Financial crisis casts shadow on foreign industry

The euro is celebrating its 10th anniversary this year — though “celebrating” might sound a little too positive.

When the transborder currency was introduced, the hope was that it would create a unified powerhouse for European countries. Folks in the film biz hoped this approach would strengthen their production and distribution networks.

Ten years later, things haven’t worked out as expected. The financial crisis has underlined the vulnerabilities of the euro, such as the discrepancies between Germany (with excess savings) and Spain (with deficits).

Meanwhile, in the film biz, European box office is soaring. Within five years, it’s expected to become the world’s biggest-grossing theatrical bloc, overtaking the U.S. But this potency is not due to unification — rather, it’s partly due to regionalism.

While much has been made about the success of “Welcome to the Sticks,” the biggest-grossing film ever in France, the culture-clash laffer had trouble gaining traction in the rest of Europe. The same is true in other countries, where local films are gaining auds due to talented (and commercial) local filmmakers and improved multiplexes, rather than multicultural collaborations.

And the 1999 idea of a unified movie machine that will rival Hollywood has slowly eroded.

“There’s been a growing awareness in Europe that the film business is a distribution game,” says former Polygram topper Stuart Till. “But while 10 years ago I think there was some hostility towards Hollywood by the European film industry in terms of a cultural invasion, the attitudes are far less adversarial now. The studios are investing in European productions and that’s no bad thing. It helps the European industry.”

Across Europe, film execs are attempting to build multiterritory distribution networks to rival those of the U.S. studios and produce international fare that can travel widely. And while the U.S. congloms now have local production operations in several countries, their films are largely tailored to the market they’re made in.

European companies have the muscle to make pics in the midlevel range, which the U.S. studios are forsaking.

Most film production involves complex patchwork structures which crisscross the Atlantic.

“We can’t position ourselves as genuine competitors to the U.S. studios, but rather as partners,” says Gaumont’s head of sales, Loic Trocme. “On blockbusters, we need them as co-producers, we need their financing.”

When the euro was born, some envisioned a multicountry system that would offer U.S.-style tentpoles, with Luc Besson and his 1997 Bruce Willis starrer “The Fifth Element” cited as a prototype.

In fact, those goals have evolved, as has Besson’s company, EuropaCorp, a French-based international film studio that finances, produces and distributes its own films. Its stock in trade is producing English-language films, such as “Taken,” aimed at not only France but also international auds, which account for 30% of its revenues.

EuropaCorp created the “Transporter” and “Taxi” franchises plus “Arthur and the Invisibles” and its follow-ups — big hits internationally but not so much in the U.S.

Co-founder Pierre-Ange Le Pogam says: “I’ve never been in the position of a conflict of European-against-American cinema. I’m a big fan of American cinema.”

“One of our strategies since 2000 is to be the best distributor and marketer in our domestic market of France — and also to be on the side of what the American studios have been building forever and create a little niche in which we have our own space.”

EuropaCorp also is in advanced negotiations with two studios about an English-language remake of the French hit “Tell No One” and another potential English remake of “Banlieue 13.” It’s indicative of the parity in relations between Euro companies like EuropaCorp and the studios.

Other European companies are expanding their horizons, without aiming to become Hollywood-style majors. There have been more efforts to bolster distribution entities that cross the continent.

In September, Till announced he was acquiring the international sales and distribution operations of Mel Gibson and Bruce Davey’s Icon Entertainment, with a view to building or acquiring distribution outlets in France, Italy, Germany and Spain as well as exploring opportunities in the fast-growing market of Russia.

Toronto-based Entertainment One has acquired Canuck distrib Seville Pictures, Benelux indie RCV and E1 Entertainment in the U.K.; Goldman Sachs-backed Alliance has the U.K.’s Momentum and Spain’s Aurum under its umbrella and is partnered with Tarak Ben Ammar through his Gallic distrib Quinta and Italian distrib Eagle Pictures; StudioCanal owns the U.K.’s Optimum Releasing in addition to Gallic distrib Mars and Germany’s Kinowelt; and French sales, finance and production entity Wild Bunch has entered joint ventures with A Film in Benelux, Bim in Italy and Senator in Germany and maintains its own French distrib operations.

French companies in particular are increasingly looking to English-language productions.

StudioCanal is fully financing “Chloe,” an Atom Egoyan-directed thriller toplining Julianne Moore, Liam Neeson and Amanda Seyfried and produced by Ivan Reitman and Tom Pollock via their Montecito Picture Co. banner.

Pathe co-financed “Slumdog Millionaire,” taking international rights, and co-produced “The Duchess,” starring Keira Knightley.

Gaumont began shooting “Last Night,” also with Knightley as well as Eva Mendes, on its own dime before Miramax came in as a partner.

These deals underline the fact Hollywood’s increasing interest in being a part of European production. Euro producers believe they can retain their creative autonomy even while using Hollywood coin.

Universal has a majority stake in Brit production powerhouse Working Title and inked a deal with Italo shingle Cattleya in January to acquire a 20% stake in the company.

Universal and Focus Features Intl.’s multipronged deal with Cattleya is structured flexibly enough to give Cattleya latitude to continue operating as a free agent.

“This is the first time Hollywood has made this type of investment in continental Europe,” boasts Cattleya topper Riccardo Tozzi.

Andrew Cripps of Paramount Pictures Intl. notes: “The U.S. is a homogeneous territory of 350 million people. Europe may have more people, but it’s more fragmented. You still can’t compete on a regular basis with the appeal of English-language product across borders and nationalities.”

European execs aren’t allowing themselves to get too carried away just yet, however. There’s a reason Hollywood has dominated the global film industry for as long as it has.

“When you look at all these pan-European setups, while some will survive, not all of them will,” says Paul Trijbits, exec producer at Ruby Films, which has a development and production pact with Miramax and Film4. “Invariably, some of them will end up being bought by the studios. The studios will not allow too big a share of the box office to be taken by nonstudio entities. Just look at Polygram.”

Working Title co-topper Eric Fellner notes, “If you want worldwide access to distribution, shelf space and output deals for TV, the only companies that can really deliver are the studios.”

These plans are very different from the ones envisioned a decade ago with the implementation of the Eurozone, when most of continental Europe — with the exception of the U.K. — adopted a homogeneous currency.

Polygram’s attempt to build a multiterritory distribution network to rival that of the studios actually ended that year, following its acquisition by Seagram, while the U.S. market entered a strong period. That gave indie distribs plenty of product with which to fill their slates.

While pics like Summit’s “Twilight” can give ambitious distribs like E1 Entertainment and Eagle Pictures hits to rival studio tentpoles in their territories, they remain rarer than a full moon.

Which makes producing internationally viable projects all the more crucial for Europe’s film industry.

John Hopewell, Elsa Keslassy, Nick Vivarelli and Nick Holdsworth contributed to this report.

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