Momentum president Xavier Marchand and Alliance Films CEO Victor Loewy discuss the success of The King’s Speech, the pay TV market and the virtual print fee.
The Alliance Films network, through its subsidiaries in Canada (Alliance Films), the UK (Momentum) and Spain (Aurum Producciones), has proven to be one of the most successful global independent distribution outfits in recent years.
The company’s strategic partnerships include exclusive distribution deals with Relativity in Canada and UK, Focus, TWC, CBS Films and Newmarket Films in Canada, as well as ongoing relationships with Summit, FilmNation, Exclusive Media, IM Global, Lionsgate, Wild Bunch, Constantin Films, EuropaCorp and Nu Image in all three territories.
Screen talks to Xavier Marchand and Victor Loewy about how the pheonomenal success of The King’s Speech will impact on the company and the major challenges they see facing the distribution landscape in the UK.
How do you acquire films for your different territories?
Xavier Marchand: Robert Walak, SVP of worldwide acquisitions, and his team initially act for the entire group. They trawl the marketplace, and then it’s quite decentralised. Every team in every territory reads the material. Robert sounds out and checks the response from local territories. We take on board the feedback from everyone and then decide whether it’s a property for the three territories or just for Spain or Canada or the UK. If it’s something for the three territories which is at an early stage we are now prepared to co-finance, too. It’s a lot of work — it’s not just the two of us who read the scripts! Everyone’s opinion is valuable.
What is your acquisitions philosophy?
XM: In Canada and Spain we are the largest independents. In the first quarter of 2011 we had the biggest market share of any distributor in Canada and in Spain we are neck and neck with some of the studios in terms of market share. The type of deals we have in the market place allows us to chase the big movies. In the UK we have an output deal with Relativity which gives us access to commercial American movies such as Limitless and The Fighter. With the bigger independent movies they are not always available plus it’s a very competitive market and we don’t want to overpay for some of the bigger titles because we have existing alliances in place. We like to complement the Relativity titles with British films, such as The King’s Speech, The Woman in Black and Shame. We’re also finding our niche for foreign films such as Scandinavian movies including The Girl with the Dragon Tattoo and we recently bought Headhunters and Troll Hunter.
In Canada we buy every type of film from tentpole to art house movies and we will distribute 65 movies theatrically this year. In Spain we also have a very hefty lineup, with almost 30 films, but the focus tends to be on tentpole movies. In the UK it’s a broader mix.
There must be a great energy travelling through the company at the moment after The King’s Speech’s success?
Victor Loewy: The King’s Speech in Canada was a huge result but our team in Canada is used to having these giant movies. We’ve had a number of huge films in Canada, and a number that have grossed more than $20m.
XM: The King’s Speech is an unprecedented box office success in the UK. It is in the all time top 25, bigger than any Working Title film, which has got to be the benchmark for British films. For sure it’s a huge triumph, it shows that my UK team really know how to release a blockbuster.
How will the profits from The King’s Speech impact your strategy?
XM: In terms of the bottom line it has a big impact for us and more importantly for the profit participants or many years to come. For us it will make a financial difference for a good couple of years for sure. But it’s still a one-off; it’s not a franchise. I think it will make an impact in terms of the level of talent that talk to us. I don’t have specific names but people pay more attention when dealing with us because of its success. Also, we have a great relationship with Iain Canning and Emile Sherman, two of the producers of The King’s Speech, who in turn will certainly capitalise on this success, which will also benefit us through our production deal with them.
Until three years ago we were essentially a distribution company and did not have a production strategy. However when independent film financing started drying up and the independent supply looked fragile we decided to start generating more of our own content. We made a deal with Iain Canning and EmileSherman in the UK [their company is See-Saw], and one with Jason Blum for low-budget horror films. We also created a joint venture production company with IM Global called Automatik run by Bryan Kavanaugh-Jones.Through Automatik we are producing Safe starring Jason Statham.
VL: The impact of The King’s Speech is felt mostly in UK. It gives the company much more visibility. It’s a one-time boost but it doesn’t change the economy of the marketplace.
But there must be an injection of capital coming to company that wasn’t there before?
VL: The company was sold to an investment bank four years ago but was public so there was never a problem with cash. The reason we didn’t get bigger films in the UK before was that we weren’t in that market. It wasn’t that we couldn’t afford them they just weren’t for sale.
How can you replicate the success of The King’s Speech?
XM: We’ve had success previously with period pieces like Miss Potter and The Young Victoria. I know my team is very good at distributing these types of films, so we’ll always pay attention to classy British period pieces. If you get a strong emotional story it can work but it’s like digging for oil. Ironically, there have been quite a few through the door since then but nothing we’ve been taken on. However we’ve just acquired Kevin Macdonald’s How I Live Now which is not a period piece but shows great promise both commercially and artistically.
Tell me about your production activities.
XM: We teamed up with Exclusive and Hammer to co-finance the The Woman In Black which we will distribute in our three territories. That’s in post with a $20m budget. Exclusive is an international sales company so we’re a great match. We are also exploring co-production options with Medusa in Italy.
How will your approach to production evolve?
XM: We spend about $100m a year across the group on acquisitions. If it’s a production spend it’s got to come out of that budget. The one thing we are not doing is investing hugely in development. In saying that, if someone comes to us with a great script and needs money for a re-write and we love it then we’ll do it.
What is your assessment of the local pay TV market?
XM: It would be great if a company like LoveFilm in the UK, or Netflix in the US, steps up and starts competing with Sky. Sky is married to the studios and even though we are close to the Sky people they just don’t buy from the independents or they buy for a lot less than they buy from the studios and that’s because there is no alternative to Sky at the moment.
In Spain, where Canal Plus started playing the same game as Sky, dropping the prices and not buying aggressively from the independents, we decided to skip the pay TV window and in most cases go straight to Antena 3 and other networks who are putting a good premium on getting an earlier window.
We’ve tried to convince the free broadcasters in the UK to take the same approach as in Spain and put a premium on getting the film early but they haven’t responded that way. So far there’s no incentive to give them an earlier window which means we’re still looking to monetise the pay TV window.
VL: There’s no other country on the planet where a pay service largely tells you they’re not going to buy from you. In countries like Canada and France there would be an anti-trust investigation. In France, Italy, Canada, there is a quota of local films that have to be shown.
What are the main challenges facing the distribution sector at the moment?
VL: The number one problem in the UK is cinema chains abusing their position through their market dominance. In most other markets you get film rentals between 40- 50% whereas here in the UK it’s somewhere in the high 20s and low 30s for the majority of film releases.
Another challenge for the independents in this country is the VPF [virtual print fee], it’s an additional burden for us. With the film rental so low here it’s a double whammy – we’re paying for the conversions and we’re not getting increase film rentals - we’re not sharing the same way we’re sharing elsewhere. That’s a big additional cost for us.
In Canada, even not accounting for the VPF, you get 50% film rentals. In order to pay for the equipment and get a 30% rental it’s nonsensical.
For years the monopolistic position of BSkyB has allowed them to get away with not supporting the independents which is an outrage.
The DVD market is taking a hit everywhere. We’re looking at a couple of UK films that we think have good box office potential but the DVD index is so low you’re confronted with a film you like but can’t fund. It’s becoming like the US where the distributors don’t put up the MGs anymore they just put up the P&A. Here it’s the same.
You were instrumental in setting up the new Independent Film Distributors Association. Why did that need to happen?
XM: It gives us a voice and regroups all the independent distributors. We are all facing similar issues which are not necessarily the same as the American Studios. It’s not just a theatrical association it deals with all aspects of the market place – such as piracy, subsidies and so on.
VL: If you look at Canada or France, the majors interfere very little, whereas the independents association has an enormous impact on legislation and how local product is subsidised.
And you’re hoping to go to government with your grievances?
XM: Yes. We are already interacting. The last straw was the VPF. We’re being held to ransom. The VPF prices have been fixed by the studios and there is very little room for negotiation. I went with an outside lawyer to Brussels. We hired lobbyists to get access to the competition unit, which was a painful cost for us. The studios can obviously spend millions on those kinds of battles. In the end Brussels dropped the investigation because the studios agreed to drop certain things. We don’t know what those things are, but the reality is that nothing has really changed. We initially went to the office of Fair Trading here but they re-directed us to Brussels. It’s too late to change the VPF model. The exhibition chains have a gun to our head and the ship has sailed.