A slew of international deals challenge studios' traditional role

Is Hollywood outsourcing its first-look deals?

On Nov. 19, Brad Pitt’s Plan B shingle signed with India’s megabucks media giant Reliance Big Entertainment to develop the vidgame “Dark Void” into a film. At the same time, Reliance signed with Imagine Entertainment partners Brian Grazer and Ron Howard in a deal that kicks off with Reliance’s acquisition of “Mofos,” a Josh Berghaus/Jay Shore-scripted comedy.

When companies like Imagine and Spyglass, and production shingles of Pitt, George Clooney, Tom Hanks, Chris Columbus, Julia Roberts and Walter Parkes & Laurie MacDonald have a project, they are as apt to get the greenlight from Asia, India, Europe or the Middle East as they are from a Hollywood studio.

In the past 18 months, five non-U.S. media companies have signed deals with a slew of Hollywood talent, with at least four more major pacts expected within the next few months.

While foreign investment in Hollywood is nothing new — recall Vivendi and Matsushita’s separate ownership of Universal and Sony’s current ownership of Columbia Pictures — this new wave in international money appears more targeted and talent-focused. In some instances, they are bypassing the studios and working directly with stars and filmmakers. And they want more than just an onscreen credit and a share in profits: They are asking to be included in the development process.

The newcomers make it clear that they’re not trying to usurp the majors. They want the studios as their partners in financing films, and are also deferential with talent that has existing first-look studio alliances, like the one Parkes-MacDonald has at DreamWorks, Grazer and Howard have at Universal, and Pitt has at Paramount.

The goal goes beyond securing distribution rights in their home territories. They’re broadening their businesses by controlling content and working within the Hollywood system. And, in many cases, they’re hoping to parlay the imminent deals into co-financing pacts with the majors. In short, they’re becoming genuine global players.

The scale is ambitious. For example, Reliance got the trend rolling when it announced first-look deals in May 2008. Since then, it has acquired some 20 projects, and expects to put two to four films into production next year, aiming to continue that pace for the next several years.

“The amazing thing about the guys at Reliance is the speed with which they’re able to move,” says helmer-producer Brett Ratner, for whom Reliance acquired Rob Liefeld’s superhero graphic novel “Youngblood” to direct. “They also have the ability to partner up or co-finance the film with a studio. It really offers freedom for the talent they’re working with.”

Most of these deals have occurred so recently that there is no way to judge the results. But the pacts challenge the accepted definition of what a Hollywood film is — even what a Hollywood studio is — as these offshore companies gain creative influence and lend their cultural sensibilities to the creative process and play on the broadest global level possible.

A few examples:

• Seoul-based CJ Entertainment, a powerhouse in Asian production and distribution, made a first-look deal with Columbus and his 1492 banner (which is also part of the Reliance roster). The goal of the three-year pact: generate family-friendly global blockbusters that will help CJ broaden its reach. CJ execs say they are open to investing in other filmmakers.

n Imagenation Abu Dhabi last month staked Parkes and MacDonald to a $10 million revolving development fund for their shingle, which is making the Steve Carell starrer “Dinner for Schmucks” and a third installment of “Men in Black.”

• France’s Studio Canal just forged production partnerships with Gary Barber and Roger Birnbaum’s Spyglass Entertainment, Joel Silver’s Dark Castle and Neal Moritz’s Original Films.

• Gaumont’s first-look deal with producer Nick Wechsler, sealed last May, puts the French minimajor in the center of several projects that include the Julian Fellowes-scripted “Greek Fire,” with Eva Mendes playing Maria Callas in a drama about her affair with Aristotle Onassis, and the Paul Schrader-scripted “Dying of the Light,” a Nicolas Winding Refn-directed thriller. Gaumont chairman Sidonie Dumas and CEO Christophe Riandee also have an informal arrangement with producers Alexandra Milchan and David Seltzer for English-language projects.

• Reliance has created first-look deals with the production companies of CAA-repped stars and directors, including Nicolas Cage, Brett Ratner, Jay Roach, Jim Carrey, Clooney, Columbus, Hanks, Pitt and Roberts.

To some, this is a big break for filmmakers, since it offers them an alternative to studios, which are increasingly banking on presold brands and effects-heavy pics. In years past, foreign bucks provided a solid resource for art films. But since foreign audiences are increasingly embracing effects-heavy action films — “2012” earned $341 million in only 10 days overseas — some filmmakers worry that the new investments will begin to favor that genre, at the expense of serious dramatic films.

But at least for now, the deals are extremely attractive. As the majors are gradually retreating from first-look deals, the offshore companies are stepping in, paying overhead and providing coin for their scripts.

Hollywood talent agencies have latched onto the outsourcing trend as a way to find development coin for future projects, since most Hollywood studios aren’t spending money on such efforts until 2010.

CAA has been at the forefront, but other agencies are following suit. UTA, for instance, recently hired former veteran WMA indie film agent Rena Ronson, and one of her priorities is to scout funding opportunities for clients. The CAA team that put together Reliance and CJ deals expects giant companies in other regions to take part as well. Likely suspects include Germany’s Constantin, France’s Metropolitan and the U.K.’s Entertainment Films, which all need to replace films once generated through a deal with New Line. As economic conditions improve, talent deals might even be made by companies based in places like Russia and China.

For the past few years, the studios’ traditional assets — notably physical production space such as backlots and soundstages — have found themselves competing against much improved facilities and financial incentives across the world. Now — with distribution systems in the midst of the digital switchover, and uncertainty prevailing over how to best monetize the online model — the international companies are embracing the mantra that content is king.

With proven track records in their home countries, these players are hardly starry-eyed. They look at the relatively risky game of staking development as a way to secure commercial product for their own pipelines, and to realize expansion ambitions by co-financing big films with Hollywood studios.

Reliance, for example, is keen to establish itself as a global media giant. Already huge in India, the conglom sees Hollywood as the logical territory for major expansion. The first-look deals complement the company’s investment in DreamWorks.

Imagenation, on the other hand, is more of a financial investor, looking for a return on its money as well as helping to build Abu Dhabi into a regional film hub.

For StudioCanal, the forging of its partnerships is directly linked to its multiterritory distribution operations in France, the U.K., Germany and Benelux.

“You can’t supply three territories just by buying at markets,” says Ron Halpern, Studio Canal’s head of international production and acquisition, who also oversees U.S. productions. “A lot of our partnerships have come out of StudioCanal bringing material to producers and the partnerships which we’ve forged over the years. We need good, ambitious English-language projects. Otherwise there’s no benefit to distributing in all these territories.”

For Korea-based CJ Entertainment, the allure was expansion into the West, with the secondary benefit of securing Asian distribution for films generated by Columbus. It’s the company’s biggest Hollywood play since CJ Group chairman Miky Lee became one of the original DreamWorks investors, an arrangement that ended when Paramount bought the studio in 2006.

“The company sees itself as a multiplatform consumer lifestyle brand that includes food products and other venues,” says Ted Kim, exec veep and head of production for CJ Entertainment America. “We see ourselves as a content company with distribution assets, and this was an extraordinary opportunity to work with 1492 at a time when the confluence of studio business and worldwide distribution is changing. CJ’s long-term goal is to be a gateway between Asia, Hollywood and the West.”

Both Kim and CJ’s senior veep and head of international Michael Suh said they hope 1492 will consider the occasional Asia-oriented storyline and Asian talent, and maybe tell some stories aimed at the Asian market. But they will give Columbus and his 1492 cohorts the kind of creative latitude they show talent at home.

“The Korean film environment right now is similar to Hollywood in the ’70s,” Kim says. “It is very much an auteur-driven market, where directors tell stories, and we support the filmmakers. There is incredible freedom, and we did not sit down with Chris and say this is what we want. It’s really about, ‘Let’s make films that can play around the world.’?”

The offshore investments aren’t without risk, though.

Development funding is considered the most speculative, as perhaps two of 10 projects developed get made. India-based UTV has made aggressive moves into Hollywood over the past few years, but a development deal with Will Smith and James Lassiter’s Overbrook hasn’t led to a film yet, and a 50% financing stake in the M. Night Shyamalan film “The Happening” didn’t pay off in a hit.

Still, the development business is less pricey than in past years, because specs, pitches and books are selling for lower sums, and writers are working cheaper. All of the new development arrangements are set up to be lean and mean, and selective in terms of the projects that are acquired. And the construction of the deals calls for the development funding to be recouped when it becomes part of the film’s budget line.

Ratner is also a creative consultant on Reliance’s ambitious $30 million “Kites,” starring Hrithik Roshan and Barbara Mori, helping the producers re-edit the film and secure domestic distribution.

That’s all part of a strategy of ensuring that these international players aren’t simply seen as faceless checkbooks.

“We’re not a purely financial investor. We are a strategic investor,” says Reliance topper Amit Khanna. “In this new global world, it makes sense for people to work together across many markets. Talent needs to be treated in a certain manner. That was how the studios were initially built by people like Sam Goldwyn.”

Producers and talent who have made such deals marvel at the ease of getting approvals to buy projects — Khanna has approved purchases in as few as 15 minutes — vs. the bureaucracy of major studios. They also don’t miss the micromanaging that Hollywood studios are famous for.

“The best thing about this is you have a chance to take a project from a nascent stage to finished script with the least amount of notes, other than the ones coming from you and the filmmaker,” says producer Wechsler of his Gaumont deal. “Because the economics at studios are so big, there are so many other projects that distract the powers that be from focusing on you. In only a few months, we have put together a few great projects. They have very commercial instincts about how a project should be developed, and they are smart. And since I am one of their few partners in this regard, their attention is focused on me and I’m not competing with 20 other projects.”

And while these companies are under no illusion about what is attracting them to Hollywood talent, these new partnerships are taking place against a backdrop of fundamental shifts in the workings of the global film biz.

“There are big changes in the ways that films are financed,” says Gaumont topper Riandee. “This is true in every country. The big TV networks are putting in less money, DVD sales are down and VOD has not replaced the lost DVD revenues. We want to secure the best projects out there, and for English-language projects, you absolutely have to work with an American partner.”

As for identifying which projects to move forward with, the usual questions of budget and global appeal are as relevant as finding culturally appropriate material.

Companies such as Imagenation and Reliance are unlikely to want to develop or finance projects likely to offend auds in the Arab world or India. While the potential remains for cross-cultural misunderstanding, U.S. filmmakers and their international partners are more sensitive to each other’s beliefs and values than ever before.

“We haven’t come across anything so far that we’re uncomfortable with,” Khanna says. “A good story is a good story, and we look at each individual project with an open mind. The world has changed and everything has to change with it, including the film industry. Everyone is working with each other across geographical borders. It’s the new global order.”

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