Creating an independent, international film distribution empire is easier said than done.
Former Polygram and UIP topper Stewart Till is the most recent entrant into an increasingly crowded field of companies seeking to consolidate the fragmented landscape of national distribs into multiterritory supergroups.
Till’s deal to purchase Icon’s international arm, which includes distribs in the U.K. and Australia and a foreign sales operation, is intended as the springboard for further acquisitions of companies in Germany, Spain, France and Italy. He has powerful backing in the shape of Len Blavatnik’s Access Industries, and there’s no shortage of cash-strapped distribs eager to offer themselves for sale.
Yet as rival groups such as Alliance, Entertainment One, StudioCanal, Wild Bunch and Lionsgate have already found, building bridges across borders is a tricky, time-consuming and often frustrating process. For all the bullish talk and tire-kicking over the past couple of years, the pace of dealmaking has been slower than anticipated.
“Every single company we look at in the independent sector isn’t in fabulous shape. But their valuations are always based on prospective numbers rather than historical ones,” says one potential buyer, with a hint of exasperation.
The logic is compelling: Surviving as a national indie, typically self-owned by its management, is a fragile and uncertain existence in a world dominated by the global hegemony of the Hollywood studios. Banding together across borders promises greater financial stability and better access to product.
But logic is rarely paramount in the indie film business. This is a world of mavericks, cowboys and, yes, conmen. After buying Spain’s Aurum in 2004, Alliance and its U.K. arm Momentum Pictures spent four years sorting out the mess they found there and suing the previous owner for fraud. That case was finally resolved in Alliance’s favor this year, but the multimillion-dollar compensation award couldn’t make up for years of wasted management time.
That experience has made Alliance circumspect about new deals, which partly explains why its proposed partnership with Tunisian-born mogul Tarak Ben Ammar has been slow to finalize. Ben Ammar, who runs his own boutique distrib in France, bought Italy’s Eagle Pictures a year ago with the stated aim of merging his group with Alliance. But the Alliance/Ben Ammar pact remains in due diligence.
Negotiations by Alliance to buy Scanbox fell apart in April, with the Scandinavian management blaming the Canadian group for dragging its feet over the fine financial details.
Throughout all this, however, Alliance, Eagle and even Scanbox have been buying films together. For example, they prebought Ealing’s “Picture of Dorian Gray” for Canada, the U.K., Spain, Italy and Scandinavia.
France’s Wild Bunch has finally completed its deal with Italy’s BIM to go with its joint ventures with A-Film in Holland and Senator in Germany. StudioCanal appears to have paused in its geographical expansion after adding Germany’s Kinowelt to its roster of distribs, which also includes U.K.’s Optimum and France’s Mars. It is using this as a foundation for ramping up investment in international production.
Lionsgate execs claim they are still scouting for takeover targets, notably in Australia, where they were outbid a year ago for Magna Pacific.
Entertainment One has struck a flurry of deals in recent months to boost its ownership of TV and DVD content, and to consolidate its position in its home market of Canada. Having
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bought Contender in the U.K., RCV in Benelux and Seville in Canada to give itself a strong theatrical distribution business across those three territories, E1 picked up another Canadian distrib, Maximum Films, two Canadian TV production companies, Blueprint and Barna Alpa, plus TV distribution outfit Oasis. It followed that up with the $63 million reverse takeover of DHX Media, parent of kidvid outfit Decode Entertainment.
“Our play is in distribution platforms and content ownership, and I’m really agnostic about where that content comes from,” says Patrice Theroux, E1’s president of filmed entertainment. “We’ve been expanding our rights ownership to augment the amount of content we can put through our distribution companies. This content is very lucrative from a DVD point of view, and gives us more leverage with broadcasters around the world.”
Meanwhile, the first movies from E1’s output deal with Summit Entertainment for the U.K. and Canada will start coming through this fall, with the release of “Twilight.”
Theroux expects that E1 will resume its expansion into new distribution territories in 2009. “Our strategy is not about buying companies, but funding management groups,” he says. He also insists that joint acquistion of movies across all the E1 territories is “not a hard rule.
“RCV, Contender and Seville won’t buy more than four or five theatrical titles and maybe a dozen straight-to-video titles together each year. You’re not going to see us buying 18 theatrical titles across all territories – that’s not our model, that’s a studio model.”