distribution.
“Companies like Netflix, Amazon and iTunes have basically provided an endless distribution funnel for films,” Rose said. This fall, for example, Netflix and the Weinstein Company announced that they would release the sequel to “Crouching Tiger, Hidden Dragon” simultaneously on Netflix and in IMAX theaters, totally bypassing distribution through theater chains. Netflix also signed a deal with comedian Adam Sandler to finance and distribute through its streaming service four films starting in 2015.
Just as video-on-demand altered the television landscape forever, so too, it seems, will film-on-demand deals disrupt the film industry. Perhaps most threatened are the big studios and large theater chains that currently wield tremendous market power through their lock on the distribution channels. It may be that the next great business battle will be between old Hollywood and the new technology companies like Amazon, Netflix, Google (via YouTube) and iTunes.
From the ground level, a movie-goer might see the film industry just as he or she has always seen it: as a glamorous and lucrative business churning out a steady mix of blockbuster movies, romantic comedies and a leaner diet of art house flicks. But pull up and away from the industry landscape a bit, and one might see two storylines unfolding.
On the one hand, studios—burdened with high overhead costs and the rising costs of making movies—are making fewer films and safer films. These are what are known as “pre-awareness” blockbuster films—films that are derivative of a brand, such as the “Iron Man” series, or “Transformers.” They are grossly expensive, but if they strike a public chord, they can be grossly profitable as well. “Iron Man 3,” for instance, chalked up a profit of $432.6 million. When Stewart was an executive at Warner Brothers, they were making 25 to 30 movies per year. Now, most studios make eight to 10 per year. Both the quality and quantity of the fare is ever more limited.
At the same time, advances in technology and innovative financing and distribution models are driving a second, more expansive storyline. Today, over 80 percent of movie screens across the globe are digital. This reality removes the burden and cost of making a movie with film. Digital cameras, iPhones, tablets, laptops and other devices offer high-quality audio-visual, editing and mixing capabilities at relatively low costs. The era of the micro-budget film is dawning. As Stewart pointed out, “If you can make a film at the right price point—as the Internet is expanding and pay-per-view is expanding—there is a growing value in content. And that’s exciting.”
What’s more, with a range of financing options available—debt financing, equity financing, crowd-source funds and pre-sale agreements—the possibilities for aspiring filmmakers have expanded considerably.
And, finally, there is now the possibility of distributing and marketing through film-on-demand companies. Gone are the days when the studios had complete vertical integration: ownership of the content, stars and directors on contract, financing power and control of the distribution channels.
What has not changed in this century-old industry is its underlying premise: that people care about and are moved by stories. The dramatic arc of a life, if told in a compelling way, can touch even the most cynical of viewers. Perhaps because character determines the outcome of any given story, and the fact that the human character is infinitely unpredictable, we never really know where a story will lead. But we wonder, and that keeps us watching.