Studio faces dwindling competition in local production

MADRID — With Disney and Paramount having opted out of the international acquisition biz, and Fox and Sony focusing in some territories on select titles only, Warner Bros., a constant supporter of local film productions, has the opportunity to become the primary U.S. player overseas, snapping up a wide range of projects with a host of local partners.

In Spain, Warner has long been a key U.S. presence, with its Spanish arm leveraging local relationships and the major’s own vast vault to claim a preeminent position among distribs and consolidate its TV outlets here.

“The best thing about Warner Bros. is that it really wants to distribute local movies,” says Francisco Ramos at production shingle Zeta, whose “I Want You,” a potential teen phenom, will be go out via WB on June 22. “You don’t get the sense it’s an imposition from the U.S. or London.”

Warner’s international strategy is also a good example of the hay to be made amid an economic downturn, with the company collecting sometimes tidy distributor’s fees on top Spanish movies, as well as developing relationships to exploit Spain’s new array of digital TV channels.

Rather than co-producing, WB Spain focuses on distributing local productions. Last year, it steered its eight Spanish releases to 40% of the total B.O. brought in by local productions. It handled four of the eight top-grossing Spanish films, led by Santiago Segura’s latest cop comedy installment, “Torrente 4: Lethal Crisis,” which grossed €19.6 million ($25.5 million, see chart).

WB is the country’s top theatrical distrib overall, including local and U.S. product, with “Torrente” and “Harry Potter and the Deathly Hallows — Part 2″ each surpassing $20 million locally, while Clint Eastwood’s “Hereafter” and “Sherlock Holmes: A Game of Shadows” banked more than $10 million.

And while its slate for the rest of 2012 looks to bring in more B.O. bounty — “The Hunger Games” is set for April 20, while “The Hobbit: An Unexpected Journey” and “The Dark Knight Rises” are on deck — Spain is facing its worst market downturn in 40 years.

“The whole industry is caught up in the hugely challenging business environment in Spain right now, the toughest I’ve experienced in over 20 years,” says Josh Berger, Warner Bros. prexy-general manager for the U.K., Ireland and Spain, who has spearheaded Warner’s TV ops in Spain since 1991.

Hollywood tentpoles fall far short of the numbers they achieved even a few years ago, and top DVDs shift only about a quarter of the units they once did, bruised by changing consumer habits, piracy and now 48% youth unemployment.

So distributing Spanish film’s biggest hits helps shore up WB’s returns. Still, it’s hardly a sure thing, considering, as producer Adrian Guerra notes, that only 10-15 Spanish earn a profit each year.

Berger says Warner’s success is based on its ability to be in business with top talent. This is aided locally by the fact that unlike France, Germany and Italy, which have their own mini-majors, Spain does not.

“We are considered as the first option for Spanish producers when they want to make films,” says Pablo Nogueroles, director general of Warner Bros. Pictures Intl. in Spain.

Additionally, as a fee for releasing Spanish films, the studio can charge around 10%-15% of distributor net rentals — the money distributors get back from exhibitors, which in Spain, depending on the film and box office, averages about 47% of exhibitors’ total box office grosses. Fees rise to 20%-25% if a studio puts up P&A, which can run around $1.3 million on larger local films.

WB handled Juan Antonio Bayona’s “The Orphanage” and will release his “The Impossible” Oct. 11. It released the Guerra-produced “Buried” and “Red Lights,” 2012′s biggest Spanish opener. Thanks to a relationship firmed up by Warner’s Paris-based veep of local productions Simona Benzakein, it has released Pedro Almodovar’s films for decades. It also boasts good relations with Segura’s Amiguetes, Mod, Atipica, Zeta, Antena 3 Films and Telecinco Cinema.

Richard J. Fox, WB Entertainment exec VP of international, has been building relationships with top talent since 1992, and has proved decisive in targeting films. (Besides Berger and Nogueroles, the operation also includes Jose Abad, Warner’s senior V.P. of TV for Southern Europe.)

“Warner Bros. is very fast (at) closing down rights and very smart in choosing their Spanish movies and nurturing relationships with top filmmakers” Guerra says.

In both film and TV, WB also has been consistently good at spotting new market opportunities as older ones recede.

In 1990, Warner Bros. Intl. Television Distribution struck Spain’s first-ever output deal, with nationwide state-backed TVE. When that agreement ended, WBITD cut two deals with La Sexta, a boutique channel aiming to power up its soon-to-launch DTT channels.

The first of those deals, in 2010, worth a reported $90 million over three years, represented only a slight drop in value from the TVE deal.

La Sexta 3, a niche DTT U.S. movie channel tapping WB product, now commands a 1.4% market share, a standout performance for a niche channel. (Paramount Channel, another film web, launched in Spain on March 30.)

“Warner Bros. found an alternative to TVE with La Sexta at just the right moment,” says Spanish analyst Eduardo Garcia Matilla.

“Like on pay TV, movies can now drive niche channels (on free TV). As established channels’ audiences have declined, movie titles have once more become profitable.”

Antena 3, which bought La Sexta in December, figures to build on the WB output deal, analysts say, since it’s Anetena 3′s only multiyear pact that features firstrun series.

But Warner’s success in Spain has not been a one-way street, particularly considering the company’s effect on the local biz during difficult times — and Spanish bizzers are letting the studio know that.

In February, WB swept 13 of the Spanish Film Academy’s 29 Goyas awards, the highest honor for a Spanish pic.

And after Gonzalo Salazar-Simpson, accepting best picture kudos for “No Rest for the Wicked,” thanked his distrib by saying that Warner “bet on not just this film but (on) Spanish filmmaking,” the 1,900-strong Academy audience burst into heartfelt applause.

Filed Under:

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