Film News

Sign of the Times: Annapurna Flails As Netflix Spends Big

Almost exactly four years ago, Relativity Media – the mini-major film studio responsible for hits like Limitless and Safe Haven as well big misses like Out of the Furnace and The Warrior’ Way – filed for Chapter 11 bankruptcy. Now one of their old competitors is possibly leaning the same direction. Sigh.

In 2015, Relativity’s controversial CEO Ryan Kavanaugh finally faced the music over his bad investments and out of control spending. As I noted at the time, that didn’t mean others were giving up on the mid-budget movie. Adam Fogelson launched STX Entertainment, a Chinese-backed mini-major with plans to release as many as 15 mid-budget ($25m to $75m) movies per year through at least 2017. It got off to a great start with Joel Edgerton’s The Gift and later found a hit franchise with Bad Moms but has yet to reach its 15-per-year goal, topping out with 10 releases in 2018. Megan Ellison’s Annapurna, meanwhile, was trucking along nicely, financing awards-contenders like American Hustle, Her and Joy for other studios to distribute.

Different Year, Same Story

Fogelson on left, Ellison on right

Today, Relativity is but a vague, distant memory. STX, which took a bath this year on it ill-fated kids franchise play Ugly Dolls, can barely even afford to release its own movies anymore. Fogelson recently wandered off to Saudia Arabia in search of new capital and is reportedly seeking “superstar executive talent” to turn things around. Annapurna has been in a death spiral ever since Ellison expanded the company in 2017 to become a full-fledged distributor. When that didn’t work out with an immediate flop like Detroit, she borrowed a page from her brother David’s Skydance – the financier responsible for recent Star Trek, Terminator, and Mission: Impossible movies – playbook and made a surprising bid for a big budget franchise.

Ellison pulled off a coup by outbidding the rest of the industry to secure the domestic rights to the next Bond movie. After all, you need the big hits to subsidize all your smaller movies and losses. That’s how the majors did it for years before Disney changed the rulebook, and the next Bond was supposed to be the start of a new direction for Annapurna, with fewer overall movies but the occasional blockbuster mixed in to save the smaller awards contenders.

Bankruptcy or not, The Bond movie will still come out on time due to Annapurna’s co-financing deal with MGM, or so sources told THR.

The hits, for Annapurna, haven’t come fast enough or, really, at all. THR now says the studio, which has lost multiple senior executives in the past year, is exploring bankruptcy. A defiant Ellison assured her employees that the house isn’t actually on fire, adopting a Trumpian “fuck the media for being so obsessed with me” stance.

And – oh yeah – this also happened yesterday: Netflix threw $200 million at the Game of Thrones guys like it was freakin’ monopoly money.

The trends, they are a…staying the same.

Annapurna’s 2018 releases grossed a combined $84m domestic, over half of that from Vice alone. Vice, it should be noted, reportedly resulted in a $15 million write down.

The Seemingly Annual Eulogy for the Mid-Budget Movie

Mid-budget hits are rare, but they still do happen. Case in point: Game Night grossed $117m worldwide last year on a $37m budget.

For the past decade, there has been considerable hand-wringing over the death of the mid-budget movie. Those old enough to remember when going to the movies didn’t have to mean choosing between branded blockbuster #1, branded blockbuster #2 or that micro-budget art-house movie that might never leave LA or New York longed for a return to the days of old when you could check out a rom-com, buddy comedy, action romp, adult drama, or just something that didn’t have to be the biggest movie in the history of ever. As Mad Men’s Matthew Weiner put it, “Something happened that nobody can make a movie between $500,000 and $80 million. That can’t be possible.”

In response, indie film pioneers found other careers, mega-famous actresses like Gwyneth Paltrow, Jessica Alba, Kate Hudson, and Cameron Diaz gave up acting to become lifestyle gurus and/or CEOS of their own clothing companies, and the average crew member found it harder to make ends meet as studios made fewer films and TV networks turned toward shorter seasons, with fewer episodes equaling fewer paychecks.

The question remained, however, whether the major studios turn away from mid-budget investments created an inefficiency in the market which could be addressed by smaller competition or was simply a permanent change to the order of things in Hollywood. If somebody other than one of the Big Five dared to make other kinds of movies beyond superheroes and horror, would enough people buy tickets to make it worth the effort?

Some investors, largely those with Chinese money, sure hoped so; most have walked away disappointed. Vanity Fair and Variety have each penned their annual eulogies for the mid-budget movies, lamenting the failures of the likes of Long Shot and Stuber. The only long-term feasible business model, it seems, is either Blumhouse’s micro-budget strategy or Disney’s mega-blockbuster approach.

An awards-contender distributor like Annapurna, subsidized from the very start by a billionaire’s daughter, can’t go on hemorrhaging cash forever no matter how good the movies might be.

Netflix’s Wallet Is Too Small For Its Fifties and Its Diamond Shoes Are Too Tight

Netflix – despite all of its recent stock market drama and internal musings about finally applying “quality” and “fiscally wise investment” to its “you get a show and you get a show and you get a show” strategy – still has a high tolerance for burning through cash. David Benioff and Dan Weiss are just a few of the big names Netflix has poached away from rivals, joining other megaproducers like Ryan Murphy, Shonda Rhimes and Kenya Barris. As part of their new deal, Benioff and Weiss will use the $200 million to build up their own production company through which they will develop both film and TV products for the world’s leading streamer. (Obligatory Game of Thrones snark: Only time will tell if they’ll again think it prudent to have a dragon suddenly understand thematic symbolism.)

While this is happening, the industry trades have been reporting that Netflix is rethinking its film strategy, possibly because spending $150 million on a Ben Affleck warmed over 80s action movie didn’t move the needle like they expected. However, just as soon as everyone was reporting about an oncoming wave of belt-tightening Netflix shelled out crazy money to buy a Rock, Gal Gadot, Ryan Reynolds project which had been put in turnaround by one of the majors. The streamer also continues to produce an insane number of smaller movies while one of its most direct competitors, Amazon, continues to inch toward giving up on the theatrical release model for its mid-budget entries like Late Night and The Report.

One of the common defenses of Netflix is that if it didn’t exist the mid-budget movie might be dead entirely. The people over there pride themselves on serving up the type of entertainment that people still like but can no longer find in movie theaters. What’s really happening, however, is that Netflix is filling a gap while simultaneously reinforcing the creeping notion that some forms of entertainment are worth paying for and others aren’t. If Netflix truly revived the rom-com on the backs of To All the Boys I’ve Loved Before, Set It Up, The Kissing Booth, and Always Be My Maybe, then where the hell were those same fans when Long Shot was in theaters?

Richard Curtis and Danny Boyle’s unabashed rom-com Yesterday is sticking around at the box office longer than expected, but how much of that is “rom-com” and how much is “Beatles karaoke”?

Four years from now, I wonder if this basic article could be re-written with maybe just “Annapurna” search and replaced with the name of the latest mini-major to struggle. Maybe it’ll be A24, which seems relatively safe right now but continues to spend an alarming amount on marketing. Either way, if the movies – big or small – are good they’ll always find an audience eventually…probably on streaming. After all, that’s where the majority of us saw Annapurna’s Sorry to Bother You.

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