The US deal conundrum

Who is distributing it in the US? It’s a question foreign buyers have been asking for decades. For bigger budget English-language films with US talent attached, the international pre-sales market has always been dictated by the domestic component. Local distributors will not take a punt on a $15m-plus movie unless they know a US distributor is on board which will give it a wide release.

“Sometimes the talent package and script are strong enough to warrant a pre-buy risk, although many European buyers are looking more to local films to fill the slots”

The reasons for this are numerous. Overseas distributors can get their hands on specially created US marketing materials and benefit from an often splashy domestic marketing campaign. Young target audiences in foreign markets will pick up word of the film on the internet, and magazines everywhere publish interviews around the US release. The crossover effect of US marketing is global.

But there are more basic business reasons: some TV deals are only triggered by films with US deals, while exhibitors in foreign markets frequently demand a wide US release before they risk taking a film on hundreds of screens in their own circuits.

“Exhibitors in Germany are conservative and very US-centric,” says Thomas Augsberger, who acts as the US buying agent for TMG/Concorde in Germany.

“They find out pretty quickly if a film doesn’t have a US deal.” And when it comes to costly prestige films, says Los Angeles-based buyers’ rep Mirjam Wertheim, US exposure around awards season is invaluable for international release campaigns.

But the problem for buyers today is that US distribution is in crisis. The studios and their specialty arms have virtually stopped buying third-party titles, bigger independents such as Senator, Yari Film Group and ThinkFilm have gone out of business, and the brightest new indie, Summit, is focusing on its own production rather than spending tens of millions of dollars on a pick-up. Since a US pre-sale is highly unlikely these days, international buyers won’t step up.

“You have to be so careful about how you contract these deals,” says Lara Thompson, the chief buyer for multi-territory distribution network E1 Entertainment. “You can pre-buy a film being assured of a wide US release and by the time the film is finished that wide release just isn’t happening any more. You don’t want to be on the hook for the full MG in that situation.

It’s tough to get exhibitors in the UK to book a film if it essentially becomes a premiere DVD title in the US. The value for UK rights doesn’t just fall by 20%, it plummets to a fifth or less. In general, I wouldn’t go near a $20m or $30m film which doesn’t have dependable, and contractually enforceable, US distribution in place.” There are exceptions. Wertheim says sometimes the talent package and script are strong enough to warrant a pre-buy risk, although many European buyers are looking more to local and European films to fill the slots while the US crisis continues.

“There are so many examples of $25m films which have gone straight to DVD in the US recently, from The Mutant Chronicles to any number of Paul Walker action movies,” one buyer told me. “I don’t want to see these kinds of projects any more.” Augsberger and Thompson are two of the buyers who have sought security in output deals, and both Concorde and E1 are part of Summit’s output deal network for its own productions such as Twilight.

Other suppliers with domestic already set - Lionsgate/Mandate, Relativity, Focus - have a considerable advantage. “It’s a market of haves and have nots at the moment,” says Augsberger.

There’s little doubt the conundrum will solve itself eventually. The studios have cut back on production so dramatically that they will need outside product within the next year or two, and new distribution outfits are brewing from old hands such as Bob Berney and Rick Sands. But in the meantime, the message from territorial buyers to bigger-budget film producers is clear: get the US deal, then we’ll talk.