Scott Macaulay heads a roundtable discussion on the current indie model and what the hopes are for the future of the business.

“The sky is falling,” Film Department head Mark Gill famously proclaimed at the L.A. Film Festival this past summer. His spiritedly downbeat take on the indie world and its operating paradigms resonated throughout the industry as he catalogued all of the past year‘s problems (a glut of films, vanishing specialty distributors and skyrocketing marketing costs, among them) before concluding by telling filmmakers to make better movies — and fewer of them!

One could quibble with elements of Gill‘s argument — are $15 million and up films really the only ones we should be trying to make? — while still recognizing that his general points are sound. Something has changed, and that‘s apparent even to the average person (and investor), for whom mainstream newspaper stories about failing indie companies and unsold films have now replaced the rags-to-riches Sundance tales that have drawn so much speculative capital to the indie world.

To discuss all of this I invited a distinguished group of producers and sales agents for a long discussion of indie film past, present and future. Josh Braun, Matt Dentler, Ira Deutchman, Ted Hope, Lars Knudsen, and Jay Van Hoy joined me at the IFP office on August 22 (before, incidentally, Hope‘s Film Independent keynote and the credit and market meltdown of early October) to figure out where we go from here. The edited conversation in the magazine runs 7,000 words; here are the first 1,700.

I want to start by asking about how the paradigm of making independent films is changing for the producers here given all of the recent changes in our business.

Hope: Well, it‘s curious, because now it‘s probably more like it was when we started [the production company Good Machine] than it ever has been before. In the late ‘80s and into the ‘90s [Good Machine] developed a four-strand production business. One was low-budget first features — from a couple of hundred thousand to a couple of million dollars — which were designed for a full unveiling at Sundance with a drive for U.S. and international sales. The second was kind of a low-budget indie auteur business — the Hal Hartleys, Todd Solondzs and John Waters. These films would [cost from] a couple million dollars to six or seven and would be more foreign-driven but would still be looking for some kind of U.S. sale. And then there were, and I group them together, the prestige, mini-major films and the potential crossover mini-major films — the films that are in Mark Gill‘s sweet spot — movies that have two or three leads and a known director. You could package these films and get them financed by U.S. distributors. The fourth strand were the few movies that we set up in the studio world. Now those first two types of films are no longer a part of the equation unless you truly shrink and make them some other way. And the third strand, those $8 million to $15 million films, has become difficult too. When we started you would expect to get 50 percent from the U.S. [for these films]. Then conservatively you would put down 30 percent from the U.S. We do those [financing calculations] now and put in zero from the U.S. That‘s what we actually expect to get out of the U.S., even with two or three stars. The U.S. is not the driver it used to be. It‘s just another territory that has its odd fluctuations as much as France or Japan or eastern Europe. Right now its value is in the tax-rebate money. And so you take foreign and your soft money and you hope you hit 100 percent [of your budget]. In the Mark Gill speech he made it sound like a new recognition that you needed to have foreign value, but that‘s what the model was back when we started making Hal Hartley films.

So if that‘s the reality of the business, what will happen to all those low-budget films and first-time filmmakers?

Hope: I think that there‘s still a way to get those films made. It takes a lot longer and you get a lot more bruises as you run against the brick wall of, “No, no, no, no.” But at one point you finally chip away and you get through the wall. It‘s much harder.

It‘s a passion model, not a business model?

Hope: Well when someone asks to see the numbers on your films and they want to see the profits, there‘s no category for “cultural profit.” There‘s not a category for the career advancement that you provided everybody. You don‘t get to monetize the fact that the company that sold the film was then able to get the next film by a certain director who admired the one you made. It is a scary thing when you can‘t figure out what that exact business model is up front.

The first two strands that you said are not part of the equation anymore — I think those strands are where a lot of readers of the magazine see themselves. Does anyone else at the table see their business model in those first two strands?

Braun: As somebody selling movies, I can go in and out of any one of those categories if they are movies I believe in and believe I‘m going to sell. A movie like Baghead was a very low-budget film with no stars but it had genre elements so maybe I thought it was more sellable for that reason. We sold it to Sony Classics for a decent amount of money — it made a profit. But that‘s not going to happen to every film. There are plenty that I don‘t think we‘ll make much money on, but we love them and still sign them.

Van Hoy: I guess [our model] is probably very similar to the first two strands that Ted started with. When we make films we‘re more focused on a [director‘s] second feature, and [making] the first feature is part of that. One of the reasons we‘re able to produce [these films] is because we keep our overhead low. I found an apartment that‘s not expensive.

Hope: It‘s so true. The absolute best advice is keep your overhead as low as possible.

Deutchman: You can also marry well. [laughs]

Hope: When I moved to New York I had a Manhattan apartment that I paid $350 a month for. I was across the street from Coronet Pizza, which had the biggest slice of pizza on the island for $1.10.

Van Hoy: Our office is in Brooklyn.

Braun: It reminds me of when I was in bands years ago — the bands that could thrive were the bands that had cheap rehearsal spaces.

Jay and Lars, how many films are you working on right now?

Knudsen: Five in post, two of which are in Toronto, and then I guess three or four features that [we‘re prepping].

Is your company based on the idea of that kind of volume? Do you need that many films to make your model work, or did it just work out that way?

Van Hoy: I wish that volume counted for something materially. It kind of doesn‘t because the fees are so low.

Hope: But aren‘t you covering your office spaces and assistant salaries?

Van Hoy: Kind of. Some films are subsidized better than others.

Knudsen: When we do five features in a year, all we need are two of them to [pay us] decent fees. For the rest of them we don‘t take a fee and try to make them for $100,000 or $200,000.

Hope: It was kind of the same model for us — we tried to have two that cost $8 million so we could do two that cost $2 million. Today the no-budget stuff is really spaghetti on the wall. It only makes sense [as a producer] if you are doing a true portfolio, like raising $2 million to make eight films. You can then afford to have a few of them completely not stick and hope that the one in eight hit will pay for the rest of the losses you‘ve incurred.

Van Hoy: Looking at our future we see ourselves being pushed more and more into distribution. That‘s a reality that, along with a lot of other producers, we‘re just now confronting. What does that mean for us as producers and how are we going to do it? I don‘t have the answers at the moment, but it‘s definitely something we have to consider now.

Ira, how has the last year‘s worth of business developments in the independent film world informed your model at Emerging Pictures?

Ira: In my case, Emerging is five years old, so it‘s not a reaction to what‘s going on today. Today is just an extreme version of what was going on five years ago. And to go back even further, when I first started in this business there was no such thing as American independent film. It had not been coined as a term, nobody knew what it was, and there were only a few extremely maverick directors who were doing it out of absolute necessity. We‘re talking about starting with Cassavetes all the way through John Sayles. It was around the time that Sayles started working that American independents began to have a name. In terms of funding you had then an enormous need for product because of the home-video boom. That was really behind just about everything that was being funded at that time. There was a sense that if you made a film for a couple of hundred thousand dollars, or even $400,000, $500,000, that the downside risk was pretty minimal because there was always a video value to just about anything of quality. There really was a business plan to these kind of movies. Now, the video market as we know it sucks, and all these “new models” that we‘re all so crazy about are peanuts. I mean, if you want to make the equivalent of what would have then been a $400,000 to $500,000 movie, in terms of knowing that there really is a business that can support it on the downside, you‘re making movies for $6,000.

Hope: Anne Thompson had an article [in Variety] on the top non-theatrical VOD, or available for download, film and it made something like $28,000. I said to [This is That partner] Anne [Carey], “I figured it out, I know how to cover our overhead for the year! We make films for $4,821, and based on what I expect the profit return to be, if we make 200 of them in a year we‘ll keep our doors open.”

Deutchman: When people talk about these fabulous business plans to make movies for whatever the number is, and they start building in numbers for what it‘s going to sell for here and over there and wherever, I have to just throw my arms up because in today‘s marketplace there‘s no way that you can build anything that has an inherent value unless you‘re able to pre-sell it, in which case you‘re in business.

Braun: There is some kind of disconnect between information that‘s gotten to people about what things should cost and what the market really is. There are a number of good filmmakers who come to us and say, “And the great news is that it‘s only a $3 million budget!”

Deutchman: Or documentaries that are made for a million dollars. “You made a documentary for a million dollars?”

Braun: Maybe certain documentaries have a huge built-in audience, but I always say, “Come back when it costs $550,000; that‘s a more practical business plan. Even then it‘s risky, but at least there‘s a possibility of a significant television deal and foreign sales, and then you‘ll break even.”

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