Film business shifts to private equity, local fare

CANNES — Producers, buyers and sellers at Cannes found the film biz experiencing deep structural changes in how business is done and money made from making movies.

Market numbers were down by as much as 30% from last year, with a palpable sense that many of the more marginal players stayed away.

Buyers are shifting to acquiring films a la carte instead of programming larger slates; private equity rather than debt is playing a bigger role in film financing; and distributors and sales agents are moving far more aggressively into production as a means to maintain creative control over projects and keep hold of the rights.

There is also a distinct move toward local content even as the film industry becomes ever more global.

Theatrical has become the key cash generator for many European distribs as the economic meltdown has devastated TV sales and piracy has hit DVD’s hard.

“The market’s concentrating around a reduced number of stronger buyers and sellers, companies with strong financial stability, especially strong ties to television,” says Harold Van Lier, StudioCanal’s exec VP of international sales.

“Everybody is trying to come up with a new business model,” says Robbie Little, the British-born founder of Los Angeles-based the Little Film Co.

“At the moment, the model is a vertical one — a waterfall of people from writer to distributor where everyone is tying to make money from the process of making the film rather than the success of the film.”

The signs are of a shift toward a horizontal model, where each part of the chain works together to make the film profitable and earn their cut from its sales. Little, who with his wife Ellen has played a role in financing, producing and/or distributing more than 300 movies in his career, also notes the preponderance of private equity and tax credits for film financing, plus the emergence of a more democratic means of distribution, particularly via digital and the Internet. Projects with the right cast, script and budget will continue to raise money and sell well.

Companies like Studio Canal, Focus Features Intl., Europacorp, Pathe, Hyde Park and Hanway all reported strong presales on a number of buzzworthy projects.

Reports of the death of presales may have been premature, but the traditional financing tactic works only on the most solid of projects.

Focus Features Intl., for example, presold “Eagle of the Ninth” to buyers in every major territory, except Japan, worldwide. Some of the bigger deals inked included France’s Metropolitan, Germany’s Telemunchen and Bim in Italy.

“We’re happy to report the presales business is alive and kicking,” says Focus Features Intl. sales prexy Alison Thompson.

Studios and their remaining speciality labels are acquiring very little, preferring to invest in local production and exploring more flexible mixed-financing formulas with overseas producers. Quentin Tarantino’s Cannes competish entry “Inglourious Basterds” benefited from co-financing from co-producers Henning Molfenter and Carl ‘Charlie’ Woebcken, both top execs at Berlin’s Babelsberg Studios, where the pic was shot.

With the exception of IFC and Sony Classics, U.S. buyers have yet to ink deals on festival films.

But premium-level product, especially that which is already lensing, did robust business.

Odd Lot Intl., for instance, inked multiple deals on the Nicole Kidman drama “Rabbit Hole.” Summit Intl. inked deals on the Sean Penn-Naomi Watts thriller “Fair Game,” the “Twilight” followup “New Moon,” and the romantic drama “Remember Me” (starring “Twilight’s” Robert Pattinson), in most of Europe and Asia.

Madeleine Stowe’s “Unbound Captives,” with Hugh Jackman, Rachel Weisz and Pattinson — who stars in at least three pics on offer — is doing brisk business. Hyde Park presold to the U.K.’s Entertainment, among other territories.

Italy’s BIM took a bold approach, picking up seven titles — three from Focus Features Intl., including “Eagle of the Ninth,” and four from Gallic partner company Wild Bunch. But BIM Distribuzione topper Valerio De Paolis says the big change in the market for him was that for the first time he was buying for larger commercial releases.

“The significant thing is that in next year’s lineup we won’t have a single pure auteur arthouse movie. I just can’t open a movie on 60 screens anymore.”

For some, the new model boils down to accepting less money: Adriana Chiesa, topper of leading Italian sales company Adriana Chiesa Enterprises says: “Some of us are refusing to budge and lower our prices. But, let’s face it, that’s what we need to do.”

Ali Jaafar, John Hopewell and Nick Vivarelli contributed to this report.

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