The new European studios

For the UK’s Momentum Pictures, it was an easy decision. The company boarded The King’s Speech at an early stage through its first-look deal with producers See-Saw. The period drama was always likely to have box-office traction in the UK. But Momentum’s Spanish sister company, Aurum Films, passed on the opportunity to acquire the title. “When we looked at the project, our Spanish team didn’t see it. On paper, it’s not an obvious movie for Spain,” says Xavier Marchand, president of worldwide distribution at Alliance Films and managing director of the UK’s Momentum Pictures.

As he points out, Aurum’s footprint is different to that of Momentum. Both are wholly owned subsidiaries of Canada’s Alliance but the Spanish distributor is focused on “very broad multiplex movies”.

Aurum’s decision highlights one of the biggest challenges inherent in a multi-territory buying partnership: different countries have different tastes.

“The philosophy at PolyGram, which was not the US studio philosophy, was that you have to let your local teams have a big say; they know their market better than the centralised office,” says Marchand, who worked at PolyGram Filmed Entertainment (PFE) in the late 1990s as president of international distribution.

PolyGram-lite

In the 12 years since the demise of PFE, the potency of the PolyGram dream is as strong as ever. There are frequent attempts to establish pan-regional distribution models with the muscle and reach of the US majors — usually with an overt reference to the PolyGram paradigm.

But what many companies are now pursuing is a kind of PolyGram-lite: a buying partnership in a number of key territories combined with first-look deals with producers — not necessarily a full-blown studio model.

“The economics of the business have changed,” says Marchand of the difference between PolyGram’s heyday and now. “The margins are lower than they were because the DVD business has been eroded and piracy is very strong. It would make more sense for a Lionsgate or a Summit eventually to expand in Europe. You need the product.”

‘The economics of the business have changed. Margins are lower because DVD has been eroded and piracy is very strong’

Xavier Marchand, Alliance Films and Momentum Pictures

StudioCanal has the product. And through its ownership of Optimum in the UK and Kinowelt in Germany (which are both ramping up their local production activities), it has immense buying power, market access for its 5,000 library titles and the ability to finance and produce films on a major scale (it invested around $215m in production in 2010). The French powerhouse partnered with GK Films and Spyglass on The Tourist (a remake of a StudioCanal library title) last year and has fully financed Working Title’s $30m spy thriller Tinker, Tailor, Soldier, Spy.

“With these three territories, we cover 60% of Europe,” explains Rodolphe Buet, StudioCanal’s executive vice-president, international distribution and new business. “Then we are in a position to set up partnerships with additional distributors such as Medusa in Italy on some movies or Alliance.

“The fact we operate on a three-territory basis allows us to really develop a European marketing strategy, to create the right marketing materials and to discuss at the right level with the studio in the US the potential of the StudioCanal territories on the global box office of the film.”

Similarly, Wild Bunch distributes both its own titles and pick-ups to all media in France (Wild Bunch Distribution and Wild Side), Italy (BIM Distribuzione), Germany (Wild Bunch Germany/Central Film Verleih) and Benelux (Wild Bunch Benelux). It has a library of more than 1,000 titles and is also active in electronic distribution through Filmo TV, its VoD/SVoD platform. There has long been speculation it intends to expand into the UK, and earlier this year it teamed up with UK festival organiser FrightFest to theatrically distribute horror films in the territory via Entertainment One (E1) to “test the waters”, according to Vincent Grimond, Wild Bunch’s chief executive.

Grimond says Poland is a territory in which they are interested. “Poland is a significant buyer. It’s got one of the fastest-growing economies in Europe and we can definitely relate to its people.”

However, the resources needed to create an actual mini-studio are extraordinary. Canadian powerhouse E1 has film distribution arms in Benelux (where it acquired local outfit RCV in 2008), in the UK (where it acquired the Contender Entertainment Group in 2007), in Australia (where it recently bought Hopscotch) and a US video-releasing arm.

“I’ve never produced my own movies,” says Toronto-based Patrice Theroux, E1’s president of filmed entertainment. “It has always been through acquisition. There are very, very competent people producing movies out there.”

Since 2008, would-be empire builders have had to cauterise their ambitions for very predictable reasons.

“In the current economy, it doesn’t make any sense to invest in additional territories,” says StudioCanal’s Buet, who notes the complexity of working in some of the other strong European markets. “Spain has a problem with DVD piracy and a very difficult TV situation. Italy is a specific market and I’m not sure it makes sense to invest. There are the majors [in Italy] and very strong independent companies linked to TV broadcasters. The Nordic countries and Benelux are [also] very complex territories, multi-lingual and addressing very specific numbers of people.”

Teaming up with Hollywood

It is telling, too, that Paris-based Quinta Communications’ Tarak Ben Ammar has now tweaked his plans for a pan-European distribution network. “I still believe there is room for multi-territory distribution but I have discovered it can be a partnership with majors,” Ben Ammar recently commented after Quinta’s $55m epic Black Gold was backed by two majors. Universal took Germany and Spain while Warner Bros pre-bought the film for France, the UK, Latin America and the Middle East. Quinta’s Eagle Pictures is to handle Italy. Independent distributors had passed on the project due to the price.

Enter Warner Bros and Universal. “It’s a big-scale adventure film in the vein of classics like Lawrence Of Arabia. We loved it,” says Christian Grass, president of international production and acquisitions at Universal Pictures International (UPI). “It felt totally unique.”

The US majors, with big overheads in European countries and a strong demand for product, are still in the market for independent movies — and they do not have to be rivals.

Grass says UPI is not just interested in big projects but would consider buying territories on smaller films, even without the guarantee of US distribution. “If these films are made at a certain budget, you can recoup also out of the international marketplace.” UPI is also financing Juan Carlos Fresnadillo’s Intruders out of Spain with Antena 3 and will distribute internationally.

‘We keep looking at Europe. We would love to do more expansion in Europe or English-speaking territories’

Patrice Theroux, Entertainment One

The challenges are not just down to the economy. When the Icon Group decided not to pursue the strategy for a pan-European network advocated by its former CEO and now chairman, Stewart Till, one key problem cited by insiders was the punishing nature of pay-TV in the UK. With broadcaster Sky holding a monopoly and favouring US studio fare, it is tough for the UK independents to get their movies onto the Sky platform.

Others remain keen to grow. In the short term, Alliance/Momentum has also struck an informal alliance with Italy’s Medusa to “co-buy and look at movies”, says Xavier Marchand. The company is already at a size where, between its three territories (Canada, UK and Spain), it can greenlight movies if it works with a financial partner. However, Marchand suggests the company would like to expand into “one other” major territory, whether France, Germany or Italy.

“That would make us even more of a stop for anyone who wants to finance movies. If you have Italy, the UK, Spain and Canada and you approach a producer, you bring a big chunk of the financing straight away.”

E1 likewise aims to increase its global reach. “We keep looking at Europe. We would love to do more expansion in Europe or English-speaking territories,” says Theroux, who explains the company is also on the prowl for libraries.

For its part, StudioCanal is cultivating relationships with new technology partners such as Apple, Sony, Google and Microsoft. “Controlling worldwide rights on the library allows us to set up deals that I hope are at the same level as the studios,” Buet explains. “The deals are much better than if we were just operating at a local level.” The company is also building relationships with Amazon and LoveFilm. “In the UK, these companies are becoming real competitors to Sky,” says Buet. “They are very keen to invest substantial money in the pay windows.”

Jet lag

StudioCanal’s strength, says Buet simply, is that it is a European company. “We are fully immersed in the local territories. We’re able to travel easily between them. I’m able to meet with the major exhibitors and broadcasters and discuss directly with the teams.

“We looked at potential opportunities in Australia. Then we thought that operating a company in Australia or another part of the world with nine-hour jet lag and not really knowing the market, not being directly connected, was not the right decision or way to operate.”

Releasing locally produced, often culturally specific films in multiple territories is not straightforward at any time. Momentum’s Marchand is sanguine about this. “Look, if today you’re talking to me about The King’s Speech, I’d say we should have fully financed it,” he says wryly of Aurum’s pass. “But it doesn’t work like that.”