Germany's ConstantinFilm will not be renewing its output deal arrangement with Mandalay Pictures when it expires at the end of this year. The decision comes as the producer-distributor is drawing up a new strategy for filling its product pipeline for theatrical releases.

As a recent bank analystreport observed, until now there had been a three-way split in the sourcing ofConstantin's product between in-house productions, output deals, andfirst look/pick up deals. In future, the plan is increase the product share ofin-house productions to 35%, while the share of output deals and firstlook/pick up deals would each be reduced to 25%, and the new source via servicedeals - such as the one concluded with RTL Television - would provide a further15%.

Its current output deals arewith Mandalay (which will lapse on December 31st this year), HydePark Entertainment (which extends until mid 2005), USA Films (the end of 2003),Spyglass Entertainment (for a number of films) and Escape Artists (end of2005). In the case of Hyde Park and Spyglass, the TV rights are held byKirchMedia.

While Constantin's in-house and co-productions such Girls On Top, Emil Und Die Detektive and Der Schuh Des Manitu were highly successful at the German box office this year, the company has not fared so well with titles from its output deals.

Launched in Germany as theopening film of this year's Berlinale, Jean-Jacques Annaud'sMandalay Pictures/CP Medien production Enemy At The Gates was savaged bythe German critics and was seen by 196,000 cinemagoers for a gross of DM 2.3m.Another Mandalay/CP Medien production Frank Oz's The Score took just DM 3.6mand was seen by 302,383 despite its high-calibre cast. Releases so far from Hyde Park haven't done any better with Original Sin taking around 130,000 tickets and Startup a paltry 65,000; and nor have those from USA Films,with One Night At McCool's being seen by 202,000 cinemagoers for a gross of DM2.34m when the film was released at the end of April 2001.

The situation has reversed itself from last year where Constantin's outstanding success intheatrical distribution had been driven by its output deals with such releasesas Sleepy Hollow (from Mandalay) and The Sixth Sense (from Spyglass).

As Thomas Peter Friedl,Constantin's board member responsible for distribution and marketing, told thebusiness new service vwd, the disappointing performance of films from theoutput deals had been responsible for last week's issuing of a profitwarning. He stressed, however, that Constantin had not "participated inthe madness" of some its competitors by paying as much as 17% of thefilms' production costs when committing to its output deals. "Weparticipated with ten and eleven per cent in the production costs", hedeclared.

According to Friedl,Constantin will have posted estimated sales of Euro 84m and an EBIT of Euro 2mfor the first nine months of this year and, after last week's profitwarning, the company is looking to sales of more than Euro 100m and an EBIT ofbetween Euro 2m and Euro 5m for the full financial year.

In the same interview with vwd, Friedl suggested that an EBIT of Euro 2mwould be the "worst case scenario" and there were hopes that thefinal three releases of 2001 - including the Bruce Willis-starrer Bandits from Hyde Park - would propel that figure about Euro 2m. In addition, another 100-300,000 admissions could be added to Der Schuh Des Manitu's 8.5mtotal by the end of the year.

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