The days of big MGs from Japanese distributors may be over, but there is still a market in Japan for a certain kind of movie that is sold at the right price.

The news out of Japan so far this year has made depressing reading for the international sales business. A string of indie distributors have gone out of business and those that are left are being extra cautious and rarely pre-buying films. Box office is up, but only for studio product, and the video market has declined by $1bn over the past five years. Some US banks won’t lend to US sales agencies if they expect to get something out of Japan.

“This painful period is a correction that needed to happen. Just as in the rest of the world, Japan had way too many distributors buying too many films”

Unlike many Asian territories which are still building multiplexes, Japan is a developed market where box office has been flat for many years and too many films are jostling for release. Ticket prices are the highest in the world so audiences are choosy about what they see.

This has been especially true in this year of recession, following two decades of stagnation, when Japanese consumers have been trading in Louis Vuitton and Gucci for high-street brands. Local product has been strong because it’s backed by local studios and broadcasters which can arrange carpet-bomb promotion across multiple platforms. In times of hardship, people like to be told what they should go and see.

None of this is good news, but it also carries some important messages for the international sales business. Japan may be a unique market, but the convulsions it’s currently going through are rooted in the same dynamics that are affecting the rest of the world. The basic facts are that around 90% of the box office is dominated by studio films, whether local or foreign, and revenue from the internet and mobile platforms is not growing fast enough to make up the huge loss from DVD.

But this is still a $2bn box-office market and around 10% is still open to independent product. The question is, what type of film is going to make its money back in that 10%? And the answer is not anything big and expensive that costs a distributor up to $10m and another $5m for p&a.

In his recent speech to the Independent Film & Television Alliance, producer Bill Mechanic told producers they should stop trying to copy studio films at a lower cost. Nothing could be more prescient for the Japanese market ‹ too many local distributors have been burnt with big indie titles such as The Golden Compass that were released on 200-300 screens. It’s also tough for the tiny films that go out on one screen in Tokyo and 20-25 nationwide.

The challenge for Japanese buyers is to find films in that middle range that are distinctive enough to stand out from the studio product and have a compelling marketing hook.

Films that appear to have succeeded in that bracket so far this year include Che, which grossed $15m for Gaga/Nikkatsu, Taken, Vicky Cristina Barcelona, The Wrestler and Transporter 3.

Looking ahead, Japan’s television market, which has long been dominated by free-to-air broadcasters, is gearing up for the entrance of new pay-TV players via digital satellite and IPTV. Japanese kids have grown up surfing the internet on their mobile phones. But it’s still not clear whether movies or other forms of entertainment will triumph in this digital transition.

Many young people are mostly using their phones to e-mail each other. There will be further casualties among Japanese distributors before anything emerges to replace DVD.

But this painful period is also a correction that needed to happen. Just as in the rest of the world, Japan had way too many distributors buying too many films. Few will survive, but the ones left standing will be strong, and in tune with the realities of the modern-day market.