American Film Market Dailies

A graduate of USC Business School, Jonathan Wolf has held an illustrious career in finance and business within the film industry. He joined IFTA in 1993 as Senior Vice President of Business and has been Managing Director of the AFM since 1998. I sat with Jonathan Wolf at the Fairmont Hotel during the 2017 AFM to get his opinion on the climate of the current marketplace. Here is what he had to say:

This is an interesting year in distribution, right? What's the general feeling at this market in light of The Weinstein Company falling apart and other distribution companies struggling against Netflix etc.?

WOLF: I tend to take a long view as opposed to just how things are going this week. As Netflix and subscription services around the world continued to grow the value of syndication in film started to tank and disappear. It basically destroyed that value. A decade ago a buyer of a film in Italy could forecast what the cycle of syndication was worth fifteen years out and they would put that into their ultimate estimated value. As subscription services were built that whole syndication piece disappeared. All those cable networks and stations had to switch to something new because they don't play movies anymore, everything's available on subscription. This created uncertainty for the buyers who were coming in and buying all rights for their country. Business hates uncertainty because you don't know when to take risk. If things are certain, like if you know it's going to be raining for the next week you know to carry a jacket or an umbrella. If someone says, “We don't know how the weather is, what do I pack for my trip? Well, I can't pack everything so maybe I don't take the trip.” So, if you know what the weather is you can plan ahead. If you know what the marketplace will be you can plan ahead and make offers appropriately.

When uncertainty came along the buyers became very risk adverse. So, yes they'd continue to buy films but they'd be very cautious with their offers. What we're seeing now is while the change is not complete, the buyers can now see over the horizon. They can see where this is going to land, what the values are going to be, what they can and can't get out of subscription versus on demand and all the other mediums. So they're more confident in making offers to cover a longer period of time because they have a sense of where that is. Because of this, many films we're seeing here were washed out of the process because they were packaged a few years ago, which was a different marketplace then. Those films have missed the marketplace in terms of pricing the film properly. All films will sell if they're priced right. Just like everything sells in a department store if it's priced right. Sometimes there are discounts because a store guessed wrong on a style or bought too many. Film is no different. You have films that were made a few years ago, anticipating the marketplace would be a certain way. They come here when it's finished and find out the marketplace changed. So, that's a struggle. Now that most sales companies and buyers see where the marketplace is going they can anticipate the future, they can make production decisions today with confidence that the film's done in eighteen months. The film still has to meet everyone's expectations but the marketplace won't pull the rug out from under them and change. So there's a sense of confidence of having come to a stable place now.

What does the future of the AFM market look like with the new studios like Netflix who not only produce but self distribute?

WOLF: The AFM serves the marketplace, so I'm not looking at the AFM I'm looking at the market. AFM will evolve into whatever that means. But when you look at Netflix, they'll become a studio. There are seven major studios now. They produce 100 or so films per year. The independents, excluding India and China, produce about 1,000. India and China triples that number and I'm not counting Nigeria. Netflix isn't going to make 500 movies. They not going to make 100 films. They're going to make a small batch of films and some of the others may as well. The independents are made up of entrepreneurs. What Netflix is destroying is not marketplaces like this. It's destroying the livelihood and the spirit of entrepreneurs. Sure, they're giving great jobs, making great films and actors, directors and cinematographers are having a wonderful time, but people who want to have a stake in the game and build a company, these are the ones that are challenged and that's a shame. But Netflix is also coming in and saying they only want the on demand rights or subscription rights and they leave theatrical on the table.

The consumer still wants to enjoy a film in a communal environment and laugh and scream and cry with friends next door in a linear storytelling manner that they can't pause, where you can't get off the roller coaster halfway through. Netflix doesn't understand that environment. They're all about, “Oh, we'll give you twelve hours of episodes you can binge on at home on your couch with popcorn. The consumer wants some of that but when you look at series, global production series is in a bubble. All bubbles burst. All the TV networks we talked about before that used to have feature film as their primary programming- whether it was love stories, action adventure, etc.- lost feature film when they saw those values diminish and the consumer eyeballs went elsewhere. They started creating series. They had to. They had to make series TV.

We have a TV channel here called American Movie Classics (AMC). They don't even say their name. Why? Because all the classic movies went to subscription. They had to change. Now they come up with top TV series instead. This is being funded around the world by bundled cable and satellite packages for the consumer. I cannot choose to exclude AMC from my package. I must pay for it. So, it's a tax the consumer didn't vote on that is supporting production of TV series that aren't being watched. There are 450 narrative series produced in the USA. It's absurd. This bubble will burst, whether it's the consumers unplugging, whether it's the cable and satellite companies realizing they need to un-bundle their offer or they're going to lose their customers. The bubble will burst, the flow of money from consumers from 2^nd or 3^rd tier networks will go away. Then there will be less TV. Then actors and entrepreneurs are going to do what they've done for a century now, which is long form feature film. We still have a rough patch on that road but it's optimistic. The biggest problem I've heard by filmmakers about series TV is getting actors for film because when they commit to series it's a long working schedule and they can't leave. That will free up soon.

So there is still optimism for independent filmmakers in the face of series?

WOLF: They're just different. TV works well for an aging baby boomer population who wants to sit at home and not go out. And then you have 'Thor' do $120 Million this week and more in China. The audience is there for the right film. I'm not saying it's all action adventure. They'll go to anything if it's the right film.

Can you explain the AFM on demand screening platform?

WOLF: AFM screening platform is not year round. It starts the week before AFM and it ends at the end of March, the week after FilmMart. You don't have to go to a theater to screen AFM on demand. You can screen at the theater and add AFM on demand or only screen films on demand. It's your choice. The sales companies can choose four different audiences and they can have one or all of these audiences. The first audience is the AFM buyers, second is press, third is everyone else at AFM, fourth is buyers not at AFM who didn't make the trip. There are many countries where the cost of travel is such they can only make one trip a year. Maybe the once a year is Cannes, another year it's Berlinale, another year is AFM. We understand that so it's an opportunity to reach the buyers who maybe couldn't travel. Of course we deliver reports on whose watched and that kind of thing. We ended at the end of March so it wouldn't interfere with anything Cinando was doing for Cannes. This is because the Berlinale and FilmMart don't have an online platform so it allows companies who put their film on here to use that as a benefit for AFM and Cannes. It closes March 31^st and reopens a week before AFM the following year. We've also put kiosks in the AFM so those who want to see a film here can screen on them. Maybe they have only two hours and can't make a screening. We did this for two reasons: the most important is that as budgets get bigger and smaller and less in the middle, it becomes less and less cost effective to have an AFM screening. A screening costs about $1500. If you have a $300,000 film, you can have one screening at $1500 and hope the right 30 people in competition with 28 other auditoriums. We needed to make sure that companies with smaller films had an opportunity to find their buyers. And of course for those who were in the theater, if the buyer missed it the film is on demand. There's 75 films on the platform the first year, which is great because we expected 50. Every company sells differently. It's our job to provide all the tools in the tool box for them to sell. Do they want a banner in the lobby, on demand screenings, theatrical screenings, do they want a sea view, how it is that they want to sell. We let them select how they position their company and film. We were missing this in the tool box.

There's a lot of doom and gloom in the trades about the current marketplace. Was this a good year for AFM in your view?

WOLF: For us, the biggest challenges we found was that a number of the things we were doing over subscribed. We're dealing with larger audiences. Our pitch conference had 700 people in it. We didn't expect that. We did a session last night, “The future is female” and our round tables had 200 where we can only fit 130. So, we're happy it was sought after but unhappy we had to turn people away. We did a writer's workshop. We expected 150 but we got close to 400. We had room then because we did it at the Fairmont. Our carousel cocktails are at capacity. We may have to add a 5^th night next year because we can only take 500 a night but we had more than 2,000 people. Even location Expo. We sold out. We couldn't offer them space this year so we'll have to re-position for next year. We have a lot of organizations, especially national institutions talking to us about having a bigger presence.

The doom and gloom comes from certain Hollywood based industry publications, whose names I won't say, so I don't get repeated, who only focus on large big budgeted films, of which maybe fifteen or so companies at the AFM produce. 45% of the sellers at AFM come from non English language countries. I've seen nothing written in the Hollywood trades about them. Probably half of those 45% sellers do not focus on wide big budget theatrical releases. They are dismissed as schlock horror in one sentence. Then the trades focus on where is the big picture but no announcement is made. That's like, if you're covering real estate, you're only covering mansions in Beverly Hills and ignore the rest of the industry. You would never get away with this as a writer in the real estate industry. It's shocking that they get away with it. They say the halls are empty. I'd be mortified if the halls were crowded. At any point in time in the day there are close to 800 buyers in theater seats. And if the other 800 who are here aren't in meetings I'd be shocked as well. They're in meetings where the door is shut and the groundhog Hollywood trade writer who looks down the hallway and doesn't see anybody doesn't go into the theater and look, doesn't ask us about theater attendance. Who do you want to find in the hall? The person whose not buying. So, it's a groundhogs approach. Nobody from The Hollywood Reporter or Variety, now I've said their names, has sat with me at this market. And here we are.

Well, at Filmfestivals.com, we interview you at every market because the marketplace changes every day and it's fascinating.

Follow Jonathan on Twitter: @AFMhoncho

Interview by Vanessa McMahon