Low-Budget Movie Producers Threatened With Global Disruption

Low-Budget Movie Producers Threatened With Global Disruption
Illustration by Mike Ray

For eight days each November, the Loews Santa Monica Beach Hotel closes down. Guests of the luxury hotel — who typically pay $500 or more a night — are turned away, as the entire place is handed over to movie executives from more than 70 countries.

This is the American Film Market, or AFM, which for 35 years has operated a thriving swap meet for independent filmmakers and distributors. Each hotel room is converted into a temporary office, where producers pitch buyers on their slate of films.

Over the years, a rough hierarchy has emerged. The major players in the independent world — the Weinstein Company, Lionsgate, StudioCanal — have suites on the hotel's top floor, with dramatic Pacific Ocean views. The less established companies — the ones that may be at their first AFM, or their last — are crammed into the lower floors, with views of the street.

On opening day of the American Film Market, the hotel lobby is a cacophonous din of broken English. It's like the United Nations, except instead of diplomats it's full of movie people in blazers and open-collared shirts. Foreign governments are formally represented. Many of them have booths where they try to entice producers with tax credits. "Come shoot in South Africa," says one banner. "35% rebate." Next to the front door is a big stack of trade publications. The major trade papers all produce "show dailies" — big, glossy magazines on the deals happening inside this very hotel.

Shaked Berenson, in the Epic Pictures suite at the Loews, did his best to create a bidding war for Space Dogs 2.
Shaked Berenson, in the Epic Pictures suite at the Loews, did his best to create a bidding war for Space Dogs 2.
Photo by Danny Liao

Shaked Berenson, co-founder of Epic Pictures, has timed certain announcements to try to generate excitement at AFM about his projects. Screen magazine's opening-day list of "buzz titles" features a blurb about his upcoming horror anthology. It's third from the bottom — well below reports on Lionsgate, Annapurna Pictures and the new Quentin Tarantino film — but Berenson is in the conversation.

The next day, Variety reports that Epic will produce Who Gets the Dog? with Alicia Silverstone. (The headline: "Pooch Pic: Silverstone Tops 'Dog.'?")

Epic occupies three rooms next to the elevator on the seventh floor — one below the top — with an ocean view. Last year, the company had tiger cubs running around in the suite to promote a kids' film. This year, it has hired a masseuse, in case anyone wants a massage.

Berenson is meeting with Ivan Micic, a distributor from Serbia, and asks him if he's seen the news about Silverstone. Micic has, and he's not happy about it. He had signed onto the project when Eva Longoria was slated to play the female lead.

As he explains, Longoria is known to Serbian viewers from the long-running TV series Desperate Housewives — one of the few American shows to break through on Serbian TV amid a glut of Turkish programs. But Silverstone is an unknown in Serbia.

"It's gonna be a bigger movie," Berenson assures him. "I thought you were going to be super happy."

Berenson switches gears. He shows a trailer for Space Dogs 2 — a Russian animated film — and invites Micic to a screening that's coming Saturday. Micic notes the price Berenson is asking for the children's film but doesn't express much interest. Berenson scans the rest of his catalog.

"World War II movie?" he asks Micic. "Those work for you?"

"We have had a lot of wars," Micic says grimly. "We don't want to watch war."

It's not an easy time to be an independent film producer. DVD sales have collapsed, piracy of films is rampant, and no one knows what to do about it. The major studios are big enough to weather these forces, but the smaller companies are struggling.

"Either you spend $5 million and make $5 million, or you spend $2.5 million and make $2.5 million," Berenson says. "But unless you're spending $50 million, how can you actually make money? Anything you do, it ends up that you're basically breaking even."

Berenson has been a producer for nearly a decade. He was born in Delaware and grew up in Israel, and holds dual citizenship. After graduating from UCLA, he was looking for a bartending job when he lucked into a gig as an assistant to an Israeli producer.

He quickly worked his way up in the industry. In 2007, Berenson and Patrick Ewald, his boss, co-founded Epic Pictures. Earlier this year, their Big Ass Spider! won a Saturn Award.

"It won a Satur-an Award," Berenson says in his Israeli accent. "Y'know? Satur-an. The planet."

The award is given by the Academy of Science Fiction, Fantasy & Horror Films — a low-budget institution headquartered out of a ramshackle house in South L.A. At the awards ceremony, held at a Burbank restaurant, Berenson received the prize for the year's best DVD release. It wasn't a completely accurate description — Big Ass Spider! did have a small theatrical run. But if the Academy didn't know that, Berenson wasn't about to mention it.

"Movies like this obviously will never, never, never, never, never get into the Oscars. So this is the No. 2 for the Oscars," he says. "Here is the problem. No. 1 is here" — he reaches over his head — "and No. 2 is here" — he reaches down to the floor. "The Oscars are only for artsy-fartsy dramas and crap. ... It was a great honor."

But being named "Best DVD" in 2014 is an achievement tinged with irony and foreboding. It's sort of like being named "Best Silent Film" in 1930. The DVD is dying fast, and anyone who specializes in direct-to-video releases has to scramble to stay in business.

Digital distribution — legal and illegal — has put the whole business model under tremendous strain.

As in the music industry, movie producers have turned to streaming services because it's better than outright theft, but it doesn't make up for losses in their traditional film revenue streams.

At 34, Berenson is too young to be talking about the good old days. But as he pitches distributors on Epic's offerings, he returns again and again to the theme of decline.

Low-Budget Movie Producers Threatened With Global Disruption
Photo by Danny Liao

Discussing HBO's plans to offer its streaming service separately from cable subscriptions, he worries what this will do to cable companies, which are a major source of his income.

"Everything that happens is good for you as a consumer and bad for your business," he grumbles. "I look in the paper, and I'm like, 'Oh, that's awesome, but also I need to look for a job.'?"

It was the same thing when Netflix's streaming service came out. His first thought: "Holy fuck. We're doomed."

The independent film world is small, and most of the same people follow a regular circuit: AFM, Berlin, Hong Kong, Cannes and a few other festivals. It's a lot of traveling, considering that these days most of the actual business can be done via email or text.

From the producer's side, what makes these events worth the travel cost is their ability to create the pressure of an auction environment.

"You want everybody to see it at the same time," Berenson says. "If you do it over email, everyone can take their time."

The hottest title at this year's AFM was The Hateful Eight. The trade magazines — The Hollywood Reporter, Variety, Screen — were full of reports on Quentin Tarantino's new Western, set to begin filming this winter.

Since a draft of the script leaked earlier this year, Tarantino had become zealous about stopping leaks. Foreign buyers who were serious about making a bid for the film were permitted to read the script only in the Weinstein Company's suite — and even then, they were forbidden from seeing the final chapter.

Bidding was expected to be intense, and the asking prices were astronomical — a reported $12 million for German rights alone.

AFM has a reputation for low-budget schlock — cheesy action movies, horror flicks — because that has traditionally played well overseas. But the offerings run the gamut. These days, in fact, it seems that the hottest genre is family films. It's still possible to sell DVDs of family movies — especially at Walmart — and moms are less prone to committing piracy.

One of Epic's more successful titles this year is Black Beauty, based on the children's classic. The novel was written in 1877, so it has lapsed into the public domain, which means that anyone can use it. Indeed, the family trend is so hot that another Black Beauty is on sale on the fifth floor.

Epic's version has Luke Perry from Beverly Hills, 90210. Berenson shows his trailer at least a dozen times a day to distributors from Latin America, Europe and Asia. "That's an awful big horse." "Neigh!" "They're gonna put him down." "I'll do whatever it takes." String crescendo. "You're a true friend." "Families are complicated." Whoosh. Title card.

Black Beauty's TV rights for Germany, France and the United Kingdom are gone within a day. But Berenson has a harder time with Let's Kill Ward's Wife, a comedy with Patrick Wilson, who starred in the movie Little Children opposite Kate Winslet.

Berenson's pitch: "Four friends. One has a wife who is a bitch. They joke and make plans about killing her. Then she dies. It's an accident. But because they were planning so much, they were afraid they were gonna blame it on them, so they kind of go through with the plan."

It's not an easy sell. Eric Schuit, a Dutch TV distributor, has seen a cut of the film.

"It's a bit of a strange tonal shift," he says. "The first 35 minutes I'm laughing. Then the blood is spattering around."

"It's silly," Berenson says.

"Yes. Silly," Schuit says. "Then later it gets dramatic. The guy cries. 'Oh, I don't want to do it.' He has to destroy her head. It's a strange — you have to admit there's a tonal shift in the movie."

"It's silly," Berenson says.

A Russian video-on-demand distributor also is confused.

"It's a comedy — not horror," Berenson explains. "You know it's a comedy because the title is in blue. If the title was in red, it would be a horror movie."

Besides the genre issue, there is also the matter of misogyny. Two female distributors from Chile screen the trailer, and look aghast.

"Not sure," one stammers. "No."

Berenson is almost apologetic. "Maybe should not show to female acquisition people."

 

The Loews Santa Monica Beach Hotel
The Loews Santa Monica Beach Hotel
Photo by Danny Liao

Nearly every conversation begins with a lament about the industry. It almost seems like a bargaining tactic — "I'm getting killed this year, that's why my offer is low" — except that most milk the theme well beyond any strategic utility.

In the Netherlands, Schuit complains, everyone has become addicted to Popcorn Time, an application that makes pirating movies as easy as watching Netflix. Berenson hasn't heard of it, and asks if it's a new streaming service.

"It's illegal!" Schuit says. "It's a bunch of assholes who think it's nice and bright and great to make illegal downloads!" (Popcorn Time recently posted on its website that it was closing of its own volition.)

Schuit says he has talked to both of the major Dutch political parties, and neither is interested in cracking down on piracy.

"One says, 'Maybe you should target the advertisers,'?" he says. "Bullshit! Those are mostly porn and they're in Kazakhstan."

Berenson recalls being on a panel with tech-industry people who argued that downloading movies was harmless.

"Suddenly I'm, like, the conservative. I'm the Man," Berenson says. "I don't think they realize — the gaffers, everybody's making 50 bucks a day to make this content. People think it's their right to do whatever they want with it."

Now he's getting worked up.

"And all their excuses are fucking bullshit," he continues. "?'Well, it's not accessible. It costs too much money.' OK, I want a Tesla. Does that mean I can break into it? And they say nobody's getting hurt. You want me to give you phone numbers to people getting hurt?"

As if piracy weren't enough of a problem, Schuit also is terrified of legal downloads.

"A few years from now, people like me won't exist anymore," he says. "iTunes, Google Play store, Amazon — those are all over the world. People like me won't exist. Theatrical will exist a little longer, because of local contacts, marketing, press. But the next step, cable operators without their own (streaming) platform — they're gone, too. Why would you buy a film on cable?"

"Am I gone, too?" Berenson asks.

Schuit says no — someone still has to make the content. "First I'm gone, then these companies are gone, and the [AFM] will be one day, because you'll see five clients and be done."

In a meeting with a Brazilian company, Berenson complains that piracy is basically legal in Greece. "The problem is no politician wants to take away free movies. It's not good for business," he says. "They think producers are all fat old guy with cigar and two young girlfriends. They don't see how it hurts everybody. So many people get hurt."

On the market's second night, Berenson attends a party hosted by some Finnish producer friends. The event is to celebrate the launch of a crowdfunding campaign for Iron Sky 2.

As the traditional approach to financing and distribution gives way, many are searching for new ways of doing business. The Finnish producers hope to revolutionize the business model for independent film. Their plan is to bypass the distributors and go straight to the fans.

They have produced a trailer, with which they hope to entice fans of the original Iron Sky to "pre-buy" the new movie, which won't be completed until 2016. Tom Green, the former MTV star, has signed on to play the lead. He gets onstage to introduce the trailer.

"I believe this new product will change the face of the movie industry!" he declares. "I believe it will make its filmmakers filthy rich!"

The original Iron Sky featured Nazis invading the Earth from a secret base on the dark side of the moon. For an independent film from Finland, it did quite well. It was especially popular in Germany, and about 10 million people saw it worldwide.

"How to top the premise of Nazis on the dark side of the moon?" director Timo Vuorensola asks when he comes onstage. "The idea of Nazis riding dinosaurs dawned on me."

Indeed, the trailer depicts Adolf Hitler on the back of a Tyrannosaurus rex, riding around in the hollow center of the Earth. Green will play a cult leader based on Steve Jobs, and the film will feature a Ben Hur–style chariot race with half a dozen triceratops. When the lights go up, the crowd buzzes, interrupting Green's monologue.

"Shut the fuck up! Shut the fuck up!" Green bellows. "Anyone who's talking is a fucking prick!"

He then introduces a woman in lizard makeup, who performs a striptease on a folding table.

"It is what it is," Berenson says, when asked about the trailer.

"It looks awesome!" Ewald says.

Like everyone else, the Finnish producers are worried about piracy. Their solution is to release Iron Sky 2 on the same day on every platform in every territory. If the film is universally available, maybe viewers won't decide to download it illegally.

It's a gamble, though, because this is not how the movie business is used to operating. Distributors depend on exclusivity windows in each territory and on each platform. A movie that is available everywhere at the same time is worth much less.

The producers of Iron Sky have come to AFM to make their pitch to the distributors. For the next several days, they will be camped out at a rented house in Venice, talking about Nazis riding dinosaurs and pitching a disruptive vision for the future of independent cinema.

Foreign distributors often buy rights to a movie project based on little more than the poster.
Foreign distributors often buy rights to a movie project based on little more than the poster.

Compared with that, Big Ass Spider! seems quaint. The film is a nostalgic throwback to "creature features" of an earlier era.

It began as a bet. Berenson was at the Cannes film market, which coincides with the famed film festival. He was talking with a distributor for a British TV channel, and the two were complaining about films so bad they were "unwatchable."

"We were talking about these movies — the Nazi zombie movies, Sharktopussy, or Robosnakes, or whatever, and I told him the budget is not the problem," Berenson says. "At least the reported budget is more than enough to make a good film."

From that, the bet emerged. For the price of an unwatchable movie — around $1 million — Berenson bet the British distributor he could make a watchable one. If he succeeded, the distributor would pay him £5, or about eight bucks. It took three years, but the result of that conversation was Big Ass Spider!.

The film stars Greg Grunberg, the likable, round-faced actor and producer best known from Heroes and Alias, as an exterminator who has to take down a rampaging, 50-foot-tall spider. In the climax, the spider climbs up the US Bank Tower in downtown L.A.

The director, Mike Mendez (Masters of Horror, The Gravedancers), was reluctant to take on the project at first. Berenson says Mendez's initial reaction was, "Oh God, is this where my career is going?"

But he was talked into it. "When you're passionate, people come on board," Berenson says.

The movie did not take itself too seriously, and the lighter tone worked. The film debuted at South by Southwest to decent reviews. The Hollywood Reporter said the film "does almost everything just a tiny bit better than it needs to," while Variety found it "charmingly lo-fi." In addition to a limited theatrical run, it aired on the Syfy Channel and Netflix.

"In the U.S., over 3 million people downloaded it illegally," Berenson adds, with a bit of pride. "Ten thousand people paid to see it on DVD or iTunes."

It's still running on Space, a Latin American cable channel. Each time it airs, Berenson gets tweets in Spanish. During a meeting with a Brazilian distributor, he hands over his phone and she translates for him. "They're saying it was so bad it's good," she says.

It might have been schlock, but it was quality schlock. The British distributor agreed the film was not unwatchable, and paid up by buying Berenson a beer.

"We cared," Berenson says. "A lot of people don't like what happened with the genre. They wanted to prove we can make it better. Everybody wants to prove something."

Space Dogs 2 debuts at the AMC theater in Santa Monica on a Saturday, as part of the market lineup. Animators a dozen time zones away have been scrambling all week to finish its new action sequence. Berenson was sweating about whether it would be ready, but the Russian producer delivered the digital file just in time.

Berenson had good luck with the original Space Dogs. It was released in Russia under the title Belka and Strelka in 2010, commemorating the 50th anniversary of the flight of two Soviet space dogs. The film was financed in part through the Russian Ministry of Culture, and it spawned a TV series, plush toys and a sequel.

 

Low-Budget Movie Producers Threatened With Global Disruption

Epic picked it up and repackaged it for foreign markets, and it grossed a surprising $30 million abroad. Berenson is trying to repeat that success with the sequel, which tells the story of Pushok, a Russian puppy who has to rescue his dad from the moon.

The theater is about half full. Some in the audience are distributors, but most are families who have been recruited to participate in a test screening.

The movie seems a little jumbled. Some key exposition seems to have been removed to make way for the new sequence.

The children don't seem to mind too much. In their survey responses, they like the lunar rover and the monkey. But they were confused about Pushok's dad — some thought he was a bad guy. Berenson decides to put back a scene of the dad saying goodbye. He'll also put the rover on the poster.

Whether that's enough to make distributors happy is another matter. The first film did well because it was one of the few independent, 3-D animated features on the market at the time. Now there is a glut of them.

Marc Goldberg, the British distributor who acquired the rights to the original, emails an offer after the screening, then swings by the office on Monday morning to follow up.

"The director is traveling," Berenson tells him, saying he wants to touch base with him first before responding. "So we don't have any rush."

"There's no rush," Goldberg agrees, "but we're not going up."

Berenson responds with some passive-aggressive banter. "This guy's a friend. I remember his first market, when he came to Berlin. He wasn't even sure what his company's name was."

"I had hair back then," Goldberg says. "You made me lose it."

The energy of the market's first few days has ebbed. Many people have left. Despite his best efforts, Berenson has not been able to create a bidding war for Space Dogs 2. Only some minor territories — Chile, Venezuela, Malaysia — have sold.

Low-Budget Movie Producers Threatened With Global Disruption

That's been the story all around the hotel. According to The Hollywood Reporter, foot traffic was "undeniably light," a sign of "a market in transition."

As the ground shifts in their industry, everyone has to adjust to stay on their feet. On the fifth floor of the hotel, Ehud Bleiberg is sitting on a sun-drenched patio overlooking the Pacific. A tray of fruit sits on the table, untouched. He has been in the business for 30 years and is talking about his newest film, iLived, which is aimed squarely at the digital generation.

It's billed as a "tech thriller." A young app reviewer downloads a self-help app that helps him get his life together. But then he gets addicted to it, and the movie takes a dark turn. It sounds technophobic, but Bleiberg says he is trying to appeal to digital natives. He plans to release a companion app that will encourage moviegoers who download it to turn on their phones in the movie theater, then engage with their small screen while watching iLived on the big screen. He expects it will be the first "second screen" feature to be released in the United States.

Asked about those who complain about piracy and other threats to the industry, Bleiberg has a blunt answer.

"They're right. So what shall I do? Continue to complain?" he asks. "As long as you're on the wheel, you're OK."

Back in Finland, Tero Kaukomaa, one of the producers of Iron Sky, said in an email that he did not close any deals in Santa Monica. He thinks it will take some time.

"I start to do deals in Berlin in February or latest Cannes in May, whenever I'm totally ready with the distribution concept of Iron Sky," he wrote, adding that he had already raised $100,000 on Indiegogo.

"The promo has about million views already in Internet!"


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