The UK remains a challenging market for independent distributors, but the mood is one of cautious optimism, as Sarah Cooper discovers.

It has been an eventful year for the UK independent distribution sector, with the merger of two major players (eOne and Momentum), the demise of Revolver Entertainment, the receivership of two major DVD retailers (HMV and Blockbuster), the arrival of a new player (Koch Media), the return of another (Icon), not to mention an unexpectedly hot summer leading to the lowest July admissions in 10 years.

“Last summer we had the Queen’s jubilee, the Euro 2012 football tournament and the Olympics to contend with, and this year the hope was that it was a clear summer and cinema could be strong, but it hasn’t worked out that way,” says StudioCanal UK CEO Danny Perkins, who is nevertheless optimistic about the year ahead.

“When you look at the huge number of quality films coming through in the autumn and the start of the new year, hopefully they will be strong enough to get people back into the cinema,” adds Perkins, whose upcoming StudioCanal releases include Cuban Fury and Inside Llewyn Davis (the company itself has had a strong end of summer thanks to Alan Partridge: Alpha Papa and Rush).

‘It is certainly tough but there are definitely opportunities for the right films’

Danny Perkins, StudioCanal

When it comes to the UK theatrical market, says Lionsgate UK CEO Zygi Kamasa, it is more important than ever to have the right product in order to compete with the growing range of on-demand services on offer to consumers. “It is getting harder and harder for anything that doesn’t have an original hook to it. That’s been true for a while but it’s more prevalent now than ever.”

Meanwhile, the onslaught of high-quality TV dramas - which attract top talent both in front and behind the camera - continues to have an effect, most notably, on the middle tier of theatrical cinema.

“You can’t make a mid-budget espionage thriller because something like 24 does it so well, and people get to watch it in their own home, so you have to make a $100m espionage thriller and put Tom Cruise in it. If you’re going to do something, it has to be bigger than what TV is doing,” says Kamasa. “The gap between the small, interesting movies and the big-budget movies is widening. Anything in-between is not working.”

The situation is not helped by the fact the UK continues to be an expensive market, both in terms of product and p&a costs. “We still have to pinch ourselves at the amount of media we will be buying between the month of August and Easter next year, because one of our strategies is constant marketplace presence,” says eOne managing director Alex Hamilton - appointed as head of the newly merged eOne and Alliance UK film team in January - whose upcoming releases include 12 Years A Slave, Tracks and Dallas Buyers Club.

“Every year the degrees just get finer and finer, and you stand to lose more and more money, so you have to be slightly more discerning in what you invest in. But that’s not new,” adds Kamasa.

One area where UK distributors are choosing to invest is in local fare. “It is a big part of what we’re doing,” says Perkins, whose upcoming UK projects include Jeremy Lovering’s In Fear, Richard Ayoade’s The Double and Yann Demange’s 71.

“There have been some great [UK] breakouts in the last five years, such as The Best Exotic Marigold Hotel, The Inbetweeners Movie and Skyfall. There’s definitely an appetite for local films,” adds Perkins, who cites StudioCanal’s increasing involvement at the production stage of a feature as being key to the end result. “We are well resourced to get in there early and we want to do more of it. The earlier we get involved, the better an understanding we can get of the project.”

Production is also part of the strategy for smaller UK indie distributors such as Metrodome, whose releases this year have included Noah Baumbach’s Frances Ha. Recent acquisitions include Lukas Moodysson’s We Are The Best!.

“Production is becoming key for us. Not necessarily just creating UK-centric product, but also diversifying our revenues into the international sales space too,” explains managing director Jezz Vernon, who nevertheless admits that “the layer below the mini majors is difficult”.

‘Culturally, British audiences want to follow things that are show in their home countries’

Zygi Kamasa, Lionsgate

Indeed, Revolver Entertainment closed its doors in March this year, giving Metrodome and other distributors at the same level the opportunity to mop up some of the films acquired previously by Revolver.

Lionsgate also makes investing in UK projects a key part of its strategy, with releases this year including Hummingbird, Great Expectations and Filth, with The Railway Man and Dom Hemingway still to come. “If you have a really interesting comedy or drama that is British, that’s more of a unique hook than if it were American. British audiences want to see British films and culturally they want to follow things that are shot in their home countries,” says Kamasa.

Meanwhile eOne will be releasing the third Nativity film, directed by Debbie Isitt, this Christmas, following strong box-office figures - despite poor reviews - for the second instalment. “They are popular mainstream British films that aren’t necessarily made for the metropolitan sophisticate,” says Hamilton. “Popular cinema is part of British film-making traditions and I’m loathe to turn our nose up at that.”

With Paddington and Shaun The Sheep on the slate, Perkins admits that investing in family fare is also a key part of StudioCanal’s strategy. “We want to be a company that does films that work theatrically and the family market has the biggest-grossing films.”

Home entertainment shifts

Things may have looked bleak for the UK DVD market back in January, when it was announced HMV and Blockbuster were to go into administration, leading to substantial losses for independent distributors, especially in terms of library and catalogue titles.

However, seven months on, things are not as bad as originally predicted, with HMV being rescued by Hilco (albeit with a dramatically reduced number of stores)and DVD figures beginning to steady, largely thanks to some strong supermarket sales this year.

“Everyone found this challenging - we just hope they can continue to build the rebooted business as they’re still a key part of product diversity when it comes to bricks and mortar,” says Metrodome’s Vernon. “We would just like to see more opportunity for strong back catalogue on DVD.”

“There is still a valuable market for physical, and we are seeing a growing share of Blu-ray with new releases,” adds Perkins, who reports “strong results” for Evil Dead and The Place Beyond The Pines on DVD “at the toughest time of the year”.

Meanwhile, Lionsgate also reports life in the DVD market. The company sold 163,000 DVD copies of Olympus Has Fallen in one week, for example. “The DVD market is fine for the movies that have worked. What you’re no longer able to do is take a movie that you’ve struggled with theatrically and rescue it on DVD,” says Kamasa.

‘There needs to be a willingness for both exhibitors and consumers to support this alternative stream’

Craig McNicol, Koch Media

“Physical may not be the sexiest proposition in this digital world, but it’s still a huge revenue source each year, so we wanted to give it appropriate resource,” says Hamilton of eOne’s decision to divide its home entertainment into three departments: physical, digital and TV. “It is about making us ready for the changes that continue to happen, but respecting the value of each.”

And while the last few years have seen a decline in the physical market, UK distributors are seeing growing returns from VoD services. “Historically, Sky was great for the studio distribution sector, LoveFilm and Netflix are great for the indie sector,” says Hamilton.

“Subscription VoD, pay and free-to-view revenues are the key areas ongoing; transactional VoD still has a distance to travel in terms of consumer uptake,” adds Vernon, who points out the biggest stumbling blocks for VoD are technology and lack of cable delivery.

“The BBC iPlayer has shown that average speeds can cope with glitch-free high-definition encodes but the lack of one simple low-cost technology is holding it back - current solutions are splintered and bitty.”

Consolidation and competition

The big news this year was the merger of two major UK distributors eOne and Momentum (owned by Alliance), creating a 100-person strong company that will release more films than any other UK distributor.

While Icon was focusing on production from 2011-13, the sector has, in the last two years, seen the big six indies (StudioCanal, eOne, Entertainment, Lionsgate, Icon and Momentum) become four.

“For international sales agents, there is a reduced number of companies in that space, but in terms of releasing films, there is no difference - there are the same number of films out there so it’s still very busy,” says Perkins.

“For us, it’s good because there is more choice and less competition. Four is still a healthy number,” says Kamasa. “We all have slightly different tastes, different remits and supply chains. It’s healthy enough to keep good competition, but not so oversaturated that when there is good property we don’t stand a chance of getting it.”

‘Production is becoming key for us. Not necessarily just creating UK-centric product, but also diversifying into international sales’

Jezz Vernon, Metrodome

The sector has seen the arrival of a distributor, Koch Media, from Germany, which following its acquisition of London-based independent distributor G2 Pictures, launched with the release of Arbitrage earlier this year.

“Being a new player on the block is very exciting,” says Craig McNicol, Koch Media’s managing director of northern Europe. The company plans to release 25 films a year into UK cinemas, including Peter Landesman’s JFK assassination drama Parkland.

However, the landscape is set to change again in the coming year after the recent announcement that Icon Film Distribution is to relaunch, with its new CEO Ian Dawson seeing “a huge opportunity at a time when consolidation between larger independents has created a real gap in the middle of the market”.

Working with exhibitors

While there are still grumbles from distributors over the VPF model, the relationship with exhibitors seems to have been noticeably calmer this year.

“We all had a moan about the adoption of the VPF model, but that’s as it is now. If we bring [exhibitors] good movies then hopefully they’ll be happy and we’ll be happy,” says Hamilton.

StudioCanal has been encouraged by the fact exhibitors seem to be sharing more information with distributors, including figures on advance ticket sales ahead of a weekend release. “Going into the weekend, it means we can get a sense of what’s happening with the film and think about ways of promoting films within particular cinemas,” says Perkins.

Distributors are still asking for shorter release windows. “Arguably [exhibitors] are not always as open to considering shorter windows as we’d like them to be, and lack of flexibility can sometimes be frustrating,” says Kamasa.

Meanwhile, McNicol would like to see “a change in approach of multiplexes scheduling multiple prints of blockbusters in the quest to improve market share. In any mature market there is a polarisation to the majors, however this can lead to an almost formulaic output. There needs to be a willingness for both exhibitors and consumers to support this alternative stream.”

While the UK may be a challenging market, its distributors are more than aware of the need to innovate, stay ahead of the digital curve and find new ways to reach audiences. “It is certainly tough, but there are definitely opportunities for the right films,” says Perkins. “It is our job to try and find them.”