Cynics abound when it comes to movie economics.
“We’ve seen some revenue streams flattening, which can be daunting,” says DreamWorks Studios president Jeff Small. “But some good things are happening as well.”
Small is among the cautiously upbeat speakers on a panel titled “Five Reasons to Get Into the Film Business Now” at the 3rd Film Finance Forum West — Presented by Winston Baker in Association with Variety — that will consider these film financial milestones:
• Walt Disney raked in $663 million when selling its Miramax film division in December, which exceeded early estimates and is a boost for film library valuations in general. The buyer Colony Capital is a new financial player in film.
• Indie distributor Summit Entertainment — home of the “Twilight” movies — is raising $800 million in publicly-traded debt, as part of a refinancing.
• The Middle East and India, which were Hollywood backwaters not so long ago, now originate multi-million dollar investments in Hollywood films, most notably the DreamWorks Studios-Reliance Big Entertainment deal.
In another hopeful sign, researcher IHS Screen Digest sees the declines slowing in the US physical video business — DVDs and Blu-ray — with year-over-year slippage easing to mid-to-low single digits from the dramatic drop of 2009. Even with the recent slide, major studios took in nearly $10 billion from physical video from the U.S. alone in 2010.
Naysayers can still find plenty of reasons to be pessimistic, particularly as multi-billion-dollar Wall Street funds that directly financed film slates have been disappearing. But Clint Kisker, director of Screen Capital Intl., disagrees, saying, “Take my word for it, some are being refinanced. We’re working on one right now.”
Improving film industry fundamentals are piquing the interest of investors, who see see Russia, Turkey and Brazil emerging as meaningful pieces of the foreign pre-sales matrix. U.S. basic cable networks, such as FX, Turner Broadcasting and USA Network, are paying healthy prices for fresh theatricals and 3D has helped prop up worldwide box office. “Since January, we closed more deals with partners to finance our films and had more inbound calls from investors inquiring about opportunities than we did in all of 2010,” says Sean Kisker, Lionsgate executive VP, strategic planning and operations, motion picture group. “I think that speaks to international strategic buyers wanting to be part of the picture and institutional investors as well. Whether it’s a new budget or a new mandate, people are willing to talk about film financing again.”
He notes that Lionsgate has seen domestic video-on-demand revenue for its films jump from 5%-10% of box office two years ago to a 10%-20% today, as VOD release moves up to be simultaneous with DVD.
“We are going through a transition in terms of the delivery vehicles and film economic models,” says Adrian Alperovich, who is president of acquisitions and operations at startup distributor FilmDistrict that recently landed a long-term licensing deal with Netflix. “More screens (from emerging digital media) are a good thing if people like our product. And people still love our product.”
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