The Risks and Rewards of Self-Distributing Movies, With Black Bear’s Teddy Schwarzman

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2:06It is Wednesday, October 29th. At the Toronto Film Festival last month, I saw a couple good movies that were both produced by Teddy Schwartzman. One of them, a mountain man drama called Train Dreams, was a big hit at Sundance and sold to Netflix for a big price. It's now in the Oscar race. Another one, Tuner, with Leo Woodall as a piano tuner turned reluctant thief. It had no distribution at all. And I asked Teddy at the after party, what's up with that? He said he's going to release it himself. Interesting, I thought. Who in the world would want to launch an independent film distribution business right now?

2:39It's hard enough to make money in movie theaters for the major studios, the ones with big-budget tentpoles and IP-driven blockbusters. Making and releasing smaller, independently-financed titles almost seems like a death wish in an age where that business has kind of downsized or transitioned over to streaming with fewer breakouts in theaters and even a few years ago. But lately, despite the risks, or maybe because of those risks, We've seen a new player or two pop up in that market. Black Bear is about to give it a go. If you're not familiar, it's the independent production sales company founded by Schwartzman.

3:12His dad is Steve Schwartzman, the CEO of Blackstone. Black Bear has been around for almost 15 years. It's a big player in the independent world. They produce dozens of films, everything from the Oscar contenders Mudbound and Nyad and The Imitation Game and Sing Sing. They do TV too, but mostly film. They sometimes finance their own movies. They also sell off distribution rights around the world. The company has a small international distribution arm they started. They had Conclave and The Brutalist in a couple territories. But now, as of next Friday, it's in, yes, the U.S. theatrical distribution business with a boxing film called Christie, starring Sidney Sweeney.

3:47A couple others are coming next year. So why do this? Is there actually an opportunity here? Or is this just that there are so few buyers out there for these kinds of movies, Black Bear needs to go it on its own? A good question. so I figured I'd have Teddy on the show to explain and discuss. Today, it's the independent film distribution business and making big bets on small movies in theaters. From The Ringer and Puck, I'm Matt Felony, and this is The Town.

4:16Okay, we are here with Teddy Schwartzman, founder and CEO of Black Bear and big player in the independent film world. Welcome, Teddy. Thank you, Matt. Great to be here. Okay, so I want to know the basic question. Why do this? Why launch U.S. distribution at a time when people are jumping up and down, screaming about how hard it is to get any traction in the U.S. distribution market? Like, is this an opportunity you see? Or is this just you've been kind of backed into a corner on some of these movies and you need to do this to get these movies seen in this country? I think we're just gluttons for punishment.

5:02No, come on. You've managed to stay in this business for 15 years, so you're doing something. What do you see here? Well, I think from our side, we try to make moves carefully and methodically without delving too much into Black Bear's past. We started as a production financier, developer, hands-on producer. Over time, we built out verticals that would allow us to help monetize not only our own films, but other people's films. So in 2013, we launched Elevation Pictures in Canada. That went from about 10 people in Toronto to about 40 people that we have there now. We've released about 600 titles to become the number one distributor in Canada.

5:46Including some big ones. You had Conclave, you had a couple others. Yeah, we did. Last year, we had Conclave actually not only in Canada, but also in the UK. where we won the BAFTA for Best Film because we grew a distribution first in Canada, then we expanded into other English language in the UK. UK is a more difficult market just because of theatrical settlement rates. That means you get less money from the theaters. Correct, which makes your P &A more risky, your advertising dollars more risky, and means that you need to find films that you really think can outperform. So in the UK, we take fewer swings.

6:21We focus on 10 to 12 films that we believe can really pop, but also have artistic and creative merit. And in Canada, we've been releasing about 40 films a year and became the number one independent distributor there for the last seven years. So we've been in the business of distribution. We've been in acquisitions. We've been in marketing, publicity, theatrical distribution, and understanding landscape. Gate. We've released movies for Lionsgate, Focus, Neon, A24, and have been doing so for the last 10 plus years. I think from our standpoint, our business has continued to evolve. Now you're competing with them, essentially.

7:01You know, to me, there's a community aspect to what we get to do, you know, where we actually like each other, at least I do. So while we might compete for dates, we're also still collaborating, right? We're releasing some neon and A24 films this year in the fall or otherwise. But what we're really focusing on is building out our own slate for distribution and I think filling a hole. Now we're getting to the answer because I want to know why do this. If you have these relationships with these existing distributors, why launch your own in this country? Because it's a very different market than plugging holes in different markets around the world?

7:40The U.S. distribution market is very competitive. Very competitive, certainly on an acquisitions basis, on a completed film basis. I think where we have an expertise is a 15-year track record of production and being able to identify opportunities early. So that ramp-up that we've been having on the production side took us from, call it, one to two films a year when we started out in 2011 to three to four. And now because of just sort of the robustness of our infrastructure, both domestically and in the UK, we've been making about six to eight films a year. So this is not us looking for a safety valve to release movies.

8:20It's the fact that we've really built ourselves into a full-fledged independent studio. And with the amount of capacity for critical and commercial films that we've been producing, We think there's a real ability to ramp that up, not only for our own films, but for really talented partners that we've been working with through our international sales apparatus, where we want to be a port-a-first call for what we think is slightly missing in the marketplace, which is the top end of director-driven artistic projects that we think can cross over commercially and really speak to a broad audience as well as the coasts, as well as not being afraid to be directly, inherently commercial in our taste.

9:05And we have the ability at Black Bear as a studio now to not only release specialty films, but to do 3 ,000 plus releases to put up P &A to rival major studios and yet have an infrastructure that we think is much more efficient than the way legacy studios would have built themselves. So why not do them all? why are you selling train dreams at sundance to netflix for a deal that was reported at more than 10 million dollars like if this is such a an opportunity for you guys i mean it seems like you're still putting those movies out there for sale to the highest bidder if you can get them we are definitely not no you're not you're you are holding certain things back from the get-go Let me say this.

9:49We are beyond grateful to Netflix. No, really. No, I get it. I get it. That's a very good movie, by the way. I'm not surprised they spent that money on it. Look, honestly, that was a movie that, frankly, we're blessed to have a collaboration, an ongoing collaboration with Clint Bentley and Greg Quedar, who we did Sing Sing with, you know, which was a film that nobody wanted to make and thankfully really connected. And I think that we've now taken a bigger bet on Train Dreams with Clint directing, you know, on a film that from an international presale standpoint, nobody wanted a film about a logger over the decades.

10:27Yeah, but if you believe in this model, we're talking about this model, like, why are you still selling movies at Sundance? Well, because at Sundance, we didn't have U.S. distribution. Okay, so if you had made Train Dreams today, I mean, that is, I love the movie. It's a tough sell in theaters. It's contemplative. There's no real star. It's period. Like, it's the kind of movie that if it doesn't become the frontrunner for Best Picture, it's tough to get an audience in theaters. We're looking at these numbers that are coming out on these independent films in theaters. It's tough to get an audience and break through.

11:05But what you're saying is you see some kind of a opportunity here. And I want you to explain why you see that. Well, I'll also say with Train Dreams, I think that on paper, it's a difficult film to get butts in seats for. But I think what we've been in the business of doing on the production side and what we now believe in on the distribution side is really trying to bottle magic. Honestly. Is that a business? It's a really hard business, man. It's a really hard business. Unless you can get Netflix to pay you$10 million. Look, again, I love Netflix. Definitively not the goal. But that said, I'm a firm believer that everything happens for a reason.

11:48And with Clinton Gregg last year, I think Sing Sing was somewhat overlooked by coming out in the summer and only having so much powder behind it. I think we knew while we were in early stages of discussions about U.S. distribution, we weren't ready. And the last thing that I'm ever going to do is partner with writers who I love and believe in, director who I trust implicitly, and our talent and put them into a situation where we don't have an infrastructure, but we say, trust us, we're coming back to you in nine months. So when we launched distribution, we launched it in August. I think we might have been scooped in July, but we launched in August, you know, and we launched with eight films that are in post-production and now an eye towards acquisitions.

12:34We are huge supporters of the movies that we've made in the past, the distributors that we're currently partnered with, while we're also focused on our own distribution slate and maximizing our movies. Okay, so I want you to explain how that works. Because I don't think people realize how difficult it is to ramp up a U.S. distribution unit. Like, use Christie as the example, because that's the one that's coming out. What does it mean to book the theaters, put together a P &A plan, do all of the things that distribution requires? Sure, I can do how to build a distribution company 101, which I'm still learning, so bear with me.

13:20But it's a number of facets, right? First, there's obviously the operational side, making sure you have proper finance, proper accounting, proper business and legal so that you're set up not just for that film, but for films in the future. We have a six-person theatrical distribution team that's in place right now, headed by David Spitz, who for 15 years was overseeing theatrical distribution for Lionsgate, but also our in-theater marketing team to make sure that you get your standees up, to get your posters up, to get your trailer play. So we have that team that's in-house right now. We have a six-person marketing team that's going to be growing that's focused not just on creative advertising, but then also really focused on digital marketing.

14:02I think we want to make sure that as we build our infrastructure, we have the heft to be able to go head-to-head on big theatrical wide releases against major studios, but also want to make sure that we're nimble enough on our specialty films because we're going to be playing in both lanes. We have a publicity department that works through strategically both the direct-to-consumer campaigns as well as the award strategy, which is a major consideration on Christie, especially for Sidney Sweeney, who gives what I think is one of the more impressive and singular performances that we've been lucky enough to be involved with.

14:39Did you get her to the Dodger game last night? That was a nice little stunt with the real-life boxer. Last thing I would want to do is try and get somebody to the Dodgers game in LA traffic. No, but she was there sitting next to the real life boxer. That was a nice little moment for you. But that's the kind of thing that a distribution team does. Yeah, 100%. I think we believe that this is a movie that can not only appeal to a cinephile crowd, but appeals to audiences across America. The people who are watching the Dodgers game should be watching Christie. 100%. True. Okay. So this is like a eight-figure investment in distribution.

15:13Have you ever taken outside money? or has this all come from you've never taken outside money all comes from me yeah we've been a single source finance company from the get-go with me luckily having those funds to be able to to back our our films and i remember when we uh when we started black bear in 2011 i was on some panels where where people were basically just saying you know other people's money right and And to the extent that you're putting equity into films, you're a vanity play. And I think that definitively can be true. We've just wanted to grow slowly over time, but profitably, and try to control our budgets, control our spend, but really bet on quality.

15:58I think we want when the Black Bear logo to come up, you won't necessarily know what genre it is, but it's going to be quality. 15 years is like dog years for an independent film company. It's like lasting 100 years as a major studio. Thank you. No, look, it's been fun to watch the industry evolve from a time where there was actually a DVD market to rely upon. I remember sitting in some meeting with tech investors talking about how there was going to be this confluence of content and tech and kind of had no idea what they were talking about until all of a sudden Netflix really flipped a switch and stopped sending DVDs.

16:39and you realized that our business was evolving. You say evolving. A lot of people would say swirling the toilet. Look, it's complicated. You know, I think we live in a world that is ever-changing. I'm sure AI is going to only enhance that, as you saw with Amazon layoffs yesterday. But I think what we try to do is study that change, find holes in the marketplace where we see them, and then move aggressively but intelligently, I guess only time will tell whether that's actually true, if it's intelligent or if it's completely foolish, you know, to try and establish a foothold. And I think you can analyze till the cows come home models, which we do, because you need to be rigorous in how you are evaluating what a film can and cannot do, both creatively and financially.

17:29But if you separate that bottling of lightning, that capturing of magic that we talked about is a terrible, terrible business, then none of the numbers really make sense because you need to create a product that transcends the sum of its parts.

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18:40A trusted urology specialist can help diagnose PD and walk you through your options, including non-surgical treatment. Visit TalkAboutPD.com. okay so take us through the model on a movie like christy the nrg tracking has it at three million next weekend that could go up a little depending on you know she's everywhere publicity the reviews coming in but let's say that grosses five million dollars or less in its opening weekend in theaters sure what's the model on that where do you how do you get to break even? How do you factor in PIVA, the awards campaign, all of it? This is close to our model, though I think that from our standpoint, you know, our spend, you know, about, call it 10 days out, is really starting to kick in.

19:27So what's a marketing campaign for a movie like that in theaters? This is our first release, so we're going to spend. What does that mean? Like 10 million? We're going to spend more than a specialty distributor would spend because we believe that this movie is not just an arthouse movie. We believe that this is a commercial film that crosses over, plays not just the coast, but plays across America. I think your number is a reasonable number to throw up there, but that number to us equals a box of, call it around the same, if not a little bit higher, and we get to break. Break means break even in theaters.

20:01Or does it mean break even if you factor in PIVOD and you're out of wood? Correct. I think it's interesting to see some of the analysis that whether it's variety, deadline, or otherwise do, which is generally analyzing box office, dividing it by 50%, looking at your P &A and your budget, and then saying, did you break or did you not off of theatrical box? Nobody models out their returns based on theatrical, right? If you were doing that off of a business that takes 50 % off the top, then it wouldn't make any sense. No, I mean, it is a good indicator of what the ultimates will be because a lot of those are set by theatrical box office and the interest level is there with exceptions.

20:46Movies take off on streaming that were not hits. I mean, Salt Burn was a good example. Two years ago, gigantic hit on streaming. Didn't do much business in box office. I agree with your criticism there. Yeah, and at the same time, you're completely correct that we're a theatrical first model, right? To the extent that something hits Netflix and becomes a huge hit there, there's no upside for any of the profit participants, right? That's a pure license window. And that license is generally tied to how does the film perform at the box office? So you want the film to perform at the box office so that the downstream ancillaries are being maximized.

21:25And you don't have a general output deal. A lot of distributors like A24 movies go to HBO Max and the various vertically integrated companies like Searchlight, their movies go to Hulu. You don't have that. We have not announced our output. We are in active discussions. We are set as it relates to Christie. So where will that go after it's in theaters? We haven't announced it yet. Oh, okay. But someone bought it. Yes. So from our standpoint, we know our risk tolerance. And at the same time, this isn't for us about mitigating risk, right? It's about maximizing potential. When you have a movie that you think plays to audiences, this is one of our highest testing movies ever.

22:08It's in the mid-90s for both men and women over 35, and it actually is in the low 90s for women under 35. So this is a movie that plays, and as we premiered at the Toronto Film Festival, I won't talk to you about standing ovations because I know how we feel. Please do not. Do not. It's not as big of a problem at Toronto. So it's a little problem, but it's not like Venice or Cannes. No, but I will just say that this is a movie that moviegoers love. And so what we've been doing is playing the film not only in Toronto, not only in London, but we've been playing the film across the country in regional festivals that not only have been recognizing Sydney's incredible performance, but also that there's a story here.

22:51The interesting thing about not having a direct output deal and selling these movies to streaming individually as a distributor, it really places a premium, I think, on star power. I mean, this is essentially the modern equivalent of the old DVD business, where if you had a star that people knew and cared about on the cover of the DVD, you could get a better premium. And that sort of fueled the independent film business. It's why, you know, all these movies would go to AFM with, you know, these older stars like Schwarzenegger and Stallone. It's like they can sell these movies overseas and they can put them on the DVD box.

23:35And now you do a female boxing movie. There's one price with regular actress. There's another with someone like Sydney Sweeney who people recognize. And a streamer is going to say, you know what? People are going to click on that. I guess first I would say I don't believe. And while I'm trying not to talk about the discussions that we're having, I don't believe we're going to be a company that's existing and modeling on having no output, right? We are a company that's releasing up to 12 wide release movies with 20 plus of P &A behind it. Okay, so you want a macro like Hulu, A24 style HBO Max deal?

24:16Yeah, just because I can't talk about it at this point doesn't mean it isn't a definitive part of the model, and it is. But I think the way that we've always built films, in part because part of our model is thinking about a film's performance domestically, and it's thinking about a film's performance internationally. And the international markets have generally been very star reliant, right? And what you don't want to do is be building movies with stars that feel like they're from another era, but still have DVD value in Germany or free TV value in Germany. And at the same time, it's a hard market out there.

24:52and you want to make sure that you are putting your best foot forward as to maximizing the value of your films when they do work. So we've always been in a star driven business, but we also recognize that stars don't make movies work. Okay. I get that. I just wonder if the stars are going to be necessary to generate the kind of streaming traction that you want, but you know, It's an open question. Well, look, I think from our standpoint, we have multiple Jason Statham movies. He's a star. He's a star. We're working with Matthew McConaughey on a film that we're incredibly excited about. I think from our standpoint, we are working with them not because they are stars, but because they're great at what they do.

25:40Oh, that's very nice of you, but they're also stars. Yeah, but I would just say, what's the right way of saying it? Um, from our standpoint, we're not trying to make things, uh, just because of who goes on the box. We're trying to support films in their genre that can really break out and be defining. So sometimes that's surprising. What's the end game here? What do you want both in the short term and in the long term out of this initiative? Like, do you want to be considered a competitor to a 24 where you're releasing 10 to 12 movies a year and a couple of them hit and it pays for the whole thing like that sort of necessarily kind of changes the kind of movies that you're making i think i think we'll let others make the comparisons um but i think we're stepping in as a highly capitalized experienced studio that is willing to play aggressively in both the acquisitions game and be bold and uh take risk as it relates to the types of films that we back and how we support them.

26:46Once you launch U.S. distribution, that really becomes your business. Right, so this is you as a company now. You are a U.S. independent distributor competing with Neon, competing with Sony Classics, competing with A24 on their smaller movies. Exactly as you said. I think for us, we don't see so much overlap with some of the companies that you mentioned. Well, A24 is making$50 million movies starring Dwayne Johnson. now. Oh, 100%. So that's a little bit probably, it seems like that'd be a little out of your budget range. No, no, there's, there's, look, I think we've made numerous movies that are 80 million, 90 million.