Alcon’s Film Slate Begins to Deliver Box Office Results

By DARRELL SATZMAN

Staff Reporter

It features three Oscar winners and one of the hottest young directors in Hollywood, but the real story behind the psychological thriller “Insomnia” involves the unlikely duo who hope to ride the film’s box-office success and critical acclaim to the major leagues of film production.

Chums from their undergraduate days at Princeton University, Broderick Johnson and Andrew Kosove, co-founders and co-presidents of Alcon Entertainment, had scant experience and practically no connections in the entertainment industry when they set out from the East Coast in the early 1990s with the notion of being film producers.

The project they were championing in those days the true tale of a playground basketball star who ran a criminal enterprise before being sent to prison and turning his life around never came close to getting off the ground. But the project led them to a circuitous connection with FedEx Corp. Chairman and Chief Executive Frederick W. Smith.

Smith, a movie fan with a keen interest in the entertainment business, made a cameo appearance in the 2000 film “Castaway,” in which Tom Hanks played a marooned FedEx executive.

“I really felt these two young men were blindingly brilliant in the field they had chosen,” he said. “The key thing about Alcon was the way they approached the management of the risk.”

Alcon, which is backed financially by Smith, has just released its second film in a nine-picture, $300 million distribution deal with Warner Bros. Starring Al Pacino, Robin Williams and Hilary Swank, and directed by Chris Nolan (“Memento”), “Insomnia,” earned more than $26 million its first weekend in theaters and likely will become Alcon’s biggest hit yet.

It’s a critical moment for Alcon, “a hybrid company,” in Kosove’s words, that both finances and produces its films.

“So far, we’re on the right side of the ledger, which is better than a lot of film companies have managed,” said Smith, who owns a little more than half the company.

Prior to “Insomnia,” Alcon had scored hits with “My Dog Skip,” which cost $7.5 million to make and earned more than $35 million in domestic ticket sales, and “Dude, Where’s My Car,” another low budget film that has earned more than $80 million worldwide.

Long shot

But unlike the mythical archer whose arrows never miss and for whom the company is named, Alcon has not always been on target. Its first film, “Lost and Found,” and last year’s “The Affair of the Necklace,” also starring Swank, were commercial flops.

More than jubilation, the early success of “Insomnia” has been met by relief by Johnson and Kosove, both of whom are in their early 30s.

“What it means is that we now have the cash flow to fund our next six pictures,” said Kosove. “It gives us access to better material and the ability to raise more financing. And it helps us (lessen) our investor’s risk, which is a huge goal for us.”

After being introduced to Smith by another producer in the mid ’90s, Kosove and Johnson persuaded the FedEx founder to read a business plan they were preparing in exchange for their help arranging theatrical distribution for a film financed by Smith that had hit a snag.

Johnson and Kosove have degrees in economics, and before Kosove lured him to Los Angeles, Johnson was an analyst for Salomon Brothers in New York. They wrote a 220-page tome that read as much like a financial analysis of the film industry as a business plan.

“The main ingredient in my career has been getting very good managers and giving them authority to run with the ball,” Smith said, adding that he saw a bit of himself when he was starting up FedEx in Kosove and Johnson.

Kosove and Johnson understood the economics of financing the production of movies was getting more difficult for the major studios, strapped by huge overhead costs.

They concluded that a bare-bones outfit that could arrange independent financing and manage the production while tapping into the major studios’ vast distribution networks was the best bet.

“The main thing was we told him we would run a streamlined, disciplined organization with very little overhead,” Johnson said. “We were going to be very careful with his money.”

Smith stuck with them when their first project flopped. But “My Dog Skip” garnered good reviews and became a surprise hit during the summer of 2000. That paved the way for Alcon’s distribution deal with Warner Bros. Alcon, which will produce films in the $12 million to $60 million range, retains the overall rights to its movies.

“‘Insomnia’ is the biggest bite they’ve taken so far. They’ve been growing and they’ve been willing to take risks,” said Kevin McCormick, executive vice president of production at Warner Bros. “It’s very unusual for a couple of young guys to come up and start making mainstream movies right away, especially when they are running a business in addition to producing the pictures.”

Building a library

Because Kosove, a native Philadelphian, and Johnson, who hails from Georgia, entered the film business without hands-on moviemaking experience, they have taken to hiring more seasoned outside producers on a film-by-film basis. The formula works, according to Swank, who re-signed with Alcon for “Insomnia” despite the commercial failure of “The Affair of the Necklace.”

“They have a lot of patience and their demeanors are down-to-earth. And they are really smart,” Swank said. “You need those qualities to be a good producer. I’m sure these guys are going to be around for a long time.”

Despite their momentum, Kosove and Johnson say they intend to keep Alcon as small and agile as possible. The company, which is based in Century City, has 13 full-time employees.

Smith, who has become as much a mentor to Kosove and Johnson as a financial backer, declined to say how much he has invested in Alcon, other than to note it’s a relatively small amount. His main role, in addition to collaborating on decisions about which films get greenlighted, has been to guarantee loans made against future revenues.

Since the company has been operating in the black, Smith said his exposure has been minimal. “They have a good plan for managing a portfolio of movies and minimizing the risk,” he said.

“To make this really pay off, we’ve got to create a body of work, and we’ve got to do it in the next 10 years,” he said.