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EuropaCorp Rejigs Strategy to Cut Losses Post-‘Valerian’

PARIS – After posting record losses of $135 million during the last financial year, Luc Besson’s film studio EuropaCorp is set to scale back its ambitions and rejig its strategy to climb out of the red.

The new plan, which EuropaCorp CEO Marc Shmuger unveiled during a shareholders meeting in Paris on Wednesday, involves a drastic reduction of the film slate, an increase in TV activity and cutbacks in overhead, as reported last week in Variety. The company plans to produce two to three English-language films a year – including its next project, an action thriller by Besson already in pre-production – and two French movies per year, Shmuger confirmed to Variety following the shareholders meeting.

It’s a clear departure from the strategy put in place by his predecessor, Christophe Lambert, who had launched the U.S. distribution venture RED with Relativity Media in 2014. In order to feed that distribution pipeline, EuropaCorp had started producing eight to 12 films of different genres and set bigger budgets. Most of these films ended up being box office flops, most notably “Shut In,” “The Circle,” “Miss Sloane” and “Nine Lives.”

The company will now focus on making action thrillers and science-fiction films, in line with the company’s DNA, along the lines of “Taken,” “Lucy,” “The Professional” and “The Fifth Element.” Shrinking the slate will also allow Besson to be creatively involved in all these projects, said Shmuger, who noted that Besson had less oversight over the under-performing English-language films than he did when the company had a smaller slate.

Although Shmuger did not address budgets, a source close to the company said that EuropaCorp will work with more modest budgets of about $25 million to $35 million per film.

The first film to be produced under this new mandate is Besson’s next movie, an English-language action thriller with a female lead, budgeted in the $30 million range. The film, based on an original idea and written by Besson, is due to start shooting next month.

Shmuger said EuropaCorp was actively developing a sequel to Scarlett Johansson-starrer “Lucy.” Although he didn’t give any specifics on the project, he disclosed that Besson had already written the script.

EuropaCorp also intends to ramp up its TV business in the U.S., which has been successful with franchise-based series such as “Taken,” and it’s looking to expand other film franchises into the TV space.

No new equity investors or shareholders were announced during or after the meeting. Shmuger said the company was seeking more capital and hinted that a deal might soon be announced.

The French buyout company Mediawan has been discussed as a potential bidder. Shanghai-based Fundamental Films, which invested $50 million in “Valerian and the City of a Thousand Planets” and holds a 29% stake in the company, is unlikely to plow more equity into EuropaCorp because of China’s crackdown on overseas entertainment deals.

Besides the overly ambitious content strategy put in place in 2014, EuropaCorp also faced two obstacles that had not been foreseen when expanding its footprint in the U.S., Shmuger said: the bankruptcy of its business partner, Relativity Media, and the crisis hitting the U.S. indie sector.

In spite of the challenges, Shmuger said the outfit would hold on to its U.S. distribution operations. He said EuropaCorp reduced its staff by 90% last December, from 60 employees to six, and cut its overhead by $15 million across the U.S. and France. Shmuger said the company was now taking steps to reduce overhead further, but he did not mention layoffs.

Speaking of its three-year marketing and distribution agreement with STX, Shmuger said EuropaCorp was sharing the financing of the P&A with them and will “examine its appetite for P&A risk” on future film releases. Although EuropaCorp had limited its exposure on “Valerian” to less than $15 million by raising roughly 90% of the film’s budget via presales and equity investment, it could still lose about $60 million, the bulk of that from P&A in the U.S. EuropaCorp is disputing this loss figure and claims it is pure speculation.

“Valerian” has so far grossed more than $225 million worldwide and has yet to open in Japan. Shmuger predict thats the movie will perform well in ancillary markets, as have most of Besson’s films, in particular “The Fifth Element,” which did not perform as well in U.S. theaters as it did internationally but ended up being a home entertainment hit.

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