A24, the chic independent studio that has captivated cinephiles since launching in 2013, maintains an oddly inverse relationship between cultural impact and financial reality. The studio, specializing in low-budget filmmaker-driven artistic stories, has never exceeded 2.45 percent of the annual U.S. box office. Civil War, its highest grossing movie globally, topped out at just $127 million. Yet, A24 has quickly become one of Hollywood’s defining brands, transforming into a multifaceted lifestyle company with a faithfully devoted following.
Last summer, the famously niche studio secured funding that valued it at a whopping $3.5 billion—much smaller than the publicly traded Paramount’s $8 billion market cap but on par with the mid-major studio Lionsgate’s $2 billion valuation (though comparing private valuations and public market caps is far from apples to apples).
In recent years, whispers around town have grown increasingly louder that A24 is eyeing bigger-budget, broader appeal fare. As its business ambitions grow, essential questions arise: Can the cultivators of cult classics go commercial? What risks and rewards follow? And what is A24’s ultimate endgame?
Living up to a $3.5 billion valuation
A24 typically operates in a profitable lane of low-budget productions with short paths to break even. Its average theatrical budget ranges between $15 million and $20 million and it never breaks the bank on marketing. This approach will likely never produce Marvel-sized box office results, but it minimizes risk and creates a recyclable formula of success. (A24 did not respond to a request for comment).
“On any given project, they’re only making maybe tens of millions of dollars,” David Offenberg, an entertainment finance professor at Loyola Marymount University and author of Independent Film Finance: A Research-Based Guide to Funding Your Movie, told Observer. “They’re never in a position where they hit a home run and make hundreds of millions of dollars on a title. They’re taking small bites of profit.”
That’s all well and good for an independent studio investing in boundary-pushing art. Moonlight (which earned $65 million worldwide, per Comscore), Lady Bird ($80 million) and Everything Everywhere All At Once ($111 million) are among the best films of the 21st century for my money. But they don’t make a multibillion-dollar enterprise, which explains A24’s strategic expansion. The studio has grown its TV library with successes such as HBO’s Euphoria, Netflix’s Beef and Showtime’s The Curse. Civil War, at $50 million, represents its largest big screen budget yet and signals more commercially-oriented gambles ahead. (April’s well-received Warfare, for instance, is driven by its harrowing action).
“When you receive a $3.5 billion valuation, it’s hard to justify that if you’re solely in the auteur cinema lane,” Marc Simon, an entertainment IP attorney with Fox Rothschild LLP, told Observer. “To help justify that very significant valuation requires the shifting strategy we’re seeing to grow revenue streams.”
A24 movies comprise just 0.75 percent of the annual movie supply on average from 2019 to 2024, according to media research firm Parrot Analytics. Yet the studio delivered an average of 1.25 percent of the U.S. film demand share and 1.03 percent globally in that time span. Punching above its weight in that way warrants further investment. But A24 can’t simply flip a switch and begin delivering blockbusters (just ask Netflix, which struggles to consistently match the movie engagement of its theatrical peers). Its success largely stems from its highly curated, specialized tastes, making this beefy transition a tightrope walk between old and new strategies.
A24’s streaming playbook
A24 increasingly emphasizes TV as viewing habits evolve. “It’s been the case for some time now, and certainly emphasized by the pandemic, that butts in seats has been replaced by butts on couch watching streaming,” Simon noted.
Successful episodic content generates significant service fees, covering broadcast access, cable and features like HD and DVR. When A24 owns the underlying intellectual property, it also collects rights fees for derivative works and merchandise opportunities. Partnerships with HBO, Netflix and Apple leverage these possibilities while keeping the A24 brand relevant between theatrical releases and attracting new audience segments that aren’t always leaning into the cinematic output.
“A TV library gives them more stable cash flows whereas a film library melts very quickly,” Offenberg said. “A TV library is more valuable because TV can get renewed for years. Plus, it can be recreated in other countries so you can sell the format as well and not just the content itself.”
TV also serves as both a development pipeline and ecosystem extension for A24’s creative partnerships with storytellers such as Benny Safdie (The Curse), Ramy Youssef (Ramy) and Sam Levinson (Euphoria).
Can cult classics pay blockbuster bills?
Historically, financing film to make money is about as effective as shooting craps in Las Vegas. A24 began as an indie distributor before moving into self-financing and production. By expanding this approach, the studio is accepting greater risk in pursuit of greater rewards.
A24 isn’t the first specialty division attempting to pivot into more bankable content. Miramax, New Line Cinema, Focus Features and many others have made similar moves with varying success. Independent studios that pull it off get acquired—Lionsgate scooped up Summit Entertainment and Disney bought Miramax. Those failing to find a consistent audience tend to run out of money. We hardly knew ye, Annapurna Pictures and Open Road Films. A24 has built a sustainable business with a clear brand identity that is synonymous with a specific slice of filmmaking. Leaving that lane runs the risk of destroying the sound foundation.
“When you branch out, you don’t want to dilute your brand identity and alienate your core followers,” Paul Dergarabedian, a senior media analyst at Comscore, told Observer. “They’re trying to bridge the gap between cinematic fast food and fine dining.”
A24’s upcoming adaptation of the genre-blending Death Stranding video game exemplifies this strategy. Success will attract new audiences outside of A24’s standard target demo while generating substantial box office revenue (Death Stranding has sold more than 19 million copies). Failure would strain A24’s thin profit margins and raise concerns about the studio’s ability to elevate more accessible entertainment for the masses. Dwayne Johnson’s MMA biopic The Smashing Machine (directed by Benny Safdie) arrives in October and will be followed by Josh Safdie’s $70 million Marty Supreme starring Timothee Chalamet in December. This type of expansion requires A24 to continue marketing in unconventional and smart ways, but with a broader audience in mind. Ideally, the studio can prove to Hollywood that risk is sexy once more, as Ryan Coogler’s Sinners currently proves. (Hot vampires—still popular!)
“If they can create a ladder by which the auteur filmmakers enter the A24 ecosystem and then climb the rungs within the studio to bigger budgets and more commercial content while keeping the je ne sais quoi that makes A24 special, that’s a homerun,” Simon said.
Is an “exit” on the horizon?
Private equity firms such as Thrive Capital, Stripes, Neuberger Berman, Guggenheim Partners and Eldridge have all invested in A24. This is key to the studio’s overarching strategy, which recently points to one clear hopeful outcome for the indie darling.
“Private equity typically has to sell within five years of making the initial investments,” Offenberg explained. “So they build up the valuation as much as possible so they can get the biggest exit possible. It’s effectively the CEO’s job to make the company as valuable as possible for some sort of transaction.” Though the entertainment media M&A market has cooled during this current industry contraction, swallowing up A24 is undoubtedly an enticing prospect for some.
Hollywood has always been a copycat league where successful strategies are imitated until every last ounce of value has been squeezed. As A24 attempts to graft its strategy of creatively singular storytelling onto bigger budgeted commercial bets, it will send ripple effects throughout the industry whether you’re an indie studio like Neon or a prestige subsidiary comfortably nestled in the P&L statement of hugely profitable conglomerates.
“Believe me,” Dergarabedian concluded, “all of these specialized distributors will be looking very carefully to see if they can and should apply this model to their studio.”
