New paths to success

Berlin Film Festival 2012

While Germany and France negotiate the best way out of the euro crisis, indie mavens are assessing just what kind of fiscal atmosphere they’ll be heading into at the European Film Market.

On the plus side, there’s a growing appetite for arthouse pics with a more mainstream bent, as auteurs embrace more commercial pics or move into English-language filmmaking. But the indie biz must contend with decidedly selective buyers battling higher p&a costs in many territories; drops in DVD sales and TV buys; and local pics grabbing more market-share than ever before — it’s these fundamentals that really preoccupy Berlin-bound international indie players.

Most big projects that create market buzz, if they come together at all, do so on the near eve of the February market, and some sales agents are being mum with the details.

Summit and Exclusive are bringing new titles to Berlin, while Voltage has “three new movies, two in financing,” says Voltage Pictures’ Nicolas Chartier. Basner’s FilmNation is selling Steven Soderbergh’s Rooney Mara starrer “Side Effects.” W2 Media will be repping “The Drummer,” with Vera Farmiga and Aaron Eckhart, while Hyde Park Intl. reps Berlinale competish title “Jayne Mansfield’s Car.”

Protagonist will be launching sales on “Streetdance Jnrs.,” the third installment from Vertigo’s successful “Streetdance” franchise, in addition to one new title. It is also showing promos on “The Sweeney,” toplining Ray Winstone, and Ben Wheatley’s next project, “Sightseers.”Former Hyde Park exec Mimi Steinbauer’s new banner Radiant Films will bring a trio of titles to the EFM, led by “Lullaby,” by artist Andrew Levitas.

Wild Bunch is selling an exorcism drama from Cristian Mungiu (“4 Months, 3 Weeks and 2 Days”), alongside Pablo Trapero’s “White Elephant,” repping a step up in scale for the Argentine helmer, and Lu Chuan’s $20 million epic “The Last Supper.””Looking at the growing trend in crossover successes, I live in hope that buyers will be throwing themselves at the few exciting projects the next market has to offer with greater confidence and the fear of missing out,” says Harold van Lier at Studiocanal.

The projects face an international market of, as usual, many moving parts.

The good news: More commercial-leaning arthouse titles or edgier mainstream movies such as “The King’s Speech” ($415.4 million worldwide), “Black Swan” ($324.7 million), and current players “Drive” ($71 million to date), “The Artist” ($32.2 million to date) and “Tinker Tailor Soldier Spy” ($50.1 million to date) are energizing sales, B.O. and awards season, catering to an aging baby-boomer audience looking for a night out at the multiplex that doesn’t involve battling robots.

“To generalize, buyers are looking for very theatrical, very commercial titles and, at the other end, more commercial arthouse movies,” says Summit Intl.’s David Garrett.

Constantin’s Martin Moszkowicz concurs: “There’s most definitely been a re-positioning of arthouse movies over the last two years. It’s a real positive change. We’ll continue to see the results this year.”

Films such as “Drive” or French blockbuster “Intouchables” have “broadened the scope of distributors’ interests, notes Telecinco’s Ghislain Barrois.

Gaumont’s Cecile Gaget agrees: After passing on “Intouchables,” “Distributors are now saying ‘Maybe we’re too focused on some genres and need to open up.’ ”

But while some foreign distributors are broadening their tastes, some of their revenue sources are contracting.

Despite indie distributors taking $10 billion in overseas B.O. in 2011, up 17% vs. 2010, there was a concurrent drop in DVD sales.

IHS Screen Digest’s Helen Davis Jayalath estimates total distributor physical video revs from outside the U.S. dropped to $13.1 billion in 2011, 16.5% off 2004’s historical highpoint. The international market for physical video income looks set to decline every year through 2015.

Not only have DVD sales dropped in Western Europe, but also advertising costs have climbed far more than box office, with U.K. p&a expenditure doubling in the past 10 years to $4 million or more for top indie releases with big stars, such as “The Tourist.”

In Germany, says Moszkowicz, average p&a costs have increased 80%-100%, with top titles easily going up to $3.9 million-$5.1 million, if you include TV spot buys.

“Only a trickle of new product will come out of the indie U.S. market this year,” says IM Global’s Stuart Ford, blaming “exchange rate issues and broader macro-economic difficulties.” Rising release costs and DVD sales decline in international markets mean distributors are going to be more selective, says Summit’s Patrick Wachsberger, and foreign distributors “are going to use every argument possible to bring prices down,” citing the weaker euro and a changing TV market.

At many overseas broadcasters movies are being pushed out of primetime slots, lowering acquisition prices, while since Cannes 2011 the euro has slid 14% against the dollar as investors fret about Spain and Italy meeting budget deficit targets and bank capitalization.

In Italy, Medusa and RAI’s 01 Distribution reportedly froze their foreign film acquisition budgets just before the 2011 AFM to focus more on Italo productions.

Italy’s third big pic buyer, Eagle Pics, might well wait to buy at Cannes, unless a movie really lights a fire at Berlin, says Eagle’s Maria Grazia Vairo.

“Western Europe’s economic crisis is an issue,” says FilmNation’s Glen Basner. But it will more likely affect film budgets than sales pricing.

That, however, could be a boon, argues Pathe Intl.’s Muriel Sauzay: a bigger-budget film in France used to cost some €16 million ($20 million) on average, but now, that figure has been pushed down to $13 million-$15 million.

“If the industry wants to be competitive, budgets have to be kept reasonable,” adds Pathe Intl.’s Mike Runagall.

For Exclusive Media international sales prexy Alex Walton, shifting territorial strengths and some countries’ less predictable B.O. make pics’ bankability less predictable.

Above all, economic uncertainty prescribes greater caution. “If you pre-buy a movie, who knows what the economic situation will be like in 12-18 months?” Chartier says.”(The) times when foreign distributors (could) buy off two minutes of footage are becoming rare,” says Kinology’s Gregoire Melin.

Wachsberger remains upbeat: “The decline in Italy and Spain means we have to be cautious, but it’s not a crisis.”

Those declines are also offset — in part or whole — by other territories on the rise.

Russia — with a box office rise of 20% in 2011 to $1.16 billion — “is far more interesting as a sales territory than Italy or Spain, probably the two of them combined,” says Moszkowicz. “Brazil, Mexico, Turkey are growing quickly.”

Competition in the U.K.’s VOD sector has seen Netflix and Amazon-owned Lovefilm offer up lucrative exclusive deals with indies during pay TV windows, a slot that was previously dominated by the less-indie-friendly BSkyB.

Other Euro territories could see a VOD uptick, says IM Global’s Stuart Ford: “We hope and expect that, as and when VOD platforms become slightly more reliable, they will gradually re-inject confidence into the marketplace, but we’re still in a period of transition.”

In Western Europe, local pics saw market share growth in all of Europe’s Big Five territories in 2011, notably Italy, which went from 29% to 37%, and France, where home-grown hit “Intouchables” has grossed $146.3 million, which went from 36% to 42%. The drop in DVD sales, the rise of local hits, the weak TV market all adds up to “a focus on ever fewer movies,” Moszkowicz says.

And buyers aren’t willing to settle:”Good films aren’t good enough: You need great films, amazing reviews,” says Chartier. “The market is really about cherry-picking what’s really stands out because it’s so good, so strong,” echoes Celluloid Dreams’ Hengameh Panahi.

“The degrees of how well a market does are driven by IP. If you come in with big movie you can do your business there,” Sierra/Affinity’s Nick Meyer says.

“People need films for 2013,” says Harold van Lier at Studiocanal. “If something good comes onto the market, they’re all going to jump at it.”

At Berlin, less seems to add up to more for buyers.