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INDUSTRY BEAT
Netflix becomes a player in the acquisitions game.

BY ANTHONY KAUFMANN

Eric Besner estimates he’s acquired roughly 100 films since starting as Netflix’s VP of original programming since April of last year. That’s more than most independent and dependent distributors combined. From Born Into Brothels to Balseros, The Talent Given Us to The Girl from Monday, Netflix’s titles comprise perhaps the most comprehensive catalogue of recent indie narratives, documentaries and foreign flicks all available in one place.

This past April, Netflix hired Bahman Naraghi, formerly a top executive at Intermedia Films and Miramax, to oversee the financial operations of Netflix’s newly named original division, Red Envelope Entertainment, and in May the company announced one of its biggest acquisitions, Sundance 2006 competition entry Sherrybaby, starring Maggie Gyllenhaal, and an arrangement with IFC Films to distribute the movie in theaters.

With Naraghi on board, Besner’s commitment to “championing new talent,” and strategic partnerships with entities such as IFC, Sundance Channel, Docurama, THINKFilm and Emerging Pictures, the seven-year-old mail-order DVD-rental outfit is becoming the foremost player in the truly indie sector. “Small films can find an audience,” says Netflix’s chief content officer Ted Sarandos. “People’s tastes are much more diverse than what we give them credit for.”

But Netflix’s rise comes as traditional distribution avenues are faltering. “How do you make a little indie work in theaters today? It’s impossible,” says Mark Duplass, producer-writer-star of Sundance 2005 entry The Puffy Chair, which was jointly acquired by Netflix and Roadside Attractions earlier this year. “With a week or two in theaters, it’s inevitable death. So we wanted to reckon with that reality and find new and innovative ways to release and market the movie.”

Duplass, together with his brother, Puffy’s director Jay Duplass, initially met with Netflix alone to make a deal for home entertainment rights — “a decent five-figure offer,” says Mark. “We asked them if we could put together a decent theatrical run, would they be willing to give us a little more advance,” says Jay. They agreed.

Around the same time, Roadside showed interest in the film, but according to Mark, “they were concerned with how to market it. This is a digital movie with no stars. And frankly, we agreed with them. We knew it would work on DVD, but we weren’t sure of the theatrical commitment. I think Netflix made a big difference.”

Roadside Attractions’ Howard Cohen admits that Netflix’s involvement tipped the scales in the film’s favor. “It was a psychological thing, in that here was another entity that believes in the movie and that was willing to split costs with us,” he says. “It was the little push that we needed.”

While Howard Cohen is still unsure of how the Netflix partnership will pan out, he calls the company “the future.” “They’re the only major entity that really has a firsthand relationship with their consumers,” he says. “They have 4 million subscribers, with an interest in independent films, and they have their names and e-mail addresses — and we don’t and Hollywood doesn’t.”

Another 2005 Sundance premiere, Kyle Henry’s Room — which got Besner’s attention as a result of the film’s two Independent Spirit Award nominations and Netflix’s distribution of Spirit nominee DVDs to voters — will be available on Netflix and for purchase “day-and-date” on Nov. 7. (The company has abandoned “exclusive” windows, preferring to maximize a film’s potential in all media simultaneously.) Before the film’s DVD release, the producers are staging a self-distribution tour in theaters in order to stir up press.

Room producer Jesse Scolaro is realistic about the reasons they went with Netflix. “Here is a film that doesn’t appeal to a mass audience, it doesn’t have [recognizable] actors and it’s somewhat experimental in genre, so we said, ‘Who is our target audience?’” he explains. “After talking to Netflix and finding out about their demographic” — educated city-dwellers between 20 and 40 years old, according to Scolaro — “we decided they would be the right home for the movie.”

Most of Netflix’s deals are similar to the one offered to Room’s filmmakers. Netflix offers a recoupable advance, plus a percentage on every rental as well as royalties off gross sales on other deals outside of the rental — such as sublicenses to retail partners like Hart Sharp Video. “After fees and costs are taken off wholesale revenue,” says Besner, “a certain net amount is going to end up with Netflix that’s going to be shared with the filmmakers.”

But how much? And can filmmakers make a living on such an arrangement? “A lot of it really has to deal with your expectations,” adds Scolaro. “No one is becoming wealthy, but we’ve been able to make our investors happy.”

Besner says he’s candid with filmmakers. If a movie is better suited for retail distribution — sports-related films and family movies, for example — he’ll tell filmmakers to bypass Netflix and go straight to video retailers to work out a deal. (Or in some rare cases, filmmakers with specific niche audiences have found profitability selling DVDs directly through their own Web sites.)

Michèle Ohayon, whose 1997 Oscar-nominated documentary Colors Straight Up was acquired by Netflix, has continued to work with the company on her subsequent films. For her recent nonfiction chronicle Cowboy del Amor, Netflix worked with Emerging Pictures to put the film in theaters nationwide for one-week runs before making the film available for rental. “Within a month we were close to 10,000 units,” says Ohayon.

But aside from her up-front advance, Ohayon says she has not seen a penny of it. “They have to recoup first for the theatrical,” she says. “At the end of the day, it’s a very costly undertaking, and if you have to hire another company to do it for you” — in this case Emerging Pictures — “it’s going to cost a lot.”

Ohayon admits that the model isn’t exactly financially viable. “It’s not like we can sell a movie and live on it. I make documentaries for mostly educational purposes,” she says. “I write fiction for a living.” (A narrative screenplay for Cowboy was optioned by Focus.)

Still, Ohayon is delighted by her Netflix partnership. The company has gone so far as to producer her newest documentary, a love story about two Holocaust survivors, giving her one of two high-definition-camera packages. (On the Outs co-director Michael Skolnik is using the other for a project set in Swaziland.)

“It’s not like we’re throwing money around willy-nilly,” says Besner. “The idea is to be wise about spending in a strategic fashion, doing negative pickups, purchasing at festivals, or investing when you see a synchronicity with a filmmaker when the budget is the right size” — according to Besner, the $250,000 range — “and it makes sense.”

For Ohayon, Netflix has made sense. “When you’re an established filmmaker, you get tired of shopping your projects over and again,” she says. “You want a home, even if it means sharing the ownership of your work.”

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