31/05/2024
Inside Cannes 2024: Adapting to Struggles and Shifts in the Independent Film Market
Despite the outward optimism at Cannes this year, a sense of weariness lingers among buyers shaken by increasing asking prices while theatrical demand plummets.
Several prominent presale packages found buyers. The most notable from a non-streamer was Ruben Ăstlundâs âThe Entertainment System Is Down,â with Keanu Reeves and Kirsten Dunst, for which A24 acquired the US rights for over $10 million.
Netflix and other streamers are still investing in select titles, but not at previous levels and typically exclusively for worldwide rights, taking away popular titles from traditional international distributors.
Streaming giants Amazon Prime Video, Netflix, and Apple capitalized on the most audience-centric presale packages. Amazon secured multiple territories for several star-driven projects in pre-production and post-production.
Apple outbid all others with a reportedly $40 million worldwide presale acquisition deal for âTenzing.â Netflix made a strong return with a $34 million presale deal for âMonsanto,â to star Glen Powell and Laura Dern.
These direct-to-streaming acquisitions deprive independent domestic distributors of the opportunity to rejuvenate the independent cinema market. These deals also highlight streamersâ aggressive tactics in expanding their content libraries with high-profile projects, underscoring their ongoing efforts to attract and retain subscribers in a changing digital landscape..
High asking prices for distribution rights remain a significant hurdle for buyers. The end of the Hollywood strikes and the return to production have driven talent costs up, compelling independents to pay premiums to retain star attachments.
Minimum guarantees have recently increased across most territories, which is unusual given the substantial decline in demand for independent films. These increases are even more perplexing, considering revenue from home entertainment (EST and VOD) is almost entirely absent. And while SVOD remains robust for popular titles, television revenue is mainly missing from the equation. Distributors must rely on massive box office receipts to recoup distribution advances, but admissions havenât recovered after the 2020-21 lockdowns.
Financing arrangements made during stronger buying periods and rising inflation further complicate the pricing landscape. Buyers without solid Pay-1 deals struggle to meet these high costs, indicating a need for strategic financial planning and negotiations in the current market.
The strain is especially severe with A-list market packages. Independent producers, battling to attract and keep talent in a post-strike environment, are battling exorbitant fees for talent offered by studios and streamers. This intense competition has forced sales agents to hike territorial distribution minimum guarantees to recover investment capital. Sales estimates set in a pre-strike time, when streamers were more actively spending, coupled with inflation, have only worsened the situation.
Festival selections with significant buyer interest have also seen aggressive pricing. Many mid-market projects now demand up to $1 million for territories like Italy, Spain, and Scandinavia, which was unthinkable not long ago.
Recent acquisitions for North American rights reflect ongoing caution among US buyers, who lack robust Pay-1 deals to support sizable minimum guarantees. This void also has a cascading effect on international distribution. These shifts underscore the evolving and increasingly competitive landscape of the post-lockdown film market.
US buyers largely stayed on the sidelines during Cannes, reflecting a cautious stance amidst market uncertainties. Neon continues to glow after securing its fifth consecutive Palme dâOr win with âAnoraâ taking the top prize at Cannes, joining A24 as active market buyers.
Debt-laden studios and their independent distribution labels are navigating a tumultuous transition in the evolving streaming landscape, resulting in a lack of domestic deals. This void exerts downward pressure on international distribution. Films without a US distributor face deteriorating values over time, making it increasingly challenging to recoup production budgets.
More traditional independent distributors previously active in the US market are absent altogether, waiting to see if theatrical audiences return.
Despite these hurdles, there has been a rise in worldwide rights deals, particularly with streaming platforms. These deals are fostering new financing models and opportunities. However, buyers are predominantly interested in films featuring solid casts that can guarantee audiences.
Distributors seek the assurance of marketable names that audiences will recognize, leaving many mid-market and specialty producers and distributors struggling to secure these lucrative deals. This focus on top talent effectively sidelines a significant portion of the independent market.
In the French Riviera sun, enthusiasm burns bright, but after traveling back to the office, the allure of film packages can fade fast, leading to extended closing periods and cancellations.
Amid the outward positivity of this yearâs MarchĂ© du Cannes, the underlying atmosphere was one of caution. Buyers meticulously evaluated opportunities over days before making offers or walking away. Many festival titles that generated buzz initially with significant interest faded by mid-market and challenged to draw meaningful distributor attention. Such hesitancy indicates a selective buying trend, focusing on high-potential titles while others await further scrutiny.
Cannes is a critical barometer for the industryâs fortune for the rest of the year. As the market navigates these changes, the question remains: how will the independent film sector adapt in this new reality?
Buyers flinch in Cannes as sellers ramp up asking prices
Amid a generally positive market the familiar gripe of high asking prices has sent a clear message that buyers and sellers are finding it increasingly tough to reconcile their respective financial models.
The tension remains particularly acute on A-list market packages, where independent producers have fought (and paid) to attract and hold on to talent in a post-strike world where hefty offers from studios and streamers, driven by talent agents, have been hard to resist.
The ripple effect has forced sales agents to push up their asks in order to recoup financiersâ investments. Sales estimates set more than a year ago, when deep-pocketed streamers were more active in the market, coupled with inflation, have also made the situation challenging.
Sellers have been aggressive on buzzy festival selections that have popped here, too. Screen has heard Goodfellas bumped up its $600,000 price tag on Italian rights to Jacques Audiardâs Competition entry Emilia Perez to $1m.
Similarly, buyers have spoken of eye-watering asks on territories for Coralie Fargeatâs The Substance and Mohammad Rasoulofâs The Seed Of The Sacred Fig.
Neon picked up North America on Rasoulofâs film amid ongoing caution among US buyers lacking robust pay-1 deals to back big bets; a situation that also affects international buyers.
San Fu Maltha of Dutch distributor Perisccop, whose market acquisitions have included the documentaries Black Box Diaries from Dogwoof and Hung Up On A Dream sold by Utopia, was nonetheless among several Benelux buyers ruffled by prices.
âI donât want to offer at this point,â he said. âPrices were slightly too optimistic when packages were put together two years ago, when the market was more buoyant and there was more optimism about streamer deals and distribution companies needing content⊠Weâve seen films hit the market and not deliver on those estimates.â
UK sellers have reported a positive market, although attendance from Japan, Australia and New Zealand was believed to be soft, while the Russians have been buying. Several Hong Kong sellers said the market still had not rediscovered pre-Covid momentum, while Asian buyers in China and Singapore have been active.
Singapore independent distributor Thomas Chiaâs Lighthouse Film Distribution acquired All We Imagine As Light, the first Indian film in competition in three decades; Media Asia clocked up new sales on-site for Hong Kong action thriller Twilight Of The Warriors: Walled In, with deals closing for South Korea (Contents Panda), India (Indo Overseas), Eastern Europe (Polemedia), and Indonesia and Cambodia (Westec Media).
Todd Olsson, president of international sales at US-based Highland Film Group, reported a strong response across the slate, particularly on Justin Chadwick action thriller Sierra Madre starring Kiefer Sutherland, and John Stalberg, Jr.âs Muzzle: City Of Wolves starring Aaron Eckhart.
âThis is the busiest market we have had in years,â said Olsson. âEverybodyâs aggressively pursuing content.â
Much talk has also centred on the state of the market ecosystem itself. TIFF announced it will launch an official content market in 2026, after it emerged earlier this year that AFM is moving to Las Vegas for its 2024 edition. Last night attendees at a Marché reception heard that Ventana Sur is in exclusive talks to relocate to Uruguay later this year.
David Ellisonâs Skydance Media sweetens offer for Paramount
David Ellisonâs Skydance Media and its investment partners have increased their offer to Paramount Global board members, signaling the technology scionâs strong intent to take over the storied media company.
Two people close to the discussions who were not authorized to comment confirmed the new offer, but precise terms were not disclosed.
The move comes less than a month after Skydanceâs exclusive negotiating window expired without a deal. Since then, Paramount board members have been considering a rival $26-billion bid from Sony Pictures Entertainment and Apollo Global Management, but those talks have been slow, knowledgeable people have said.
Controlling shareholder Shari Redstone has long preferred Skydanceâs proposal, which would give her family a premium on their voting shares. Redstone, Paramountâs non-executive chair, would like to see the New York-based media behemoth her father built remain whole, rather than be carved up.
Some film producers and agents also are rooting for the Skydance bid, believing it represents the best chance to preserve one of Hollywoodâs oldest studios â a famous fixture on Melrose Avenue. In addition to Paramount Pictures, the company owns the CBS television network, CBS television studios and cable channels including TV Land, Nickelodeon, BET and MTV.
Both sides recognized that previous proposals by Skydance â joined by RedBird Capital Partners and private equity firm KKR â would not pass muster with shareholders, including those beyond the Redstone family who hold voting A-class shares, knowledgeable people have said.
The new proposal, which came earlier this week, increases the amount of money that would go to shareholders, one of the knowledgeable people said.
In the waning days of Skydanceâs exclusive negotiation period, which ended May 3, Skydance and RedBird increased the financial terms of the proposal under consideration by a special committee of Paramountâs board. At the time, the bidding group had offered $5 billion, which included about $2 billion to buy out the Redstone family shares.
But board members and the Ellison team disagreed over how much of the remaining $3 billion would be used to pay down debt and how much money would go to shareholders.
Redstone has the power to push through the deal she wants because her familyâs National Amusements Inc. owns 77% of Paramountâs voting shares. However, she and her fellow board members also have a fiduciary duty to look out for the interests of all shareholders.
Redstoneâs willingness to work exclusively with Ellison to forge a complicated two-phase transaction, which would lead to a roll-up of Ellisonâs smaller Skydance production company, infuriated investors. The wrangling caused months of tensions in Paramountâs boardroom and contributed to the ouster of Chief Executive Bob Bakish, who was open to considering the Sony-Apollo deal.
The deal envisioned by Sony Pictures and Apollo would buy out Paramount shareholders and retire Paramountâs existing debt. Sony was expected to be the lead investor and absorb Paramountâs film studio operations and franchises. Apollo, which has television station holdings, was expected to claim the CBS side of the business.
But thereâs been little momentum in their talks with Paramountâs board, knowledgeable people said.
During a presentation for Sony investors Wednesday night, Sony Pictures Entertainment Chief Executive Tony Vinciquerra said the company would be disciplined in its approach to dealmaking.
âWe will not make investments that donât complement our current strategy,â he said. âOur strategy is to have more [intellectual property], more product, more library to sell.â
Unlike Hollywoodâs other major studios, Sony has not lost billions of dollars trying to create a stand-alone streaming service. Instead, the Culver City studio has profited by selling its shows to other distributors and streaming services, including Netflix.
Vinciquerra made it clear there were boundaries to Sonyâs investment interests, suggesting the company wasnât about to bulk up on cable television channels, a sector of the business that has been under particular strain in the shift to streaming.
âWeâre not going to get into a general entertainment streaming service,â Vinciquerra said. âWeâre not going to be operating other businesses that are outside the strategy that weâve defined.â
Hollywood crews in âcrisisâ: âEveryoneâs just in panic modeâ as jobs decline
After more than two decades in the industry, Keith Dunkerley still loves nothing more than working on a set. The 47-year-old director of photography and camera operator, whoâs had consistent work since he moved to Los Angeles 23 years ago, said his is âthe best job in the world.â
Since the writersâ and actorsâ strikes last year and the slow restart of production, though, Dunkerley said his work opportunities look quite different than in past years: He has worked only 18 days during the first five months of 2024.
âPeople outside the business donât understand this is not a factory,â Dunkerley said. âItâs not like, âOK, the strikeâs over, go back to the factory, turn the lights on and get the machines going.â A lot of us knew itâs going to take some time to ramp things up.â
While Dunkerley supported his family through savings and odd jobs as a handyman on TaskRabbit during the strikes, the sluggish rebound has been difficult for him. Heâs recently made more than 60 calls to friends and industry contacts to look for prospects.
What Dunkerley is experiencing is a part of the massive ripple effect of the WGA and SAG-AFTRA strikes that is still affecting tens of thousands of people working in entertainment and adjacent industries. Crew members, especially, have been hit hard.
âI am currently in the worst place Iâve ever been in my entire life financially,â said Heather Fink, a boom operator and director. âThe industry is in a crisis. It is not back to normal. We are in debt.â
FilmLA, a nonprofit that tracks on-location permitting in the city, released a report in April that revealed a slow bounceback in production after the dual strikes. Local on-location filming in the first quarter of the year was down 8.7% from the first quarter of 2023. Television production was especially impacted, with production falling 16.2% from last year.
Paul Audley, the president of FilmLA, said these findings are startling when considering that film and television production saw a âretractionâ at the start of 2023 in anticipation of the looming writersâ strike.
âWhat weâre facing is a combination of effects of the studios, as well as the streamers, cutting back not only the number of series they produced but in some cases the number of episodes theyâre producing for shows,â Audley said.
With scarce work opportunities, many crew members are concerned about how they will maintain their health insurance, which is often directly tied to the number of hours they work. Those who have coverage with the Motion Picture Industry Pension and Health Plans must work 400 hours in a six-month period to maintain their insurance. Many veteran crew members, like hairstylist and department head Jason Orion, whoâs worked on shows including âGreyâs Anatomy,â said he has never been close to losing his coverage until now.
Orion was able to keep his health insurance thanks to a job on â9-1-1.â He said because he worked down to the wire before the 2007-08 writersâ strike, he thought heâd be busy until the strikes officially began. In reality, he had âan almost nonexistent beginning of 2023.â Even the shows and films shooting in L.A. now have slashed many departments, he added, noting sets that historically employed 20 hairstylists now have just two or three.
Orion said â9-1-1â was a âvery hard show,â noting that crew member Rico Priem recently died in a car accident after pulling a 14-hour overnight shift. âWe were all tired, it was a very terrible thing,â Orion said after noting that hours on sets are generally âbrutal and relentless.â
These tough conditions are one of the top concerns in ongoing negotiations between the International Alliance of Theatrical Stage Employees (IATSE), which advocates for film and TV crew members, and the Alliance of Motion Picture and Television Producers (AMPTP), which represents Hollywood studios. Much like the WGA and SAG-AFTRA negotiations, wage increases, residuals and the use of artificial intelligence also are issues on the table.
Some crew members said theyâre cautiously optimistic that negotiations will proceed smoothly and that work opportunities will ramp up once an agreement is reached, which members seem to believe will happen before their current contract expires on July 31.
For others, optimism does not come easily after a year of struggle. Fink said working in sound for 14 years was âhonestly one of the biggest mistakes Iâve ever made in my life,â and that she feels uneasy about the future. One of her primary concerns is the increasing number of productions moving away from L.A. and California to states or countries that offer better tax incentives for production â a phenomenon dubbed runaway production.
âIâm so afraid that there isnât going to be a job to even be concerned [about] what the conditions are,â Fink said.
California offers $330 million annually in film tax credits, but other states looking to build up their status as production hubs, like New York and Georgia, provide more attractive incentives and programs with higher or unlimited funding. New Yorkâs cap is $700 million and Georgia currently does not have a limit.
âCalifornia remains noncompetitive with the rest of the world that is offering incentives and tax credits,â Audley said. âEverybodyâs aware that California is not an inexpensive place to do business and we have, in the past, been able to overcome that ⊠but itâs just noncompetitive and we donât have anywhere near enough money in those funds from the state to draw and keep production in L.A.â
Outside of the U.S., several countries, including the United Kingdom, New Zealand and Australia, are offering cushy tax incentives for studios, where they can bypass unions and pay crews lower wages than in the States.
âFor so long, American culture was the thing that we exported. It is very strange to watch everyone be OK that itâs getting imported,â said Ian Barbella, a camera assistant whoâs worked on series and films including âLessons in Chemistryâ and âWine Country.â âThereâs no context of [how] thatâs an American company not using American workers.â
These compounding sources of stress â the fear of their jobs moving out of state or abroad, the strenuous conditions they face on set and the lack of employment opportunities â are affecting the mental health of many crew members.
Diego Mariscal, a dolly grip with 25-plus years of experience and credits including âSpider-Man: No Way Homeâ and âThe Mandalorian,â has been running a popular Facebook group called Crew Stories for the last five years. The online community of 90,000 shares on-set experiences â both the good and the bad â and offers support through posts and fundraising for colleagues in need. Mariscal said he has seen the toll this âweird limboâ has had on his peers.
âEveryoneâs just in panic mode and they donât know what to do,â Mariscal said. Through his social media accounts, he said he has recently fielded multiple messages from crew members experiencing suicidal thoughts and severe mental distress.
Communities like Crew Stories and the friendships crew members have developed with co-workers have been a refuge for many. Jennifer Rose Clasen, a still photographer for âThe Flight Attendantâ and âBig Little Lies,â said her âfilm familyâ has been leaning on one another and sharing their mental health struggles as they muscle through the dry spell of work and the uncertainty that lies ahead.
âI constantly have to remind my friends this isnât their fault because thereâs a little trickle of work out there so thereâs just enough for people to feel like theyâre failing,â Clasen said. âThat, compounded over 10, 12, 14 months, truly takes a toll on peopleâs well-being.â
Amid the mental and financial challenges theyâre facing, some said those outside of the industry expect them to seek out adjacent careers. Dunkerley said itâs not that simple.
âI love what I do,â he said. âYou definitely question what you do, you wake up [and] itâs kind of like, âWhat am I doing? What am I supposed to do now? Whatâs going to happen?â And you just hope that something will pop up. Iâm really hopeful. Fingers crossed.â
Los Angeles loses ground to rivals in film and TV employment but remains the biggest player
Los Angelesâ portion of the domestic film and TV economy shrank last year amid devastating industry struggles, but it remains by far the most powerful entertainment player in the United States.
According to the latest Otis College Report on the Creative Economy, released Thursday, the City of Angels posted a 27% share of domestic film and TV employment in 2023 â down 8% from 2022 but still way ahead of its fiercest competitor, New York, which made up 12% of the entertainment workforce.
Other U.S. production hubs lagged far behind Los Angeles. Each claiming 2% of the entertainment pie last year were Atlanta, Dallas, San Francisco, Chicago and Miami; while Nashville, Tenn., Austin, Texas, and Washington, D.C., each hovered at 1% â largely in line with where they stood 10 years ago.
Last year, the entertainment industry was hobbled by six months of overlapping strikes by the Writers Guild of America and Screen Actors Guild-American Federation of Television and Radio Artists.
Additionally, the Otis report found that workers in Los Angeles County earned 50% of all wages across the domestic film and TV industry last year.
With the exception of New York â long a production stronghold â film and TV activity outside of Los Angeles was spread pretty evenly throughout other parts of the country, leading Otis College to conclude that there is no âNew Hollywoodâ on the horizon.
The new report tracks the pivotal decade from 2013 â when Netflix launched the streaming revolution with the release of âHouse of Cardsâ â to early 2024, immediately following the Hollywood writersâ and actorsâ strikes.
âLos Angeles is still the apex of the entertainment industry, but the industry itself is undergoing once-in-a-generation changes,â Patrick Adler, principal at Westwood Economics and Planning Associates, said in a statement.
âIt is less dependent on film and television studios, more oriented toward online content creation, live events and gaming, and also much more technical and managerial than ever. What it means to work in Hollywood is starkly different today than even 10 years ago.â
According to the study, film and TV currently covers about 52% of the entertainment business in Los Angeles County, coming in 12% behind 2013. Employment levels spanning film, TV, sound, broadcasting and print media â all labeled âtraditionalâ entertainment fields by Otis â have similarly fallen roughly 9% from 2013 to 2024.
The waning prominence of film and TV coincides with a drop in production, which is still down 9% from pre-strike levels, according to the report. Film and TV employment in Los Angeles County is 19% lower than it was prior to the work stoppages â leaving thousands of writers, crew members and other entertainment workers in a state of financial and emotional distress.
Otis College previously reported that entertainment employment in the greater Los Angeles area plummeted by 17% during the overlapping writersâ and actorsâ strikes.
Previous reporting by The Times illustrates that the production and employment crisis in Los Angeles predates the walkouts and can be largely attributed to an ongoing industry contraction following studiosâ overspending during the streaming wars.
As a result, film, TV, commercial and other production activity in the first quarter of 2024 was about 20% below the five-year average, according to FilmLA, a nonprofit organization that tracks on-location production in the Greater Los Angeles area.
Meanwhile, job growth in âmodernâ entertainment sectors â identified as software publishing, video gaming, social media, streaming, performing arts, live sports and âindependent artistsâ â rose 53% between 2013 and 2024, Otis College reported.
The fastest-growing corner of the entertainment industry in the county is software publishing (including video games), which has jumped 149% in the last decade. Film, TV and traditional publishing are the only areas that have seen a decline.
The report also determined that the number of college-educated workers in the Los Angeles entertainment industry increased from 46% to 68% between 2000 and 2022.
Creative and management positions accounted for 59% of entertainment jobs in 2013 and had risen to 66% by 2022. Meanwhile, the amount of manual occupations, such as transportation, cleaning, groundskeeping and construction, had declined.
Additionally, the entertainment workforce over the last decade has become more racially diverse. The share of white workers in creative fields decreased between 2013 and 2022, while employment for all other racial groups grew, the report indicates.
âMy hope is that the trends identified in this study and our ongoing Otis College Report on the Creative Economy give industry leaders and policymakers insight into the needs of an evolving workforce,â Charles Hirschhorn, president of Otis College, said in a statement, âone that requires more training, investment and education than ever before.â
Lionsgate Studios May Make Lower-Budget Movies Just For Starz As Company Moves Ahead With Split
Lionsgate is thinking about making âlower-budgetâ movies for Starz as the TV streaming and linear network is set to split with Lionsgate Studios by the end of the year.
âI wouldnât be surprised if we also made some lower budget movies specifically for Starz,â said CEO Jon Feltheimer on a post-earnings call. âAnd weâre talking about that and thinking about the calculus for how that works.â
Talking about Lionsgate theatrical output â from big swings to the many smaller films on its slate that he said generate 90% returns, Feltheimer noted that âat the end of the day, we take all that product, all that product, and all that huge investment, and it goes all into the library. And the new stuff drives the old stuffâ in a virtuous circle.
âWeâve got a really a great ecosystem, whether weâre the same company or whether weâre two companies. I think you can expect those mutual benefits to continue.â
Lionsgate Studios recently became a publicly traded company (stock symbol LION) through a S**C merger in the first step in a separation. Lionsgate Entertainment (LGF), which still includes the studio and Starz, is trading as usual. But the plan is to spin out the studio to shareholders (except the circa 13% owned by S**C investors), leaving two pure play companies. Vice chair Michael Burns said the LGF board has authorized a special committee to work out the terms of the spin, which intends to collapse the Class A and Class B shares, with some premium for the A stockholders. There will be a shareholder vote on it all before moving forward.
âWe are going through the processes, you know, regulatory, shareholder votes, notices, all of that. So I think we all believe that the sooner the better. But weâre putting that target by the end of the year and have to follow all these different processes. Also remember, thereâs a Canadian aspect to us. And all those iâs and all those tâs have to be crossed,â he said.
UK Indie Film Tax Credit becomes law âin nick of timeâ ahead of General Election
The UKâs Independent Film Tax Credit (IFTC) has become law âin the nick of timeâ according to BFI chief executive Ben Roberts, moving on to the statute books just before Parliament is dissolved this week ahead of the UK General Election.
The IFTC was announced by Chancellor Jeremy Hunt on March 6 as part of the Conservative governmentâs Spring Budget. When Prime Minister Rishi Sunak called the UK General Election for July 4, there were fears that the IFTC â which was part of the 2024 Finance Bill â might not have time to pass through Parliament.
MPs only have until May 30 to pass remaining legislation in a period known as the âwash-upâ before Parliament is dissolved.
However, the Finance Bill moved quickly through Parliament last week before finally receiving Royal Assent on May 24. Once a bill has completed all the parliamentary stages in both Houses, it can receive Royal Assent. This is when the King formally agrees to make the bill into an Act of Parliament, effectively turning into law.
In a comment posted on LinkedIn, Roberts said: âFor anyone concerned about the security of the Indie Film Tax Credit heading into the election period â the Finance Bill received Royal Assent on Friday, just in the nick of time. There is some further âhousekeepingâ required for the BFI to issue the interim certificates, but the IFTC is safe. Pass it on.â
The IFTC is aimed at reinvigorating the homegrown film production sector, and gives UK-qualifying films budgeted up to ÂŁ15m a tax relief of 40%. During Cannes, UK producers reported significant interest from potential international partners as a result of the IFTC.