TOKYO — Buying major Hollywood pictures against expensive minimum guarantees was always a risky job for Japan’s major players. Recently, though, the dangers have become real enough to move some to focus more on independent, arthouse fare, perhaps signaling a realignment in the industry.
Numbers are not adding up anymore. Take Gaga Communications and Nippon Herald, two important distributors of imported films. Gaga recently announced a consolidated net loss of 7.94 billion yen ($72.84 million) for the fiscal year ended Sept. 30. Nippon Herald ended up with almost a $12 million loss in operating profits for its first half, also ended Sept. 30.
Both companies suffer from “Hollywood hangover,” as one distrib exec calls the problem of high-priced imports which didn’t perform as expected at the box office, costly ad campaigns notwithstanding.
Another victim of the increasing reluctance of Japan’s audience to flock to Hollywood fare in numbers warranting healthy returns is veteran importer Toho-Towa. It quit its output deals with Revolutions and Spyglass last spring and still had to watch as one film after another (“XXX” and “Tomb Raider 2” among them) disappointed at the box office. “Terminator 3” was the only exception.
Meanwhile, smaller films and Asian productions have increasingly stolen the show. Japan’s multiplex operators have recognized the potential and opened more screens for specialized pics.
Take Shochiku’s release of the Canadian-Spanish coproduction “My Life Without Me,” which didn’t even reach $400,000 in the U.S. In Japan, the tally stood at $5.4 million in seven weeks, about the same as the “Italian Job” did for Nippon Herald — with very different acquisition and P&A costs.
Nippon Herald successfully released “Whale Rider” and “Winged Migration” to healthy returns, gradually building up the release from one screen to more than a dozen, and relying more on good word-of-mouth than on pricey ad campaigns. Gaga could see similar successes with films like Danny Boyle’s “28 Days Later.”
The result: Nippon Herald recently announced a strategy shift sure to appeal to independent filmmakers. The company will be more selective in its acquisition of major Hollywood fare and wants to be more active in the distribution of smaller, less-expensive films. At Gaga, a stronger emphasis for spreading risk over a wide variety of pics is also in the offing.
“It’s about time Hollywood understands that the theory of Japan covering 10% to 12% of production budgets is a myth,” says one exec in Tokyo. “Distributors here cannot go on hemorrhaging money. The audience here wants more variety, and Asian films, independent pics and arthouse releases fill the bill.”
Enter Japan’s newest player on the distribution scene: Toshiba Entertainment, formerly Amuse Pictures, established last October.
In early December, the company announced an ambitious lineup for next year and 2005, covering a wide range from the Vin Diesel-action adventure “The Chronicles Of Riddick” to “American Splendor,” peppered by some Korean and Chinese entries.
It’s a slate that apparently follows the new thinking in Japan: the more smaller films, the better the chances of covering the exorbitant costs — and potentially corresponding losses — for the occasional tentpole.