Film

Why La La Land Worked Better Than Anyone Dreamed

How value investing, mixed with a contrarian streak, helped Lions Gate beat the blockbuster model.

How Lions Gate Beat Hollywood With 'La La Land'

Brassy love ballads, Technicolor dialogue, and a smattering of soft-shoe–La La Land had all the makings of a blockbuster, in the 1940s at least. Today, the mass market of moviegoers prefer action to romance, aliens to artists, and above all else the blossoming genre of superhero bros in tights.

It’s no surprise that La La Land was a hit with critics and remains the heavy favorite to win the Academy Award for Best Picture on Feb. 26. What’s improbable, however, is how widely the film has won favor. Of late, the most critically praised films tended to have little clout with consumers: The Hurt Locker, which won Academy bragging rights in 2009, managed just $17 million in domestic theaters, for example. But La La Land is packing them in like an esoteric jazz club that suddenly becomes the “it” spot. Life, it seems, is following the script.

“We all thought it was going to be something very special,” Erik Feig, co-president of the motion picture group at Lions Gate Entertainment Corp., said in an interview. “But if you asked any of us if we were going to be approaching $400 million, we would have told you to wake up.”

With a win on Sunday and a corresponding bump from Oscar buzz, La La Land will likely become the top-grossing Best Picture since Lord of the Rings: Return of the King in 2003. Going into this weekend, the paean to the city of angels had garnered $135 million in domestic theaters and an additional $206 million abroad. 

And there are a few weeks left in its theater run—possibly more if it wins. On top of that, the film has only been showing in China, the world’s No. 2 movie market, since Feb. 14. 

This dreamy run, however, is no happy accident. It’s the product of a string of savvy, somewhat counter-intuitive decisions. In Hollywood, Lions Gate is best known as a bit of a value investor. It generally backs small- to mid-sized films that have “breakout potential.” It also spreads the risk by bringing in financing partners and lowers its costs by occasionally giving major talent a cut of the profits.

Instead of the Marvel comic book catalog, it snapped up the Hunger Games series. Rather than Star Wars, it has Power Rangers. To be sure, Lions Gate has had its flops. Its Divergent series has managed only a shadow of the success of Hunger Games. But over time, Feig said, the company has improved its decision-making to the point that 70 percent of its films are profitable.

In terms of investing, Lions Gate has a few simple rules—rules that apply to any business looking to stand out in a crowd. Work with talented people, protect their vision, and don’t try to please everyone.

“Most of our films, in some ways, are contrarian bets,” Feig said. “We’re programmatically oriented to embrace the fact that something is different because we want to give the audience the pleasure of discovering something new.”

As a general proposition, he explained, consumers often have no idea what they really want.

The company’s La La Land courtship began at the Sundance Film Festival in 2014, when Damien Chazelle premiered Whiplash, his breakout hit about a drumming phenom clashing with a mercurial conductor. Lions Gate tried to buy the distribution rights but lost out to Sony. It did hit it off with Chazelle, however. “We asked him what he wanted to do next and he said, kind of sheepishly ‘a musical,’” Feig recalled. “We were like, ‘Great!’ And he was like, ‘Really?’” A musical these days is a seemingly foolish bet, but it does fall squarely in the camp of not trying to please everybody.

Early in production, Lions Gate made a second illogical move: It encouraged Chazelle, the writer and director, to spend more money than he had originally planned—about $30 million. With it, they were able to afford more expensive lead actors in Emma Stone and Ryan Gosling, as well as blowing out a few scenes, namely the intro montage, which involved closing a Los Angeles interstate in the middle of the day. “We thought there was a chance we could get a rebate from the city for that, which I should note we didn’t,” Feig said.

The cast of La La Land.
Lions Gate encouraged a more lavish opening montage for La La Land.
Photographer: Dale Robinette/Lionsgate

The scene did, however, secure financing from Black Label Media. “We just loved what we saw,” said Joseph Cohen, whose American Entertainment Investors consulted on the deal. “We figured it could have big commercial appeal, though a musical with a budget over $30 million was not a slam dunk.”

Spending big where it matters is another thing Lions Gate has fine-tuned over the years. “You pick your moments,” said Basil Iwanyk, whose Thunder Road Pictures produced both John Wick films, Sicario, and a string of other movies distributed by Lions Gate. “When you spend your resources in those certain spots and really deliver, the movie is going to feel a lot bigger than the budget is,” he said. 1

Finally, Lions Gate was realistic about its audience. When judging a project’s potential, the company tries to picture two consumers: the most likely fan—in this case, Broadway junkies—and a second, wider demographic that might get sucked in. For La La Land, the company was hoping for couples and older women. The film, it turns out, over-performed on all fronts.

Some 36 percent of La La Land viewers are male, according to survey data from comScore and Screen Engine LLC, and the audience is almost perfectly balanced by age, with about a quarter of viewers under 25 and a quarter over 55. Abroad, La La Land has garnered almost twice as much ticket revenue as the next-closest nominee, Hacksaw Ridge. The French, in particular, are gaga over it.

A post shared by La La Land (@lalaland) on

 

In short, the return on investment on a singing Gosling has been surprisingly good and is getting better by the day. Iwanyk said films that cost from $30 million to $50 million are becoming a sweet spot for the industry. The biggest studios—squarely focused on potential blockbusters—aren’t bothering. Yet, as the industry launches one breakout after the next, investors have come clamoring. “Honestly, it’s a seller’s market,” he said. “The upside is ginormous and the downside is relatively light.”

Cohen, a former investment banker, agreed. There’s more money and more potential buyers in the independent film market than he’s ever seen before. “It’s the opposite of just doing the next giant shark movie,” he said. “Because, at some point, the next shark movie won’t work.”

For Hollywood, La La Land represents a new script for success, and its legacy will be that precious currency: optimism. Studio executives who spend their days modeling projected cash flows the way junior investment bankers do long into the night will be slightly more inclined to go all gauzy-eyed and think: “Maybe, just maybe, I can make it.”

“The only risk you can take these days is not taking a risk,” Feig said.

Of course, it doesn’t always equal reward, as that old saw can be misleading. But sometimes, if the stars align, it can be commensurate—and then some.

  1. Chazelle echoes this. He has said that with La La Land, he focused on making a good beginning and a good ending—with no crummy scenes in between.

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