Indie Film's Financial Paradox: More Backers But Less Box Office

With a dozen or more movies opening each weekend, the hits like '47 Meters Down' are few and far between, but for lots of distributors it's not about numbers anymore.

On any given Friday, multi­plexes are filled with a dozen or so new movies, most of which are independently financed. Take Sept. 22, when a whopping 15 films battled for the same shrinking pool of box-office dollars. When the dust settled, the indies Battle of the Sexes and Victoria and Abdul made the biggest impact in limited release, although it's unclear how much either can broaden its appeal to become profitable. Others, like Friend Request from Byron Allen's Entertainment Studios, crashed and burned with a $2.4 million haul from 2,500-plus theaters.

In this tougher box-office landscape, more movies are finding themselves in a black hole. In another era, the August flops Patti Cake$ (a Sundance favorite) and Good Time (with Robert Pattinson) likely could have found an audience. Now they join a scrap heap that is causing some in the indie film world to question why so many small movies are being made and released in theaters in the first place.

As always, follow the money. Despite the box-office challenges, there is no shortage of funds being poured into indie films. At the Toronto Film Festival in early September, the breadth of deep-pocketed financiers was on display, from Garmin heir Ken Kao's $50 million epic Hostiles to Ukraine-born billionaire Len Blavatnik's I, Tonya. New distributors 30WEST, backed by auto scion Dan Friedkin, and Neon, with money from Alamo Drafthouse founder Tim League, made splashy pickups. "As long as you aren't just writing a blank check, there are still many ways to stay profitable," says Waterstone Entertainment's Jeff Kalligheri, who co-financed the Alicia Vikander-James McAvoy thriller Submergence. "We just have to find creative ways to mitigate our risk regardless of the market."

Many distributors continue to buy, not because it's financially lucrative but because it feeds another side of their business or their parent company's overall strategy. Releasing movies has become something of a side hustle.

"A lot of these [distributors] are opening their movies in lesser theaters or their own theaters for two weeks and then getting on to their real agenda that has nothing to do with the theatrical profit," says Tom Bernard, co-president of Sony Pictures Classics, one of the handful of distributors that still is a theatrically driven company. By contrast, many other distributors are really in the VOD or streaming business or have bigger interests that overshadow how their individual films fare at the box office.

Open Road, originally funded by the AMC and Regal theater chains, recently was bought by Donald Tang's Tang Media, in part to provide a route for Chinese features to reach American audiences. Magnolia Pictures is part of Mark Cuban's 2929 Entertainment, which also controls the Landmark Theatres chain. And while Amazon is treating many of its films to theatrical releases, the company's goal in procuring content to stream is to drive Prime subscriptions rather than profits. (Jeff Bezos once said, "I'm pretty sure we're the first company to have figured out how to make winning a Golden Globe pay off in increased sales of power tools and baby wipes.")

Even A24, which became the "it" indie distributor after winning the best picture Oscar for Moonlight, makes money primarily through smaller movies like The Sea of Trees that air via its DirecTV partnership. "They're kind of preying on distressed films and filmmakers most of the year, picking up these little films from desperate financiers who are believing in a dream and think their movie will be promoted like Moonlight," says one sales agent.

Still, new theatrically driven companies do keep emerging. Allen's Entertainment Studios managed to break through with its first wide release, June's 47 Meters Down, the most successful indie of 2017 with $44 million at the box office vs. a $5.5 million budget. But Allen spent $30 million on P&A for the shark thriller. "Investing $30 million didn't scare me," he says. "What would have scared me more was investing $10 or $15 or even $20 million. That wouldn't be enough to cut through the clutter."

For its second outing, the R-rated thriller Friend Request, Entertainment Studios spent $22 million on P&A, partially offset by Global Pictures Media. And it flopped. Admits Allen, "We're learning."

This story first appeared in the Sept. 27 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.