There's a joke among US sellers that "even the buyers that don't pay aren't buying" at the moment. These sellers certainly lean towards gloom and doom in their conversations; indeed it's unlikely that a movie the size of Gangs Of New York could generate the eye-popping sales numbers today which it did at MIFED three years ago.
Independent buyers have been too hurt by a string of large-scale investments in underperforming films like We Were Soldiers, K:19 - The Widowmaker and Ali to take risks like that anymore - not to mention small matters like the worldwide economic downturn, the collapse in advertising revenues or the demise of Germany's Neuer Markt and the "funny money" it flushed into the marketplace.
But many of the more seasoned sellers are welcoming the new realism in the international film business. "It's a market defined by distributors with a clear take on their business" said David Linde, co-president of Focus Features this week. "They do not want to see budgets loaded up by fees that have nothing to do with the production or financing of the film itself."
"Buyers are looking for value," agrees Nick Meyer, co-president of Lions Gate Films International. "People are really scared about spending $7m or $8m on a movie. Those are prices that will put them out of business."
Fortunately, it's not just the buyers who are saying no to outrageous prices. Sales and financing companies are saying no to studios and producers who want extortionate sums from "foreign".
"In the marketplace in the state that it's in today, there are fewer players able to finance movies and you can do more realistic deals with studios or producers," confirms Hal Sadoff, a partner in Cobalt Media. "There's a ceiling for what every territory will pay," says Intermedia worldwide distribution chief Jere Hausfater, who adds that a seller can only get expect to get 50% of a budget out of international sales. "The whole idea of getting a percentage out of a territory has gone out the window."
That doesn't mean, however, that there is a shortage of big-budget Hollywood movies to buy. Just that, for once, buyers have the opportunity to be more discerning in their choices and approach each project with caution, often outside the frenzied setting of a market. "We are doing a lot more work prepping our buyers," says David Glasser, CEO of Splendid Pictures, which comes to Milan with $44m Richard Gere thriller Without Apparent Motive as well as the first two films from Mark Gordon, Bob Yari and Mark Gill's Stratus Film Co - The Painted Veil and Liar's Club. "We do 60% of our business before the markets. There are no aggressive bidding wars on site anymore."
Similarly New Line International president Camela Galano completed extensions of her output deals with Village Roadshow in Australia and Svensk Filmindustri in Scandinavia as well as her first ever output arrangement with longtime New Line buyer Metropolitan Fillmexport in France last week - before the market. All last until the end of 2005. "We'll use MIFED to sell territories like Italy and Japan where we don't have output deals," she said.
But even New Line, in its post-Lord Of The Rings glory, is jostling with competitors to get commitments from the buyers who do pay. "Spyglass, Revolution, Universal are all competing with us to sell their movies in Japan and Germany," says Rolf Mittweg (pictured), president of worldwide distribution and marketing at New Line Cinema, who will be at MIFED with Galano for the first time in six years. "The marketplace has gotten crowded. There's more big product than the distributors in each marketplace who can handle it can handle."
The companies Mittweg is referring to - Spyglass and Revolution, at least - don't even attend MIFED. Nor does Hyde Park Entertainment, whose chief executive Ashok Amritraj (pictured) is preparing a European sales trip in mid-November. Spyglass co-president Gary Barber meanwhile is mulling options for his films when his five-year deal with Kirch/Mediaset-backed Epsilon comes to close for continental Europe later this year. Although he does not rule out a renewal of the deal with Epsilon ("the jury's out as to what transpires post-resolution of the [Kirch] bankruptcy"), Barber says he is open to new partners once the next wave of Spyglass pictures becomes available early next year.
Hyde Park Entertainment on the other hand has renewed its deal for continental Europe with Epsilon. "There's a very limited number of distributors out there," said Amritraj, "so I'm very pleased I have Europe taken care of. Europe is a disaster right now."
Chief hot spot is Japan, the number one international territory where competition for buyers' yen is furious. Revolution Studios' deal with Toho-Towa and Pony Canyon is nearly over and word has it that it won't be renewed. Meanwhile Gaga Communications has just formed a two-picture distribution joint venture with Universal. Gaga will handle theatrical distribution of Universal's Blue Crush and Universal will handle video of Gaga's Kill Bill. The venture is likely to lead to further collaboration in future..
Of course another key frustration is number two territory Germany where "nobody will prebuy" according to Intermedia distribution chief Jere Hausfater (pictured) who still has the territory open for Mindhunters, Adaptation, The Life Of David Gale and The Quiet American. Miramax International, meanwhile, is reportedly close to a deal with Buena Vista International (BVI) for its product, exasperated at the decimated market.
"It's a buyer's market in Germany so they are suppressing the prices," says Gary Barber. "That's why the pick of the litter will go to buyers who are not dependent on TV for their minimum guarantees. If I had a lot of excess cash right now, I'd be buying up German rights."
Most of these major suppliers expressed relief that the "funny money" which came out of Germany's Neuermarkt and tax shelters has dried up. "It hurt the industry," said one. "Foreign buyers paid too much for films with inflated budgets and which were ultimately really bad movies. We are currently in the recovery process."
Several buyers have decided that lower-budget indie movies with star names attached are the answer. "I'm looking at lower budget artistic pictures which can attract major talent," says MDP Worldwide's Mark Damon whose slate includes Monster with Charlize Theron and 11:14 with Hilary Swank. "The budgets are affordable because the stars are being paid a fraction of their prices. As for the bigger pictures, I'm talking to studios about alliances on those: in those cases, we take certain territories to sell and they keep the rest and we are both participants in the picture."
This is one of numerous variations on independents teaming with studios, an increasingly common confluence. "We've always worked with multiple distributors in each territory, including on occasion with studios like BVI, Fox and UIP," says Linde, himself now an employee of Universal. "The business is merged together between studios and independents and one has to rationalize a movie from all different angles - while still maintaining those relationships."
"It's a strange picture," adds Summit Entertainment chief executive Patrick Wachsberger. "The studios sell their movies to independents, and then, as long as you're talking about movies which have studio deals in the US, they buy movies from independents. When they're buying, some studios have stronger output deals than others. Fox, for example, is in great shape in Italy since the merger of Stream and Telepiu, and in the UK of course because of BskyB."
For Linde and Nick Meyer, both who have the luxury of guaranteed domestic distribution through their own domestic organizations, the formula is to stick to movies budgeted under $20m which have US distribution in place, or in the case of Linde's 21 Grams starring Sean Penn, Benicio Del Toro and Naomi Watts, under $30m.
"The business rests on movies that don't cost $80m," says Linde. "As opposed to betting the farm on a few titles, distributors want to spread their risk on a specific films that deliver different segments of the marketplace. Gosford Park, My Big Fat Greek Wedding and Resident Evil are very relevant examples. The Lord Of The Rings was the big winner at the higher budget level and those distributors are looking strong. Unfortunately, there was also a large group of very expensive flops, which have literally taken companies out of the market."
Meyer, whose big new title is cost-effective Robert De Niro horror pic Godsend, points to recent US hits which have cost less than $15m to produce. "There's Barbershop, My Big Fat Greek Wedding, The Good Girl, One Hour Photo," he says. "Who needs K:19'."