Combined company is beefy, but is it best for producers?

TORONTO – The ink is barely dry on eOne’s C$225 million ($229 million) deal to buy Alliance Films, and the industry is buzzing about the arrival of this new, deeper-pocketed player on the scene in independent film. Of course, there’s also a degree of angst over the fact that by combining two big companies to create a single, larger entity, a key buyer in the market will be lost.

Moreover, the biz is waiting to see how the deal — which had been expected to shake out since May, when negotiations between the two companies were first revealed — impacts those at the top of Alliance, and who producers will be talking with when they make future deals.

The pact makes eOne the largest independent film distributor in U.K./Ireland and Canada, with an additional and growing presence in Spain, Benelux, Australia and the U.S.

The company will have to get Canadian competition bureau approval, though Darren Throop, CEO of eOne, says this is a standard process. The new entity is expected to control distribution of almost all the films in Canada not made by the six Hollywood majors. “The combined market share in Canada will be 20%, so we are not a monopoly,” Throop says.

One U.K. independent distributor notes that although the bigger company will see an increase in its negotiating power with producers, it will still have the same issue with rights buyers as eOne had, since it will be dominant in only five or six territories. In other words, the studios can still come in and buy up the rest of the world.

Most see the consolidation as positive, forging an entity that can put more weight behind the projects it buys.

“It’s the right company buying the right company,” one studio executive says. “When Patrice (Theroux, president of filmed entertainment at eOne) left Alliance, he set up eOne more or less on the Alliance model, but then took it to the next step.”

Another distribution exec says the deal gives eOne a stab at muscling up with the majors.

Throop knows the feeling. “The marketplace is dominated by major studios,” he says. “Our business is really centered completely around indie film, so what this deal does for indie filmmakers in Canada and beyond is a positive thing.”

In the U.K., many see the deal’s biggest impact on how the new company will combine eOne’s local distribution entity and Alliance’s Momentum Pictures.

“I think a fear in the U.K. is that they are two good companies, and the new entity is going to be less than the sum of its parts due to the volume of product,” explains one U.K. distribution executive. “Momentum has been able to grow breakout titles like ‘The Woman in Black’ and ‘The King’s Speech,’ but within the new company, it could be tougher to have breakout hits. With a lighter slate (Momentum), has been able to concentrate on each title.”

One U.K. insider says Sally Caplan, managing director of eOne’s international division, is on record as saying the company is looking to do 25 films per year; Momentum had more than 20 films in 2012.

The combined company also raises issues over what will happen with VOD partnerships. EOne has a U.K. deal with Lovefilm, while Momentum’s is with rival Netflix. “No one seems to be mentioning that,” says an independent distributor, who notes that those sort of deals have made independent distribution viable again.

In Canada, Mongrel Media is now the remaining independent distributor. The company has an output deal with Sony Pictures Classics and releases approximately 50 titles a year theatrically, and additional non-theatrical titles on its DVD label and other platforms. Mongrel releases approximately five high-profile Canadian titles a year, and has long-standing relationships with directors like Sarah Polley, Deepa Mehta and Michael McGowan, all of whom had films in this year’s Toronto Film Festival.

One insider expects eOne/Alliance will mean less competition in the Canadian market in terms of international sales. “Pricing will probably drop,” he says. “Though it might mean there’s an opportunity for another independent distributor to come in there.”

And there’s another twist in the deal for Canadian filmmakers: Established Canadian feature producers typically secure a distribution commitment as part of their application to obtain production funding from the Canada Feature Film Fund, a major financing component, via Telefilm, of most Canadian feature projects. The combined eOne-Alliance company will mean there are only two independent Canadian distributors on the landscape, with eOne the dominant gatekeeper for producers.

Inside Alliance itself, there is speculation as to who will run the company, and what role key players like Alliance’s Victor Loewy, Charles Layton, Alison Cornwell and Marchand will play, if any.

“Our executive team hasn’t had the opportunity to sit (down) with the Alliance executives yet and talk about our future as a combined entity,” Throop says. “The next stage will be: What’s the best way to combine two successful companies into the best international company in the marketplace?”

Filed Under:

Follow @Variety on Twitter for breaking news, reviews and more