Prices don't add up in tough market
SANTA MONICA — The AFM was a snooze. No question of that. But why, was the question industry thinkers carried with them all week. After all, some bizzers had talked of a pre-strike buying frenzy.
Seems instead that the pace of deal-making last week was hindered by various searches for value amid a surfeit of mediocre product.
“We can’t go on feeding a business when there are such clear changes in business models,” says Adolfo Blanco, m.d. of film at Spanish group Vertice, which includes leading local indies Manga and Notro.
“International distributors are really running the numbers these days,” says TWC Intl. chief Glen Basner. “They are really looking at their businesses and asking what works.”
Most common refrains of the past week were that more movies and projects than ever were available, but that standouts for the theatrical and all-rights buyers in attendance were fewer.
While trumpeting an event with attendance up by 2%, AFM chief Jonathan Wolf suggests sellers may be hurting themselves by bringing so many films that have previously preemed at the fall festivals. And buyers certainly complained that they have been on the road too much. But deeper factors are also at play.
“It all comes down to shelf space, whether you are talking about the theaters, the videostore or on TV,” says Nicolas Chartier prexy and CEO of Los Angeles-based indie sales house Voltage Pictures.
The weight of the Hollywood studios in the international markets is hurting the indie crowd. First, their output deals eat up large chunks of the acquisition budgets of TV nets around the world, which in turn hinders how much indie buyers can risk on buying movies on the open market. Second, by beefing up their specialty arms over the past few years, the studios have expanded deep into indie territory the range of movies they carry.
Two other factors on the demand side have flattened AFM and other recent sales marts such as Pusan: strength of local titles in their home markets; and the ongoing changes in TV, characterized by fragmentation and marginalization of movies. As a result buyers worldwide have become pickier.
“There’s no correlation between the market and sales prices. The video rental biz has plunged in some countries, and films no longer function so well on TV,” Notro says. “There’s a revolution in leisure habits among young people worldwide. Traditional core revenue streams just aren’t there in the same numbers as before.”
Says one seller: “It is simply not a volume business any more. And even the volume buyers that remain in Benelux, East Europe and the Middle East are acquiring at lower prices than before.”
The rise of local movies means distribs are generally acquiring fewer pictures in the middle ground between studio tentpoles and local champions. (When this situation reverses, as happened in South Korea in last year, appetite for acquisitions can return. Several sellers said they witnessed a revival in Korean buying this AFM.)
General entertainment nets from Europe to India are losing ratings ground to specialty channels. And in many territories, primetime has been taken over by made-for-TV content, such as reality shows or glossy skeins often repped by Hollywood studio congloms. Genre movies that might previously have had latenight TV play are now video-only titles and are going into a DVD sector being eroded by piracy.
Under these circumstances, buyers are struggling to put the numbers together, and keep coming back to safe bets driven by a handful of bankable worldwide stars.
“Movies with A-list cast do still sell at a time when people are not taking risks,” Chartier says. “But if it is only an interesting script, most buyers these days will wait for the interesting movie to come from it” before opening their wallets.
Indie producers and packagers struggled to put together projects of note in the pre-strike period, as they were unable to outbid the studios or the vertically integrated indies such as Summit, New Line and TWC. “Buyers are clearly being very careful to commit only to pictures they are sure are going to get made,” Basner says.
The vertically integrated indies have international sales and domestic distribution capacity, and are able to guarantee talent a payday. New Line largely wrapped up presales on “Sex and the City” with big ticket deals for Japan and South Korea, while Summit, with 20 movies on its AFM slate, struck output deals with Nordisk in Scandinavia and Tele Munchen for Germany.
Determining the time when buyers’ expectations and sellers’ asking prices will realign is moot. Some were hoping for short-term concessions by the sales companies. Having prebought the “Joy Division” docu and epic “Mongol” early in the session, Laurence Gornall, marketing director of Blighty’s the Works Distribution says he was waiting for a “price crash.”
Others expect the realignment to take longer. “Just because the euro is strong doesn’t mean we are going to overpay,” says Pim Hermeling of leading Benelux distrib A Film.
Says TWC’s Basner: “(Buyers) are making it harder for us, but ultimately healthier for the marketplace, (because) they will still be in business next year.”
John Hopewell contributed to this report.