Tokyo – A major realignment of Japan’s independent distribution world that calls for more emphasis on domestic fare is being fueled by the DVD boom as well as the stiff B.O. disappointment of pricey U.S. pics. And the overhaul looks far from over.

2003 STATS
Top film: “Bayside Shakedown 2” (Toho; $159 million)
Top indie: “Bayside Shakedown 2”
Total B.O.: $1.93 billion
Indie B.O.: $982 million
Total releases: 622
Indie releases: 451
“Alexander” (Shochiku)
“Oliver Twist” (Toshiba)
“Mask 2” (Gaga)
“Hostage” (Shochiku)
“The Assassination of Richard Nixon” (Wise Policy)

“A lot is moving, and we’ll see more companies concentrating on Japanese films whose costs are much lower and can easily be controlled,” says Takeo Hisamatsu, managing director at major producer-distrib Shochiku.

Meanwhile, distribs Nippon Herald and Gaga Communications are still feeling the sting from losses suffered due to underwhelming B.O. from films including “The Italian Job,” “K-19” and “The Core.” Both companies had to recapitalize earlier this year, with Kadokawa-Daiei Pictures becoming majority owner of Nippon Herald. They also announced policy changes in favor of smaller films and Japanese as well as other Asian productions.

Distribs Asmik-Ace, Toshiba Entertainment and others also are chasing after those films, which is welcome news for sellers worldwide as heated competition between buyers safeguards higher prices in Japan.

“We’ll keep up our range of films,” says Gaga CEO Tetsu Fujimura. “But we’ll concentrate on quality instead of quantity.”

With the DVD market booming, all distribs are scrambling to expand their rights libraries. Again, the emphasis will be on acquiring local product, for which rights are easier to control.