Western European film buyers have been helped in recent years by a relatively strong euro currency but for this year’s American Film Market, the euro softened about 10% versus the U.S dollar, which will squeeze their buying power. The currency for 17 Western European countries — including Germany, France, Italy and Spain — is off approximately 20% from a recent peak in summer 2008. Many international film sales contracts are denominated in dollars.
“Everybody is watching this because there will be an impact on European buyers,” says Elaine Morissette, who is senior director of the motion picture group at National Bank of Canada. “There’s a currency risk” in movie sales transactions.
Currency exchange rates are particularly dicey for film pre-buys. Money changes hands six-24 months after a pre-buy contract is signed when a finished film is actually delivered — and the exchange rate then is uncertain. Morissette says National Bank of Canada makes loans in various currencies to film clients to offset currency risks and most financial institutions offer hedges that let clients lock in an exchange rate, though such hedging transactions add a layer of cost.
One impact of a weakening euro at AFM is that deals with buyer and seller both in the euro zone could be more attractive than dollar-denominated transactions. The weaker euro also makes Western European countries a better bargain for travelers paying for hotels and the like in dollars, while European film production becomes less expensive.
While currency changes are a concern, they’re usually not deal-breakers because the independent film sales arena is accustomed to absorbing exchange fluctuations as part of normal business.
The weaker euro “comes up in conversations and for smaller companies this is more of an issue,” says Lisa Wilson, co-founder/partner of the Solution Entertainment Group, a sales company. “Conversely, I’ve never had anybody tell me ‘I can now pay you more because the exchange rate is better.’ ”