'Mini-Major' Studios Coming of Age.

As the major Hollywood studios grapple with ways to become more cost-efficient, as evidenced last week by the Walt Disney Co.'s announcement that it plans to cut 4,000 jobs, a leaner type of entertainment force is reemerging on the scene.

They are the "mini-majors," a type of company that had essentially disappeared after the prior generation - Miramax Films, New Line Cinema, etc. -- was swallowed piecemeal by the major studios.

Now a new handful of such companies is emerging -- with unrivaled power and influence outside the major Hollywood studios.

Each one has deep financial pockets and a range of business interests from film and television production to video and cable. Each either has or is developing a substantial library of film titles, and each has a fierce belief in itself.

The new mini-majors include Artisan Entertainment, maker of "The Blair Witch Project"; Alliance Atlantis, a Canadian-based backer of pictures like "The Sweet Hereafter" and "Crash"; and Lions Gate Entertainment, best known for "Gods and Monsters" and "Shadow of the Vampire."

Some would argue that the new mini-majors also include cash-rich entities like Intermedia ("The Wedding Planner") and Initial Entertainment Group ("Traffic"). But these are largely movie production and financing ventures that don't yet have the same far-reaching, multimedia tentacles of the other companies.

Most of these companies are unknown to the average movie-goer, but they are increasingly leaving their mark on the movie business as a place where filmmakers can go to make fully financed pictures that will be distributed independently of the studios.

"There is always room for mini-majors," said Steve Stabler, the guiding force behind the recently shuttered mini-major, Destination Films. "There's only six majors, and there are 36,000 movie screens in the country to fill."

But just what a mini-major needs to succeed in today's ferociously competitive environment is subject to debate.

For Lions Gate CEO Jon Feltheimer, two things are essential: diversified interests and the ability to do in-house theatrical distribution.

"We believe that being (a mini-major) means being a diversified entertainment company with multiple revenue streams," he said. "And when I use the term 'mini-major,' I also mean a company that has a built-in distribution system."

Mini-majors' capabilities

Lions Gate and Artisan both have big U.S. distribution divisions that can open a movie just like a studio; Intermedia and Alliance Atlantis don't have this yet.

But Intermedia makes up for it by being able to finance very big films with stars like Harrison Ford and Jennifer Lopez, which it then sells to the studios.

And Alliance Atlantis compensates by having distribution deals in countries all over the world, which account for more than 60 percent of a film's business.

"It's a big world out there," noted Alliance President Peter Sussman.

Still, Sussman conceded that his company hopes to have a domestic distribution system down the road, as part of a larger business plan to become a full-fledged studio.

All these companies have built their business on releasing films that are quite different from the average, lowest-common-denominator studio fare - and that's just the way the new mini-majors want it.

With the studios turning more and more to broad-based entertainment that cuts across all demographics, the mini-majors are trying to tailor their product to specific segments of the marketplace.

Both Feltheimer and Artisan CEO Amir Malin believe their success is dependent on finding an audience that the studios don't reach - whether through art-house releases or cutting-edge, youth-oriented product.

Alliance Atlantis has also followed this strategy, although it recently broadened out to make more commercial films than its traditional art-house fare, including the $25 million-plus "51st State" with Samuel L. Jackson, due out later this year.

But Sussman said these larger-scale films are the exception rather than the rule.

Cutting-edge niche

Intermedia, which makes bigger-budget fare, also believes in movies that are a notch above most studio films.

"We tend to make pictures that are content-driven, that are about something, that are director-driven," said Intermedia Co-Chairman Nigel Sinclair, citing pictures like the Sydney Pollack-produced 'The Quiet American" with Brendan Fraser, slated for release next year. "The niche that the mini-majors fill is to provide more diversified choice for talent, and in some ways be a little more on the cutting edge."

In aiming to make non-studio-type films, Sinclair and his colleagues in the other new mini-majors have learned the lessons of their predecessors well.

In the early days, New Line and Miramax made niche-oriented films targeted at a specific marketplace. New Line specialized in youth-oriented genre product like "A Nightmare on Elm Street," while Miramax specialized in upscale art-house pictures like "A Room With a View." Both accumulated important film libraries that made them very desirable to the studios.

But unlike the fledgling New Line and Miramax (which made their names before the proliferation of satellite, cable, video-on-demand and other "ancillary" markets), the new minimajors strongly believe in hedging their bets across the board. They have operations in television production, television sales, video and cable.

In the case of Lions Gate, that means activities that mm the gamut from animation to broadband, while Alliance Atlantis not only has film and TV activities (like the CBS hit "CSI: Crime Scene Investigation"), but also owns several cable networks.

Efficient operations

A key aspect to these mini-majors is that they have the flexibility and low overhead that allow them to create content cheaper and quicker than the studios.

"We don't have the vestigial structure of studios that are 50 or 60 years old," noted Feltheimer. "We don't have people who have been here 10, 20 or 30 years. And we have much smaller staffs."

But Feltheimer, for one, knows there are many functions a studio performs that his company cannot.

"We have great disadvantages compared to studios," he admitted. "We don't have the size or scope of their library. We don't have their capitalization, their access to credit, their muscle with the buyers, their huge output deals, We don't own a network or cable line. We are a little PT boat firing our missiles in between the big nuclear blasts of the majors."

And when the little missiles go awry, the results can prove disastrous.

Earlier this year, one of the most talked about new mini-majors, Destination, closed its doors - less than three years after being formed with more than $100 million in funding.

Stabler, the producer who founded the company but exited it early on, believes Destination's subsequent management risked too much on a few big pictures like "Thomas and the Magic Railroad," rather than sticking with its original plan for a larger number of lower-budget films.

While Artisan is doing much better than Destination - helped by its 6,700-title library - it has seen its value drop recently. The company turned down a buyout offer of $250 million from USA Networks a year and a half ago. Now it is in talks with an unnamed buyer for a sum closer to $150 million, according to industry sources familiar with the negotiations.