Company exec board chairman also addresses key U.S. distribution, movies’ talent drain and the squeezing out of the movie middle-ground.
There are few more acute analysts of deep trend change in the international film industry than Martin Moszkowicz at Germany’s Constantin Films, the company behind the “Resident Evil” franchise, and producer of “F…You Goehte 2,” that grossed $65.2 million in Germany, and TV series “Shadowhunters: Mortal Instruments,” acquired by Netflix for global rights, outside the U.S. As sales agents headed home from the 2016 European Film Market, Variety caught up with him to catch up on his take on this year’s market and the forces shaping the film and content industry now in a vortex of change.
With the 2016 European Film Market now winding down, how would you rate this year’s edition?
At Berlin this year, the market picked up: Higher profile projects came onto it. The business is not so market event-driven anymore. But still, a few days before the opening of the Festival, you’re got high-profile films announced: the George Clooney directed “Suburbicon,” Steven Soderbergh’s “Logan Lucky.” We can always philosophize about the industry. At the end, it comes down to what movies are there. This market was good at Berlin: It’s been one of the better markets of the last years.
Would you read anything into the fact that the two big U.S. domestic deals announced at Berlin – Paramount Pictures acquiring “Suburbicon”; “Loving” going to Focus Features – were both deals with Hollywood studios?
The big movies, when really interesting, go to the studios. Very, very, very few are going to stay with independent distributors. This is a call to producers to support the independent market place with their product long term. It can’t be in their interest to have only studios as potential buyers.
Looking at longer-term factors, 2015 was an exceptional year for Hollywood. It had huge films. But international markets for independent movies look as if they’re being squeezed between Hollywood and local blockbusters.
Certainly. The international independent film business is definitely in times of turmoil and changes in the industry, ecologically and economically – even though the market indicators are all up. Outside of old-fashioned wisdom – you need a good script, good director, good cast and everything is going to be fine – the market place is upside down. As a company, Constantin is doing extremely well at the moment – we are coming off one of the best years in our history. But we’re doing extremely well because of local movies and because of television.
And then there’s the streaming giants….
Yes, the growth rate of Netflix is staggering. And the biggest of them all has got to be Amazon, which is just starting yet but as a company is way more potent than any of the others out there. We all love to do business with them. But on the other hand of course they are damaging the classical old model via which we all made movies in the old days, or at least in the last couple of years.
Could you expand on that?
Three reasons. There is a talent drain on mid and lower-budget movies, because so many actors and directors are busy doing TV shows. Moreover, more and more pictures get sold to SVOD operators as original movies, which might work out financially these days, because it is starting to really pay top dollars. But international distributors need huge P&A dollars behind their films’ U.S. releases and the US distributors positioning know-how in order to drive their domestic opening in their own territory,
And if that falls away because the movie is going to a streaming service and they have still paid numbers on a theatrical level for the acquisition of those movies, but they’re not getting the same type of exposure. So they have a problem because these movies will have a hard time working. .
Also, independent movies used to get theatrical releases in the old days, and today they hardly ever do, because there are hardly any independent outlets, even though there are some new players, like Broad Green and STX and so on, which are just starting up.
And what do you think are the answers of the independent film industry, be it the production or sales sector?
The shrinking distribution rooster in the U.S. has had a huge effect on foreign distributors. What they’re doing is very much what we do: You go into local movies, you buy less movies, there are less English-language movies being sold. Less of them are making any money internationally. The industry is coming out of an extremely good year but because of Hollywood blockbusters and local films. There is nothing in between. With the exception of Tarantino – which isn’t really an art house movie, there hasn’t been a big art-house success in the last 12 months internationally.
FilmNation, IM Global, Mister Smith and Summit/Lionsgate are the Ferraris of the sales sector. The middle ground, which used to be the basis for the whole market, is being squeezed out. The middle ground is where the industry is built up. We’re seeing a best-seller ridden industry, very much like the book or music industry. I don’t have any remedy because obviously in part that is also where the audiences are going, that’s what people want to see.
That must have consequences on the whole industry….
Yes, if you’re not only interested in just making a movie, like many producers. And the possibilities to get a movie made are more today. There are subsidies and new equity players, even if there are less pre-sales. But it doesn’t necessarily mean that it gets to distribution, and that you can make money out of its revenues. So you need to make money out of just making it, and that’s not a very good thing to do in a business that’s based on break out success.
One international distributor told me it used to buy 40 independent films a year, and now half of the films they distribute are local productions. Can one see the same thing in Germany and across Europe?
Of course. And it’s also true for us. We still have some English-language movies that we buy, but of course we are buying much less, and I can see that all over. I think you’re absolutely right. More and more people are actually going into local productions and buying less movies off the market. If I look at our tracking list, there are some 250 titles for each market, and 80% of those don’t get sold, or get sold in a package to some broadcaster, and will never be released beyond television or on home entertainment.
Apart from that fact that more and more film festivals are rapidly becoming film and TV festivals – Sundance, Goteborg and Berlin are just early-year examples– there seems to be the beginning of a new wave of consolidation in the sales sector.
Yes. I expect at least another dozen or maybe two dozen sales companies to either merge or disappear over the next two-to-three years.
So after the immense influx of equity four-to-five years ago which prompted the creation of sales companies to bring product on to the market and close pre-sales to match the equity, we can now be seeing the reverse, with less sales companies selling.
Yes. The question is: Why engage a sales agent when a lot of producers are cutting deals with worldwide SVOD operators, do you really need a very effective sales agent geared towards servicing movies across 40/45 territories?
Rather like the printing business for newspapers, distribution and sales has a difficult future. There’s going to be a huge reduction of sales companies over the next few year. The eOne-Sierra deal is just the start and will be followed by lots and lots and lots of others.
Companies known principally as sales agents are becoming sales-production-financing entities. One of the interesting things about the eOne-Sierra deal is that it will allow Sierra to move more into financing and production.
Some analysts asked me recently what my outlook was for Constantin. It’s fantastic. For a company that produces content, the next few years will be a huge goldmine. Everyone needs our product. Some companies haven’t even started yet. YouTube is going in content. Apple is going to go in as well. And there is China…