Alchemy is in deep trouble. Its most anticipated title, “The Lobster,” has been sold to A24; it’s facing “financial discrepancies,” and major cutbacks. However, while other indie distributors fend off attacks from upstart new-platform competitors like Netflix and Amazon, the undoing of Alchemy may stem from an enemy considered all but toothless: The DVD business.
Sixteen months ago, Virgo Investment Group acquired B-movie producer Avi Lerner’s Millennium Entertainment specialty distribution arm and rebranded it as Alchemy. It soon found surprise success with “Meet the Patels,” a comedic documentary about actor Ravi Patel that grossed $1.7 million domestically. Alchemy’s acquisitions team began to assemble a promising slate for 2016, including the Cannes-acclaimed “The Lobster.”
But by the end of 2015, that potential would start to crumble as a new merger forced Alchemy into a liquidity crisis that now threatens its entire future.
In the fall 2015, the company acquired distribution network ANconnect and Anderson Digital, which serviced massive outputs deals for home entertainment. As one insider put it, “They basically bought the farm on the DVD business.”
As that deal began to impact Alchemy’s cash flow, the company’s owners fired CEO Bill Lee and replaced him with co-presidents Kelly Summers and Scott Guthrie. They focused resources on rescuing their suffocating DVD business; that priority shift meant the company’s theatrical ambitions received the short end of the stick.
The timing was especially bad in light of Alchemy’s aggressive approach to buying films on the festival circuit. The company spent $1 million on “The Lobster,” outbidding more established buyers, and $3 million on rising British genre director Ben Wheatley’s “Free Fire,” which stars Brie Larson and Cillian Murphy. Deals like those initially gave Alchemy the sheen of a rich new kid on the block; now, in the face of a liquidity crisis, they created the perception of a poorly run business.
News of Alchemy’s financial problems first trickled out of this week’s European Film Market at the Berlin Film Festival. In addition to the sale of “The Lobster” to A24, more titles are expected to follow. Its 2016 slate includes Italian heavyweight Nanni Moretti’s dramedy “Mia Madre,” Polish director Lucile Hadzihalilovic’s eerie thriller “Evolution,” and “Free Fire.” The company also acquired James Franco’s “Zeroville” and the Rob Zombie’s “31,” but had not yet decided the release strategy for those titles.
On Friday, Alchemy will open a documentary about The Denver Post’s marijuana coverage, “Rolling Papers,” in a handful of theaters and VOD. However, it’s more likely that Alchemy’s attention will be focused on contingency plans for its bigger films.
As recently as last week, a company called Screening Services Group wrote Indiewire to complain of outstanding fees concerning the use of two screening rooms in Beverly Hills. “Like Yari Film Group and Relativity Media before them, they owe us thousands of dollars that they are refusing to pay,” wrote SSG’s Joe Chifari, referencing two distributors that filed for bankruptcy in recent years.
While an Alchemy representative told Indiewire that Screening Services Group had been paid, he admitted that the company had been facing delays out of its accounting department since the end of 2015.
Alchemy’s official statement circulated to members of the media puts it bluntly: “Alchemy’s new management team has uncovered some challenges within parts of its businesses. As a result, we are working tirelessly and more importantly, we are committed to fixing each and every situation that we are faced with in order to reemerge with renewed commitments and even stronger alliances.”
While Deadline reports one source as claiming that Alchemy may find new financing resources to save the company, its future prospects as a distributor face a more pressing issue: staff morale. The specialty theatrical marketplace has found renewed momentum in the efforts of newcomers such as A24, which has gambled on ambitious projects ranging from “Ex Machina” to “Room” with a fair amount of success.
But over the past few years, A24 has developed enough solvency to justify its spending. Alchemy, on the other hand, spent aggressively on a number of titles right out of the gate before it had managed much in the way of successful releases. Now it has a number of mid-sized films possessing breakout potential, which puts its team in the regrettable situation of balking on deals it spent the past year chasing after.
That team includes former Paramount and IFC executive Jeff Deutchman, Alchemy’s senior VP of acquisitions, and senior VP of marketing Vincent Scordino. Both executive have teams working under them. In total, Alchemy employs close to 100 people. Their hopes for the company’s future may have held potential, but all signs seem to indicate that vision is no longer the company’s priority.