Grilled: Peter Schlessel and Bob Berney on Taking the Indie Plunge

“If there was ever a time to do something potentially profitable and also fun, it felt like this was a good time.”

Peter Schlessel and Bob Berney are the faces of FilmDistrict, a new independent movie studio backed by Graham King and devoted to distributing six to eight movies per year. The veteran film executives — Schlessel in charge of acquisitions and Berney in charge of distribution — sat down in their Santa Monica offices with Sharon Waxman to get grilled over their plans and how they plan to be profitable by the end of next year. Then they did a little video, too (below)!

What’s the lowdown, how big are you now, where are you going to in terms of size?
Peter – We’ll be moving to 2nd and Colorado in the second quarter of next year. We’re about 32 people now, including our TV division, including production staff.

Where are you staffing up?
Peter: In LA it’s a natural progression, we had the normal two to four movies, now it’s six to eight movies.

Bob: The distribution and marketing is about 20 people now, and we’ll probably get up to 23 to 24 – from zero.

What makes you guys optimistic about building a distribution company at a time when the industry is contracting?
Bob: One thing is the situation with exhibitors. They’ve geared up. There’s a lot of screens. With studios pulling back to larger but fewer tentpoles, there’s a real opportunity for wide release pictures if you market aggressively. Not long ago there was 4, 5 wide releases every week. Now we have weeks where there are one or two.

You saw what we wrote recently about Warner Brothers’ new strategy – fewer and bigger.
Peter: Which is perfect for us. We believe it will make more product available to us.

Doesn’t everybody complain that there’s too much product?
Peter: People stopped complaining two or three years ago.  

Bob:  There are still microreleases – 10 or 15 one-theater releases. But when you get out across the country with national circuits, you don’t see that. And you have to be very careful in picking the date, there’s not a lot of room for error.

Peter, what’s the advantage over being at a company like Sony, where you spent so much of your career?
Bob: We’re a private company, so we don’t have fiscal year agendas. We don’t have to pull movies to make our (annual) budget. You see it with Lionsgate, we only look at the movies from a cash to cash basis.

Was this a frustration at Sony?
Peter: At studios any acquired product is ancillary, which is at it should be. At Sony we had a culture of third party product, we were allowed to buy, but you see at most studios third party product is generally an afterthought. And here at FilmDistrict it’s a primary piece of the business.

You were a very successful executive at Sony. And Sony is doing well in my estimation. So what would make you want to leave to go to a startup?
Peter: I had a great run there. I had been there on and off for 20 years. It felt like everything I wanted to accomplish at that place I accomplished, everything from changing the food to changing the landscaping to bringing in "District 9." It was hard to leave. Even today I’m going to talk to 10 people at Sony. But I’m at the age I wanted to do something very entrepreneurial. Graham and I know each other well. Bob was availabe. If there was ever a time to do something potentially profitable and also fun, it felt like this was a good time.

The barriers to entry for a distribution company are less than they have ever been because the studios are holding back, and because the pay services are wiling to make deals.

Do you guys have a pay service deal?
Peter: We will.

Peter: Soon. Weeks.

Bob: With Graham’s and Tim’s (Headington, an oil tycoon) backing, we have the ability to do it. And with the studios pulling back, the pay services –

Did I hear you say Netflix?
Peter: You did not hear me say Netflix.

Bob: So you need to be well-financed.

How much capital do you have?
Peter: We have enough capital to execute a business plan of six to eight wide releases a year for an indefinite period of time.

Define wide.
Peter: Say 1,500 to 3,000 prints. We reserve the right to occasionally foray into sometihng that’s intriguing to us that’s 100% not the core business plan.

Budgets are irrelevant?
Peter: What we’re looking for is product that can be released wide. That can be an $80 million epic movie, or it could be a $2 million movie that has that potential if we’re lucky enough to find it.

Bob: We’re in the opportunistic acquisition business. It’s what it’s worth to us.

Aren’t you making two to four films also?
Bob: Bob is making two to four films and he has an output deal at Sony.

That’s not part of the six to eight films you’ll distribute?
Peter: No.

Bob: His tentpoles are separate from FilmDistrict. He has two puts at Sony, and he’ll make his production decisions as if there was no FilmDistrict.

Peter: We’re tapping into the independent community. The movies we’ve announced are basically greenlit without us. "Drive" is in production. "Lock-Out" is going into production with Guy Pearce. And "Soul Surfer" we greenlit at Sony, but we thought we could do a great job on that.

These are the kinds of movies you plan to acquire?
Bob: Drive is a high level genre – a thriller set in LA, Ryan Gosling is a stunt driver by day, a getaway driver by night. Carey Mulligan, Bryan Cranston, Christine Hendricks, Albert Brooks. It’s a good example of what we want to do – a genre, wide-release film.

Bob: Do we feel we can market these in an efficient, wide way and be successful.

Well, you can’t count on DVDs.
Peter: You can’t count on what it was, but they’re still an important revenue stream. DVD doesn’t accidentally overperform anymore, it’s like low tide. But it doesn’t mean there isn’t value there.

Do you guys own a piece of the company?
Peter: I’d prefer we didn’t tell you. We’re totally satisfied with our packages. It’s always risky to leave a studio. We have a very supportive financial backer (Heddington), so we believe we’ll have a good period of time to show we know what we’re doing.

What’s a good period of time for you?
Peter: You have to judge a portfolio slate over a two to four year period.

Bob: Even though Peter has left Sony, we definitely have a strong alliance.

Peter: They have the DVD rights, and we’ll have our own pay TV deal. They’ll handle free TV for us.

How long do you have to prove this model. Bob, this is something you didn’t have at Apparition?
Bob: I’ll say that Graham has been in this business a long time, and is comfortable with the cycles of the business. Apparition, Bill (Pohlad) was a producer, and discovered that this was really what he wanted to do.

Peter: We worked together on “Boondock Saints II.”

Are you going to make Boondock Saints III?
Peter: That’s up to Sony, they have the rights.

That’s the kind of movie you want to make?
Peter: We want movies that could go on 1,500 screens.

Bob: If you think about it, opportunistic and flexible are what defines independent film. You have to move quick. You have to be a closer. And Peter is a closer.

In what amount of time do you expect the company to be profitable?
Peter: I’d like to think we’ll be profitable from the beginning.

Bob: Why wouldn’t we be profitable?

Peter: We’re lucky because Tim is looking for us to make money over a period fo time, but not necessarily over first six months. We are looking for every movie to be profitable, but there’s no immediacy to it. We’ll have three to five movies by the end of next year. So we’ll make money on three to five movies.

If we can grind out lots of singles and doubles we’ll have a profitable business plan. And you won’t see us paying $25 million for domestic rights.