The plot thickens for indie film producers

Four years ago, independent producer Michael London, whose credits include the acclaimed films “Sideways,” “Thirteen” and “The Family Stone,” had no problem raising more than $200 million in financing to make low-cost movies at his newly formed company, Groundswell Productions.

At the time, independent movies were all the rage. Investors were hungry to cash in on a trend in which such unconventional pictures as Oscar-winner “Crash” and “Brokeback Mountain” not only win over critics but also mainstream audiences.

But over the next few years that business all but capsized. The market became flooded with independent movies. Meanwhile, the cost of marketing smaller films rose and DVD sales dwindled, forcing a number of distributors and studio-owned “specialty film” labels to retrench or go under. London found that the business model on which he had built his company was no longer viable.

In January, after his company’s main backer, TPG-Axon, got scared off by the new realities and soured on the film business, London secured a new credit facility through Comerica Bank to buy out his investors and retain Groundswell’s library of eight movies, which includes the Oscar-nominated dramas “Milk” and “The Visitor.”

London talked to Company Town about how he’s adapting to the changes in the independent movie landscape and how he’s reshaping Groundswell to survive.

How has life changed for independent producers?

Between 2006 and now the whole business turned upside down, and what had been a low-risk, high-reward model for investors turned into a high-risk, low-reward model. So, the business models that these slate deals were founded on just didn’t make financial sense anymore. The way it worked was investors agreed to put up capital and they had certain ways to offset their risk: foreign presales, domestic distribution deals that were negotiated before you made the movie, and DVD sales. That model worked very reliably, and then things began to really change.

So, has most of the money for independent films dried up?

The money is still out there. It’s the business opportunities that dried up. Independent producers have to offer investors a rational investment with lower costs, smarter movies and better returns.

What is Groundswell’s new business strategy?

We’ve cut our overhead, changed our business plan and gotten a lot more proactive about what movies to make. Budgets have to be much lower. Material has to be a little more commercial, and you have to fight like hell for domestic distribution upfront. Instead of fully financing movies or co-financing with the studios, we’re putting in smaller amounts of money and looking at equity partners and foreign companies to share the risk. We’re also producing studio movies that we don’t finance [for fees].

Give an example of how the tougher climate has affected one of your productions.

We just wrapped a movie called “Win Win,” which is director Tom McCarthy’s follow-up to “The Visitor.” A number of things had to change for the movie to get made. It’s more commercial subject matter for Tom and the cost was kept low [under $10 million] with some very significant tax rebates in New York. And, we had to secure distribution upfront [from Fox Searchlight] on this one rather than play Russian roulette at a film festival.

Where are the bright spots for indie producers like yourself?

The fun of where we are right now is that I’m doing a lot less project managing and a lot more project creating — by necessity — but that’s where I came from and that’s what I like doing best. I met two young filmmakers recently, Daryl Wein and Zoe Lister-Jones, who had made a romantic comedy, “Breaking Upwards,” for $15,000 and it’s a huge success. A year ago, that would have been beneath my radar. But my radar changed, so I tracked them down. Lo and behold, they had just completed their new screenplay, another romantic comedy about a 29-year-old woman whose fiancé dumps her, and she goes out into the dating world to find herself. All of a sudden I forget about the state of things and remembered why I was doing this to begin with — which is to discover voices like this and help talented people get their movies made.

Do you think the independent film business will ever get back to where it was?

The mood in the last few months has gotten a lot more positive. The bubble burst and the sky fell. It will take time for things to recover, but there are fewer movies getting made, less competition and the distribution world is slowly starting to rebuild. Kind of bizarrely and unexpectedly it’s an exciting time.

claudia.eller@latimes.com