Local pics give major studios a run for their money at the foreign box office

BOX OFFICE REPORTS
Click on any country for information on box office around the world

Japan

Britain

France

South Korea

Germany

Spain

Italy

Australia

Mexico

Russia

Hong Kong

South Africa

The Netherlands

Eastern Europe

Belgium

A tiny movie about port-a-potties led the charge in Oz, a hick film set on a French farm wowed the Gauls, and a family film about a Bavarian boy’s obsession with religion galvanized the German B.O.

And that’s not all: In South Korea, a monster movie called “The Host” did double the business of the top Yank entry, “Mission: Impossible 3.” Several homegrown disaster epics powered the wickets in Japan to an all-time record. A fantasy thriller called “Day Watch” bested all comers in Russia.

It was, in short, a stellar year for locally made movies in key territories, including most notably South Korea, Japan, France, Germany and Russia.

One of the reasons: Producers and directors have been inspired by TV colleagues who are making primetime shows as good as anything coming out of America — and the mid-range movies coming out of the U.S. are less and less appealing to global auds.

In addition, filmmakers have developed keener commercial instincts. In many countries, they have thrown off the shackles of subsidies (which often seem to work against commercial success) and rejected auteur-ish impulses.

Despite all the local boosts, Hollywood could breathe a sigh of relief over the year’s numbers, thanks to its tentpole titles.

“Pirates of the Caribbean: Dead Man’s Chest,” “Ice Age 2: The Meltdown,” “Casino Royale,” “Mission: Impossible 3″ and “The Da Vinci Code” led the foreign grosses for the majors to a record haul. “Da Vinci” set an international opening weekend record with $155 million. (A weak dollar, especially against the euro and the pound, also helped boost Yank coffers.)

Thanks to this combo of strong local titles and Tinseltown blockbusters, overseas business overallrebounded smartly from last year’s battering and should finish 6% above the record 2004 level of $13.8 billion — to as much as $14.6 billion, according to Fox Intl. estimates.

Of that total, the biggest chunk belongs to the big five U.S. distribs: BVI, Fox, Sony, UIP and Warners. Their cumulative tally will probably hit $8.5 billion, matching the previous record in 2004, and finish 8% above last year’s disappointing total gross of $7.9 billion.

But the story of the year was the technical sophistication and storytelling skill of locally made films. Despite being virtually unknown in the U.S., they delivered big time in key markets, accounting in Korea for a whopping 60% of the overall B.O. (Only Britain among major territories had few local hits to cheer about.)

During the Dec. 17-19 weekend frame, for example, “The Holiday” was the only non-native film in the top six slots in South Korea.

These are, say a number of sources, not anomalies but rather evidence that local film industries are coming into their own in various countries.

That kind of local success is attracting serious attention from Hollywood majors, which are getting increasingly involved in co-producing as well as distributing local fare in key territories.

Stuart Ford, prexy of sales company First Look Intl., believes that the rise of local productions and the slumping DVD market is dulling the appetite of foreign distribs for mid-budget films.

“High-profile releases with big stars and films in tried-and-tested genres with budgets under $20 million are still attractive, but the foreign market has shrunk a bit for mid-budget films,” Ford says. “And Sundance-type films are finding it tough unless they have strong critical support because international audiences are increasingly aware of B.O. performance and critical reaction.”

In some cases abroad, it’s becoming increasingly difficult to tell what’s a Hollywood production and what is a local film.

Clint Eastwood’s dual take on the battle for Iwo Jima reflects this new global-yet-local filmmaking spirit: His Japanese-lingo “Letters From Iwo Jima” is doing boffo year-end biz in the land of the Rising Sun.

Over in Britain the Anglo and American industries are now so intertwined it’s hard to define a “local” movie. Many of the hit movies that propped up the U.K. box office in 2006 had a strong British connection, including the second “Pirates” (many Brit actors) and “Casino Royale” (which is British in every way except financially).

On the distribution front, Warner Bros. scored notable coups by handling French comedy “Les Bronzes 3″ and Japan’s two “Death Note” films. Disney’s BVI is making similarly astute local choices with co-prods and distribution deals in Germany and Australia.

Meanwhile, the year is closing with a seismic shift in the foreign distribution biz as Paramount and Universal end their two-decade UIP alliance — a move that underlines the point: Foreign revenues have become far too valuable to share with competitors. As Par and U start their own offshore outfits, they’re looking at local opportunities overseas to take up the slack.

“We will be much more aggressive in investing in local product,” notes David Kosse, head of the newly minted Universal Pictures Intl. “It was a very good year for local films in a number of markets, particularly Germany. And that success really raises the bar for us.”

Kosse was referring to the eyebrow-raising grosses for homegrown thriller “Perfume: Story of a Murderer,” based on a Teutonic bestseller, and “Seven Dwarves: The Woods Is Not Enough,” a spoof that set a new bar for what the local industry is capable of.

Andrew Cripps, Kosse’s counterpart at the new Paramount Pictures Intl., points out that there’s a big opportunity overseas: “As costs of studio films go up, you can make films locally for a much more reasonable price.”

But the international biz also presents Hollywood with vexing challenges:

  • The margin for error is slimmer than ever. With studios scaling back the number of their releases, pressure is ratcheted up on the remaining tentpoles to perform well. Disney, for example, is cutting its slate almost in half.
  • Strong performances by local films can dent the potential for smaller American movies. In mid-December, “Deja Vu” finished a distant third in France with $1.8 million to two French entries — “Arthur and the Invisibles” with $11.8 million and “Hors de prix” with $3.5 million.
  • Piracy plagues every market but is most pernicious in Asia, compelling studios to opt for day-and-date openings even when that might not be the most appropriate release strategy.

The good news for Hollywood: Tentpoles worked impressively outside the U.S.

Sequels of “Pirates,” “Mission Impossible” and “Ice Age” grossed a combined $1.4 billion internationally and “Da Vinci Code,” based on a global bestseller, wrote big numbers everywhere. The Sony film took in $539 million overseas — an astounding 71% of its worldwide gross.

That’s especially important since sequels to “Pirates,” “Spider-Man,” “Shrek,” “Harry Potter” and “Bruce Almighty” are being readied for next summer. On mega-budget films, foreign performance is crucial.

“You can’t keep trying to hit doubles,” asserts Jay Sands, senior VP at Sony Pictures Releasing Intl. “You have to hit homeruns with the big movies.”

Hollywood is finding that local films have to be respected.

“Our guy in France needs to know four months out about a big local film getting released,” Sands notes.

Otherwise, there could be disappointment at the wickets on any given weekend.

Pedro Almodovar’s “Volver,” for example, outclassed “Borat” over the fall in Spain; local fave “The Egg Film” bested “Scary Movie 4″ in Mexico last spring; and a single native talent, Leon Shuster, dominates the South African wickets whenever he has a movie, leaving the big guns of Hollywood in his wake.

In that respect, the global film biz is beginning to mirror what has already happened in international TV. Locally produced fare dominates the small screen just about everywhere — though it’s Hollywood series which are the import of choice to fill the occasional primetime slot and other niches.

In fact, homegrown feature film fare accounted for a stunning 61% of total B.O. grosses in South Korea, with “The Host” raking in $90 million followed by “King and the Clown” at $84 million. The contrasts between the two — a traditional historical drama vs. an innovative effects-heavy genre piece — point to Korean cinema’s success in a diversity of styles.

In Japan, with total B.O. topping out at a record $1.72 billion, the market share of local films surpassed the 50% mark for the first time since 1985. Production of local fare may exceed 400 titles for the first time since 1973.

Although no Japanese film has crossed the ¥10 billion ($89 million) line this year, titles earning ¥5 billion ($45 million) or more — the local measure of a blockbuster — has hit six, an all-time high.

After years of miscues, Bollywood too bounced back in 2006 with script-driven local crowd-pleasers. And the Mumbai-based industry has taken a cue from America by expanding its franchise fare through videogames, merchandising and music ring tones.

In France 45% of B.O. grosses went to local fare; in Germany the figure was 26%.

The picture was far different in Italy, Mexico and even the U.K., which were dominated by Hollywood blockbusters.

In Britain none of the local pix, many financed by Hollywood outfits, was able to crack the top 20 — and the majority of movies in the top 10 Brit films would be privately regarded as flops by their distribs.

But four of the five top-grossers in Britain had U.K. connections: “Pirates,” “Casino Royale,” “Da Vinci Code” (a U.K co-production partly shot in Blighty) and “Borat” (an American movie built entirely upon the comedy of a British star). Of the top five, only “Ice Age” has no Brit connection.

“Ice Age 2″ emerged as the unsung movie of the year, icing an impressive $432 million from all overseas wickets.

At the opposite end of the spectrum was “Superman Returns,” which grossed $190 million overseas, falling short of loftier expectations. Another disappointment was “Memoirs of a Geisha,” which grossed $104 million abroad but notably failed to wow in the country where it’s set, Japan.

The question remains: Is the strong showing of local films a fluke or a fundamental shift?

Several analysts suggest there will always be the occasional disappointing year in any given film industry — but the point is there are now viable industries in so many foreign countries. That bodes well for local hits, and thus a healthier balance with Hollywood fare.

Follow @Variety on Twitter for breaking news, reviews and more