Mergers and Mega-hit Independent Films

In late 2017, it was announced that Disney would buy 20th Century Fox, including all of the beloved properties such as X-men, Fantastic Four, and… I guess, The Simpsons? The studio system continues to shrink down to a smaller number of big studios. Whether or not that portends doom for the industry or not (I tend to think not), remains to be seen. 

However, there’s an interesting notion floating around Hollywood. It involves the idea of counter-programming to the franchises and mega-sequels that are either windfalls or sinkholes for certain studios. 2017 saw several films that were small in budget, perhaps $35 million or less, make huge profits. It’s certainly not the independent film resurgence we saw in the late 90s, but there’s a trend of diverse, must-see narratives. What are the implications of that kind of content market?


The State of the Theater

It’s not fantastic. Theater attendance was estimated to be at a 22-year and saw a 2.3% decrease in revenue, domestically. However, the worldwide box office hit a record of $40 billion. People overseas get out for movies, apparently.

There’s the argument that OTT platforms, such as Netflix and Amazon, have siphoned off a large portion of theater ticket sales. Toby Emmerich, president and chief content officer for Warner Bros. says, “Consumers are loving the on-demand world. The challenge is how to motivate people to commit their time and energy to go to a movie that starts when the movie theater says it does. A movie has to be an event, or it has to be breathtakingly good. There’s never been a smaller margin of error,” (Hollywood Reporter).

That issue might be exacerbated by the Disney-Fox merger. Disney is positioning themselves to launch their own OTT platform with the help of Fox’s foundational properties. If it launches, more studios will feel pressured to launch their own OTT platforms, thus reducing the number of films they release in a year, potentially. There are those, however, that don’t see streaming as the death knell for theaters.

John Fithian, president of the National Association of Theater Owners (aka “The Other NATO”), claims, “With North American box office hitting $11 billion for the third straight year and global returns knocking on the door of $40 billion, it’s clear that people continue to seek out the emotional experience that can only be found in movie theaters.” He blames poor programming––not the streaming platforms. Fithian also diagnoses that a great boon to theater sales is a diversity in release slates.


The Power of Diverse Stories

There was a refreshing and remarkable slate of diverse stories in 2017. No one would have predicted that Wonder Woman would have been the biggest movie in the summer. Not only that, but many of the small-budget films, filled with diverse casts, made huge profits. Get Out was made for $4.5 million. It made $254 million––57 times its production cost! That’s a massive profit from a movie that explores the insidious racism in our culture via a horror/thriller.

Girls Trip quietly made the Top 10 grossing films (domestically) in 2017. It’s production budget was $19 million and grossed $139 million––7.3 times its budget. People flocked to the theaters to experience a film led by women of color, an experience that doesn’t come around often. The smaller, diverse films fared much better against such films as Valerian and King Arthur, films that didn’t hit that sweet spot of offering something new or fresh.

The reason in pointing out this discrepancy is to illuminate a changing landscape. On one end of the spectrum you have the huge franchises and mega-sequels that have enormous budgets––on the other, you have lower-budget films that feature diverse casts and pointed storytelling. There’s risk on both sides, but some executives welcome the diverse slates.

Tom Rothman, Sony Pictures Motion Pictures Group chairman, says: “Consolidation under giant corporate mandates rarely promotes creative risk-taking. And in the long run, it is always a challenge to compete against horizontal monopolistic power. For us, in the near term, it helps because we can be a stable for distinctive, adventurous filmmaking, which is what we believe the audience wants,” (Hollywood Reporter).

More and more companies are throwing their hats into the content creation ring. MoviePass, the little red card that has made it more doable to go see tons of movies, wants in the game. MoviePass announced at Sundance MoviePass Ventures––a subsidiary that will co-acquire films for distribution. Their service has boosted smaller films to the mainstream by making people more comfortable with being adventurous at the theater. Some films’ box office, like The Post, were impacted by MoviePass in excess of 10% (Deadline).


Content Creation in the Long Run

It’s fascinating to see the shifting sands of what people want to see in their video content. There’s still a huge market for comic book films, which are basically the new ‘action films.’ Then, there’s this insatiable need for people to see something new and different, especially when it concerns inclusionary stories.

The lesson here is to strive for excellence and innovation at every possible moment. We take the approach to creativity as a way of breaking down boundaries and saying something real. Authenticity is an invaluable commodity.

When we collaborate with brands or artists, it’s often a matter of: “what story can we tell that audiences didn’t know that they needed?” Flexibility and creativity in telling a story to elicit a positive reaction are paramount to our process. The brands and artists who invest early on telling stories that are real, human, and fresh will be rewarded – and that’s who we are.

By Benton Olivares