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So you want to be in show biz?
Independent films give investors an opportunity for handsome returns, but the risks can be big.
February 26, 2005: 9:41 AM EST
By Joseph Lee, CNN/Money staff writer
Production cost for Oscar-nominated
Production cost for Oscar-nominated "Sideways" was estimated at around $16 million. The film has so far earned $60 million in the U.S., according to BoxOfficeMojo.com.
"American Desi," a low-budget indie, spent about $200,000 to complete but took in about $2 million in worldwide box office receipts.

NEW YORK (CNN/Money) - Show business is risky business. Just ask Jennifer Dubin, a Los Angeles-based independent film producer.

Last year Dubin quit her cushy 9-to-5 job at a prestigious Hollywood company and founded a film production firm with two partners to scout independent projects and bring them to the silver screen.

"The risk is greater, because I gave up a steady income to take this chance, but so is the potential upside," Dubin recently said while waiting at a Manhattan restaurant for a meeting with a potential investor for a film that would be the first for her company, ODD Entertainment, named for founders Cora Olson, Dubin and her brother Jason Dubin.

Thousands of independent filmmakers toil long hours chasing the next runaway hit, but not one of them can offer guarantees to their investors, said Gitesh Pandya, another low-budget filmmaker.

"When you see an unexpected success from films like 'Blair Witch Project,' you know if the execution's done right, the reward could be tremendous," he said.

Take the example of "Sideways," one of this year's nominees for a Best Picture Oscar. The film cost about $16 million to make but took in more than $60 million domestically for Fox Searchlight, Fox Entertainment's art house film unit.

By contrast, Warner Bros. spent more than $155 million to complete director Oliver Stone's "Alexander," but the studio took in a mere $34 million at the U.S. box offices. Time Warner (Research), which also owns CNN/Money, is the parent company of Warner Bros.

"It's films like 'Sideways' and 'Super Size Me' that make folks realize that low-budget films are attractive because you can spend less to reach profitability," said Pandya.

Persuading the cousins

The first and most difficult task for most low-budget filmmakers is funding.

Production costs for a low-budget indie range from $10,000 to nearly $30 million, said Barry Polpernamn, co-founder of Civilian, an online brokerage firm offering IPOs for motion pictures.

Polpernamn, whose company is producing actor Ethan Hawke's next film, "Billy Dead," said "selling a film to investors is like selling a dream." Only a small percentage of indie films ever get made. Even then, they rarely get wide distribution deals that get them seen.

"You can point to other projects you've done in the past, but you really don't have anything to show for it," he added.

"The story is important," Polpernamn said. But investors typically like to see a star or a well known director attached to the project before signing their checks. The Catch-22: famous actors and directors are hesitant to commit until they see the money.

"That's where it gets tricky," said Polpernamn. "The actors would always say they are interested, but few would attach themselves at first. It's an uphill battle from the start."

Pandya, who is now the editor of BoxOfficeGuru.com, said he and his friends produced a low-budget film called "American Desi" in 1999. Financing the film was a struggle.

Initially, they reached out to only their immediate families -- moms and pops. The strategy was quickly extended to uncles and cousins after their parents failed to cough up enough dough.

Even after all distant relatives were interrogated, they still couldn't generate enough funding.

Then one of the producers showed the script to a few friends at work. "The Wall Street types," as Pandya describes them, filled in the gap.

The budget for "Desi" was roughly $200,000 and was released in 2001 on a limited basis -- in about 40 U.S. art house movie theaters.

The film earned about $1 million in U.S. ticket sales. Overseas receipts took in another $1 million in the United Kingdom and India.

"All of the investors (families included) were able to get their capital back, plus the agreed 25 percent," said Pandya.

Free publicity may require controversy

The three ODD founders knew a successful campaign for a low-budget film requires some free publicity. And nothing breeds that like provocative subject matter.

"The Babysitters," a dark comedy written by director David Ross about a 16-year-old girl who turns her babysitting service into a high-school prostitution ring, was picked to be ODD's first project.

"We didn't set out looking for something that was controversial," said Dubin. "It's an added bonus."

Controversy is certainly a low-budget film's best friend. In 2004, heated public debate brought extra box office receipts for films such as "The Passion of the Christ" and "Fahrenheit 9/11."

"They probably wouldn't have done as well as they did," said Pandya. "Controversy simply brought in so much extra business."

While ODD was unable to disclose a budget for their film project, recent comparable projects seem to be "Garden State" and "Thirteen." Both films cost about $1.5 million to $2.5 million to complete, according to Variety.

The production company said it has secured most of its funding for "Babysitters" and has offers out to A-list actors to star.

Meanwhile, Pandya said a sequel for "American Desi" is in the works. Most of the investors who funded the first film are already committed to the second project.

If all this tempts you into a second career as a producer, Civilian's Polpernamn offers a cautionary tale. Of the hundreds of films that are made each year, only a handful will become mainstream hits.  Top of page

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