Leading Japanese independent distributor Nippon Herald plans to reduce its acquisition of major Hollywood titles to improve revenues in its film distribution business.

This year, the company recorded an $11.8m loss in operating profit in the half year from April to September. The main cause of the decline was the disappointing performance of The Italian Job, which took only $5m at the box office.

Lord Of The Rings: The Two Towers, which Herald co-distributed with Shochiku, was the company's only blockbuster title this year, with earnings of $64m. The last instalment of the trilogy, The Return Of The King which opens on 650 screens on February 14, is expected to generate over $80m at the box office.

However, Nippon Herald has a new long-term strategy that is no longer dependent on the occasional huge Hollywood hit. "We have been distributing three to four major titles per year which we purchase for around $8m or more, but in three years time, we plan to cut the number to one or two," said Herald spokesman Kaoru Kageyama. "We are facing fierce competition in P&A -- it's common now to spend $8m on a major title. We believe if we can reduce the number of major titles, we can save at least $8m per year,"

Nippon Herald is also becoming more cautious about the few major titles it does acquire. The company plans to co-purchase these titles with other Japanese distributors to minimise the risk, while handling distribution independently.

At the same time, it intends to boost acquisition of medium budget and lower-budget arthouse films - buying 10 of the former, at a cost of $2.5m to $6m per film, and 10 of the latter annually.

The company has recently enjoyed box office successes with art-house films including Travelling Birds (Le Peuple Migrateur) and Whale Rider. Both were first released on one Tokyo screen and later rolled out to around 30 screens nationwide, earning $1m each. With an increasing number of multiplexes across the country screening art house titles, Nippon Herald is keen to develop this sector.

Meanwhile, the company is aggressively expanding its own multiplex business. It currently operates five multiplexes nationwide with a total 46 screens and plans to open five new sites within three years to increase total screens to 100.

"We first opened our multiplex in 1999 and the business has been successful, "Kageyama commented. "Now we make about $50m from our multiplex operation annually and we think the sales will continue to increase. We expect our total revenues to rise to $241m by March 2007, of which multiplex operations and film distribution will each account for around $116 m."