THB #192: Remember The Dependents

Note: I did a very late night rant on social media on Sunday/Monday on the difference between disagreeing and trying to silence others. If you didn’t catch it from the wee small hours of your inbox, it’s here.

I was plowing through Ken Auletta’s modestly disappointing Harvey Weinstein book over the weekend and then, as a result of reading in the book about a buried documentary by Barry Avrich about Harvey, I tracked down and watched the buried doc about Harvey and I was struck by the discussion of the major studio investments in independent film at the time in both pieces.

Miramax and Pulp Fiction certainly made a major impression on the majors and were part of their interest in the indie arena. But it certainly wasn’t the singular Pied Piper that the book makes it out to be. (More on this in a bit.)

It also struck me that the influence of Miramax on the larger studios investing in the indie business was not dissimilar to the influence of Netflix and how it has drawn the legacy majors down a similar path as Miramax once did. And as I thought about it, I realized that while most of the entities that were created in some kind of vision of “our own Miramax” are now gone, the legacy-attached streamers are unlikely to suffer that same fate. The details will be, I hope, instructive.

I always wrote about them as The Dependents. But that was too simplistic. Their journeys varied wildly. What follows is as brief a history as I can manage…

New Line was born in 1967 and was a true indie until Ted Turner bought it in 1994, who then merged with Time-Warner in 1996. The company operated as a not-completely-dependent Dependent for a decade (1996-2006) before it was folded into Warner Bros as a brand. Those would be considered the Mike DeLuca Golden Years, including Lord of the Rings, Boogie Nights, Wedding Crashers, etc.

Miramax was born in 1979 by The Brothers Weinstein. Disney bought the company in June of 1993, on the heels of the financial and awards success of The Crying Game, making it a Dependent, feeding Harvey Weinstein’s ever-expanding budget desires. The relationship with Disney and the Weinsteins somehow lasted 12 years. With The Boys out of Burbank, Disney tried to continue on with the brand under Daniel Battsek, but that only lasted 4 years or so. Disney sold off the brand and the library.

Fine Line, an indie division of indie New Line, launched in 1991, with Ira Deutschman leading. Best known for films by Robert Altman and Gus van Sant, the brand offered a wide range of high-quality films, like Shine, Hoop Dreams, and Crash (the first one). But the division only lasted until 2005.

Sony Pictures Classics was born in 1992, the child of Barker, Bernard & Bloom, the first two of whom had birthed Orion Classics with Donna Gigliotti in 1982, which was a child of Orion, which was born in 1978 by 5 exiting United Artists executives who forged a partnership with Warner Bros. Even under Sony, Sony Classics has never really been as dependent as the other Dependents, though many of their most commercial hits like Crouching Tiger, Hidden Dragon, were very much a part of the shared vision.

Searchlight Pictures, nee’ Fox Searchlight was born in 1994, led by Tom Rothman, who moved over from Samuel Goldwyn Pictures. Within 2 years, Rothman had become the top dog at Big Fox and had replaced himself with Lindsay Law, who has been with PBS’ American Playhouse. Law would exit in 2000, replaced by the 3-headed magic of Peter Rice, Steve Gilula and Nancy Utley. Rothman remained aggressively hands-on through his tenure at Fox, which ended in 2012. The division has always been independent minded, but fully willing to use the assets of the larger studio to their advantage, such as in 2013, when 12 Years A Slave ended up in their hands and they won Best Picture for the studio and New Regency. Rice exited in 2017, leaving the Dependent in his partners’ completely capable hands. Disney’s purchase of Fox closed in 2019, Utley and Giliula exited a year later. The division has now - under Greenbaum, Greenfield, and Rodriguez - been tasked to operate as a hybrid film/television division, releasing content to both Hulu and theatrical release.

Paramount started Paramount Classics in 1998 under Ruth Vitale (of Fine Line) and David Dinerstein (of Searchlight). The division was killed by Brad Grey in 2005 and then reborn as Paramount Vantage in 2006 under then-talent-agent John Lesher. The “new” division made much bigger budget films that were high profile and awards friendly, but managed to lose money on all but one title. The division lasted 6 years until Lesher was “moved up” to the big studio, which quickly ate him alive. Much of the staff at Vantage moved to the big studio and thrived for years. But no more indie arm.

Focus Features came to life in 2002, a smorgasboard of indies. First there were October Films (1991, Bingham Ray, Jeff Lipsky) and Grammercy (1992, Polygram/Universal). Universal bought October Films in 1997 then sold it and Grammercy to Barry Diller’s USA Films. Universal Classics was also launched in 1999 to be that company’s art arm… briefly. In 2002, new Universal owner Vivendi bought USA Films and Good Machine (1990, Ted Hope, James Schamus) and merged it all together to become… Focus. Taa Dah!!! Schamus and Linde led the company.

Warner Independent was late to the party, created in 2003, led by Miramaxer Mark Gill with the passionate and brilliant Laura Kim handling marketing. They blasted out of the gates with Before Sunset, then set records with March of the Penguins a year later. But Gill was out the door in May 2006 and 2 years later, the whole thing was shuttered.

Rogue Pictures existed at Grammercy, initially, but Focus Features started using it as a genre division in 2004. After 5 years, it was sold to Ryan Kavanaugh and Realtivity Media, assuring its disappearance soon thereafter.

Picturehouse was another weird Warners hybrid. Launched in 2005, it was - somehow - a combo of New Line and HBO. Led by Bob Berney and Jeanne Berney, it was killed off in 2008. (Jeanne and Bob now own the brand and should be releasing new product soon… not with a clear marriage with a distributor.)

Fox and Searchlight launched Fox Atomic in 2006, seeking to create a new genre brand… just as the DVD business was peaking out.

NEXT STEP…

The first commercial DVD release was Twister, released on March 26, 1997. As you can see on this chart, after a super-fast rise in sales, U.S. dvd sales peaked in 2004.

The wave of Dependents really started in 1992, with Sony Pictures Classics. Miramax went to Disney next. Searchlight in ‘94. Paramount Classics in 1998. Universal was in and out of the indie business.

But when DVDs got hot, passing the $10b mark domestically in 2002, Universal got serious and Focus came together. Warner Independent. Divisions within divisions with Rogue, Fox Atomic, and Picturehouse.

The DVD decline started in 2007, but the writing on the wall started earlier, as the release of television back catalog DVD packages artificially maintained the numbers on DVD sales in 2005, 2006, and onward.

Half of the new Dependents launched in the late 90s or early 00s were gone by 2008.

NEXT STEP…

Is Netflix the Miramax - offensive behavior aside - of streaming?

Yes, there were other competitors (New Line/October/Grammercy/Good Machine) in the space for Miramax when as they rose to the top of the food chain. But The Weinsteins brought a scale to the effort that no one else had.

First, others emulated their success. Then, with the DVD wave, there was a lot of money in content. The more the merrier. It truly was hard to lose money on a movie for a few years there.

But then, the wave subsided and the weaker organizations with the least support from above crashed. The spending and the marketing budgets and the pressure to win did not subside and suddenly, the parent companies saw that they were spending quite a bit on prestige divisions that were no longer releasing a bunch of can’t-lose-money titles.

Remember… when the spending on Dependents started, it wasn’t just about money. Miramax gave the impression that they were winning with the kind of movies that made management proud. Then it became a bigger business. Then DVD brought the goldrush.

Now… think about how the big legacy companies dragged their feet on the way to streaming, until Netflix went crazy, even more on the stock market than in gross revenue. As I’ve written before, the domestic legacy revenues from streaming are not as good a business as these companies had going before streaming. But there is the promise - as Netflix quickly pulled in 100 million international subscriptions with pretty good ARPU (Average Revenue Per Unit) - of a wide open international market that could be much more profitable for the legacy companies than ever before. And they all took the leap.

Now, we are seeing enormous anxiety as the entire industry is more than a little bit pregnant. None of the streamers, save Netflix, are close to maturity. But the light at the end of the tunnel was a lot brighter before the Netflix stock price collapsed after quarterly reports at the end of Q4 2021 and Q1 2022.

In reality, nothing has changed. What was hard before is still hard. But the ability to delude oneself or others has changed a lot.

WHAT’S DIFFERENT…

Streaming is not like DVD, a market that was quickly oversaturated and imploded in a glut and a price war… even though, ironically, it was inexpensive pricing for sell-thru that made DVD explode in the first place.

Streaming is forever.

Streaming, unlike DVD, is primarily valued as a delivey system, not an improvement in the quality of the product itself. What streaming allows for is the absolute freedom of time and access.

HD launched in 1998. America went 100% digital in 2009. First 4k TVs in 2012. But we still aren’t on a 4K standard in most households or content delivery modes. So I hold this as a minor issue at this point.

The bigger question is what the audience wants and how they want it.

As the first mover, Netflix has had its way (ironically offering a lot of 4K, but at a much higher cost per month)… not unlike Miramax.

So as they dove in, the “new” streamers swam in what felt like Netflix’s pool of ideas… in binging… in spending… in pricing… in selling no-commercial platforms… and more.

That spell making them all think this was a good idea is now broken.

It doesn’t mean that Netflix ideas are not good (or were not good) or that they need to dump them or, for that matter, adhere to them.

The question is… is this evolutionary step better or worse?

The DVD crash changed the math of the movie business in an extreme way (including reversing a culture in which DVD revenues dwarfed theatrical for a few years, making theatrical a second thought. Theatrical roared back to the top revenue creator pretty quickly.)

The Wall Street wake-up call may or may not change everything. It does, logically, point to a major cutback on filmed content creation in the next 18 months. Netflix led the industry somewhere stupid and now, people don’t want to make fewer shows and “movies,” but they also don’t want to become growth businesses that can’t ever make real money.

And as I said, streaming isn’t leaving.

So now, every one of the major companies need to think hard about their own, very specific path. Zaslav shouldn’t be the template for anyone but Warner Bros Discovery. The strategy at Paramount Global hasn’t been strong enough for there not to be another round of “who will buy it?” Sony has obliged itself to a 5-year-plan they really can’t shake. NBCUniversal will either step up, step down or just stay where they have been for 18 months already. Disney really needs a rethink. Amazon and Apple remain wildcards.

Can these companies put the wild spending and undefined content dumping behind them and find plans that work to maximize revenues?

Or will they get frustrated (along with their stock holders) and just brood, following instead of leading?

Amusingly, Tom Cruise has been on the cutting edge of both moments. He was career-killed (for a few years) by Sumner Redstone for getting the majority of profits from Mission: Impossible III, even as the studio was taking a loss… because of his DVD deal. And now, he is the cash king of Paramount, making a fortune by avoiding the streaming they are so revved up about and embracing the nostalgia of scores of million of audience members, even as so many still seem to try to force shorter windows into the winner’s column.

Kinda makes you think.

Until tomorrow…