The strength of independent ties

The strategic alliance announced this month between Metrodrome and Palisades Tartan highlighted yet again that the crowded independent distribution market is ripe for consolidation.

The deal, which comes a year after Tartan went into administration, is the latest in a string of tie-ups between distributors as they react to rapidly changing market conditions spurred by the downturn in DVD sales, the uncertainty around internet distribution and the increasing difficulty of selling to broadcasters.

“The rights issues involved in buying libraries from companies that have gone into liquidation are a nightmare”

Peter Urie, Metrodome

Mark Batey, chief executive of the Film Distributors’ Association (FDA), said distributors are being forced to change because it is so expensive to release a film. “In spite of fantastic box office, it’s not necessarily the best market to trade in,” he said. “The more clout you have to bring your films into the marketplace, the better it is.”

When arthouse distributor Tartan went into administration last summer, many buyers — Metrodome among them — eagerly eyed its 400-title library. However, as Metrodome chief executive Peter Urie pointed out, “the rights issues involved in buying libraries from companies that have gone into liquidation are a nightmare”.

However, New York-based Palisades Media Group snapped up the library and, through its three-year partnership with Metrodome, has been able to enter the UK market without the expense of setting up its own distribution infrastructure.

“Video revenues are being eroded. TV revenues have declined a lot in the past couple of years”

Francois Ivernel, executive vice-president at Pathé

It is now looking to Metrodome to exploit its UK rights, which will also include the theatrical release of Park Chan-wook’s vampire title Thirst, targeting TV, video-on-demand and other new-media outlets. Urie said the deal was “effectively a revenue share” as Metro­dome will take a fee for its service and the rest will go to Palisades.

This new alliance follows the Pathé and Warner Entertainment UK deal earlier this year, which will see the studio handle distribution of Pathé productions in the UK and ­Ireland.

According to Francois Ivernel, executive vice-president at Pathé, the deal was driven by the changing market. “Video revenues are being eroded. TV revenues have declined a lot in the past couple of years. [The deal] has been partially a reaction to that. It’s also combined with strategic thinking about what we want to do as Pathé in the UK, which is to allocate more time and revenue to production rather than acquisitions.”

Ivernel added that with the majors accounting for such a large part of the UK market, the company “had to find a way to work with them”. Its three-year production tie-up with Danny Boyle and Fox Searchlight Pictures, which specialises in producing and distributing UK and independent films, reinforces that strategy.

“We’re in a period of consolidation, we see that with the majors. There’s no reason why the smaller companies shouldn’t be looking at doing the same thing.”

Peter Urie, Metrodome

There have been a growing number of marriages between independent distributors and studios over recent years. Pathé has long had a DVD distribution deal with Twentieth Century Fox, and Optimum and Lionsgate joined forces two years ago to form home entertainment company Elevation Sales.

Further alliances are predicted. Producer Stewart Till, the founder of distribution network Stadium and the outgoing chairman of the UK Film Council, said conditions were “as tough as they have been in living memory”
and distributors will have to find tactical ways to survive. Till himself is still attempting to thrash out a deal to acquire Mel Gibson and Bruce Davey’s distribution company, Icon.

“We’re in a period of consolidation,” agreed Urie. “We see that with the majors. There’s no reason why the smaller companies shouldn’t be looking at doing the same thing.”

But the sector has yet to see a landscape-changing deal on the scale of Lionsgate’s take­over of Redbus Film Distribution in 2005 or Studio­Canal’s acquisition of Optimum in 2006.

Batey believes this is due to the nature of the UK indies. “A lot of the people in distribution are entrepreneurial,” he said. “They’re very competitive. They’re passionate about the product they’ve acquired and they don’t necessarily want to work in a bigger corporate environment.”