Access to capital is the key for top-tier sales agents to secure A-list projects in today’s ultra competitive, slimmed-down marketplace.
Top US sellers have always had to hustle for international sales assignments on the most desirable properties. But as the international sales market emerges from a slump caused in part by a glut of poorly conceived independent projects, sales companies find themselves competing more aggressively than ever for a smaller supply of product.
The hot properties now are bigger, more commercial films that, thanks to the major studios’ current preference for mega-budget tentpoles, have found a niche at the domestic box office — Limitless, Source Code and Insidious being recent examples — and shown a capacity to act as sales slate locomotives at Cannes and other markets.
And the competition to secure the hot properties appears to be driving a new round of evolution among leading sales companies.
“The world has definitely changed in the last 36 months,” says Graham Taylor, head of WME Global, the packaging, financing and distribution consultancy arm of William Morris Endeavor agency. “It’s become much tougher for [companies doing] just straight third-party sales. The advance of a bunch of sales companies with the ability to finance has changed the landscape.”
Producers, agents and financiers list a number of characteristics to look for in an international sales company.
‘The advance of a bunch of sales companies with the ability to finance has changed the landscape’
Graham Taylor, WME Global
Experience and marketplace stature are often high on the list. “That’s an important consideration for us,” says Bryan LaCour, senior vice-president and manager of the entertainment finance group at film lender Union Bank. “Is the sales company a consistent provider of quality commercial product? If they’re an important sales company to distributors, it allows them to leverage that position and attain higher sales figures.”
Marketing ability is also a consideration, according to Ben Browning, CEO of production and financing company Wayfare Entertainment. “The first marketing you ever see is done for the sales company, or in conjunction with the sales company,” Browning points out, “and it defines everything. A bad international sales poster can change the way everyone sees the movie.”
A few leading sales operations — among them Lionsgate, Focus, The Weinstein Company (TWC), Summit and Exclusive — have their own US theatrical distribution divisions, but those ties are not necessarily an attraction for producers and packaging agents. Some producers feel their commercial indie films need studio distribution in the US. Others prefer to split domestic and international rights between two companies so as to maximise revenue. “You might want to arbitrage those US rights,” says Browning. “That’s where your upside is.”
More important — and apparently coming increasingly to the fore as competition for big projects heats up — is a sales company’s financial muscle.
Sales companies which are off-shoots of production and distribution operations have always had the option of making equity investments in projects as well as handling international sales. And now new operations such as Exclusive, IM Global and Sierra/Affinity are emerging with the ability to finance and co-finance as well as sell for third-party producers.
An equity investment from an international seller might reduce the upside for an outside producer with his or her own capital but in the current financial climate it might just as easily be seen as a way to spread that capital over a bigger slate of projects.
Sales companies with the financial backing to offer minimum guarantees rather than just sales estimates certainly bring a valuable asset to the table and some producers say such guarantees, which can be used to secure bank loans before individual territory sales are made, are now being offered more frequently.
“It’s nice to have a partner that can come in and say, ‘Here’s what we feel we can get and we’ll guarantee this amount,’” says Brian Oliver, president of production and finance company Cross Creek Pictures, which is setting up domestic distribution and international sales output deals. Cross Creek’s in-production George Clooney project The Ides Of March was helped, Oliver confirms, by a sales guarantee from Exclusive Films International, whose parent is co-financing the project.
The more, the better
That sort of financial capability may eventually become a necessity for sales companies looking to compete for projects at the highest level.
“There are a lot of very good sellers,” says WME Global’s Taylor, “but I’m always of the mindset that the more people that can write a cheque for a movie, the better. Some of the sales agents out there that are very good don’t have the ability to fully finance movies, and it would be great if they could. It puts pressure on people that don’t have financing if they have to figure out finance solutions or have equity partners that will back them to make a play.”
With financial muscle and the other characteristics in mind, international industry players put anything from four to more than a dozen US sales companies in the business’s top tier.
‘The key is the ability to touch movies in various ways — as a seller, as a financier, as a co-financier and as a developer’
Nick Meyer, Sierra/Affinity
Because of its wealth of experience and extensive track record handling major titles, Summit remains the first choice for some producers, though the company’s transformation into an independent studio leaves little room on its sales slate for third-party projects. The sales divisions of indie studios TWC and Lionsgate are also highly rated for their financial strength and often impressive slates. Focus Features International, the UK-based sales division of Universal Pictures’ Focus Features, is seen as a good seller for a certain kind of film and one whose appetite for third-party product may be increasing.
Though less equipped than some of its rivals to provide financing and sales guarantees, FilmNation, sales agent on big Oscar winner The King’s Speech, is often cited because of founder Glen Basner’s track record.
Among the top tier’s newest entrants are three companies with the sort of attributes, executives claim, that will be necessary as the international sales business continues to evolve.
Sierra/Affinity was formed at the start of this year by Sierra Pictures and Affinity International and in addition to handling third-party films acts as exclusive sales agent for product from OddLot Entertainment, Bold Films and Sierra and its fund backer Incentive Filmed Entertainment.
The backing from Incentive gives Sierra/Affinity what CEO Nick Meyer sees as an important wealth of options. “The key is the ability to touch movies in various ways,” says Meyer. “As a seller, as a financier, as a co-financier and as a developer. The more you can do that, the more chance you’re going to have for success because right now every seller at this level spends a disproportionate amount of time on the sourcing part of the business.”
Exclusive Media Group, backed by Dutch investor Cyrte Investments, encompasses three production labels and US theatrical distributor Newmarket as well as Exclusive Film International (EFI), a sales division headed by ex-Paramount executive Alex Walton.
Owning a domestic theatrical distributor, says Exclusive Media Group co-chairman Guy East, “enables us, with a certain type of movie, to be able to guarantee US release”. And being heavily involved in production, East adds, “makes us a stronger company for producers to come to because they know we’re going to have three strong home-made movies each year that we’ll be selling as a backbone”.
Cyrte’s backing, meanwhile, has allowed Exclusive to launch a pick-up fund which will allow EFI to pay guarantees of up to $20m each to two to four films a year. And that, says EFI co-president Alex Brunner, “gives us a competitive edge because we have access to capital that we can slice in multiple ways, which makes us a flexible partner for agents and producers”.
IM Global first made a mark as international seller of breakout hit Paranormal Activity. But it moved into the top tier of US sellers a year ago when India’s Reliance Big Entertainment took a controlling stake for an undisclosed sum.
The Reliance deal, says IM founder and CEO Stuart Ford, “made us one of the very, very small circle of independent sales companies that also have the capital resources to be able to fully finance a picture in-house. That gives you much greater momentum and credibility in the marketplace when you’re going after priority projects.”
While IM has resisted a move into domestic theatrical distribution — being unaffiliated is “an advantage when we’re pitching for third-party projects,” says Ford, “because we’re not tied to any one distribution outlet” — it has used its financial strength to become “self-reliant” where tentpole projects are concerned and to expand into pan-Asian rights trading and other areas.
Expansion beyond international sales may not always please producer clients — some of whom worry, for example, that a company’s in-house projects will get a stronger sales push than third-party films — but it is becoming a necessary step for sales companies with top-tier ambitions.
“The old business model of an out-and-out sales agency that relies on commissions is very hard to make work these days,” says Ford, whose employee count at IM Global has gone from six to 30 in four years. “You can only manage that kind of overhead if you grow your business in other areas and have different profit centres and revenue streams rather than just sales commissions.”