With 2007 on course to break box-office records, Leonard Klady explores how developments in the international market hold the key to the future of the film industry.

Widespread predictions that 2007 would break recent box-office records look to be well founded. The international box office generated $4.5bn in the first four months of 2007. Combined with revenues from the domestic North American marketplace, the global gross for the period was $7.2bn. International theatrical accounted for 61.6% of the worldwide box office on gross figures that exceeded domestic ticket sales by 60.6%.

Based on current viewing trends, global box office could finish the year at a record-breaking $24.6bn.

The US domestic marketplace experienced a 2% improvement over 2006 at the start of the year. But the real attention will be on international expansion.

A sign of the speed of growth is the difficulty in accurately measuring it. Only now has comprehensive data become available for China, India, Russia and other Eastern European territories.

Factoring in changes in box-office reporting, the international arena saw growth of approximately 8% over the previous year for the period covering the first four months of 2007.

The international market has become increasingly significant in the past decade. Ten years ago, revenues for the US majors outside of North America accounted for just 45% of the studio's theatrical gross. Analysts anticipated that the international arena would out-distance domestic box office by 2002 and, in fact, that barrier was crossed a year quicker than the initial projection.

By last year, overseas takings were responsible for around two-thirds of revenues.

Local film surges ahead
The first third of 2007 may seem to be a bit of an anomaly but it is a sign of the times. Strong indigenous product in the major territories of Europe, Asia and South America is making its own mark in home markets.

Growth outside of North America in recent years has been fueled by the commercial potency of vibrant local product.

The mix of global and local is making an impact. While attention has focused on the gentrification of developing movie-going nations, the fact is that even so-called 'mature' markets are capable of double-digit box-office growth.

Despite or because of heated national elections, France experienced a 13% box-office boost between January and April, including such popular French titles as Taxi 4, La Vie En Rose and Tell No One (Ne Le Dit A Personne).

Historically, French productions have accounted for 30%-35% of ticket sales but for the first time in decades they exceeded 50% of the local box office.

Quantity versus frequency
The allure and frustration of the international marketplace has always boiled down to numbers.

North America's population base is roughly 330 million and that pales beside more than 5.5 billion potential movie-goers in the rest of the globe. And while the number of tickets sold outside the domestic arena may be double, the potential, at least in theory, suggests it could be tenfold.

The telling factor is frequency of visits: in North America people on average go to the movies five times a year. That level of frequency can also be found in Korea and India but for the rest of the world the measure can be as low as twice annually, though is more often three or four times a year.

The reasons for the differences are unclear and vary from country to country. There is no demonstrable indication of a greater number of diversions or alternative forms of available entertainment outside the US and Canada than inside; and viewing habits have remained constant and limited research and development has not effectively identified how to bolster attendance.

The story this year
The start of 2007 provided little evidence of the divergence between the two marketplaces. The top global performer for the period was 300, with a tally of roughly $440m. The international theatrical component of that figure was only 11% better than the domestic box office.

A better indication of grossing potential for popular movies can be seen in more recent titles that began the summer season and fall outside of the period.

Spider-Man 3 had generated theatrical revenues of $844m by the June 15 weekend, with international exceeding domestic performance by 65%.

By the same weekend, Pirates Of The Caribbean: At World's End grossed $549.4m outside North America compared to the $274.1m domestic record, roughly doubling the revenue.

The demographic dilemma
The long-held industry maxim is that hugely popular movies - especially several in a row as is the current case - will create a snowball effect. People will go out to the movies more often.

However, that clearly is not translating in the present environment. Instead, the two aforementioned titles plus Shrek The Third and Ocean's Thirteen have arrived in the marketplace like giant vacuum cleaners to the detriment of everything else playing in local multiplexes.

What has been evolving over the past two decades is a product-driven marketplace that has excluded certain potential audiences.

Major film producers in all parts of the globe have concentrated on targeting the youth audience that generally embraces 18-to-25-year-olds. That audience also happens to be more inclined to see a film on its opening weekend, and tends to be a less discriminating crowd.

In the process of coddling that sector of the population, all others have been virtually abandoned. So movies have narrowed their audience focus rather than expanded it and the effect has been a reduction in growth.

The most significant bump in movie attendance of recent note in North America occurred during the first six months of 2004 and was largely credited to the unexpected success of The Passion Of The Christ and Fahrenheit 9/11.

In both instances the core audiences were older and non-traditional and the two films were produced outside the mainstream. The expansion was without question the result of drawing in an audience that went to the movies only infrequently.

An international future
Internationally, the prospects for growth are relatively strong. The North America market is, despite all protestations, a closed shop belonging to the six major companies and their affiliate labels.

But as evidenced in such countries as Denmark, Thailand, Russia and Brazil, the hunger to see home-grown stories is significant and commercially potent. It has certainly caught the notice of the US majors, which invested more as a goodwill gesture in the past but are now primed to make it a more formal policy.

At least in theory, the backing of a US major opens up the possibility of wider access to more markets for films that have neither the cachet of a foreign-language Oscar nor a major festival award nor the imprimatur of a world-class director.

Much of the growth of the international marketplace has been predicated on the flow from the domestic arena to the rest of the viewing universe. However, we may have arrived at a point where the current will have to be reversed to continue expansion and diminish the preponderance of movies with numbers in their titles.

- Additional reporting by Oliver Ilott

StudioBox office% of BO
Warner Bros (US)630,666,54214.1%
20th Century Fox (US)624,809,15414%
Colombia TriStar(US)388,069,9838.7%
Universal Pictures (US)335,810,5857.5%
Paramount Pics (US)284,883,3246.4%
Buena Vista (US)256,070,0725.7%
Summit (US)162,040,2173.6%
Europa Corp (Fr)144,026,5373.2%
Toho (Jap)140,837,7723.2%
CJ/Cinema Service (Kor)87,056,9922%
Pathe Pictures (Fr)72,808,0901.6%
Wild Bunch (Fr)58,475,2801.3%
Showbox (Kor)55,900,5701.2%
TF1 (Fr)55,765,1621.2%
Quinta (It)55,482,3111.2%
New Line Ent48,419,2141.1%
Medusa (It)47,416,2921.1%
Initial (US)47,108,5611.1%
Icon (US)45,543,3111%
Misc US Indies211,211,1374.7%
Misc Bollywood91,238,3332.1%
Misc Japanese88,736,3832%
Misc Italian70,301,9211.6%
Misc Russian64,579,3921.5%
Misc Chinese57,326,6931.3%
Misc other European56,511,1901.3%
Misc French55,788,7971.2%
Misc English language47,026,4571.1%
Misc Korean43,530,7771%
Misc Hispanic39,237,5330.9%
Misc German34,089,0230.8%
Misc Eastern Europe30,059,8360.7%
Misc Turkish28,726,9200.6%
Total theatricalBox office% of BO
Int'l market$4.5bn61.6%
Domestic market$2.8bn38.4%

US majors
Box office% of BO
Int'l market$2.3bn47.2%
Domestic market$2.5bn52.8%

International producers
Box office% of BO
Int'l market$2.2bn90%
Domestic NA market$0.2bn10%