Late Friday, the White House announced a new deal with China that would allow for more foreign films to be released in the nation’s movie theaters — and more money in the pockets of U.S. studios to boot. After the news broke, Mark Damon, whose Foresight Unlimited sold out on the European Film Market’s hottest title, 2 Guns, told me: “I have a feeling what just happened was already perceived by the Chinese. Buyers were out in full force and paying big numbers for theatrical releases — numbers you couldn’t afford if you were just going to video or TV.” Buyers, Damon noted, were also willing to give up censorship clauses during the EFM, which ran alongside the just-ended Berlin International Film Festival. “Up until now they would do a two-tier deal: X if a movie went theatrical and Y if it didn’t and Y would be substantially less. This time, they weren’t insisting on those.” The new agreement allows foreign studios a 25% share of box office as opposed to the traditional 13% and provides for 14 additional titles outside the 20-film quota. Chinese box office is projected to hit $5 billion from a potential 16,000 screens in 2015. There are currently about 6,200 screens. Talk about a need for product. One European exec tells me they’ve heard that on pictures where you’d normally expect to get, say, $50,000, the Chinese will now pay as much as $500,000.

China typically buys a range from art house to genre to blockbusters, although films targeted for theatrical tend to be tentpoles like recent hit Mission: Impossible — Ghost Protocol. (Family fare also has a place: Vincent Maraval of Wild Bunch tells me among the films he’s sold to China one of the biggest theatrical hits was March Of The Penguins.) The newly eased restrictions stipulate that a film must be released in the IMAX or 3D format and once that clause is met, they can also go out via 2D. That will surely mean more room — and competition — for big Hollywood pictures, but indies should also benefit. As part of the agreement, China licensing arrangements can now be negotiated on commercial terms comparable with other proportionately sized markets while the government will also promote the entrance of other distributors. FilmNation’s Glen Basner tells me, “We indies never really had any chance to get a quota slot, but now it’s happening fairly regularly.” FilmNation handled international sales on 3D underwater thriller Sanctum, which grossed over $20 million in China. “The market is slowly opening up,” he says, while the new deal “benefits everybody. Now it’s up to us to deliver the movies.” FilmNation’s hot EFM titles included J.C. Chandor’s All Is Lost and Steven Soderbergh’s Bitter Pill.

Ahead of the U.S.-China announcement, Patrick Wachsberger, co-chair of Lionsgate Film Group, told me he’d seen seen an increased Chinese presence for over a year amid the box office boom. “It does seem, however, that many buyers are also further encouraged to buy since the VOD market is currently growing — though it is certainly a matter of debate how much that growth will continue without government restrictions being imposed.” Indeed, there are no VOD quotas, and Maraval also maintains “the prices are high and VOD works when you can distribute to the entire country.” In other growth areas, I’m told South Korea was offering more than ever at the EFM now that VOD is expanding there, while the UK, France, Russia and Japan are also high on VOD.

anon
3 years
Great news - I guess more money, more jobs, and more movies for everyone. This is probably...
Alex
3 years
Thanks for the insightful and well-written article! Sounds like the industry has good times ahead.

In Japan, several execs tell me distributors there are now more likely to consider pre-buys. “The Japanese are starting to buy again. There’s more competition, meaning pre-buys are more likely and people are ready to take more risk,” says Elle Driver’s Adeline Fontan Tessaur, who sold Berlin opening-night film Farewell, My Queen to Gaga. Prices have not reached the highs of the pre-crisis days, but they are coming back. Following the financial woes and last year’s devastating tsunami, Maraval says “they need cinema now more than anything”.

The country in the most difficulty right now is Italy. “That’s the biggest question mark,” Basner says, because the market is in flux with buying at RAI essentially frozen. Medusa is also buying less because it’s investing in local productions. “There is no understanding of where free TV valuations will be in a year,” Basner says, which makes it tricky to know how to adjust. Maria Grazia Vairo, head of acquisitions and sales at indie Italo distributor Eagle Pictures — which picked up Summit’s hot supernatural love story Beautiful Creatures at the EFM — tells me, “The market is very, very tough. There’s only one pay-TV, two free TVs and VOD hasn’t taken off, so now it’s just about box office with no ancillaries.” Across all Italian indies at the EFM, she says there were only about five pre-buys. “We don’t really know when things will change, everyone is seeing what happens.” Fontan Tessaur adds that Italy is “the last deal you do now.” Samantha Horley at the UK’s Salt Company, which just announced Jennifer Aniston comedy-drama Miss You Already, tells me, “You have to write it off as a dead market, if you sell it’s a bonus.” This “completely affects how you finance a film,” she adds.

Speaking of financial woes, Greek buying hasn’t suffered as much as one might think. Damon says. “On average, numbers in Greece came down, but not for the big pictures. I was getting offers at levels I’ve seen before, they’re just being careful about their ability to eventually be able to pay for these pictures.” Basner says Greece is still buying and prices can be adjusted to make sure the business there is healthy. “It’s one thing if they buy, but it’s another if they can’t pay for it a year later,” he says, adding, “There are times when distributors choose not to pay and times you understand they’re really suffering and that’s the case here so we want to be an active participant and help how we can.” Fontan Tessaur has the same take: “You work with them on prices — we have to support them.” She estimates prices in Greece have fallen by as much as 30%-50% in the past three years.

On the overall upside, most of the people I’ve spoken with are eyeing a healthy Cannes market. “Based on the experience of EFM, we should expect a strong Cannes market for pre-sales of strong products whether big release or specialties products,” says Wachsberger. Horley adds: “I’m feeling really good about Cannes. There’s something to be said for coming out the other end of a tunnel where you can see the lie of the land. It’s a very tricky time right now but if you stay realistic, people are pre-buying, they do need movies and they do want movies.”