Rendez-Vous will test fortitude of film market
“Credit crunch,” “cash flow,” “recession”: Such buzz words, rather than buzz titles, threaten to overshadow the 11th Unifrance Rendez-Vous With French Cinema.
Running Jan. 15-19 in Paris’ truly Grand Hotel, Europe’s biggest national cinema showcase unspools as the world tips into recession. And bankers — let alone film execs — cannot predict its depth or breadth.
For the local movie business, consensus is that some territories and companies, inside and outside France, will be far harder hit than others. Most predict that the crisis will retard trading and force budgets down, pushing sellers and buyers mainstream.
“We’re looking at a perfect slowdown,” says Nicolas Brigaud-Robert at Films Distribution.
That said, France is better positioned than many other film powers in Europe to ride out tough times ahead: Many Gallic sales companies double up as domestic distributors.
At 171 million through November, admissions were 6.7% up year-on-year, the most significant rise in Europe’s “Big Five” territories. Pathe blockbuster “Welcome to the Sticks,” which grossed E120.6 million ($164.4 million), accounts for nearly all the uptick, as well as French films taking 46% of tickets sold, besting U.S. movies (44%).
Bulwarked by French nets’ investment quotas, French TV sales remain vibrant. For example, EuropaCorp, Luc Besson’s mini-major, taps 30% of revenues from international, and 20% from domestic TV.
France’s foremost film financing banks — Fortis, Natexis subsid Coficine, ABN AMRO’s Neuflize OBC — are still bankrolling sales agents’ minimum guarantees, as well as France’s production and distribution sectors.
Problems at Fortis, where a BNP Paribas buyout has just fallen through, have not impacted film lending to big or medium-sized companies. Neuflize OBC has committed to film financing in 2009.
“Private equity money is still accessible as a complementary piece of the financing puzzle on certain pictures,” says Lionel Uzan, SND director of international sales and acquisitions.
Some companies — StudioCanal, UGC, Pathe, Gaumont — can leverage strong balance sheets. SND and TF1 Intl., for example, are broadcaster subsids. And Wild Bunch closed a reported $150 million investment deal with New York’s Continental Ent. Capital (CEC) in 2007, before the crunch set it.
But France’s sales sector still faces a double whammy: credit-choked foreign distribution clients, and, again largely abroad, piracy, which continues to contract arthouse markets, weaken DVD sales and collapse TV sales — where they still existed.
Overseas distribution, like domestic U.S., is punishingly capital instensive. For foreign distributors, the problem “isn’t paying minimum guarantees, it’s the P&A, which in most countries is cash-flowed via bank credit until box office recovers P&A costs,” says Brigaud-Robert.
And the squeeze compounds deteriorating market conditions.
In Britain, “the plunging (value of the) pound (against the euro and dollar) and DVD prices will impact minimum guarantees in 2009,” says Mark Adams at ICA Films.
As a worst-case crunch scenario, Courson points to Russia, where acquisitions are plunging at ad-strapped broadcasters, which are, anyway, priming domestic TV production.
In another credit-crunched territory, Spanish banks stopped lending to local distributors over the summer, refusing even to discount TV contracts.
Cash-rich sales companies enjoy “the luxury, if they really believe in a project, of having slightly less pre-sales and taking more risk from their own balance sheet to get a project started,” says Yann Le Quellec, managing director for CEC Europe.
But they’re still exposed to risk from the international market.
“The credit crunch is a severe wake-up call. This reality check will probably serve a drastic corrective to our industry,” says Celluloid Dreams prexy Hengameh Panahi.
Nobody has their heads in the sand. Especially on full-financed films, distributors and sales agents are exploring new recoupment models: split-revenue deals, with no minimum guarantee, or delayed minimum guarantee payments, says a European distributor.
Production sales companies are eyeballing budgets and execs are examining the kinds of films they’re making.
“Everything above $22 million is a huge risk that only a studio can take,” says Franck Ribiere, co-prexy of La Fabrique des Films, which is producing two inexpensive genre films: “Humans,” an action-adventure pic, and horror comedy “The Pack.”
StudioCanal will focus on “not-too-expensive, accessible indie movies with very strong directors and a good cast, for $15 million or below; and more straight-entertainment movies around $40 million,” says Courson.
Instead of “American independent films with no international cast and Asian films with no story,” Cellulloid Dreams will concentrate, with exceptions, on “European films with strong storytelling and bigger international movies with cast,” Panahi says.
“Big projects have to work on pre-sales, which are becoming more difficult. But with the right package, there’s no reason you can’t pre-sell,” insists Gregoire Melin at Kinology, which is selling some big films: “Gainsbourg,” co-produced by Universal, Olivier Dahan’s “My Own Love Song,” with Renee Zellweger, Andrew Niccol’s “The Cross,” Aton Soumache-produced “The Prodigies,” and Juan Solanas’ $35 million “Upside Down.”
All signs are, however, that many international distributors will largely sit early 2009 out . The question remains: For how long?