Looking at the Big Picture: LFCA Conference Attendees Discusses Survival of the Giant Screen
It is an ironic metaphor that the most recent giant screen film to be funded with a grant from the National Science Foundation and investment capital from the Museum Film Network is Dinosaurs! Many large format filmmakers, distributors and exhibitors alike worry that this fractionalized industry is on the verge of becoming a dinosaur itself unless it reinvents the business from the inside out, both creatively and financially.
That was the general consensus of those who attended the Large Format Cinema Association (LFCA) conference, held at Universal Studios in Los Angeles last April. The struggling large format industry is undergoing a major sea change and some wonder if it can weather the storm. Among the many challenges facing the industry: declining audiences, hard-to-find investment capital and sponsorships, shorter exhibition runs, lack of product for 3-D and dome theaters, a small percentage share of box office for filmmakers and competition for product between institutional and commercial exhibitors.
One only has to look at how the industry is structured to see just how fractionalized it has become. First, you have the large film formats and projection systems: 15-perforation/70mm film (IMAX Corporation), 8-perforation/70mm (iWERKS Entertainment, Inc.) and Japan's 10-perforation/70mm film (Goto Optical). Then you have the exhibition venues: flat screen 2-D, flat screen 3-D and dome theaters, with either tilted or horizontal screens. Of 350 large format screens worldwide, approximately half are institutional theaters in museums and science centers while the other half are commercial theaters in multiplexes, with most of the commercial theaters equipped with 3-D projection systems. As if that weren't confusing enough, you have producers who are also distributors, distributors who are also exhibitors, and manufacturers who produce and distribute product as well as design theater systems. It's no wonder the industry is having an identity crisis.
Institutional vs. Commercial Exhibition
Up until the mid-'90s, most of the theaters were 2-D institutional theaters, and most of the films shown were education-oriented entertainment, i.e., natural history and science films, destination films and adventure films. According to Joe DeAmicis at the California Science Center, things began to change when IMAX Corporation went public and started building theaters in commercial locations. "The uniqueness of the ‘IMAX experience,' which could often be defined as ‘there's only one in your city,' became, by virtue of being in the multiplex, just another big screen, so the ‘special-ness' and the branding started to change. They [IMAX] started to show 35mm films [re-purposed to 70mm] on IMAX screens because they weren't drawing the audiences."
As for the original IMAX brand, DeAmicis further explains that "IMAX had these three pillars of what the brand stood for: education, family and technology. That brand was put at risk to suit their growth needs, if they were going to have a proliferation of commercial films such as The Matrix Reloaded, which is certainly not a G-rated film." Jeffrey Kirsch, from the Reuben H. Fleet Science Center in San Diego, concurs. "Unfortunately, rather than focus on original content, the commercial theaters have become enslaved to the IMAX Corporation's business plan of re-purposing Hollywood films with their digital enhancement [the IMAX DMR process] of 35mm material."
DeAmicis also points out that at the same time, technological improvements at commercial theaters for regular 35mm films began to appear, thanks to the creation of stadium seating, better sound systems and bigger screens. "So now the technological advantage of IMAX is starting to shrink," says DeAmicis. "At the same time all of that was happening, you had the proliferation of natural history programs on cable television in the mid-'90s from Discovery and National Geographic. Since that time, everything has been downhill. The uniqueness is not what it was, the technological advantage is not what it was and the programming isn't as effective."
Ironically, many institutional theaters are taking programming cues from their commercial counterparts, bumping films off their schedule if they don't pull in audiences quickly enough. Diane Carlson of the Pacific Science Center states, "The reality is, all theaters—commercial and institutional—want to have films that are going to generate revenue for them. Gone are the days when institutions could be elitist or driven more by mission alone. Everyone has been hit by the bottom financial line. Even the Smithsonian Institution, which for years wouldn't show T Rex: Back to the Cretaceous, is now showing it."
During the panel discussion titled "Strategies for Successful Film Programming," Toby Mensforth, director of theaters for Smithsonian Business Ventures, told the audience that as the "800 pound gorilla" of institutional exhibitors, the Smithsonian Institute generates a combined $15 million each year through its three IMAX theaters. Since Mensforth books traditional nonfiction films two years in advance into their weekly daytime slots, he can't re-program and "turn on a dime," unlike the smaller institutional theaters. However, he does book nights and weekends with only a few months advance notice, offering more commercial fare, i.e., entertainment-oriented and fiction films such as Cirque de Soleil and The Young Black Stallion.
Other exhibitors, such as Charlotte Brohi from the Houston Museum of Natural Science, have seen audience attendance decline dramatically over the years. To counter that, these exhibitors are programming several large format films at a time-thereby reducing the profit for filmmakers and distributors-where in the past, these same theaters would book one film for six months. They are also demanding shorter lease terms from distributors, so if a film performs badly, it can be easily replaced.
This makes it difficult for distribution companies who need a guaranteed time run and/or ticket sales to build an audience, according to Patricia Brandino, director of film distribution for Destination Cinema. "I know what a theater is capable of producing and I know the theater also wants to bring in as many people as possible" explains Brandino. "So if they have a good marketing plan and I know they're a good producing theater, then we make it a minimum attendance guarantee, which gives them the flexibility to schedule."
The Everest Effect?
The enormously successful MacGillivray-Freeman film Everest (1998), which generated $127.5 million at the box office, created unrealistic expectations, according to Carlson. "What people didn't realize was that Everest was an anomaly," she notes. "It was incredibly successful over a very short period of time because it was helped tremendously by two things—being about a disaster and the success of [the best-selling book] Into Thin Air. That just made it a very timely topic." Carlson further explains that "all of a sudden there were a lot more films from '98 forward, which on one level was good for theaters, but on the other level, more challenging for the industry as a whole because now theaters had a lot more films to choose from. You could have shorter runs and offer your visitors a lot more, but as a consequence, the amount of revenue that went back for any one film was diminished. Instead of maybe opening two films per year, now it was easy to open four or five films per year, but the pie didn't grow any bigger, so each slice was a little smaller."
DeAmicis points out that despite the large box office numbers for Everest, "Filmmakers who came into the business didn't realize that only 20 percent of the box office goes to the filmmaker and distributor." That is, if the film makes a return on investment. According to Mary Kaye Kennedy, director of marketing and distribution for WGBH Enterprises, even though Shackleton's Antarctic Adventure (2001; White Mountain Films, NOVA/WGBH, co-prods.) has received critical acclaim, it still hasn't earned back its budget, which she admits was more than the typical $6 million for a 2-D film. But, Kennedy observes, "It's hard for any film, regardless of distribution strategy, to make a return on investment in today's giant-screen marketplace, because of decreases in attendance and the reduced number of film slots."
However, Steve Kempf, who with his brother Don runs the production/distribution company Giant Screen Films, believes it is possible to see a return on investment. "If a film is properly funded to minimize the equity investment that requires a return on capital and if the film is properly positioned for the marketplace—institutional vs. commercial, with potential for some degree of crossover—it can provide a return for the filmmaker." According to Kempf, 40 percent of the financing for the Giant Screen film Pulse: A Stomp Odyssey came from private sources that included equity investors, while 60 percent came from sponsorship funding from Honda. Says Kempf, "With other films, we have used pre-leases to help finance, and bank loans have come into play. Grants from organizations such as the National Science Foundation [NSF] are certainly a worthwhile source for Large format films, though one into which we have yet to tap."
"To be really successful, the film should appeal to the institutional market as well as the commercial market," Carlson maintains. "The institutional theaters, if they really want to come onboard with a project, have the ability to help finance films through a variety of means. Some may be interested in being in an equity position with the film; they may be interested in doing a pre-release; they may be willing to help with their funders—the National Science Foundation or perhaps their own sponsors—if they believe passionately in a film."
Strength in Numbers: The Museum Film Network and Other Consortia
Carlson acknowledges that the Pacific Science Center is not in a financial position to be an equity partner in a project, since it has no endowment and needs to earn 85 percent of its revenue. However, the center has helped filmmakers with projects it's interested in "by signing a pre-lease agreement that the filmmakers can take to a bank or another lender and say to them, ‘We have these contracts.'" Other museums that do have the ability to invest have banded together to form the Museum Film Network, leveraging their assets to become equity partners in projects. Started in 1985 with just six theaters, Kirsch says that the network "is now an international consortium of 15 dome and flat screen 15/70 theaters. We have produced two films [To the Limit and StormChasers] and invested in and/or pre-leased about a half-dozen other films. Thanks to our earned revenues from our first films, we have established a revolving fund for film production investments."
Boston's Museum of Science is one of the 15 institutions in the network, and according to the manager of its Omni Theater, Cherie Rivers, the group has just invested $1 million in the film Dinosaurs! Says Rivers, "On an annual basis we review film proposals. In the past, offers that have been accepted have been for a $1 million investment that we'll put up for a large-format film with a guarantee return of that money. So, we're investing money, and as part of that, our group gets a discounted price for the film. Most of the time, the theaters [in the network] take the film, so the filmmaker is getting not only investment money, but also the lease fees to book the film." Rivers admits that the initial idea was for the group to produce films, "but the process is so difficult that after producing the first two films, we never produced a third [and instead] started investing in other projects."
With a guarantee that the network will get its investment back, Rivers says it gives filmmakers the "seed money" they need to get their project off the ground. With the Boston museum's $1 million investment, the filmmakers were able to obtain additional funds from other sources. But Rivers also admits that not all producers like this approach. "We had to pick and choose among those who were willing to do it that way."
The Museum Film Network is not the only special interest museum group to band together. There's also an informal 3-D film interest group of a dozen theaters that meets once or twice a year, according to DeAmicis from the California Science Center. As for financing films, DeAmicis states, "We don't have a legal relationship to pool money," but a filmmaker can pitch individual members in the group who have the capability of investing money-unlike the center, which is a state-run institution. One of the recent 3-D films that did just that is Bugs!, produced by Phil Streather, CEO of Principal Large Format in the UK.
According to Streather, 3-D films on average cost 25 to 30 percent more than 2-D films, putting them somewhere in the $7-$9 million dollar range. Streather found five institutions with 3-D theaters (Pacific Science Center, Moody Gardens IMAX 3-D Theater, IMAX Theater at Bristol, Entergy IMAX Theater and the Johnson Theater at the Smithsonian Natural History Museum) that wanted the project. They were willing to negotiate pre-lease guarantees with the film's executive producer and distributor, Jonathan Barker of SK Films. Still, a major chunk of the financing needed to be secured, so by thinking outside of the box, Streather approached the bug exterminator company, Terminix.
Even though Bugs! is "pro-bugs," Terminix recognized the opportunity for an unconventional marketing platform: Terminix likes bugs, too-just not the ones that live in your home. Terminix capitalized on the film's opening in 52 different theaters, providing direct marketing support and placing television ads in some markets. According to Brohi at the Houston Museum of Natural Science, the film is successfully attracting audiences.
Sponsorships and Grants
Sponsorship money and pre-leases are also part of Tim Adeylott's strategy for financing a large- format natural history film. Adeylott is a documentary filmmaker who also functions as the public relations and marketing manager for the New Mexico Museum of Natural History and Science. Adelyott hired Giant Screen Films to help find pre-leases and sponsorships. "In order to make any kind of profit," he maintains, "you need at least one-third in sponsorship, and it is starting to look like closer to one-half."
Meanwhile, Adeylott is in the middle of the NSF funding process, having already received an initial planning grant of $50,000 from the foundation. "Theaters will not invest in films and do pre-releases until some other money is attached," states Adelyott. "You use the pre-leases for getting financing from a bank as promissory notes from the institutions. So basically, you're paying the bank when you get your film, instead of the distributor."
However, Valentine Kass of the National Science Foundation is the first to admit that applying for an NSF grant is a very laborious and competitive process. Kass, who is responsible for administering media grants under the Informal Science Education (ISE) program, has awarded $39 million to the Large format industry alone in the last 13 years. "There's a whole process of applying, and it's a lot of work," admits Kass. "The competition is very great. In the last round of proposals, we had 27 new proposals, including [for] large format. Of those 27, five will get funded. Our funding is not expanding and people's budgets are getting bigger." Even though the NSF will fund only a portion of the film, that can be a huge chunk—up to $3 million under the new guidelines. Yet, Kass points out, "Just because you ask for $3 million doesn't mean you'll get $3 million."
Since the mission of the ISE is to promote science literacy, Kass stresses the need for filmmakers to know who the target audience is and how the program will promote "engagement and interest in science." The filmmaker is also expected to have a comprehensive funding plan in place when applying, along with advisory boards, a production team, a management team, a reasonable budget and a distribution/marketing plan. "All of our media projects are multi-platforms," she maintains. "They have a whole array of ancillary products and/or collaborations with museums or corporations to do various kinds of outreach activities."
Despite the stiff competition, Kass points out that these grants are coveted because filmmakers don't need to pay back the money, though they are held accountable with periodic financial reports and annual updates. As for approval rights, "We give feedback during the negotiation process of the award," says Kass. "But once an award has been given, it's been pretty much hands off."
What The Future Holds: Profits, Production and Presentation
Veteran filmmaker Tim Liversedge generally self-finances the production of his films, as he did with his first large-format film, ROAR: Lions of the Kalahari. Part of the reason for doing so is to retain creative control, and, as he confesses, "to take the anxiety out of making documentaries by capturing some basic elements that guarantee the production." The film was shot over a period of two-and-a-half years on several different formats, including 15/70, 8/70, and 35mm. However, after the shooting was over, he needed completion funds for the post-production process.
Enter National Geographic, which partnered with Liversedge and provided a loan. However, Liversedge admits, "They're taking a large chunk of the equity in the film for providing that money." Liversedge wishes exhibitors paid out box office receipts as high as 25 percent to the distributor and the filmmaker, but states that's not really the case. "The actual per head rate is between 10 and 15 percent of the box office," says Liversedge. "It's too small of a percentage to make the films viable. And the sad thing is, because of that, good filmmakers are reluctant to get in and make good films. And because of that, the quality of the films over the years has not evolved, so attendance is static and declining, in some cases."
Kennedy from WGBH Enterprises agrees with Liversedge's assessment. "The biggest issue facing us now is film quality," she states, indicating that was the conclusion of a large international research study by the Giant Screen Theater Association (GSTA) that she headed. "The research showed that most of the people who come are becoming non-viewers after two or three giant-screen films. So the biggest issue is if we make great films, the theaters will show them. And if they're performing, hopefully in more slots, then we get money back. Then film number one helps sell film number two, which helps sell film number three."
Others, like DeAmicis, feel that hope for the future lies in keeping the large-format brand identified with the institutions. "There are still so many of these commercial entities putting product into the pipeline," he says. "We keep waiting for them to drop out because we know they can't make any money." For Carlson at the Pacific Science Center, what ultimately will matter the most is the longevity of institutions. "Our president or CEO may leave, but if you have donors in that community and they've given very significant sums in capital to put in a theater, that theater is going to survive the CEO, the film buyer and the theater manager. That's not necessarily the case in the commercial arena. So I think institutions are still the anchor, and will continue to be the anchor of large format, because the institutions are in it for the long term."
Dianna Costello is a Los Angeles-based writer and producer who received an Academy Award nomination for her film Graffiti. She is currently developing a large format science-based film project.