The CEO talks about the unusual but successful business model of US and Russia-based distributor VolgaFilm. Andreas Wiseman reports.
Eyebrows were raised when Russian distributor VolgaFilm paid a multimillion-dollar minimum guarantee for The Hunger Games at the 2010 American Film Market. It was a risky investment for an independent in an increasingly expensive market.
But Volga achieved the biggest opening for the film in a non-English language territory and it has grossed a company-record $13.3m as of April 19.
Since it began its Russian operations in summer 2008, Volga has followed an unusual but successful business model. Founder Sergei Yershov, former co-president of Lionsgate International, runs Volga from Los Angeles, overseeing an acquisitions team which has yet to set foot in Russia. “Some people criticise the fact my acquisitions team are American and have never travelled to Russia and don’t speak the language,” he explains. “But that was intentional. If I had a Russian acquisitions executive, I doubt they would have been as excited two years ago about buying The Hunger Games considering the market for it in Russia. We’re trying to introduce a different mentality, an international mentality.”
Yershov himself has not been to his homeland for two years. He considers close contact with the US industry a competitive advantage, bearing in mind the strong demand for US product in Russia: “Being here allows us the possibility to interface with new producers.”
Volga now has 52 staff spread across Los Angeles, St Petersburg, Moscow and Kiev. Crossing all those time zones, Yershov describes Volga as “the company that never sleeps”.
‘Everyone who witnessed the release of The Hunger Games and The Artist said we achieved a miracle’
Sergei Yershov, VolgaFilm
The acquisitions policy is skewed towards English-language titles and has always been film-maker driven: “We overbid for The Hunger Games because of the film-maker [Gary Ross]. It’s always film-maker driven. Are we excited about what they have to say? Are we excited to market them? I was recently excited by the acquisition of documentary Marina Abramovic: The Artist Is Present, for example.”
In 2011, Volga released 14 films theatrically, generating box office of $9.2m. In the same year its television sales increased by 6%, from $8.8m to $9.3m. But Volga has had its best year at the box office in 2012, with strong numbers for The Artist and The Hunger Games.
“Everyone who witnessed the release of The Hunger Games and The Artist has said we achieved a miracle,” says Yershov. Suzanne Collins’ novel saw relatively minor sales in Russia but the distributor printed a special edition with a teaser poster wraparound. The books were distributed in schools, colleges and universities throughout the country.
Volga collaborated with major exhibitor Cinema Park on a Hunger Games competition to win a seat at the European premiere in London and the company blitzed social networks with other competitions.
Such initiatives came naturally to the company’s young, mostly English-speaking staff in Russia. Yershov estimates the average age of Volga’s marketing employees to be around 30.
Volga is riding the wave of Russian audiences’ desire for Hollywood content. But Yershov believes the country’s recent box-office surge masks underlying structural problems: “Of course there have been some huge successes but there is also a graveyard littered with fallen heroes who jumped on acquisitions that didn’t deliver. The industry is growing and attendances are improving but we are also under-screened and p&a costs are rising.”
But Volga is looking to the future. The company will continue its core operation as a feature distributor but has plans to widen its operations.
“We want to grow as a vertically integrated media company and acquire other local companies. We’re evaluating acquisitions of local cable companies and exhibition entities. We don’t want to be known solely as a boutique distributor. We are also thinking about feature and TV production. We want to make a brand for our type of films.”
- VolgaFilm ― formerly Film Depot Inc ― was formed in 2006. In 2007 it pacted with MGM for more than 50 titles.
- VolgaFilm opened its Moscow office in 2008, and secured more than 80 titles from the Vestron library, including Dirty Dancing.
- In 2009 Slumdog Millionaire and Spread make $3.6m and $2.7m respectively in Russia.
- By 2010 VolgaFilm had opened offices in Saint Petersburg and Kiev.
- One Day and Jane Eyre make $3.2m and $1.1m respectively in 2011.
- The Hunger Games and The Artist make $13.3m and $2.6m, respectively in 2012.