Screen analysis- The end of the Line

When Time Warner issued a brief statement last Thursday (March 28) announcing New Line Cinema would be absorbed into Warner Bros Entertainment as a genre unit, it was made very clear New Line's international sales activities would be terminated.

'With the growing importance of international revenues, it makes sense for New Line to retain its international film rights and to exploit them through Warner Bros' global distribution infrastructure,' said Time Warner's president and CEO Jeff Bewkes in the announcement.

It might seem curious that international rights management should be addressed so centrally in the first announcement of a studio's demise, but then for New Line Cinema, international sales has always been a core part of its business model.

In an interview with Screen last October, New Line founder Bob Shaye explained the company first sold foreign rights at Cannes on a 1977 film called Stunts. A Nightmare On Elm Street sold out at Mifed in November 1984 when Stanley Dudelson was heading sales for the company. When Rolf Mittweg came into New Line in the late 1980s, he was charged with building a more sophisticated sales operation and putting in place ongoing output partners for the studio's product.

Entertainment Film Distributors in the UK became a firm fixture in the New Line distribution patchwork as did Metropolitan Filmexport in France; Kinowelt in Germany; Alliance in Canada; Svensk in Sweden; Village Roadshow in Australia, New Zealand and Greece; and alternatively Aurum and Tri Pictures in Spain.

The relationships were conducted either on a package basis where the distributor would pay minimum guarantees, or output deals where the foreign distributors committed to annual slates and paid a percentage of the budget of each film according to a mutually agreed formula.

When New Line was bought by Time Warner in 1996, Warner Bros stepped in for Latin American rights and, following the collapse of the Kinowelt arrangement in 2001, took over German-speaking Europe, Russia and Eastern Europe.

The distribution partners had good years and bad with New Line. None were thrilled with The Long Kiss Goodnight or The Island Of Dr Moreau but for every flop, there was a Seven or Austin Powers, a Mask or Rush Hour. Cam Galano stepped in for Mittweg in 2001 when Mittweg assumed a larger role at the studio.

Mittweg and Galano worked together on the financing and distribution puzzle for The Lord Of The Rings trilogy. Some 70% of the $270m production budget was covered by international distribution partners.

In addition to Entertainment, Metropolitan and the usual suspects, they sealed mega-deals for the trilogy with Nippon Herald in Japan and Taewon in Korea at Cannes 2000.

The success of the three films for the international partners cannot be overestimated. Nor can the fact they, more than anybody involved, took a huge risk on the trilogy.

The risk paid off. The Greens at Entertainment, the Hadidas at Metropolitan and others genuinely shared in the profits of one of the box-office phenomenons of the last 20 years. It was the international buyers' dream. Instead of losing money on studio cast-offs, they had a hefty piece of a trilogy which grossed nearly $2bn outside North America.

The run of success continued with the first of what could have been another trilogy, this time based on Philip Pullman's His Dark Materials books.

The Golden Compass cost $180m to produce and was considered a flop in North America with its paltry $70m gross late last year. Overseas, however, was a different story. Entertainment took $53m in the UK, Metropolitan took $25.5m in France, Taewon took $22.5m in Korea, Tri took $18.5m in Spain, Roadshow took $14.8m in Australia and New Zealand, RAI took $13.8m in Italy and Gussi took $10.4m in Mexico.

Gaga has just opened the film in Japan last weekend on a powerful $7.7m, bringing the international total to $264.3m and counting. Should the film hit $300m - highly likely in the next few weeks now that Japan has opened - Warner Bros will be hard-pressed to deny production of a sequel.

With many of the international deals expiring after this year's production cycle, the elimination of New Line product from the independent market brings a dramatic sea change to the complexion of the global business.

While Warner Bros Pictures International (Wbpi) will relish new genre product to power its distribution machine, independents will be competing for an increasingly small number of tentpole pictures available to them. Witness the numbers paid for Martin Scorsese's Shutter Island in a handful of territories at Berlin as proof of the hunger for star-driven Hollywood movies as locomotives for independent distribution slates.

'If it means that Nigel (Green, boss of Entertainment) has to go out into the open market to source projects, that means there will be another powerful, massive buyer out there to compete with,' says one rival UK distributor, who did not want to be named. He predicted the fight among independent distributors for studio-level product will now become more ferocious than ever.

'Warner Bros has taken one competitor out of the marketplace on the distribution side... the downside is that the competition now comes in the buying arena rather than the distribution arena,' the UK distributor adds.

Entertainment, for one, never relied entirely on its New Line partnership and has a host of other films and relationships up its sleeve, dealing with all major sales companies and securing regular product lines from companies such as Initial Entertainment Group, Gold Circle Pictures and Hyde Park International.

But the success enjoyed by companies such as Entertainment with Time Warner films must have been galling to top brass at Time Warner.

'It's a natural process that happens all the time,' comments Dutch producer-distributor San Fu Maltha, who helped Netherlands-based A-Film secure a deal with New Line for The Lord Of The Rings trilogy. 'Big major companies, if their specialist arm is becoming too commercial, too successful, will fold it in again when they have a reason to.

'It was quite clear from the moment of The Lord Of The Rings that (the folding in of New Line at Warner Bros) would be the price of success.'

Maltha predicts that distributors will become 'more dependent on the fewer sales agents that bring the big product. New Line was one of the suppliers of major films. For (the distributors), it was, if not a lifeline, an important source.'

In some major territories, namely Italy and Japan, New Line preferred to seal deals with different distributors rather than tie down its product with one partner.

In Italy, Rai Cinema's distribution arm, 01 Distribution recently handled the Italian roll-out of The Golden Compass and, at AFM, secured the remaining pictures in the 2008 cycle - namely Sex And The City, He's Just Not That Into You, Journey To The Center Of The Earth 3D, Appaloosa and The Time Traveler's Wife. Rai Cinema's chief of acquisitions, Paola Malanga, says she expects existing contracts to remain intact.

Medusa handled The Lord Of The Rings trilogy, smaller distributor Moviemax recently handled the Italian roll-out of Hairspray and Ernesto di Sarro's Nexo distributed The Cell, Final Destination, Frequency, Blow, Town & Country and Fur.

In Japan, the studio worked with most of the major companies - Shochiku, Gaga and Nippon Herald among them.

Much of the international fallout of the announcement has yet to be established.

It is yet to be understood what impact the clipping of New Line's wings will have on Material Entertainment, Robert Jones' London-based production company backed by New Line and Entertainment which had a huge 2007 hit with Run, Fat Boy, Run.

Whether there will be sequels to The Golden Compass based on the film's international popularity and, if so, who will own the rights to distribute them is also unclear. Perhaps Warner Bros with its streamlined distribution system and global marketing capability could drive the grosses even higher than the New Line independents could.

And where will the New Line International executives land' Mittweg and Galano are among the most well-known executives in the international world, so their options are wide.

As for the other hundreds of existing New Line staff, rumours in Los Angeles already suggest many will be absorbed by emerging domestic outfits such as Summit and Overture.

One thing is certain. International buyers will be looking to Summit and Overture to bring increasingly high-level product to the marketplace and fill the gap left by New Line Cinema. Because it is a very big gap indeed.

Additional reporting by Geoffrey Macnab, Theodore Schwinke, Jean Noh, Sheri Jennings and Nancy Tartaglione-Vialatte.