Currency exchange takes big bite out of biz

SYDNEY — The seven Hollywood majors relished their tea break in the U.K. amid an otherwise turbulent rental year overseas.

Film revenues for the seven Hollywood majors shrank almost everywhere in Europe except in the resilient British market, according to newly released stats for 2000.

Although the slippage in many markets can be attributed largely to the strength of the greenback vs. ailing local currencies, distribs say their figures reflect dwindling ticket sales in key territories such as Germany as well as Japan.

Nonetheless, Europe generated $1.23 billion in rentals for the majors last year (55% of the pie), down from 1999’s $1.27 billion. Asia and Australasia ponied up $668 million (30%), compared to the prior year’s $707 million. Latin America contributed $328 million (15%), up from $306 million.

The decline in some markets was largely “product-driven,” says 20th Century Fox Intl. president Scott Neeson. He points to Germany, where attendance fell last year despite an increase both in screens and in the number of films released.

“The problem in Germany is that a small percentage of the population goes to cinemas a lot and the vast majority don’t go at all,” Neeson says. “The industry needs to get together to look at ways of fixing that.”

In Japan, which remained the U.S. majors’ most lucrative theatrical market overseas despite a pronounced downturn, Neeson is convinced teens have cut back their moviegoing because they’re spending upwards of $100 a month on cell phones that allow them to transmit photographs and messages to each other.

“That’s the hypothesis everybody in the industry talks about. We will find out (if the theory holds up) by carrying out a survey in the near future,” says Kiri Inomata, president of UIP Japan.

But it was the unyielding greenback that trumped any gains the studios might otherwise have made.

Neeson estimates Fox Intl.’s theatrical revenues also have been eroded by about 25% over the past three years due to the strong dollar.

In Europe alone, exchange rates wiped approximately 15% off Columbia TriStar’s rentals last year, and the studio’s exec VP Tony Manne does not detect any radical changes. “There have been no major hits or improvements in currencies compared with last year,” Manne says.

United Intl. Pictures president/chief operating officer Andrew Cripps estimates that currency swings, mostly in Europe, depleted its billings by about 10%. “I see stability in exchange rates in the major markets, but I don’t think we can forecast a good recovery,” Cripps says.

The Hollywood majors’ rentals outside North America tallied $2.24 billion in 2000, a slight downtick from 1999’s $2.29 billion.

The figures are compiled by the Motion Picture Assn. and circulated privately among member companies. They are a reliable barometer of the seven majors’ fluctuating theatrical fortunes abroad, but a less effective gauge of those markets’ total B.O. health, since they don’t count local product or films handled by indies.

While the trend toward splitting rights between a variety of domestic and international parties continues, Manne believes independently produced big-ticket films increasingly are ending up in the hands of the majors overseas.

He cites John McTiernan’s “Rollerball,” which German financier-distrib Helkon Media financed by selling domestic rights to MGM and all foreign rights, except Germany and Japan, to Columbia TriStar.

“Most of the customers for (pricy indie-originated projects) are the majors, because they’re the only ones who are big enough to bankroll them, and can cover their risks via TV and homevideo deals,” Manne says.

UIP’s Cripps disagrees, contending the MPA’s rental stats are not a true guide to the state of the biz in markets such as Japan and Germany because rights there frequently are laid off to indies.

Five of the top 20 titles in Japan, for instance — “The Green Mile,” “End of Days,” “The Blair Witch Project,” “Sleepy Hollow” and “U-571″ — were released by Japanese distribs last year, Cripps notes.

As for Germany, he says, “A lot of MPA films were sold off or subject to co-production deals not seen in other markets.”

U.S. studios collectively saw their film rentals dip in Asia, while Latin America experienced an upswing.

Brazil and Mexico showed healthy gains, spurred by aggressive multiplex rollouts in both territories. In Asia, South Korea and Taiwan rose, also benefiting from new screens and fairly stable currencies.

The 14% plunge in the studios’ rentals in Japan last year can be attributed equally to the weak yen and to the overall market’s decline, says UIP’s Inomata.

Nationwide, admissions fell by 6.5%, but the attrition rate was worse in Tokyo (12% in ticket sales, 15% in grosses, Inomata estimates) as the capital continued to suffer from the “doughnut effect” — audiences deserting Tokyo to patronize new multiplexes in outlying areas.

He adds, “We certainly hope last year’s B.O. decline will be reversed this year, especially because of the forthcoming stronger summer releases.”

Hollywood films generated just $4.1 million in rentals in mainland China last year, in part a reflection of how little of the B.O. cake remains after the exhibs’ cut, monopoly importer China Film’s fees and a panoply of taxes have been extracted. Nevertheless, that number was an improvement from 1999’s minuscule $1.4 million.

To gain entry to the World Trade Organization, the Beijing government has promised to undertake a raft of reforms, including doubling to 20 the number of foreign films imported each year on a revenue-sharing basis.

But execs such as Manne doubt 20 will be anywhere near enough to justify the massive investment needed to build screens, rejuvenating the country’s aging, dilapidated cinemas.

“I think it could be 10 years before we see anything real (in revenues) from China,” he says.

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