Podcast #5: Fernando Loureiro
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Transcript
Colin: Hello and welcome once again to Filmonomics @ Slated, the podcast series that looks under the hood of the global film business in order to give you a better understanding of its decision-making mechanics and the various forces that act upon that moviemaking engine.
I’m Colin Brown, your podcast host, and my latest guest is the strikingly prolific film financier and producer Fernando Loureiro. Talk about hitting the ground running. It has not even been two years since he and production partner Roberto Vasconcellos formed their company, Exhibit, in July 2015 and already three of their films have enjoyed top-flight festival premieres — and they also have another three intriguing films in various stages of production and preparation. On current form, we are going to be seeing Exhibit’s freshly minted logo exhibited quite a bit over the coming year.
Fernando’s three festival films seen so far give us an early clue into the intentionally diverse range of films that Exhibit has been pursuing. THE LITTLE HOURS, for example, is a nuns-gone-wild comedy set in a convent in medieval Europe that played as a Midnight Madness offering at this year’s Sundance. And just last week, two rather more contemporary and suspenseful films — THUMPER and SWEET VIRGINIA — premiered at the Tribeca Film Festival. Both these new films could be described as thrillers and both have exciting casts that happens in each case to include one of the headline actors in the new Netflix series THE PUNISHER, John Bernthal and Daniel Webber. But that is where the similarities end with these two new Exhibit films.
Jordan Ross’ crime drama THUMPER, which was executive produced by TRUE DETECTIVE’s Cary Fukunaga, takes us into the seedy underbelly of a suburban California that is lorded over by a menacing drug dealer played by an electrifying Pablo Schreiber.
Jamie Dagg’s SWEET VIRGINIA, by contrast, is a brooding, tension-soaked Alaskan neo-noir more in the spirit of the Coen brothers breakout film BLOOD SIMPLE. The chilling hitman in SWEET VIRGINIA was even described in an Indiewire review as the millennial answer to Anton Chigurh, the psychopath at the murderous heart of NO COUNTRY FOR OLD MEN.
That these films have memorable elements is no accident. In an entertainment world overrun now with highly polished films and series that have a generic sameness about them, you have to find those differentiating factors. The need to stand out is uppermost in Fernando’s thinking:
Fernando: I think that’s been the trickiest thing for everybody, for people trying to sell, for filmmakers and for financiers and investors, because there are just so many movies. You can invest in so many different movies that you really have to stop to think: How different is it. Sometimes it’s better to do something a little off center you know that’s going to be different than something that’s more down the middle and straight up commercial. Because if it’s different that’s going to call attention to itself and not be drowned out in the middle of all that other content.”
Colin: Now, before you go adjusting your listening devices, I should point out right upfront that our interview with Fernando, through no fault of anyone, was marred by audio problems. So please bear with us on this: you will be rewarded with insights into how the film business looks like on other side of the negotiating table. Hearing the questions that cinephile investors like Fernando ask themselves when trying to source projects will help us all become better partners with money.
And talking of money, one of Fernando’s concerns relates to the sustainability of production cost structures for film projects. Before he co-founded Exhibit, Fernando was part of the Sao Paolo-based team at Rodrigo Teixeira’s production powerhouse RT Features. At the time, a common complaint heard among international funders like RT was how state financing for films was merely helping to bloat budgets of film projects irrespective of their actual market appeal. Fast forward to today and you’ll see that in many ways this inflationary tendency has crept over into private film financing domain too with the arrival of multiple new sources of equity and debt financiers. In such an overheated market, producers need to exercise vigilance and discipline — otherwise, as Fernando notes here, their filmmaking costs can grow out of whack with what those projects can realistically sell for in the marketplace.
Fernando: To be honest with you, I think the first thing is that right now, there’s a lot of money out there looking to invest in film. I think there is so much equity, and so many different sources of equity and investment opportunities, people wanting to invest in film, that in a way, it’s become hard because that makes it more viable for people to try to raise the budgets, for filmmakers and producers to get more money for budgets. But at the same time, paradoxically, what’s happening is unless you’re one of those few breakout Sundance hits that you see that makes it seem like the whole market is bigger than ever, unless you really hit the bull’s-eye on your film, it’s becoming clear for us that to mitigate risk, you have to bring the budgets down more and more. And so basically, you’re praying that there’s a Netflix or Amazon component to the distributors’ offers. So definitely, I mean, in that sense, it’s been hard.
The average MG’s from distributors, they’re not as consistently high as maybe you’d want them for the budgets and most of all is what happens is, you known; it’s harder and harder for films to have a long theater life or even get a theater release which makes all the difference for an indie film. A lot of that is obviously viewing habits of the public that everybody knows about, Netflix, and Amazon. I think that’s something that’s really been difficult to gauge. And so, I think obviously, any film investment, no matter the budget, even for studios, it’s a portfolio investment.
Which is one of the reasons why we’ve done six films in the span of a little over twelve months. We would never advise anyone to invest in only one film at a time. Just try to spread your money as much as you can and to be careful to protect your investment, because you never know what’s going to happen with the film.
Colin: How Fernando ended up making six American independent films in such a short space of time is itself an interesting tale of business opportunity and market adaptation. As you will hear now, his initial involvement was further upstream in the life-cycle of a film, fishing in the spawning grounds of potential movie ideas and then hatching them into screenplays that would be produced by other entities.
Fernando: Well, I’m from Brazil, originally. But I grew up in London and New York and Boston. And there was a time I was based in Brazil, a few years ago, where I was working with RT Features. And our business plan, at the time, was investing in development. So, we were financing the development of projects at a time when development financing had dried up. This was around 2007/2008 when we started doing that, and what we would do was we looked for underlying rights that we thought would make great films, right. So we optioned books and graphic novels and short stories and articles, and then we would partner with different production companies in the US, in New York and in LA, to help develop them. After a while though, we saw that it was becoming quite difficult, because even if you got a project to where you needed it, you felt it’s ready to be made, then you still had the whole battle of raising the production finance. At first, we had capped how much we would spend per project on the development but as we started working with bigger production companies, that escalated dramatically.
And so, eventually, we were introduced to this opportunity by UTA, who we were working with closely at the time. They introduced us to a project, which was Noah Baumbach’s next movie, which was FRANCES HA. And we had never done production financing, but the price of the film was much lower than what Noah has typically made his movies for. It was almost like an experiment that he was going to do, and in exchange he needed a lot of freedom, which we were fine with. And for us, our thinking was guaranteed we’re going to have a film for the same price that we’re financing some of these other projects of development, right? Instead of maybe getting stuck and not being able to move forward after the script phase, we’ll have a guaranteed film. Let’s try this out and see how it goes and it went very well.
Colin: It was around this time, shortly after FRANCES HA was finished, that Fernando decided to leave Rodrigo Teixeira’s RT Features in Sao Paolo because he wanted to move to Los Angeles. As he and Roberto set out their new company stall as Exhibit, they could point to the visible success of FRANCES HA which earned a Golden Globe nomination for actress (and co-writer) Greta Gerwig and a Best Picture nomination at the 2014 Indie Spirit Awards. Often thought of as the BREATHLESS of Mumblecore movies, this endearing romantic comedy cost somewhere between $2 million and $3.1 million, depending which budget report you believe. It went on to gross more than $4 million before becoming finding an avid fan following on viewing-on-demand platforms. The fruitful experience with Noah Baumbach had convinced Fernando that he was better off controlling a project financially and creatively as a producer rather than rely on the whims of the marketplace to determine the fate of projects he had developed.
Fernando: The problem is that the risk that the financier of development takes is not commensurate with the return a lot of times. Not always the case but a lot of times it isn’t because the risk outweighs the benefits sometimes because you have a low probability of the film getting made unless you also have production financing. There’s also smart development which, you come aboard and there might be a first draft already or an idea but there’s already some sort of talent you know that is going to push the film forward such as a director or an actor who is really committed and you know they are going to make the film, it might take a few years but, they’re going to stick with it and they’re going to be this driving force behind the film. And in that case, there’s kind of the road to getting it made, it’s clearer. When it’s just you and you finance this book and its deep development and you want to just put it together, the risk is really high because you don’t know how the script is going to turn out. You don’t know if you’re going to be able to get the writer there or if you’re going to have to hire other writers and the price tag’s going to go up and up in your investment. And usually, the return on that investment is really squeezed at the budget. You don’t get like a big back end for that, if you’re just doing development. When you go off on set. You get some credits and you get a decent return on your money but considering the high risk, it’s tricky.
So, ideally, when you do development, at least for us now, we have a very clear road of how we’re going to get this film made, what it’s going to take. Make sure we have a good idea of how much we would spend and make sure that we have at least, let’s say half, of the equity that we know that we’ll invest in the film. Know that we’ll either have 100% of the equity or at least half, and we know how to get the other half if we don’t want to do the full amount.
Colin: As an observer of the film business, it has always struck me how back-to-front the risk/reward profile is for film investors. Those who become involved during the embryonic stages of a project, and therefore take the biggest risks, are the ones who get the smallest returns, if any. Whereas investors who come in at the end, when they know as much about the film as anyone, can often take a disproportionate amount of the rights because people are desperate — or, at the very least, assume a commanding position in the pecking order of those waiting to get paid from the film’s revenue streams.
Fernando: That’s exactly right. The later you come in on the process, the earlier that you make your money back. Sometimes you have these opportunities to invest in what they call finishing funds, which is basically the movie’s done shooting, it’s in the can, they’re editing it but they need some more money for post-production and you’re in this position where usually, you know they really need that money or else that whole other investments’ gone. So you know you can be the first one out which is kind of crazy because there are these other investors who came in early when there wasn’t anything, took this big leap of faith, risked everything, sometimes made these movies even without a bond, you know, and they went through this whole risk of execution, and when you’re doing finishing fund, you can watch maybe a cut of the film already and you know what you have. So yeah, for sure, and the same thing with development.
Colin: Establishing the most attractive foothold in that financing food-chain in a major challenge and so if finding the most attractive projects. This is as true of companies like Exhibit that have money as it is of producers reliant on other people’s money. In both cases, you still have establish your legitimacy, credibility and trustworthiness as potential partners. All within a business environment that so often plays like a smoke-and-mirrors act rigged by conjuring artists and snake-oil salesman.
Fernando: A lot of the fear cause for a good reason a lot of the agencies have or producers and filmmakers is that some people say they have money and the money isn’t real. And they end up with egg in their face or put in a really, really difficult position. And so, one of the things that Roberto and I, my partner, we work in at Exhibit is we have certain values that we have in place that hopefully makes us a friendly company for everyone involved. We try to be transparent, we try to be honest, quick, easygoing, but at the same time firm. There are minimum things that we need in place. Basically, our thinking is we want to treat people how we would like to be treated, and I think people appreciate that in this industry.
And so it’s hard for us to source films, and it’s hardest why when one film happens and the other doesn’t. I think a lot of great films eventually do happen. I think quality rises to the top, it might take time; sometimes a film takes 10 years to get made or sometimes it only takes one year, there’s no rule of thumb. But I always think that quality rises to the top both in script and film form.
But what I would say is, with this market, with such a huge saturation of product, in general, of content and with such vast, vast array of choices for consumers in entertainment and not just film and television. You used to be able to know “Okay, I’ll make this thriller kind of down the middle, I’ll know what kind of business I will do well domestically. It’s a safe bet, as long as I keep it at this budget level and I kind of have this cast.” Nowadays with this ever-changing market, one of the things that we’ve noticed is that’s not the case anymore.
You have to have a film that sure, it might have these requirements but you have got to think: Okay, how is this different from any other film in this genre? How is this such a different point of view that, say, calls attention to itself, right? How are you going to cut through the noise and really, really grab the audience’s and most distributors’ attention and say, ‘Okay, this movie is a movie that deserves to get a good release and get attention?’
Colin: Once he has landed on such a standout project, I asked Fernando what he does to protect himself as an investor and ensure that he and his company are in a position to enjoy any financial upside that the project might generate.
Fernando: It’s numerous things, First of all, it’s choosing the right partners If you’re financing a film that you’re not the lead producer on it, then you better make sure that you really trust who is the lead producer that, one, he or she has experience and that they’re trustworthy in some way. Which is sometimes very hard to gauge until when you’re actually working with that person. But it is a small community, so word gets around so you can get a feel of people’s reputations and their past work. Then you try to work closely with them. It’s really a fine line.
Colin: As a practical consequence of all this jostling for the right partners, once producers and investors have established that trusted rapport, they tend to keep working together. There’s a reason why they call this a relationship business. In Fernando’s case, he has worked on several occasions already with Brian Kavanaugh-Jones, the financing agent-turned-producer known for the INSIDIOUS and SINISTER horror fanchises as well as his collaborations with director Jeff Nichols on films such as TAKE SHELTER and LOVING. That relationship led to FIRST LIGHT, Jason Stone’s supernatural teen story that used the Slated financing platform to assemble its backers and is now in post-production. In Fernando’s view, Slated helps engineer those all-important trust mechanics.
Fernando: For us we were introduced to FIRST LIGHT through Brian because we were working with him on other films and he’s a producer who we really trust, him and his company, Automatik, and we enjoy working with him. And so, he introduced this opportunity to us and there already was a large portion of the financing that had been arranged through Slated. Now, the great thing about Slated and I’m not saying this about the other financier because I don’t know enough to say if that’s the case for him, but generally speaking the great opportunity about, I think, Slated being involved and helping is that a lot of people come and want to invest in film but it is a very insular community and it’s very hard sometimes for you to break in and get the best projects or know if you actually have a good project in your hand or it’s not being transparent enough, you’re not receiving all the information or maybe you’re not working with the very best people. But Slated in a way leveled that playing field, you know.
Because Slated is well ingrained in the community, they’re able to source great projects and offer those projects to people who otherwise normally would not have that opportunity to invest, and maybe a certain level of projects or films. And this is how it has been historically the case in Hollywood, in the film industry, where the biggest thing is access to projects because that’s what’s going to really make or break your company, because you might have all the money in the world but if you don’t have access to the best projects or the best people, the best teams, then it’s going to be very tough for you to be able to survive and make smart investments. And Slated, not only is it well ingrained in the community, but it also, they break down the projects to help give you the tools in order to measure the project to see whether it makes sense or not, such as evaluating the script and the project as a whole and the team behind it. They use objective measurements.
Colin: Right now, Exhibit is in production in New York on its sixth film that offers an intriguing twist on the post-apocalypse genre. A lucky recluse is doing just fine as the last person on earth after humanity has been wiped out in mysterious circumstances — until a second survivor arrives with the threat of companionship.
Fernando: So, we’re fully financing film called I THINK WE’RE ALONE NOW. It’s based on a script by Mike Makowsky that was on The Blacklist this past year. He’s a great young writer who had 2 scripts actually on The Blacklist. And our co-producers again are Brian Kavanaugh-Jones and his partner at Automatik, Fred Berger, who produced LA LA LAND recently. And great director who we’re huge fans of, Reed Morano, is directing it and is also, in my opinion, one of the best director of photography’s in the business. Her eye is amazing and she’s so intelligent, it’s amazing just hearing her. She’s a deep thinker is what I would say when you hear her kind of analyzing the script and the film and seeing what she’s executed so far.
And we have actually the perfect cast for the film. Peter Dinklage and Elle Fanning. Peter Dinklage is also a co-producer on the film with us. And then there are other 2 large roles who the cast — well, we haven’t announced them yet — but there are also fantastic actors. So, we’re very proud of it. And I think once people see it, I think you’ll see how our company is evolving.
Colin: Surveying the project choices that Fernando and Roberto have made so far, I wondered to what extent they take into account what other producer-financiers are doing. If everyone is trying to stand out in this marketplace and make distinctive films, what level of second-guessing is involved in trying to stay ahead of that competitive curve?
Fernando: I think when choosing films in general, at least in our opinion, you can’t keep trying to imagine what other people are thinking too much, especially competitors. Competitors and in some cases the audience as well, because we love film and we watch a lot of film and television. And so, it’s always that seminal question that everyone asks: Would I want to watch this? And are there other people like me who would probably want to watch this? Because you have to be careful not to overthink yourself to death, and kind of miss an opportunity or kill something that could be really unique. So, it’s kind of hard. We don’t really stop to think about our competitors to be honest with you, we never do. We stop to think whether there’s an audience for the film and whether the film has the opportunity to be great. And I think, as we grow we’re only going to be more selective and not less selective in terms of who we work with, the filmmakers.
Colin: And having made a couple of thrillers, a couple of comedies, and embarked on both a teen sci-fi and a dystopian drama, I wondered whether Exhibit might also zero in now on particular sweet-spots in the marketplace or whether the company will always be as deliberately wide-ranging in its choices going forward.
Fernando: We don’t want to stick to one genre. We want to stick to good films. That’s our thing. We’re not concerned with ‘Oh, we’ll only do this kind of film’ or, ‘that genre’. At least up until now, that could always change because the market’s always evolving and you have to be sensitive to market changes but so far, our philosophy has been: is this good, is it going to be good, is this a good investment? We want to be known for making good films. And so what has happened, as a consequence, is people send us projects from every single kind of genre, every single kind of approach and tone. Which I love, because I do this because I love film, it’s something that I’ve loved since I was four years old. My first memory in life is watching E.T. in a movie theater. And so my partner and I, we both just want to make great films.
We’re very proud of all our films and we’re very proud of all the filmmakers that we’ve worked with and all the producers, they are all talented. I can honestly say there isn’t one film that we regret having made. We don’t know, let’s see how everything’s going to turn out but we don’t regret anything, any of the films that we’ve made. I think we did what we came out to do and we’re going to continue doing so. This has only been our first year. I don’t know if we’re going to be making six movies a year anymore, because I think it’s hard to keep up that rate and somewhat unnecessary; but we thought that the first year it was necessary in a way, since we’re not making big films let’s make a lot, let’s make a lot of movies of this certain budget range and if we make enough in 1 year we’re going to call attention to our company in certain ways. It’ll be our calling card, because not a lot of people are making that many movies in one year.
Colin: Listening to Fernando discuss his journey from Brazilian development financing to prolific American indie producer now fully financing his own projects is to be reminded of the constant need to iterate and adapt. In that respect, production companies are indeed like start-ups.
There are all sorts of theories as to why startups fail to find traction — as 95% of them do apparently. But one of the most compelling is that the majority of them spend too much time focusing on gaps in the market, and trying to replicate the strategies for exploiting those gaps, rather than looking at their own strengths and identifying the areas where they will have an unfair advantage. The most successful businesses are those that create some kind of temporary monopoly.
The same could be said for the independent production world. The most consistently successful producers are those that find that distinctive edge that leverages their strengths, core competencies and passions. Like Fernando, they pay no heed to what their rivals are doing, or necessarily even what the box office tells them that audiences were watching yesterday in their pursuit of singular projects for which they have a particular affinity. And then they make damn sure that they surround themselves with a protective cocoon of like-minded partners and creative teams. You want to make sure you have best fighting chance of reaping the full benefits in the event that the project finds future success in the marketplace.
That’s all from me and Slated for this episode. Tune in again for further adventures in the screen trade. And in the meantime, keep cutting through that noise.
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