Podcast #11: Sophia Dilley

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Transcript

Colin: Hello and welcome back to filmonomics @ slated. I’m Colin Brown, your podcast host for this series that examines the film industry from the inside out. And what a complex, and so often contradictory, business this whole world of visual storytelling can be! As I laid out in my White Papers on film financing that I wrote for Slated a couple of years ago, there are just so many competing interests to satisfy when deciding what ideas are worth that long and winding road to the screen. Not only do you have to find the shiniest, sharpest needle within that huge haystack of possible projects, you then have to thread that needle multiple times as well.

As I came to understand, the industry’s most reliable producers are those who can combine an almost radar-like sense for where the zeitgeist is heading with a business framework that both shields them from disaster and arms them for success. And, above all, they need a great sense of story. Which brings us to this week’s guest, Sophia Dilley. She’s the Vice President of Development and Production for Film and Digital Media at Route One Entertainment in Santa Monica. You’ll hear more about the projects that Route One has been involved with in the interview coming up. But to give you an initial sense of Route One’s acumen for sourcing ideas, it’s worth noting that only a year after the company was founded in 2009 it grabbed the rights to Damien Chazelle’s kidnapping screenplay, THE CLAIM. That is a full three years before Chazelle made the short version of WHIPLASH that launched his Oscar-winning career.

Signs are THE CLAIM will finally go into production this year or next; and should that thriller find success with audiences next year it won’t because it was made to capitalize on Chazelle’s sudden name recognition in the wake of LA LA LAND. It will be because the material itself mesmerizes. As Sophia notes, filmgoers do sense when they’re being cynically exploited, as opposed to genuinely entertained.

“If you can achieve a story that everyone wants to hear, or a certain part of the population wants to hear or see, you’re going get them. And it’s a matter of how you position it. But if you start with, ‘Hmm, how can I make money off of my audience?’ I think it’s pretty clear that’s where you started.”

Over the course of eight years, Route One has grown into one of the more dynamic finance and production companies active today. It was co-founded by Russell Levine, who serves as CEO, and Jeffrey Ubben, the activist investor who spearheads ValueAct Capital, a $16 billion investment fund based in San Francisco that has put money into companies such as Microsoft, Reuters, Rolls-Royce, Martha Stewart and Adobe. Ubben also has a significant minority stake in the United Talent Agency (UTA) and is on the board of 21st Century Fox after ValueAct acquired a $1 billion stake in the Hollywood studio conglomerate in 2014.

With Ubben’s backing, Route One has become a fascinating example of a boutique film company that deploys a venture capital-style model in the way it sources and develops a global content portfolio. As a hedge fund manager, Ubben likes to find trailing-edge companies and steer them in the transition from old-tech to new-tech. The direct-to-consumer revolution now engulfing the entire entertainment industry, a wrenching process that is cutting out so many of the industry’s middlemen, means that Route One is constantly re-evaluating its own content strategies. Unusually in a film business so notoriously slow to adjust, Route One is not afraid to venture down new production and distribution paths. So I asked Sophia how she goes about selecting projects in such a shifting environment. What is she looking for these days?

Sophia: Well, unfortunately for me it changes every day! Literally, I feel like my mandate is constantly in flux. And I think that’s for a variety of reasons. You know you always are looking for the same fundamentals of like a good story. There’s a certain set of rules I think I always look for: Am I engaged or interested? Did I want to finish the story? Am I turning the pages? Like when I’m reading scripts, you automatically can kind of see the difference between something that’s well-written and something that isn’t. The way we kind of read through content is we do hold it to a certain standard when it’s on the page.

So that never really changes. But in terms of what we’re looking for story-wise, it’s always trying to predict what would fit into the zeitgeist in two to three years from now. And what’s relevant now is also important because you’re trying to attract your talent, your directors, and so there’s a certain level of balancing. OK, what is in a story now that’s important that will capture the attention of filmmakers and talent? And what do we think is going to be profound and good and interesting and viable in two to three years. So, you’re always battling with that. It isn’t literally day-by-day, but it’s just a lot.

I called last year: The Year of the Drug Cartels. Because I got, I think, 60 scripts that were about running drugs into the United States. It was like, you know, ex-con who becomes a drug smuggler. You could tell that everyone had watched BREAKING BAD and was so in love with that story that on some level, they wanted to tell a different piece of it. So I just like with every script I got I went: You know, I think you might not want to do this because it’s obvious that the market is oversaturated with it!

Colin: Sophia first joined Route One in 2010. The daughter of an award-winning production designer, she grew up on film sets. She then went off to study film production, political science and project management during her university years before landing her first industry jobs working for director Peter Berg on his films, HANCOCK and BATTLESHIP. Over the course of her seven years at Route One, the company has shifted gears in ways that have mirrored the course changes across the independent filmmaking landscape as a whole.

Sophia: Route One is a production, development and finance company. We’ve been around since 2009. I joined the company in 2010. We’ve kind of gone through multiple iterations. The first being we were a development company that was focused mainly on just finding really interesting and great material and helping package and then set it up elsewhere. And then in around 2012, we secured production financing out of a sovereign fund in South Korea. So it enabled us to put equity into films in the $15–35 million range — and higher if it was a co-financing situation. Basically, in that model we were making movies that were highly commercial, highly marketable movies that could be made for a certain budget. Sort of the middle class of film, I suppose, is what that range is. Definitely foreign sales driven and a little bit more in the later 90s, early aughts style of film. We made five movies out of that fund. The first one was A WALK IN THE WOODS with Robert Redford and Nick Nolte and Emma Thompson. And then we did EQUALS with Kristen Stewart and Nicholas Hoult. And then we did a two-picture deal with STX Entertainment: FREE STATE OF JONES, SECRET IN THEIR EYES. And then COLOSSAL with Anne Hathaway and Jason Sudeikis.

And then we had a couple of movies that we actually ran through our lead investor who’s out of San Francisco and we kind of did a straight equity deal. It was sort of a new test of the model of where we are now, with the first being TALLULAH. TALLULAH we fully financed. It’s a just over three million dollar budget. And it’s a movie where we were really focused on trying to find something that works for the OTTs [Over-The-Top services], something that was female-driven and we obviously had a female director and writer, Sian Heder, who is amazing. And we kind of worked with that movie and turned it into a couple others; we turned the profits from that movie into LANDLINE and are moving forward. We put some additional financing into THE CIRCLE and we’re hoping to get a couple movies going this year. So we’re in a little bit of a transitional phase as a financier. We’re working more in this space that we think the market’s going. We don’t necessarily believe that the traditional foreign sales model is that viable anymore. And we’re still focused on finding really great awesome material.

Colin: In making these transitions, Route One has tended to be a little ahead of the industry curve. The Korean fund that Sophia alludes to here is the $110 million Sovik Global Contents Investment Fund that brought Route One together two of Korea’s leading entertainment players, Lotte Entertainment and CJ in a partnership with the South Korean government to make thrillers, comedies and action pictures. It was the largest entertainment fund in Korean history, forged at a time before Asian money rushed again into Hollywood — only to start retreating this past year.

The foreign pre-sales model that Sophia refers is also backtracking. In the past, independent filmmakers could raise a portion of their production budgets by selling rights in advance to a few distributors on a country-by-country basis, and then raise the balance through bank loans. The problem with this model is that pre-sales are so dependent on securing those few actors who are popular across the global stage.

And since so few star names are readily attainable, or even necessarily appropriate for the project in hand, the alternative for production companies like Route One is to fully finance films themselves or else partner up with other sources of equity financing. They do so in the hope that completed film will either attract distribution offers that will more than cover their costs, or provide them with a sufficient share of the future revenues to justify that initial outlay. But then along came Netflix, Amazon and the over-the-top streaming platforms to muddy the waters even more. The more these OTTs hoover up worldwide video-on-demand rights, the more that the value of DVD and pay-TV rights that underpin those distribution deals in different territories have cratered. So, just like Route One has done, production companies are turning to more and more to these platforms as their primary buyers. Which begs the question: How has this new industry dynamic changed the decision-making process when green lighting projects?

Sophia: I think a lot of it is speculation. A lot of it is grounded in real changes that are happening. I think the disruption that Amazon and Netflix and the OTTs have brought to the table is that they don’t rely on the same type of sales. Obviously with the subscription model their basis for material is really going after the markets that are going to stay on their platform due to a piece of content. And I think with the foreign sales model you’re dependent on, not necessarily a lack of sophistication but the reliability of an audience abroad really to come and see a movie star over and over and over again and it’s really hard to predict who’s going to be successful and who’s not. I mean EQUALS is a really good example for us. We had Kristen Stewart is one of the biggest stars at the time and had just come off TWILIGHT and you know there was a lot of trust that she’d be the kind of person who could open this movie abroad and in the U.S. And it’s a great film, it’s a beautiful film, and I think it’s just a testament to the fact that audiences are sophisticated and it really depends on the story. The story matters. I think probably 10 years ago people were excited about seeing Jason Statham in a movie and now it’s like we’ve seen him in 30 movies and you know your audience has become more just aware of the system.

So I think the U.S. has been experiencing it earlier than the rest of the world but everyone is sort of getting onto the same page and as the theatrical experience has become more event-driven, I think we’re going to see a bigger divide between the types of movies that get wide releases and the types that don’t.

So, you start to kind of read the market based on what you’re getting, based on what’s already out there, based on what’s being made and what you think will work in the future and also to go off of what we’ve been talking about, you know, predicting what we think will work on a streaming platform, right? It gives you a little more liberty to play around with who you think your audience is because you’re no longer going after this sort of nebulous four-quadrant or two-quadrant or just the 15-to-25-year-old male. You’re really looking at: OK, is there an audience for this? Who is that audience? And will the OTTs respond to that because they know exactly how to market it?

I think my eyes were opened with TALLULAH. We had a great experience marketing the film with Netflix and it was so interesting because that’s where everything happens for them, right? When you open their platform it’s like: How do we get somebody to click on your movie? And it was just fascinating. They don’t share any of their data, but knowing what your interaction was with like the thumbnail and the images and knowing what you’ve seen and who’s in it, they can really strategize around how they algorithmically get it to you. So it’s fascinating. I’m excited by it. It means that there are more ways to get your content seen.

Colin: More ways to get content seen and more ways also to experiment in how to present that content to potential audiences. There has been considerable media attention given to the way that Netflix and Amazon use data to help determine the likely audience appeal of feature films and episodic entertainment that they acquire or invest in. But so often overlooked in such discussions is the way that those streaming platforms are changing the marketing conventions as well. The theatrical rules of engagement are being re-written.

Sophia: They’re different in that in a traditional release — and I’ve only done this a couple times so I’m not, you know, I’m not an expert by any means — but in the traditional release what the conversations tend to be more around are: You’re getting your billboard; you have your building blocks; you’re going to have your image that everybody has approved. And in the Netflix-Amazon universe I might have a thumbnail of a MAKING A MURDERER, right, that works better for me than it does for you. And they know data. So they’re going to go: OK, we know she responded to this image which means we can give her this image and she’ll respond to that. You know, they’re doing all this constant sort of psychological tests with how people are responding. And so that’s a totally different conversation. And in fact I found it fascinating from the deal making on the front end of the film because you often make deals with talent where, you know, the talent’s tied to each other. And that really screws up Netflix! Because they can’t put 25 people in a photo. You know, you’re tied. You’re all tied to each other and there you have to fit into this little tiny one-inch photo on your screen and so, it’s complicated. It was really eye opening for me that you want to pay attention to that on the front end because it can affect how… I might respond to Ellen Page. You might respond to Alison Janney. You might want to flip those thumbnails based on your user.

And in a traditional model where they’re tied to each other, they’re going to have both and that makes the image harder to reach its true core audience. So that was fascinating and totally different conversation than what we’d had theatrically because theatrically we just said: Yup, there’s the poster; there’s the billboard; there’s the trailer; we put it out on these traditional means. They’re not doing anything where they can say: Oh, Colin you were driving today. We noticed you saw that billboard. They don’t have that. They don’t know who is looking at what. They can only kind of speculate and track in their own unique way. So I think this is much more hard data. They can really see what’s working and what isn’t.

Colin: All this hard data has given companies like Netflix and Amazon the confidence to ignore the old rules. While traditional distributors strive to make the numbers work when thinking about buying films at festival and markets, Netflix can simply swoop in, as it did with TALLULAH, and pay a reported $5 million for worldwide VOD rights before even knowing how Sundance audiences and critics might react. Even though this was director Sian Heder’s first feature, they already knew the impact of her writing from her work on ORANGE IS THE NEW BLACK, plus whatever audience insights it might have gleaned from the 2007 film JUNO when it comes to Ellen Page, Alison Janney and offbeat stories about motherhood. Not only can they operate by a different set of numbers, they don’t even have to share those numbers. Knowing that Route One’s co-founder is a San Francisco investor immersed in the world of industrial transformation, I wondered whether all these creative upheavals are embraced as part of the company culture. After all, the company’s own tagline is: “Redefining Commercial Filmmaking in Hollywood.”

Sophia: Yeah, definitely. I think that one of my favorite things — and certainly why I’ve worked for this company for so long — is that we aren’t afraid to innovate. And I think that that is critical now in any part of the entertainment industry. It’s very clear that if you are not able to adjust to the changing tides and really think differently and approach projects differently in thinking about where they’re going to fit. The supply is so high you know. Everyone can do this now. Everyone can make content. And everyone can make good content if they are talented enough and they have access to these materials. And because of that, you know, you not talking about the seven major conglomerates. You’re taking about like hundreds of companies and if you can’t keep up with that pace, it’s just not going to work. And that I think is a very San Francisco startup tech mentality. You’re constantly evaluating how can you adjust your company? You’re constantly looking at: OK, this isn’t working but where’s the opportunity in that? And how do we shift in our approach? And again that’s sort of why I was laughing at the beginning saying, “My mandate changes all the time.” Because we are very much so geared in this way where we are on our feet and adjusting a lot. And there are positives and negatives to that because obviously, then you are in this constant sprint almost. I attribute that definitely to the San Francisco zeitgeist. That’s their worldview.

Colin: A prime example of the imaginative leaps that Route One is willing to take is Nacho Vigalondo’s sci-fi black comedy COLOSSAL starring Anne Hathaway and Jason Sudeikis. This is not your typical monster movie, despite the scenes of a giant lizard ravaging the Korean city of Seoul, but rather an allegorical tale about a hard-drinking woman on the verge of a breakdown who returns to her hometown in America to try to put her life back together. Even the way the film was acquired and distributed broke new ground. Premiering at last year’s Toronto film festival it was bought by a mysterious distributor, later revealed to be the intriguing new upstart Neon, which then partnered up with Legion M, the first fan-owned media company, to help bring the film to market this past April. On so many levels, Route One’s involvement in this film was an exercise in calculated risk taking.

Sophia: COLOSSAL is such an interesting film to examine and it’s so exciting for me every day. I have to admit that I am one of the people who was very skeptical: I was like: I don’t know if I understand it because on paper it’s very strange and a testament to Russell’s ability to kind of think outside the box. He really saw that Nacho’s vision was going to deliver on this. I mean the movie is so special. It’s really incredible that it’s able to kind of merge genres and yet be this really strange metaphor for kind of killing your demons. And I think: Yeah, it’s a movie where as a company we definitely took a risk and a lot of companies did not. You know, Voltage developed it with Nacho longer than we did. We came on board just sort of in the pre-production phase. But even in the production of the movie, it was so unique and working in Korea and kind of using our pieces to bring another sensibility but different, you know, it’s like you’re touching on so many different pieces of where we’re at right now, right? The world is becoming smaller, so you’re connected. East-West is really more joined than we think. The conversation around women and her relationship with the men in her life, which is really the crux of the story, is very topical. I love the film. I’m so proud of how it turned out and I think you’re right: we’ve made the decision, we went with Neon as a new distributor, and they’re a great interesting company that’s trying to, sort of, also adjust how they work in the marketing space and we worked with a company called Legion M to help us with that part that really cultivates a community in an audience. And it’s the perfect movie for that because it’s got genre elements and it also definitely speaks to what you’re saying where, you know, it is thinking outside the box, taking a risk, kind of innovation in of itself in that you’re really using it to test the boundaries of where we’re at right now.

Colin: What makes filmmaking such a challenge is this whole issue of risk management. Audiences seem to crave things they have never seen before, to be surprised in other words; while the financiers and the banks that support them tend not to like surprises. Hence the paradox: The money side keeps seeking comparable films with which to measure their risk; the creative side would like nothing better than to make films that are incomparable. Production companies are forever walking the line between playing it safe at the risk of boring audiences and trying something bold that pushes those boundaries at the risk of scaring the industry away. So I asked Sophia where she and her company fell on the risk/yield spectrum.

Sophia: I’m not necessarily risk-averse. I always look at things kind of in the middle because I do agree with the mindset of — like we’ve discussed — kind of looking at: OK, where can we take those risks? The hardest part is we’re dealing with such large sums of money, right? And I think that the challenge is — especially as an independent company — is to what threshold can you push the risk with the money you are being given? And certainly, if there was a real formula everyone would do that. And I think that’s where are going, back to your first question, there isn’t really a formula. There was a formula that sort of existed from the pre-sales market for foreign, but it’s not there anymore. You can take steps to adjust where your risk parameters are but at the end of the day, the business itself is a risk. It’s never not going to be that way. We’ve made movies where we had the best, biggest stars and they haven’t worked, and we’ve made movies that didn’t have the stars and they worked. So it’s a really fascinating dynamic.

Colin: It is worth noting here that box office history is littered with examples of over-engineered films that failed because financial considerations were put ahead of story. What might seem like a bulletproof concept on paper can backfire in practice. Like so much in life, one should beware of easy shortcuts to success. So I put it to Sophia that even when it comes to generic entertainment such as horror films, it rarely pays to do an over-packaged knock-off of what worked before — not when there are so many competing forms of entertainment chasing your leisure-time dollar and discernment.

Sophia: Yeah, I agree I was going to say that I think the perfect example is BAYWATCH. I think that to me screams business decision over creative and it’s why it didn’t really perform. You have the biggest star in the world and it’s not performing. It feels like a bunch of people sat in a room and said, “This is what will work for the audiences, this what the kids will want.” And I agree with you completely, you should start your conversation from story because that’s again, why do we listen to stories? Why do we tell stories? Why do we want stories? If you can achieve a story that everyone wants to hear, or a certain part of the population wants to hear or see, you’re going get them. And it’s a matter of how you position it. But if you start with, ‘Hmm, how can I make money off of my audience?’ I think it’s pretty clear that’s where you started. And to answer your horror part: I’m not a horror fan but I think the horror audience is very sophisticated. You can’t just make a horror film and assume it’s going to work. You have to be aware of the tropes and the traditions. Sure it’s very formulaic in its style in the genre. But in order for it to be successful, you have to be aware of those steps and either poke fun at it, raise it up or elevate it in order to be successful. I think that’s why, you know, one out of ten really knocks it out of the park. I don’t think it’s because: Oh, the horror audience just doesn’t care. You really have to understand the genre. It’s why we stay away from that. Because we don’t just don’t watch enough of it and we don’t understand it. So we’re like: If we make this, we’re going to look like we’re trying to make it for money, as opposed to passion about the idea. You don’t ever want to start with, “How can I make money?” Because you’re not going to make money! It’s not the business to do that, you know?

Colin: So if it all comes down to passion about the idea, what on Route One’s current development and pre-production slate is Sophia impassioned about making?

Sophia: I am so excited about so many things. We really pushed into television this year and we had a lot of things that we’re working on and some stuff that I can’t speak about yet but just material that I am beyond excited about because it means we’re not going to be just spending, you know, 90 pages. It’s going to be like we get to go to the world. And the stuff that we have in development, I’m very excited about.

But in addition to that, our script THE CLAIM, by Damien Chazelle, which we’ve had for many years, is going to be something that we’re focusing on getting made hopefully in the fall, or winter of next year, and that’s something I’m really excited about. I mean Damien is so talented as a writer and a director and the script is beautiful and we’re in the process of finding a director for it now, so that’s been really fun.

And then a script that I found last year called PALMER, which is sort of a story about tolerance at a time where right now, you know, we really need to hear more stories about tolerance. It’s a project that I’m really, really excited about. We have Fisher Stevens directing and it’s written by Cheryl Guerriero who’s a writer that I absolutely adore and is incredibly talented.

And then the other project is one that I actually found through a competition we did, called SABIYA and this project I’m really — I’m hoping this next draft really works because she, Dorothy Bertram who wrote it, follows this incredible story about two women who escaped from being kept held captive by ISIS and it’s incredibly compelling. And it’s based on a lot of true events and it revolves around this sort of all-woman army that kind of posed as ISIS members and help rescue women who’ve been captured. It’s a great story, so I’m very excited about that too. I have had to do so much research to get my head wrapped around this part of the world. Because it isn’t a part of the world I know a lot about. But essentially the two women who are captured are Yazidi women from Northern Iraq. Obviously the Yazidis are one of the first groups that ISIS went after to kind of capture and enslave. It’s really fascinating because there’s a lot of stories right now too about other women who’ve gone into really battle ISIS. It’s going to be a challenge to get that going because obviously it’s highly political and it’s highly difficult film to navigate both politically and also just in terms of again finding new talent and being authentic and making sure that we’re being socially conscious about what we’re putting out.

You know I’m probably going to be shooting a short for it. We’re going to try to do a short proof-of-concept as a test to see if this helps. Kind of a la WHIPLASH, doing a test run to see where the audience really is and if there’s a real appetite for it and that’s something that I’m going to be working on.

Definitely the opportunity to explore where a story can go is really fun and it’s like a totally different mindset but I’m really enjoying it. I do think that in the future it’ll be content and we won’t really be deciphering film and television. It’ll just be the length, you know? It’ll be like “Well, is it 5 minutes? Is it 3 hours? Is it 400 hours?” I think that’s where we going. So all this is very exciting. I feel great every day. I’m like I get to go tell stories. It’s so fun.

Colin: You have been hearing from Sophia Dilley, the executive who evaluates film TV and digital interactive opportunities for Route One Entertainment, and also supervises their production for a company intent on creating a diversified portfolio of highly marketable entertainment projects.

Listening to how her company has shifted strategy offers an illuminating insight into where the marketplace is heading right now. It wasn’t so long ago that basically every movie idea had to be sold twice, at least. First to risk-averse foreign distributors consumed with their fear of losing money in an increasingly uncertain market. And then to audiences who want to see something they have never seen before. As has been noted before, trying to find the right project and the right package to satisfy both of those moments in time, separated by eighteen months of what you hope is good execution, is an extremely tough proposition. Now, instead of trying to resolve that tension, producers are bypassing that first pre-sales hurdle and going more directly to the consumer. They are doing this by either partnering up with a new breed of middleman that has a more immediate sense of its audience needs — the so-called OTTs, or subscription video-on-demand services. Or else they are exploring longer form content for television, a world not locked into many of the constraints that are burdening independent cinema. And in both cases, creative risk-taking in seen as a competitive advantage in order to stand out across the endless landscape of viewing choices.

In the soccer world, the phrase Route One refers to a direct, no-nonsense style of playing in which the ball is kicked high and long up-field towards the goal. As Sophia had made clear, using similar tactics creatively — i.e. going straight for the bottom line without thinking about the intricacies of telling a good story — does not score with audiences. But from a business point of view, going more directly to the consumer clears so much of the second-guessing by gatekeepers that stands in the way of creative risk and excitement.

That’s it from me. Tune in again to Filmonomics @ Slated for more insightful interviews coming very soon. And if they inspire you, please leave a review on our iTunes podcast homepage. It’s our own most direct route to spreading the word.

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