DirecTV to Help Finance Indie Films

September 29, 2013, 7:03 p.m. ET

DirecTV to Help Finance Indie Films

Deal With Independent Studio A24 Includes Early Rights to Video on Demand

SHALINI RAMACHANDRAN And BEN FRITZ

DirecTV DTV +0.03% is taking a step into the movie-financing business. The satellite operator struck a deal with startup movie studio A24 Inc. to partner with it in acquiring independent films in exchange for rights to offer them exclusively on its video-on-demand services 30 days before they hit theaters. The deal brings an unlikely player from the pay-TV industry into the world of indie film financing. DirecTV is making an initial commitment of about $40 million to co-finance and market independent movies under the initiative. The first picture it acquired alongside A24 is “Enemy,” a thriller with Jake Gyllenhaal.The satellite-TV provider has previously obtained rights to show some movies on its VOD service before their theatrical release on a one-off basis, but this marks the first time it is investing directly in films.

The partnership highlights the importance of the growing video-on-demand market for independently financed films, many of which struggle to gain attention in theaters. It also indicates the steps pay-TV operators are taking to expand their on-demand services as they seek to retain customers in a stagnant U.S. business and differentiate themselves from rivals.

Offering movies exclusively is one of several ways DirecTV seeks to set itself apart from competitors. Earlier this year it made a bid for Hulu LLC, but the streaming video site’s owners ultimately decided not to sell. DirecTV’s most high-profile exclusive offering is its “Sunday Ticket” package of National Football League games, a deal up for renewal at the end of the 2014 season. Chief Executive Mike White told investors last week he is “optimistic” the partnership will be extended.

The satellite-TV provider’s last major movies-on-demand initiative, its “Home Premiere” program that launched in 2011, failed to draw enough customers. It charged about $30 for big-studio movies two months after they came out in theaters. Studios and DirecTV both agree that the high price, a lack of popular titles and limited marketing were a problem.

A24, which was founded last year with backing from investment firm Guggenheim Partners, has released a handful of films so far, including the James Franco comedy “Spring Breakers” and the teen drama “The Spectacular Now,” with a focus on social-media marketing.

Splitting costs with DirecTV will allow A24 to release more movies at lower cost and get promotional support from a major distributor. DirecTV has about 20 million pay-TV subscribers nationwide.

DirecTV and A24 are seeking action, suspense or comedy films with well-known stars. They acquired the U.S. rights to “Enemy” earlier this month at the Toronto International Film Festival for between $1 million and $2 million, said a person with knowledge of the deal.

DirecTV plans a “huge marketing push,” said Hanny Patel, the senior director of revenue and product marketing. She said DirecTV will place them “front and center” on its on-demand platform, charging between $10.99 and $12.99 for seven-day rentals. “Enemy” will debut early next year, after which DirecTV hopes to premiere a new movie every month, Ms. Patel said.

Because the movies are premiering first on VOD, major theater chains including Regal Entertainment Corp. won’t play them, meaning A24 will have to book them primarily in independently owned cinemas. After as long as two months on the big screen, the films will then become available to other on-demand services run by pay-TV and Internet companies. The two companies will split revenue from all distributors.

It is no longer unusual for such films to become available on VOD at the same time, or even before, they are released in theaters. But typically, the movies are simultaneously available through several major pay-TV providers and online services.

With its ownership stake and exclusive rights, DirecTV’s deal adds a new wrinkle. “What we’re seeing here is a powerful partner who’s not just incentivized to maximize transactions, but to invest in the movie’s long-term value,” said David Fenkel, a partner at A24.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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