Russia’s War Against Ukraine Triggers Empathy & Dismay Among International Sellers & Local Buyers: “There Will Be A Tidal Wave Of Force Majeures, But Loss Of Life Transcends All”  

Russia’s war in Ukraine has sent shockwaves around the world. Amid the chaos and destruction, the international distribution community, which we record, is reacting in real time with dismay and uncertainty. The human impact is stark and overwhelming. Inevitably, there are significant consequences for local businesses.

The devastation being wrought by Vladimir Putin has almost made business needs pale into insignificance. That said, there are real concerns over what happens to longstanding partners in Ukraine and Russia as well as question marks over existing and future deals with one of the world’s key international territories. Russia has long been a top ten box office market and often accounts for 5-10% of the international finance of movie packages at markets.

This week the leading US studios made their mark by pulling movies from the country. A host of international film and TV events have blocked state-backed Russian participation. Yesterday, a collection of Russian distributors put their heads above the parapet to decry the war.

Few sectors of the global industry interact more closely and regularly with the Russian business than the international sales community. We contacted 15 leading independent distribution companies in the US and overseas. All were reluctant to speak on the record, but some spoke anonymously. A couple of sellers declined to speak due to being owned by larger companies which have yet to publicly comment. Some European sellers pointed to a missive coming from sales organisation Europa International. Some Russian buyers we reached out to naturally feared government reprisal.

The situation is unprecedented and hard to fathom for many. Empathy is the overriding sentiment. International sellers build their businesses on close and longstanding relationships with foreign buyers.

There is talk behind the scenes of local buyers needing to trigger force majeure clauses in contracts, as was discussed more globally but rarely triggered during the pandemic. These are clauses triggered when an unforeseen outside event makes repayments impossible.

One international distribution veteran with links to the region told us: “Between the obliteration of Ukraine, the sanctions which have paralyzed transactions in and out of Russia, and the crashing ruble, Russia as we know it has come to a grinding halt. There are going to be massive cancellations and refunds and no one knows where this ends.”

Another said: “I’ve heard a lot about payments not being made. At the moment people are just trying to keep their heads above water. There will be a tidal wave of cancellations, requests for reductions and force majeures. All this transcends that, though. If the reality is that no one can transact [a number of Russian banks have been blocked from the SWIFT global payment system], that takes precedence. It’s going to be a huge watershed and we’re in the middle of it.”

They continued: “I pray that in this unprecedented moment, the banks, financiers and sellers would stop reading the fine print of their agreements and how force majeure is defined and look at the bigger picture. Yesterday’s letter from Russian distributors was very poignant and a beautiful anthem to what our business is about. That letter could be professional hara kiri for those individuals but they made a stand.”

One leading US sales executive told us: “It is highly unlikely any distributor can make any payment at the moment. We really couldn’t sell to a Russian distributor right now as the ruble has dropped so far and we don’t know if the distributor would even be in business by the time we’d collect payment. Everyone thinks it’s completely horrible what Putin is doing and we feel sorry for our colleagues there who we like and respect and who we know will suffer.”

Another seller admitted that “lenders are already asking what we should do about future commitments” while a UK-based company reiterated the human element of the tragedy: “We believe that regular communication is the best way forward. The overwhelming response is one of shock and sadness for our partners.”

There are multiple independent Russian distribution companies with operations in Ukraine in addition to the studios which sub-license there. But as one exec with local interests chillingly told us: “There were distributors in Ukraine. They’re all gone now.”

One privately owned Russian distributor with interests in Ukraine was so distressed about the situation that they merely said “the whole thing is a disaster, my only focus is on getting people out alive”.