The Very Independent IFC

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In the 1970s, independent films on television usually meant cheap horror and sci-fi flicks or cheesy Roger Corman productions. When high-quality independent films began finding an audience in the 1980s, the major studios swooped in and bought up the boutique outfits. That left many small, under-funded filmmakers without an outlet for their productions.

Fast-forward to the 1990s when a growing audience backlash against the predictability of mainstream Hollywood productions — followed by explosive growth of the DVD market — helped give rise to Rainbow Media Holdings’ Independent Film Channel.

It’s no coincidence that IFC launched in 1994 — the same year that indie icon Pulp Fiction and British indie Four Weddings and a Funeral made a huge impact at the box office. “We felt the phenomenon of indie films in the country was taking on increased importance,” says Rainbow president and CEO Josh Sapan. “It was something we wanted a hand in.”

Backed by a board of directors that’s a Who’s Who in Hollywood, IFC in the last few years has expanded beyond its original mission of running acquired movies almost exclusively. Recently, IFC has gained a reputation in the indie world as a theatrical film producer and distributor. It also produces original programming.

But the network has always had a reputation as an outpost of alternative content, a place uncluttered by ads where the Federal Communications Commission’s heavy hand has not yet intruded: Movies run uncut, nudity and swear words intact.

Sapan says that approach is just good business. “It makes IFC an attractive brand and home for filmmakers. For consumers it sort of resonates [with] uncompromising and genuine interest in freedom of expression.”

IN THE BLACK

After 10 years, the network is profitable as well. Kagan Research LLC estimates IFC revenue this year at about $77 million, with cash flow of $24.7 million, compared with $301.5 million in revenue for its corporate sister, classic movie channel AMC, and $121 million for another sibling, WE: Women’s Entertainment.

In 2003, Cablevision Systems Corp. bought Metro-Goldwyn-Mayer Inc.’s 20% stake in IFC, AMC and WE for $500 million. If IFC represents about 15% of the three networks’ total revenue, that implies a value of roughly $375 million for IFC at the time of the MGM deal.

That success has enabled IFC to grow its slate of original programming beyond its signature Dinner for Five series that actor Jon Favreau has hosted since 2002. The network has added a slate of original documentaries, series, and specials that it hopes will attract viewers beyond the art-house crowd while showcasing what the network calls “the independent spirit.”

IFC has also grown into a small cottage industry. In 2000, it formed IFC Films, which distributes 10 to 12 movies a year, including some that had trouble getting into theatres. IFC stepped in to distribute the 2002 sleeper hit My Big Fat Greek Wedding when other studios passed on the movie. IFC earned only a modest flat fee for its work, while HBO Films, Playtone, and Gold Circle, which paid for the production and marketing of the comedy, reportedly made over $70 million in profits.

The company also distributed Fahrenheit 9/11, Michael Moore’s documentary slamming the Bush administration, after The Walt Disney Co. turned its back on the controversial film produced by its own Miramax unit.

Sapan maintained that IFC’s decision “was not a political issue” but an artistic one. “It’s an important example of what IFC is all about,” he adds. “It’s a film that should be debated within the marketplace of ideas.”

IFC Productions, launched in 1997, has built a strong cache of small films such as Boys Don’t Cry— which earned Hilary Swank a Best Actress Oscar — as well as Girlfight and Gray’s Anatomy from director Steven Soderbergh, whose 1989 film sex, lies and videotape helped kick off the indie boom that led to IFC’s birth.

IFC Productions’ InDigEnt division produces films made on digital tape using the minimalist principles pioneered by the Danish Dogme95 collective. Filmmakers share in their projects’ revenues.

IFC executive vice president and general manager Ed Carroll says the network now enjoys output deals with most indie film distributors. “We have some clout now,” he says, adding that the network is careful not to overpay for titles even if it means foregoing earlier windows on hot movies like Magnolia and Traffic.

“You’re talking about a handful of titles,” he says. “It’s not important that we get everything first. It’s important that we get everything.”

But with many basic cable networks programming more series and fewer movies IFC has less competition for some titles, and for many films it is able to get the first window after the initial run on the premium networks.

APPLAUSE GALORE

Critics and academics appreciate IFC because of its uniqueness on television and for the role it has played in nurturing the growth of small films. Many credit the network for inspiring major studios to develop indie divisions like Sony Classics and Fox Searchlight.

“I think it’s wonderful,” says Myrl Schreibman, adjunct professor in film and digital TV media at the University of California, Los Angeles, and an independent film producer. “Television is so full of a variety of stuff that is geared toward the common market, toward gaining an audience. It’s refreshing to find a channel bold enough or brave enough to say, 'We’re supposed to be independent filmmakers.’ Most indie films are personal movies or character studies that would not necessarily be fair game for [Home Box Office] and Showtime and network television.”

“If IFC were not here today I think someone else would have filled the gap,” says Craig Phillips, associate editor for indie film Web site www.greencine.com. “They were the first mainstream, nationally seen outlet for these films that would otherwise just be seen at film festivals. Because of the channel, at least there is an outlet for that type of work.”

The question for Rainbow is: How can it grow IFC beyond its 33.65 million subscribers — most of whom are digital customers, either on cable or satellite. They represent less than half of a universe of 75 million homes passed. That subscriber number is 19% higher than a year ago as of Sept. 30, and involves deals with almost every major MSO.

THE DBS BOOST

Most of that carriage is on direct-broadcast satellite carriers DirecTV Inc. and EchoStar Communications Corp.’s Dish Network, where IFC is available to 20 to 25 million homes, appearing on the DBS equivalent of expanded-basic tiers.

Clearly, more progress must be made within the cable community. IFC has major gaps across Comcast Corp.’s 22 million subscribers, mainly in the MSO’s old AT&T Broadband systems. Asked why the nation’s No. 1 operator hasn’t launched IFC companywide, a Comcast spokeswoman says, “We are a decentralized company. Programming decisions are made on a case-by-case, market-by-market basis.”

IFC has yet to seal a deal with the National Cable Television Cooperative Inc., which represents small operators. NCTC did not return phone calls. And the MSO CableOne Inc. has not signed an IFC affiliate contract, but it has installed IFC in 5% of its digital systems. According to CableOne vice president of strategic marketing Jerry McKenna, “On digital there is no more capacity. We can look at 30 different transponders. We are doing that already.”

Larry Gerbrandt, senior associate at the financial advisory firm AlixPartners LLC, provides some perspective on IFC’s distribution: “Rainbow doesn’t have the leverage that Viacom has had with Sundance. These days carriage is more about leverage than anything else.” Viacom Inc. packages IFC’s competitor, the Sundance Channel, with its Showtime Networks digital channels.

Gregg Hill, IFC executive vice president of affiliate sales and marketing, is used to tough customers. When IFC launched, indie films were almost invisible, not only on television but in movie theaters outside of major urban areas on the East and West Coasts. Even though Pulp Fiction and Four Weddings and a Funeral created an environment where an indie film channel could prosper, Hill still had to convince operators that IFC held more than a major urban-market appeal.

“When we first started, it was more talking to operators about what an indie film is,” Hill says. “It wasn’t just selling the channel but telling them the difference between an independent film and a regular film. We were able to show them through magazine articles that it was just starting to come into the mainstream.”

IFC has also benefited from a fundamental change in the audience for independent films, fueled largely by the DVD boom, says Evan Shapiro, the channel’s senior vice president for network marketing. “The independent film audience 10 years ago was much older,” he says.

The rising popularity of indie films among younger, affluent men has allowed IFC’s affiliate sales team to tout the channel’s ability to attract hard-to-reach customers and appeal to sophisticated people with its message of airing uncut, ad-free films.

“See what happened with Saving Private Ryan,” Shapiro says, referring to the refusal of more than 20 ABC affiliates to air the film last month fearing FCC retribution. “That was embarrassing to the TV industry.”

While it certainly has some strong points for MSOs to consider, some analysts and consultants argue that no one channel can convince consumers to lay out an additional $10 to $15 a month for digital. “As things continue to get more bundled, overall price becomes more of an issue,” says consultant and former cable programming executive Lynne Buening. She says IFC’s future is wrapped up in the operators’ ability to extend digital beyond its 30% penetration. “I don’t know how you figure out any individual channel that really drives tiers.”

Hill maintains that people buy networks — not “homogenous” tiers. “To look at the whole wash and say it only works as a whole, you’re just commoditizing yourself and saying, 'I’m just going to compete at value and price.’”

Finally, there is some sense that IFC just may not play in Peoria, that its great appeal lay in big cities. Buening says people on the coasts “take for granted the open access for independent films. But when you’re outside those markets, [the audience] isn’t there.”

Observers see other challenges that could potentially come into play at IFC. According to analysts, IFC’s parent company, Cablevision, is borrowing hundreds of millions of dollars to fund its Voom DBS project. They’re concerned the company might have to draw resources from the Rainbow networks to feed Voom’s enormous appetite for capital.

But Sapan says that’s not going to happen. “IFC is a proven enterprise and is regarded [at Cablevision] as important. Our point of view is that it needs to be grown,” he says, pointing to the stepped-up efforts to produce original programming that has performed “beyond our expectations.”

LOOKING AHEAD

What’s next for IFC? Besides conquering its distribution problems, the company is eager to expand its video-on-demand offerings and add more hours of original programming.

“Stepping up our original programming are the best way to make the brand really grow,” Sapan says. “The next few years is going to see the doubling of our original programming commitment.”

In the on-demand world, IFC believes that its core young male demo is especially fertile ground for using new technology and increasing its integration of broadband content with the channel’s on-air product.

Carroll hopes to expand distribution of its IFC Uncensored subscription VOD service that offers programs that have been banned or censored either in the U.S. or abroad.

With Cablevision’s huge commitment to HDTV via Voom, IFC is likely to shoot more of its documentaries in HD, executives say.

But for a channel with a primary mission to air independent films, InDigEnt is perhaps the best example of how IFC wants to expand its output and its library while dealing with realistic budgetary limitations.

“You will see IFC become more aggressive both in the quantity of original programming and the kinds of original programming,” Carroll says. “If we’re able to engineer ways so the costs of production of more efficient, we can do more.”

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