By Andy Tillman
UCLA Anderson’s 2016 Pulse Entertainment, Sports and Technology Conference brought together leading industry executives to share insights and perspectives on current trends, opportunities and challenges. As part of the event, organized by the Center for Management of Enterprise in Media, Entertainment & Sports, there were several breakout sessions, including the panel “Flipping the Script,” in which experts discussed the mid-budget film gap in movies, its cause and the new opportunity it presents for companies working outside of the studio system.
Moderating the panel was Monique Jones (’93), VP of finance and controller at Sidney Kimmel Entertainment. Panelists included: Paul Neinstein, COO of RatPac Entertainment; Alphonse Lordo, director of media and entertainment at CIT Bank; and Ivana Lombardi, VP of film at Chernin Entertainment.
The story of the mid-budget film gap began over two decades ago when studios started to realize that nearly half, if not more, of their budgets were going to advertising. Studio executives saw that the profits were bigger for bigger budget films. A shift began to take place. The studios would rather make a large-budget film with bigger returns. Suddenly mid-budget films couldn’t get financing.
This blockbuster formula brought the studios two things every studio wants most, profit and certainty. As budgets grew, so too did the cost of keeping the studios running. The kind of money that mid-budget films couldn’t support. The market took on a barbell effect, on one end, smaller, festival films and on the other end, big budget films. This left a gaping hole right in the middle, the land of medium budget films.
Flash forward to the present day and this medium budget gap still exists. But what might be a no-man’s-land for big studios is the land of opportunity for industry veterans wanting to break away from the studios to take advantage of the opportunity that lies in the gap. Of course, this doesn’t mean the two are mutually exclusive. As RatPac’s Neinstein put it, “We work alongside studios to help finance films that might otherwise never get made. As independent companies, we have a lot of flexibility (the backing of big investors) to break into the market in ways studios can’t.” Lordo added, “With studios only going after big budgets there are a lot of actors who still need money, so there’s opportunity for everyone in mid-budgets.” Said Lombardi, “For us, it’s about getting the movie made, if you have to go outside of the studio to do that, then that’s what we do.”
Companies like RatPac are able to go after mid-budget films because they don’t have the overhead of the big studios. Neinstein believes there is a market for these films: “Consumption habits have changed,” he said, “mid-level films can be watched and pleasurably experienced at home, unlike Star Wars, which you want to see in a theater.” Lombardi added, “We are seeing more indie distributors who don’t mind picking up smaller films because these films can be extremely profitable for distributors via the video-on-demand option.”
All of the panelists agreed television is having a big impact on the industry. According to Neinstein, “There was a time when television’s demand for actors took a back seat to film. Now it’s flipped, we have to wait.” Lombardi added, “But if we have a star, we tell the network to go and find a property that will work for that actor and we work together. We’re competing for talent between TV and film. Our budgets are so low that the actors really have to love the script.”
Digital giants like Netflix and Amazon bring more opportunity, “They’ll buy the mid-level films because with their data analytics, they know exactly who to market the properties to,” said Lombardi.
“The financing structure is much more of a puzzle too,” said Neinstein. “Netflix bought the first show rights to the Big Short before the film was even made. Of course, actors have to get used to seeing their films open on Netflix or Amazon instead of the big screen.”
When asked if these new vehicles made indies and mid-budgets a threat to studios, Neinstein said, “No, but it does open the door for smaller films to get made. What happened at Sundance recently with big dollars being paid for Birth of a Nation shows that there is an appetite for these films and people want to see them in the theater.”
If this new model for mid-budget filmmaking does work, if these smaller, leaner, mid-budget companies are actually able to flip the script and fund the small but important stories studios can’t or won’t make, it could mark a new era in film and introduce a whole new generation of filmmakers.