Digital music's Orchard branches into Hollywood

The Orchard is looking for the stamp of legitimacy that comes from getting movies into theaters

Richard Gottehrer is best known as a music man. He helped pen the hits "I Want Candy" and "My Boyfriend's Back," produced albums by Blondie and the Go-Go's, and co-founded Sire Records.

Now his New York digital music firm the Orchard is tackling an industry that has proved irresistible for countless entrepreneurs: Hollywood.

The Orchard has long been a player in the business of selling digital music. It holds the rights to release more than 9 million tracks from record labels and indie artists such as Sharon Jones & the Dap-Kings, Guided by Voices and Local Natives through online services such as iTunes and Spotify.

Looking for more business, Gottehrer started taking meetings with movie studios. As early as 2006, he met with executives at show business institutions including 20th Century Fox and Universal Pictures, hoping to get the Orchard's music placed in films.

That's when he found himself hooked by the movie industry.

"I'm a music person, but I started seeing companies like Lionsgate, Universal and MGM to get involved with our music for placement in their films, and it was like being bitten by the Los Angeles bug," said Gottehrer, 74, from London.

The Orchard's film division started small, getting deals early on to distribute "action sports" movies — in other words, ski, snowboard and surf films — and National Lampoon comedies online.

It has done deals to release sports documentaries from Red Bull, children's programming from Scholastic Media and films from the National Basketball Assn. Its catalog includes more than 2,000 titles — many of them the type of art house dramas and low-budget horror movies and others that major studios wouldn't bother with.

Orchard doesn't develop or produce movies. Instead, it buys finished products and gets them to consumers, mostly through online retailers and streaming sites such as Hulu and Netflix.

Now the company is looking for the stamp of legitimacy that comes from getting movies into theaters, in addition to the straight-to-video on-demand market.

The Orchard has been sending teams to film festivals like Tribeca, TIFF and Cannes to hunt for movies fit for the big screen. In the coming days, the Orchard is sending eight staffers to the Sundance Film Festival in Park City, Utah, with the hopes of tracking down two or three more titles for this year's slate.

Helping to lead the charge is Paul Davidson, a former executive with Microsoft's Xbox video business who was hired last year. Davidson wants to compete with more established distributors like Magnolia Pictures, IFC Films and Radius-TWC, and the company aims to release 10 to 12 theatrical movies a year, taking bets on the more obscure, indie fare not likely to attract the attention of the majors.

Its recent picks include the Midwest-set poverty-themed documentary "Rich Hill," the Libyan revolution chronicle "Point and Shoot" and the Marisa Tomei comedy "Loitering With Intent." The lure of a release in theaters could attract more filmmakers, Davidson said.

"When you introduce theatrical, it gets us better content," Davidson said. "When you go to festivals and talk with producers and directors and actors, they all want theatrical. There's a cachet to it, and it unlocks every window that follows."

The company's attempt to get into the cost-intensive theatrical business comes at an uncertain time for an industry already packed with competitors. U.S. box-office revenue declined 5.2% to $10.3 billion last year, and estimated theater attendance hit its lowest level since 1995.

But the company bets it can take advantage of coming changes in the way movies make money. Traditionally, features don't appear on video on demand until months after their theatrical release. But some filmmakers and companies, including the Orchard, are experimenting by putting movies out for home consumption and in theaters at the same time, a tactic Hollywood calls a day-and-date release.

Digital revenues are a bright spot for Hollywood amid the declines at the box office. American consumers last year spent 16% more on digital home entertainment than they did in 2013, according to Los Angeles-based trade association Digital Entertainment Group. The category, which includes subscriptions to streaming video services, hit $7.5 billion in sales in 2014.

Exhibitors have balked at attempts to shorten their exclusive window for new movies, and major studios are often reluctant as well, fearing they will miss out on the big grosses a wide release affords. However, films such as "Arbitrage," "Margin Call" and last year's "Snowpiercer" have found large audiences through VOD when they debuted at or near the same time as their launch at cinemas.

"It's a tough nut to crack," Davidson said. "It's moving people off an industry norm that's been that way since the '30s and '40s, but I think it just benefits content by being more creative with it."

Orchard executives acknowledge the difficulties inherent in breaking into film, an industry where long-standing relationships are key factors when trying to score deals with filmmakers, and little-known players are disadvantaged. That was a consideration for Marshall Curry, the filmmaker behind "Point and Shoot."

"One of the main ways you decide who you work with is in part based on their reputation," said Curry, a two-time Oscar nominee.

On the other hand, its newness and focus on the digital makes it better able to sell movies to specific audiences, executives and clients said.

Last year, the company took on the unusual task of rallying the target audience for "Harmontown," the documentary about eccentric "Community" creator Dan Harmon. A key to success, it turned out, was helping Harmon himself motivate his cultish fanbase. The result was sold-out screenings where Harmon did Q&As and recorded episodes of his podcast.

"Dan has a way with making people feel special and part of his universe," said Joe Russo, CEO of "Harmontown" production company Starburns Industries.

Executives and clients point to other advantages, such as the ability to try different schemes for digital release such as "Ultra-VOD," where movies are available for home viewing before theaters. In addition, the Orchard offers large swaths of financial data for movies, letting filmmakers see what platforms generate the most sales and which marketing efforts work.

Before branching into movies, the Orchard was an early mover amid a transitioning music industry. Gottehrer first started the company with his business partner Scott Cohen in New York's Lower East Side in 1997, supplying independent music to outlets such as CDNow. The company benefited from the music industry's rocky transition to a world of iTunes and streaming services including Spotify, Rhapsody and YouTube.

Now the company wants to take advantage of digital changes in the movie business. Executives declined to disclose financial details but said the Orchard's film revenue increased more than 70% last year, while the company's overall sales increased about 15%. The Orchard, now run by chief executive Brad Navin, is privately held.

The ever-enthusiastic Gottehrer, still deeply involved in the business he started, said he hopes the Orchard gets into bigger feature films as that side of the business grows.

"We're going there," he said. "It's just going to take the amount of time that it takes."

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