Sunday, February 01, 2015
I’ve written in the past about how investing in indie filmsis like investing in startups. Although there are also many differences between indie films and startups, today I’d like to further that analogy by using a very recently released film and its not so spectacular success.
Although most of the buzz in the film industry thus far in 2015 has been about the success (and controversy surrounding) American Sniper, an equal amount of anti-buzz is being generated inside the industry about Mortdecai, Johnny Depp’s latest big feature. In this, I thought there was an important lesson for indie film-makers (and perhaps some startups entrepreneurs too) about expectations and setting yourself up for failure or success.
The reviews are in and Mortdecai, is already being called “one of the worst films of 2015” (quite an achievement since we are only 30 days into the new year), and simply “mortifying”. One article in particular caught my eye, “The Anatomy of a Flop”. Production budget estimates range from $40 million to $60 million; while that’s not astronomical in the world of Hollywood movies, given that the first weekend gross for the film was only $4 million, it’s pretty hard to see how Lion’s Gate will make a profit on this film.
The funny thing is, I recall being approached over a year ago to invest in this film. A friend in the indie film financing contacted me and asked, “ would you be interested in investing in Johnny Depp’s latest film?” If memory serves, they were hoping to raise the final $10 million or so for finishing the film from outside sources. As a very big fan of Depp, I said I wanted more details. I never got many more details beyond the fact that it was called “Mordecai”, Gwyneth Paltrow was co-starring, and they thought it was going to be a big hit!
My first hesitation was that I was being approached at all to help provide “finishing funds” for a film that was funded by a major Hollywood studios and starred A-level actors. If there's one thing that Hollywood studios have access to – it’s money. Why was I, who usually invested in and made very low budget indie films, even being asked? It was a red flag, but not a deal killer.
The second red flag occurred when I dug in more to find out what the film was about. I didn’t see the wide appeal of the movie or it being the best vehicle for Depp’s eccentric acting. "But it’s Johnny Depp and Gwyneth Paltrow!" repeated my friend enthusiastically. As far as I could tell, this seemed to be the only reason to invest in the movie.
I politely declined, since the movie wasn’t really my cup of tea personally, and I felt weird being a very small investor in such a big Hollywood production.
I had learned that Mortdecai was based on a set of cult novels from the seventies about an eccentric/rogue art dealer. While I like cult novels in general, I couldn’t see how I, as an individual investor, could possibly make money from such an expensive production (by most indie film standards, spending $60 million is like renting out Versailles for a full year just to have accommodations for a weekend trip to Paris).
Moreover, given my recent experience with Hollywood accounting and distributors (which I’ll write more about another time), I realized the only way an indie investor would see even a dime would be if the film was a huge, huge hit (of which I was doubtful).
When the trailer and TV spots began to appear last year, I recognized the project, and though I’m a big fan of Johnny Depp and Gwyneth Paltrow (two of my favorite movies of all time are Ed Wood and Sliding Doors), the trailers were terrible enough for me to say pretty confidently that I didn’t even want to bother seeing it.
It kind of reminded me of another Depp outing that involved some kind of spying opposite another Hollywood leading lady: The Tourist, where Depp played opposite Angelina Jolie. That movie, even though it was a financial success, was forgettable enough (and in my opinion terrible enough) that I can’t even tell you what it was about even though I went to the theater and sat through the whole film! If I strain my memory, I can vaguely remember something about sitting on a train with Jolie in Europe, and Johnny Depp walking on the roof in his pajamas – that’s about it. Oh wait – there was a surprise ending. Or was there? Honestly it was forgettable enough that I can’t really tell you how it ended.
The Tyranny of Expectations
I bring up this experience not to say “look how smart I was not to invest in this project” (any VC or angel investor in Silicon Valley worth his salt has invested in enough bombs, and passed up on enough hits to know that it’s not entirely a predictable thing). Nor is my point here about how terrible the film has turned out - in fact, there are probably a modest number of people who enjoyed the movie and it’s quirkiness. Actually, the fact that Mortdecai is now being called “one of the worst films of the year” made me more likely to go see it (perhaps in tribute to Depp’s great performance as Ed Wood, who was voted the worst filmmaker of all time!)
My point is actually a different one altogether. The fact that this film, based on an obscure set of cult novels, was brought to mass market by a major studio spending $60 million dollars set up a certain set of expectations. Anyone who has seen the previews and TV ads knows that Lion’s Gate must have spent a lot more on marketing – perhaps in the tens of millions – which means that to just break even the film would have to do well over $100 million! (not even counting exhibitor fees, distributor's fees, etc.).
Even for a passion project of Depp’s (since it was revealed that he was the driving force between bringing this one to market), it was marketed to the masses and released on thousands of screens because that’s the only way for it to match those lofty expectations. This is the blockbuster formula used in Hollywood again and again – get the big stars, pay them a lot, market the hell out of the film with tens of millions more in TV marketing – and release it on as many screens as possible.
I want you to consider an alternate scenario: what if Mortdecai had been brought out on a very small indie film budget, which is what happens to a lot of passion projects?
Suppose, like most indie film-makers the film had been made for a few million dollars? OK Depp wouldn’t have been able to afford to hire Paltrow or Ewan MacGregor, or even pay himself a multi-million dollar salary. Suppose also that the film had done $4 million in total box office, bringing out fans of the novels and some subset of fans of Johnny Depp?
The film, even if it was as terrible as it is now, would be a financial success and not, as many industry insiders are calling it now, “Johnny Depp’s fifth flop in a row!” My point about this film (and many others) is that perhaps the film might have done better with lower expectations and found a niche audience of people who are into these kinds of movies?
Now I’ve never met Johnny Depp personally, so have no idea if he would do a film without his usual multi-million dollar payday, but the point is that there are some films that are never going to be “mass market” films. This is why there’s an “indie” film industry – for financing those passion projects that may not appeal to “mass audiences”.
I’ve seen the same phenomenon in the software industry in Silicon Valley, where investors pump millions of dollars behind teams that try to grow their initial small product idea into a big company very fast. Many of these efforts fail, partly because of the amount of money they spend trying to “get there”.
It’s not the investors who are to blame, it’s also the entrepreneurs who eagerly go out and try to raise millions of dollars to become the next “big thing”.
There are many startup product ideas which would work great if treated as a small, bootstrapped company; but, when they are treated as if they could be the next Uber or Twitter or Facebook, they ultimately fail. By raising a lot of money in the startup world, you eventually end up spending it, and if the product hasn’t met the lofty expectations that you set when raising money, you’re suddenly out of money and the company dies.
Moreover, because you raised VC money, you tend to have hired a very expensive team of VP’s and other key personnel to bring the product to market, who aren’t going to stick around when the money runs out.
Hell, the founders have little incentive to stick around when the money runs out because of the way that VC deals are structured – they get their money out first, and unless the company/product is a stellar success, there’s no way that the founders are going to have it be a financial success.
These VC-backed companies, like Mortdecai, I would argue, are a victim of their own expectations.
In many ways, when you raise money for your startup or for your film, by setting a certain budget, you are implicitly (or explicitly) creating a set of expectations.
If I asked you to jump over a bar, and gave you the option of how high the “bar” should be set that you have to jump over, what would you say? If you wanted to be sure you would jump over it, you’d probably say to keep the bar pretty low and would easily step over it.
However, as a startup founder or film-maker, when you raise money, you are basically being asked how “high” a bar would you like to set for yourself and your project?
Inevitably, most entrepreneurs and indie filmmakers will set the bar as high as possible and try to raise as much money as possible. Most indie filmmakers would love to get a $40 million budget for their adaption of an obscure set of cult novels into film. Similarly, most entrepreneurs would love to raise $5 or $10 million or more in their series A financing.
In both cases, you’re creating a set of expectations for how well your film (or startup) will need to meet in order to not be considered a “flop”.
So, Mr. Indie Film-maker, and Mr. Entrepreneur, ask yourself for your next project, how high do you want the bar to be set?