A Director Tries 'Guerrilla' Financing: Steven Soderbergh's struggle to make his Che epic reflects a changing Hollywood

It was nearly a decade ago that Steven Soderbergh and two partners, actor Benicio Del Toro and producer Laura Bickford, first discussed making a long, ambitious film about revolutionary Che Guevara. It soon became apparent, however, that they were perhaps the only people in Hollywood willing to gamble on a four-hour epic made largely in Spanish.

Next weekend, Mr. Soderbergh's movie will begin an unusual theatrical run with IFC Films. Funded largely by foreign backers after the Hollywood studios passed, "Che" will open as a 257-minute film on Dec. 12 and play for a single week in New York and Los Angeles; then, in January, IFC will reissue the epic as two separate two-hour films at theaters across the country before also releasing it on video on demand. Mr. Soderbergh's struggles to get the film funded and released are signs of the mounting financing challenges facing filmmakers in today's Hollywood. "For a while, we were financing the script and development ourselves, waiting to see what the best circumstances for the film would be," he says.

Scrambling for production funds is nothing new for Mr. Soderbergh, a veteran director who works both inside and outside the studio system. The 45-year-old's résumé includes franchises like "Ocean's Eleven," serious, critically acclaimed films like "Traffic" and tiny independent fare like his 2006 film "Bubble."

Snubbed by the major U.S. studios on "Che," Mr. Soderbergh and his partners turned to Europe. The French film company Wild Bunch supplied about 75% of the financing for the $58 million movie and presold a number of territories to the international arms of companies like Warner Bros. to recoup the sum. Spain's Telecinco came in later and provided additional financing.

The film follows the life of Ernesto "Che" Guevara, the Argentine doctor who rose up as an idealistic insurgent and became an international symbol of rebellion. Mr. Soderbergh shot the two parts in distinct styles. For the first part, which follows Che, played by Mr. Del Toro, as he meets Fidel Castro and rises to power during the Cuban Revolution to overthrow Fulgencio Batista's dictatorship, he used a wider frame evocative of a classic Hollywood style to highlight the triumphant nature of that revolt. The second film traces Che's failed attempt to revolutionize Bolivia which ended with his capture and subsequent execution in 1967; Mr. Soderbergh shot the second chapter with a handheld camera to get across the uncertainty of Che's mission.

In a typical career sequence for Mr. Soderbergh, he followed his work on "Che" by shooting a $22.5 million Matt Damon movie for Warner Bros. about a price-fixing scandal in the world of agriculture, called "The Informant," which comes out next fall; from there, he quickly moved on to production on "The Girlfriend Experience," starring mostly nonprofessional actors and made on a shoestring budget of about $1.8 million.

Maneuvering between different types of projects demands flexibility. These days, movie theaters are awash in a glut of small, independent movies that were funded by the billions of dollars that outside investors, such as hedge funds, poured into Hollywood in recent years. The oversupply has made it difficult for small movies to compete. And now, new financing for such films has become scarce amid Wall Street's meltdown.

Such issues are, in part, what made financing "Che" so difficult. "Two decades ago, it was easy to finance a film from a single source," says Mr. Soderbergh. "Hollywood wasn't laying so much off film budgets to equity partners or other studios. But these days, every film has a handful of partners."

Indeed, Mr. Soderbergh says Warner Bros. outsourced part of the financing for "The Informant," to not one but two additional equity partners. "Twenty years ago," says Mr. Soderbergh, "nobody -- studios or independent producers -- was doing that on a budget that size. Participant and Groundswell are both great partners to have for Warner Bros., but at a certain point, if you can't write a check for this movie, then I guess you can't write a check for anything." Warner Bros. confirmed that it has two partners on the movie but says that it wasn't an unusual arrangement.

The harsh economic realities of today's film industry have also forced prominent directors like Mr. Soderbergh to seek financing abroad. Spike Lee financed his most recent film with money from Italian investors; Oliver Stone's "W." was financed by a crew of equity partners from Asia and Europe.

Mr. Soderbergh has long turned to foreign investors to back his movies, such as his 1991 mystery thriller, "Kafka." "For certain kinds of movies, you are going have an easier time finding money overseas," he says, adding that winning Cannes' top film prize in 1989 with "Sex, Lies, and Videotape" helped establish his name abroad.

Landing a U.S. distributor for "Che" proved not only to be challenging but "downright depressing," says Mr. Soderbergh, who has long nurtured cozy relationships with distributors and studios, especially Warner Bros., where his now-defunct production company with George Clooney, Section Eight, once enjoyed a production deal. The foreign-language component of "Che" posed a major problem for U.S. distributors, says Mr. Soderbergh. "I knew that a foreign language film would be a problem, but I felt that a movie about a guy who holds such staunch anti-imperialist views with him speaking the language of the imperialists would look ridiculous," he says.

Despite the language issue, "Che" eventually attracted U.S. bidders: in September, IFC Films announced it would distribute the movie. The company will offer the film on a variety of formats in rapid succession, releasing the full-length version on Dec. 12 in New York and Los Angeles for one week and then again in January as two admissions, the first titled "The Argentine" and the second, "Guerrilla." About two weeks after that, it will be available through IFC's video-on-demand platform.

While many filmmakers bristle at the idea of releasing a movie so quickly through video on demand, the notion is hardly revolutionary to Mr. Soderbergh, who helped pioneer the concept of simultaneous releases with his 2006 film, "Bubble," about a murder in a small Midwestern town. That film, along with "The Girlfriend Experience," is part of a six-picture deal he struck with Dallas Mavericks owner Mark Cuban and Todd Wagner's 2929 Entertainment to fund smaller films that get distributed simultaneously on DVD, cable TV, and in theaters.

That pact was part of an effort by Mr. Soderbergh to navigate the digital revolution. Within five years, Mr. Soderbergh predicts, the film industry will see a major Hollywood studio release one of its biggest films simultaneously in theaters, on cable, and on a DVD or Blu-ray disc. At that point, Mr. Soderbergh adds, "Only the fittest will survive."