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Japan

Rookies shake up distribution as some vets struggle

TOKYO — Japan’s film distribution world continues to see major upheavals, with new players gathering strength while established companies find themselves on the brink of insolvency.

The latest round came in mid-October, when it was announced that financially strapped Gaga Communications would be bailed out by the country’s largest cable radio operator Usen Broad Networks. Usen invested a hefty $90 million in the distrib. This was the second financial injection for Gaga this year, after a $32 million private stock placement in February.

Gaga is not alone. In April, another leading independent distributor, Nippon Herald Films, was taken over by Kadokawa Pictures, the newly formed film production and distribution subsid of Kadokawa Holdings. It nabbed 40% of Nippon Herald stock for $27.3 million. Herald’s predicament was somewhat less dire than Gaga’s because of it was the co-distributor of the lucrative “The Lord of the Rings” trilogy.

The root of the problems at both companies is similar: They paid high minimum guarantees for Hollywood films that also required exorbitant P&A commitments. The pics then didn’t perform as expected at the Japanese box office, where audiences are keener than ever to go for local or Asian (predominantly Korean) fare.

“The middle ground (among U.S. films) is slipping, with the big tentpoles working but lesser films being squeezed by Japanese and Asian product,” says Gaga’s CEO Tetsu Fujimura.

Kadokawa, meanwhile, has gone on a shopping spree. Besides its Nippon Herald investment, it increased its holdings, together with Sumitomo Trading, in 11 United Cinemas multiplexes. (Counting Herald’s cinemas, Kadokawa now has partial control over 133 screens.) Company also spent $100 million in June to pick up 2.83% of DreamWorks and the exclusive Japanese distribution rights to its films, cutting off UIP Japan from one of its most lucrative product pipelines.

Japan’s indie distribs now see Korean movies as key to their future strategy, as they are cheaper, the stars have big followings and turn over solid profits.

Ancillary biz, especially DVD sales, are key in recouping costs or making profits. Sales are increasing, albeit hampered by high retail prices on DVDs (average of $28), with arthouse and Japanese titles usually selling for $33. A theatrical release also is key in driving DVD sales, but difficult to attain for small distributors in a country with high P&A costs and overcrowded screens.

Japan at a glance
B.O.: $864 million*
Top title: “Harry Potter and the Prisoner of Azkaban” (Warner Bros., $119 million*)
Recent pickups:
“A Moment to Remember” Gaga)

Titles at AFM
The Hidden Blade: Veteran Yoji Yamada’s second samurai outing after “The Twilight Samurai,” which was nominated for a foreign-lingo Oscar this year. Pic opened the Tokyo Intl. Film Festival. (Shochiku)
Lorelei the Witch of the Pacific Ocean: Japan’s biggest-budget action feature is set on a submarine at the end of WWII. In post, eight-minute trailer to be shown at AFM. (Toho Intl.)
Swing Girls: Story of a group of high school girls getting into big band jazz has become a major hit on Tokyo screens, by filmmaker Shinobu Yaguchi (“Waterboys”). (Pony Canyon)

* through June 2004

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