An indie jones at Paramount

Over the last few months, Fox Searchlight, 20th Century Fox’s red-hot specialty division, has been very much on the mind of Viacom co-president Tom Freston. The longtime MTV cable guru took control of Paramount Pictures and the rest of Viacom’s movie realm earlier this year, prompting the departure of Viacom Entertainment chairman Jonathan Dolgen. Having been the driving force in establishing MTV as the leading brand in youth-culture entertainment, Freston has made no secret of his desire to see Paramount establish a similar beachhead in Hollywood’s youth-oriented specialty-film arena.

Having seen Searchlight hit pay dirt with everything from Oscar-worthy dramas (“In America”) to edgy horror films (“28 Days Later”) to pop crowd-pleasers (“Bend It Like Beckham”) to urban comedies (“Johnson Family Vacation”), Freston wants to do more than just beef up Paramount Classics. He has quietly made plans to start a new free-standing specialty company that would have total creative autonomy and enough financial backing to produce a slate of modestly budgeted films with rising stars and gifted young filmmakers.

The idea would be to create a new Searchlight-like company. The Fox specialty division had just as much sex appeal as any of the starlets on display at the recent Toronto International Film Festival. In the last couple of years, Searchlight has replaced Miramax as the envy of the indie film world. When critics filed stories about their festival experience, they invariably paid tribute to one of the films Searchlight debuted there, which included “Sideways,” the brainy buddy comedy from Alexander Payne; “Kinsey,” Bill Condon’s seductive biopic of sex researcher Alfred Kinsey; and “I {heart} Huckabees,” David O. Russell’s flaky romantic farce.

In a recent speech at an investment conference, Freston dismissed his studio’s Paramount Classics specialty division as “an also-ran,” pointedly citing the success Searchlight has had with “Napoleon Dynamite,” a brash comedy Searchlight bought at Sundance for $5 million that has gone on to make $40 million. Searchlight subsequently sold the film’s overseas rights to Paramount, knowing that the studio’s MTV subsidiary could give the film an invaluable marketing boost.

The new Paramount specialty division would be just one of the big changes expected at the studio, which Freston, when speaking to investors, described as having a “last-place” standing among Hollywood companies. Its last $100-million hit was “The Italian Job,” released nearly 18 months ago. Paramount chairwoman Sherry Lansing has assembled a promising new executive team, but no one knows how quickly they can turn the studio around. With Freston and Viacom co-president Les Moonves in competition to succeed Viacom chief Sumner Redstone in the next two years, don’t expect Freston to waste time in transforming what has been a fanatically bottom-line-oriented corporate culture.

When I spoke to Freston late last week, he made it clear he views the specialty film world as one of the leading growth areas in the movie business. “Once you get past the tent-pole movies like ‘Spider-Man’ or ‘Shrek,’ the indie film companies are the most financially viable part of the business today,” he explained. “A specialty company is a place where you can make a profit on pictures at a relatively low risk, market movies more cheaply and build talent relationships that provide access to great material and bring new creative energy to the parent studio.”

Freston drew a parallel to the way the record business has embraced generations of indie rock artists who’ve gone from obscurity to stardom. “There’s a whole generation of young filmmakers making garage-band-style movies that are exciting and original,” he said. “That’s been a big missing piece at Paramount and we need to have that kind of creativity in our studio culture. If I was a young studio executive, I’d say running a company like Searchlight is the best job in Hollywood.”

Freston went out of his way to avoid criticizing Paramount Classics’ current co-presidents, Ruth Vitale and David Dinerstein. But Classics, if it survives, may end up as one component of a larger specialty company. It’s an open secret in town that the studio has already approached producer Michael London about running the new company. After making two critically praised Searchlight films, “Thirteen” and “Sideways,” London recently signed a production deal at Paramount. He has told friends he’s reluctant to give up his producing career. The studio has also sent out feelers to other indie executives; this being Hollywood, when several top agents were asked for advice, they recommended their archrivals, hoping if someone from another agency got the job, they could then whisk away their clients.

So why has Paramount Classics been striking out while Searchlight has been hitting home runs? Put simply, Paramount Classics has been stymied by an outmoded, low-risk, art-house business model. Set up by Dolgen in 1998 after he came to Paramount from Sony, the company was inspired by Sony Classics, which has consistently turned a profit by buying classy but low-risk foreign films and documentaries. However, Dolgen emphasized the no-risk part of the equation so much that Paramount Classics never had enough money to bid on top films or market them successfully. While other companies made their own movies, Paramount was limited until recently to acquisitions, preventing it from scooping up a sought-after script or building a relationship with a gifted young filmmaker.

At film festivals, when rival specialty companies would see a hot film, they had the authority to immediately make an offer. Paramount, by contrast, had to get permission from a slew of executives -- many of whom had no real knowledge of the indie film business -- before they could seriously bid on a picture.

The results speak for themselves. Although Paramount Classics has regularly made a profit, it has been dwarfed by the revenues generated at a company like Searchlight, which has made $70 million to $80 million in recent years. While Searchlight and Universal’s Focus Films have movies that have reached $30 million to $40 million at the box office, Paramount’s biggest hit since the beginning of 2002 was “Mostly Martha,” a German-language film that made $4.1 million. The studio’s biggest hit this year was “Intimate Strangers,” which made less than $2 million.

While Searchlight was making movies with cutting-edge young directors, Paramount was mired in the foreign-language ghetto, releasing Patrice Leconte movies. The entire indie world has undergone a seismic shift in cinematic sensibility. A decade ago, specialty companies still survived on a steady diet of foreign-language films. But spurred by the ascent of Miramax a decade ago, a new audience emerged with radically different cinematic tastes -- fade out Truffaut, fade in Tarantino. Building on the Miramax model, Searchlight discovered a new kind of crossover film that appealed to both older film lovers and young hipsters. Its successes have been built around hybrids: art films with big stars (“The Good Girl” with Jennifer Aniston and “One Hour Photo” with Robin Williams) and genre films with stylish directors (Danny Boyle’s “28 Days Later” or Catherine Hardwicke’s “Thirteen”).

With three savvy executives at the helm -- production chief Peter Rice, marketing president Nancy Utley and distribution head Steve Gilula -- Searchlight has managed to be filmmaker-friendly and fiscally responsible at the same time. It only makes movies it can market. (Its one foreign-language release, Bernardo Bertolucci’s “The Dreamers,” was a bomb.) It has been equally steadfast about keeping a tight lid on budgets. While the company has made films with such stars as Robert Redford, Jude Law, Aniston and Williams -- and is now shooting a drama in Australia with Russell Crowe -- it has never paid an actor more than $500,000, preferring to let them take a piece of back-end profits. Unlike Miramax, it doesn’t splurge on lavish Oscar campaigns, stretching its marketing dollars by doing low-cost Internet promotions and websites. To capitalize on a heated Web debate over the ending of “28 Days Later,” the studio added an alternative ending to the film in the midst of its theatrical run, luring fans back to see it a second time.

Is it any wonder that when Freston and Lansing first met to discuss the studio’s future, at the top of each person’s yellow legal pad was the concept of an autonomous specialty-film company? “I’m really excited about the opportunity to do it,” says Lansing, who would oversee the new division. “It’s not only that it’s a good business, but it’s a way to create relationships with filmmakers before everyone else knows who they are, filmmakers that could go on to make movies with us at the big studio too.”

Paramount still has a long, bumpy road ahead. But it’s refreshing to see someone like Freston in the driver’s seat. When I once asked him what industry figure he held in high regard, he instantly named New Line founder Bob Shaye, saying he admired his willingness to make such a long-shot gamble bankrolling “The Lord of the Rings.” Now it’s Freston’s turn at the Hollywood craps table, where to succeed he’ll have to make a few risky bets of his own.