Indie recovery offset by DVD downswing

Brazil

RIO DE JANEIRO — It’s a good news, bad news scenario in Brazil. Indie distribs are benefiting from the country’s overall theatrical market recovery and the continuous appreciation of the local currency against the U.S. dollar, but they are suffering with a fall in revenues from DVD.

In the past, indies had profited from a boom in DVD rental and sell-through, which accounts for more than 60% of the total revenue of a typical indie distrib. But rental and sell-through sales in the January to February 2007 period fell to 2.94 million units from 3.06 million in the same period in 2006, according to the Brazilian Video Union (UBV). The trade org blamed the rise of pirated discs for the drop.

But despite the hit from the DVD sector, the theatrical market’s total B.O. in the first quarter of 2007 hit $83.5 million, up 9.7% from the same period last year, according to Nielsen.

For the indies specifically, the currency appreciation is also good news, as they pay less local money (the real) for acquisitions in U.S. dollars. Indeed, in the past three years, the dollar has lost about 30% of its value against the real.

“In most of the recent film acquisition deals, independent distributors estimated a higher value for the dollar. The favorable exchange rate compensates the fall in rental,” says Downtown Filmes’ president Bruno Wainer.

All things considered, Paris Filmes’ CEO Marcio Fraccaroli says he believes prices of pic rights for Brazil will fall this year.

“Producers have to adjust themselves to our reality. Since 2005, prices to Brazilian distributors have increased due to the DVD expansion here. But the reality has changed,” says Fraccaroli, adding that he thinks many of the companies that entered the indie distribution market during the boom will leave the sector.

If some companies are struggling to survive, at least one indie distrib is having an outstanding performance this year.

Europa Filmes & MA Marcondes had a total B.O. of $9.99 million in first quarter of 2007. It placed fourth in the country’s distrib ranking in the period, ahead of majors such as Paramount and Buena Vista, a rare situation for an indie in Brazil.

Their boffo perf is due in part to Mauricio Farias’ “A Grande Familia” (Big Family), which had a total B.O. of $7.5 million.

BOX OFFICE OVERVIEW

Top Film 2006:
“Ice Age: The Meltdown”: $20 million
Total B.O.: $ 326 million
Total number of releases: 337

Recent Pickups
“Grindhouse” (Europa Filmes & MA Marcondes)
“His Dark Materials: The Golden Compass” (PlayArte)
“Irina Palm” (Imovision)
“Alone” (Downtown)
“Premonition” (Paris)

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