The head of the VC firm that invested several hundred million dollars in A24 a year ago says the indie producer-distributor’s “extraordinary” momentum could lead to a large international business and potential acquisitions.
As is their wont, A24 executives are not talking publicly, but Stripes partner Ken Fox did speak with The Hamden Journal soon after the studio’s record-setting Oscar haul, highlighted by Everything Everywhere All at Once. The company’s nine wins included Best Picture, Best Director and all four acting categories (counting Brendan Fraser’s triumph as lead actor in The Whale).
Stripes, which primarily buys into software and consumer-facing businesses, invested $225 million in A24 last March, leading the first institutional financing since the studio was founded in 2012. The deal valued the company at an eye-popping $2.5 billion.
“They have really created a lot of value,” Fox said. “We’re looking for a needle in a haystack: companies winning in an attractive market because their products are amazing and loved.” The market segment needs to be big enough, he explained, and the company at an inflection point.
“A24 is that thesis,” Fox confirms. He cited its management team, talent relationships, the quality of its growing film and TV footprint and strong brand recognition as ongoing drivers of success.
That brand recognition is key. The company has forged a young fanbase seemingly as loyal and fervent — if considerably smaller — as Marvel.
A24 is still led by David Fenkel, a founder of Oscilloscope Laboratories, and Daniel Katz, the former Lionsgate Films and Guggenheim Partners finance exec. They launched A24 with John Hodges, who exited in 2018.
“We think A24 is very special, and we would partner with them to build a very large global business. I think A24 could be an acquirer.”
Being privately held, the company doesn’t report financial results, but Fox said its cash flow is positive. Asked if Stripes would consider other entertainment investments given his experience with the New York-based distributor-producer, Fox said, “At this point, we would do it in partnership with A24″ as they build their business globally. “We think A24 is very special, and we would partner with them to build a very large global business.”
“I think A24 could be an acquirer,” he added of the company, which was once seen as a potential acquisition target.
Stripes’ investments echo A24 in terms of cachet, albeit largely outside of showbiz. They include a Swiss sneaker maker (On), a New York bakery (Levain), a woman’s beauty brand in Germany (Dr. Barbara Sturm) and an organic market in L.A. (Erewhon). Media holdings have included Gimlet, a podcast firm that Spotify acquired for $230 million in 2019.
The fresh funds for A24 helped support bigger-budget films, a TV expansion and some key international hires. Other avenues for growth include A24’s budding membership program, consumer products, books and music. Makeup brand Half Magic grew out of the global beauty cultural phenomenon created by Euphoria’s makeup artist Donni Davy — an A24 show that airs on HBO — as well as #euphoriamakeup fans. It recently acquired the storied Cherry Lane Theatre in NYC’s West Village for $10 million.
Some might wonder how a press-shy company can generate so much media attention. True, the company doesn’t do many profile pieces with its execs. But the gears are grinding behind the scenes. “I think that’s all intentional and strategic to build an aura,” posits one studio executive. “Clearly, it really works.”
The Hamden Journal reached out to more than a dozen industry sources, all of whom preferred to speak on background given the competitive nature of things.
The broad consensus post Oscars is that the company’s already hefty valuation will only climb. But perhaps not in the current financial climate.
One studio head commented, “It’s more nuanced than the Oscars adding a zero to A24’s value. The multiple previously quoted in the press is where they can get to. The Oscar haul will help march towards that valuation. It’s great for the company and the brand but that valuation was a year ago.”
A leading finance agent added: “I don’t think the company necessarily gained considerable value overnight. Their former valuation had success like this baked into its model. So this is confirmation, not reason to raise expectations.”
Funny. Winning nine Oscars tends to do that.
The Theory of ‘Everything’
So how did a kooky fantasy romance about a middle-aged Chinese immigrant grappling with the metaverse sweep to glory?
The film’s box office gains (worldwide gross $108 million and counting off an estimated $25M budget) helped jump-start the indie box office during a particularly challenging period for indie theatrical releasing, not least because of Covid. The result was borne out of a confluence of marketing and publicity chops, and organic talent and audience enthusiasm.
Working on Swiss Army Man, the previous movie directed by Daniels (aka Daniel Kwan and Daniel Scheinert), helped the A24 team understand the directors’ tastes and preferences. The duo proved ideal spokesmen for the film, ubiquitous on social media and giving its out-there elements an ingratiating entry point. They even put together a book about the multiverse, sold on A24’s website.
Casting alchemy also helped. Michelle Yeoh is an idol, Key Huy Quan adorable (with a great child-actor comeback story to boot), and Jamie Lee Curtis a beloved star with deep Hollywood roots. Marketing strands included a sci-fi adventure campaign and a heartwarming family saga with Asian immigrant roots that galvanized the AAPI community. Later, promoters leaned into merch, with $2 googly eyes and $36 hot dog finger gloves selling out on the company website. Poster art pulled all of the strands together.
“Remember when hot dog fingers were fringe. There were moments when we [in marketing] were scared of the hot dog fingers. Now they’re mainstream,” said someone involved in the marketing campaign.
A24 — like many indie distributors — relies mostly on digital and social media, continuing that even into this rather big awards push. It’s cheaper than TV, more targeted, and it’s possible to see how audiences respond.
Testament to the company’s diverse slate, A24 was also repped at the Oscars with multiple wins for The Whale and nominations for Marcel the Shell With Shoes On and Aftersun. It was the most nominated distributor and had the most wins at the ceremony. Even as windows have been compressed and distributors have experimented with day-and-date releases, A24 has been steadfast in preserving healthy theatrical playtime for its releases.
An output deal with Apple, now concluded, helped deliver A24-backed projects like Macbeth to a broad streaming audience and provided financial stability in a landscape that was evolving even before Covid. An ongoing distribution relationship with Showtime landed EEAAO on the Paramount cable network’s streaming service months before the Oscars, given its March 2022 theatrical bow and June digital release, helping its exposure.
External factors also played into the win last weekend. This Oscar season, EEAAO was helped by a softer slate of major studio contenders, the films of some A-list directors falling by the wayside, and an evolved Academy membership that is now more diverse and probably more attuned to commercial movies than ever before. The film’s social justice themes also tapped into a zeitgeist, in similar but different fashion to CODA last year.
Can the company live up to the high standard of its Oscar season of glory? It won’t be easy. One former company CEO who counts himself as a big admirer of A24 says EEAAO is “a sensation but also an aberration. Even so, it’s been fascinating to see how many singles and doubles they’ve hit along with that grand slam.”
They say aberration because it hasn’t all been plain sailing. There have been plenty of films that haven’t taken off at the box office: Under the Silver Lake, When You Finish Saving the World, C’mon C’mon to name a few.
Waiting in the wings now is Julio Torres’ debut Problemista. The Tilda Swinton starrer just had its world premiere at SXSW, the festival where EEAAO began its epic run. The company’s slate this year includes its third Ari Aster film (after Hereditary and Midsommar), Beau Is Afraid, starring Joaquin Phoenix; Sundance and Berlin hit Past Lives, the directorial debut from Celine Song; and Talk to Me, a Sundance pickup that is the directorial debut of YouTube creators Danny and Michael Philippou.
The slate also includes Civil War, the action epic from Alex Garland (the writer-director whose film Ex Machina in 2014 helped put A24 on the map) with Kristen Dunst and Cailee Spaney; The Iron Claw, a sports drama starring Zac Efron; Priscilla from director Sofia Coppola; comedies Dream Scenario, starring Nicolas Cage and Julianne Nicholson and Wizards starring Pete Davidson and Orlando Bloom; Kristen Stewart starrer Love Lies Bleeding; and the Julia Louis-Dreyfus drama Tuesday.
Documentaries this year include Stephen Curry: Underrated at Apple; and The Deepest Breath, Laura McGann’s exploration of freediving, which is set to stream on Netflix.
Budgets on A24-backed movies are routinely pushing towards and beyond $20M. That leads to prices that can give overseas buyers pause; the company’s wheelhouse remains arthouse, after all. That was the case in the UK with Everything Everywhere, which couldn’t attract a buyer so A24 released the film in the territory themselves.
Beau Is Afraid will mark one the company’s biggest rolls of the dice to date with a $40M-50M budget. The movie’s trailer skews more surreal and complex than Aster’s previous genre films, which cost considerably less.
“They’re moving towards larger-budget movies and I’ll be interested to see how it goes,” says a studio source. “Will they be able to make good money across their slate?”
Television is an increasing area of focus. The division, which launched nine years ago under Ravi Nandan, is behind series like Ramy from Hulu and the aforementioned Euphoria. Upcoming 2023 series include Beef, a dark comedy starring Steven Yeun and Ali Wong that premieres next month on Netflix; HBO’s The Idol, from the creators of Euphoria, starring The Weeknd and Lily Rose Depp; Showtime’s The Curse, Nathan Fielder’s follow-up to The Rehearsal starring Benny Safdie and Emma Stone; and Hazbin Hotel, A24’s first animated series from Vivienne Medrano. Among buzzy projects in development is the Janelle Monaé Josephine Baker package De La Resistance.
International is also a significant new frontier for the company following the splashy UK hires of former BBC Films and Drama heads Rose Garnett and Piers Wenger last year. We hear there have been discussions about potentially adding help in Asia and also for first-look type deals with leading producers.
The company’s expanding high-end roster of projects and talent connections, along with its newly solidified financial footing, should help it retain its hard-to-duplicate standing for the foreseeable future. “They have done something incredibly unique by carving themselves an identify among both the industry and consumers,” one leading Hollywood player says. “Not since Miramax has there been a new brand that is known by both viewers and business.”
Don’t expect any Cold Mountain-style excesses from this group, however, the kind of overreaching that dented the Weinstein brothers and so many before them. “They’re not looking to do ego hits and self-aggrandizement,” the exec adds of Fenkel and Katz. The work remains highly curated. The challenge will be for that curation to continue in line with growth.