By Indiewire | Indiewire March 23, 2004 at 2:00AM
Distribution Partnerships: The Art of the (Service) Deal
by Rania Richardson
The runaway success of "The Passion of the Christ," "Monster," and "My Big Fat Greek Wedding," signals an evolution of the service deal, or distributor-for-hire arrangement. Where once a filmmaker only agreed to pay for prints and advertising (P&A) and give a distributor a fee to release a film theatrically when a traditional acquisition was not forthcoming, filmmakers are now actively pursuing more risk for a greater cut of the profit.
The negative connotation of the past is gone due to these recent breakthroughs, and there is an increase in producers seeking "partnership" agreements that give them more control of their release. In the case of the new documentary, "Metallica: Some Kind of Monster," filmmakers even declined traditional offers of acquisition to negotiate a service deal with multiple partners.
In response to a recent Variety story critical of Newmarket's recent deals, Bob Berney, president of Newmarket Films told indieWIRE, "In the past, producers put up the money for a service deal to create video value. 'Monster' and 'Passion' are partnerships, not service deals. It's a new paradigm. These are joint ventures."
Berney explained that his company was not shortchanged by the arrangement made for "Passion." "They (Icon) owned the film. It was not for sale. They wanted a partner for the theatrical release."
While Newmarket continues to acquire films traditionally, they are willing to consider all kinds of deals on a project-by-project basis. "We try to be creative when there's a film without a solution, and be quick to respond. There is no formula. If you believe in the film, you can always work out a deal with the producer so that there is a win-win situation," said Berney.
Sande Zeig's company, Artistic License, focuses exclusively on service deals and has distributed over 50 films. "Games People Play: New York" opened in New York on March 12. With a box office take of $12,364, it had the highest per screen average for the weekend. Los Angeles was added to the run this past weekend, and the film made a less impressive $11,870 on two screens.
Fifteen years ago, Zeig was one of a couple of independent distributors to offer service deals. "Now many companies do service deals on the side," she told indieWIRE via email, "We started focusing on service deals since theatrical distribution was our specialty and a number of filmmakers came to us with P&A budgets and the desire to have their films in movie theaters. We didn't have the financing power to purchase all rights and advance P&A costs." Regarding the recent service deal blockbusters, she commented, "A lot more money is being spent on service deals now. Not so much for our films or the independents who still have to raise that money through private sources."
The service deal is a solution when filmmakers have opted for ancillary deals that deprive potential theatrical distributors of the back-end monies that would give them a guaranteed return on investment. According to Magnolia Pictures President, Eammon Bowles, when filmmaker Andrew Jarecki approached Magnolia to release "Capturing the Friedmans," he already had an HBO deal in place. The HBO sale funded the theatrical release. "If a filmmaker has access to capital, he can hand pick the distributor," Bowles told indieWIRE, "and he can share in the ancillaries." The film grossed $3.1 million.
The bottleneck in the distribution process is another reason to consider a service deal. "There is so much more product today. There are more barriers to entry," John Vanco, co-founder of the now defunct Cowboy Pictures told indieWIRE. "And sometimes the distributor wants to work on a strong film but doesn't have the money to put behind it. Producers can get a better deal; these are not just a vanity releases."
Cowboy Pictures' most successful releases, George Butler's "The Endurance: Shackleton's Antarctic Adventure" ($2.4 million) and Aviva Kempner's "The Life and Times of Hank Greenberg" ($1.7 million) were service deals made without ancillary deals in place. Vanco said, "Both filmmakers were extremely involved and had good instincts for marketing. They were not first timers. Both had previously released features and had gone through the process before." "But," he cautioned, " I believe it would be harder on a first time filmmaker. In most cases filmmakers are so close to their film they don't have the objectivity of what will work in the marketplace."
Despite the recent spate of through-the-roof successes for a few service deals, the majority of films released this way are those that have been passed up by the traditional distributors. According to ThinkFilm Distribution Head, Mark Urman, "Except for a few notable exceptions, films that appear in the marketplace, that are not acquired in the normal channels, tend to be films that were probably not commercially viable. For every 'Greek Wedding' and 'Monster' there are dozens of films that have faded into obscurity."
"When they work, they're news. No one writes about the ones that don't work like 'Donnie Darko,' whose modest success is no comparison to 'Greek Wedding,'" IFC Films President Jonathan Sehring said, referring to two of the company's releases.
IFC Films, the band Metallica, filmmakers Joe Berlinger and Bruce Sinofsky, and Paramount Home Entertainment recently announced a multi-party deal to distribute "Metallica: Some Kind of Monster." Distributors had approached Berlinger and Sinofsky to do an outright acquisition, but Metallica wanted to maintain the control they have in other aspects of their business, including an unprecedented royalty deal. Part of the drive behind the joint venture was the negative experience Berlinger had with Artisan Entertainment's studio-style release of his film, "Book of Shadows: Blair Witch 2." "This is karmic payback," he said.
Berlinger and Sinofsky had self-distributed their first film "Brother's Keeper" in 1992 because they didn't have the money to pay for a service deal. "But if you have the budget, why not use it, instead of taking the risk that your film won't be handled the right way. The downside is the big commitment you make-- you're taken you out of filmmaking for a year to work on the distribution. It's also financially risky, of course. It's not a magic bullet."
According to Vanco, "The definition of a service deal is an issue of semantics. There is a broad continuum of distribution deals, from the negative pickup acquisition to the gun-for-hire services rendered at the other end. Most fall somewhere in the middle. Think of George Lucas who self finances his projects but hires a studio to release them. That's a service deal."
Vanco continued, "People are stepping back and reexamining the old models. As service deals become more common, producers may come up with more ideas on how to structure the deal. They might start to build an extra $200,000 into their budget to option out of an advance and P&A guarantee to drive the train and not be dependent."