Across the US, the buzzwords in store windows and nightly newscasts are slashed prices, bargains andcost-cutting. Yet the rallying cry ahead of this year’s American Film Market (AFM), which runs November5-12, is ‘bigger is better’.
Belt-tightening in the wider economy will not necessarily translate into distributors bargain-hunting for smaller films, experts say. Echoing the sentiments of many executives, Alison Thompson, president of Focus Features International, says simply: ‘I don’t know if what’s happening with the global economy is directly impacting our business yet.’
For larger, higher-profile films, AFM is expected to be more or less business as usual. Steve Bickel, head of international at The Film Department, predicts: ‘It will be selectively busy. Buyers know they’ve got to fill their slates and have tentpoles to help previous smaller acquisitions. Money is tight so they need to be sure their projects can generate profits.’
David Garrett, president of Summit International, agrees that at the top end of the market there should be solid business. ‘There’s always a paucity of product at a certain end of the market - if you’re bringing anything good to market, people are prepared to pay for those films,’ he says.
Summit’s big offerings include Roman Polanski’s political thriller The Ghost, based on the Robert Harris bestseller, and the new $80m Denzel Washington thriller The Book Of Eli.
Buyers are expected to be more selective and board strong projects that have every element in place: firm financing commitments, a marquee cast, a strong director and a fully developed script.
‘What doesn’t change is that good scripts will get good directors, which in turn attract good cast and we’ll always be able to sell these movies whether the market is up or down,’ agrees HanWay Films CEO Tim Haslam, who has six films being readied for delivery in 2009 and four more in 2010.
Stuart Ford, CEO of IM Global, says completed projects or those in post or going into production immediately will seem less risky to distributors than pre-buys. ‘It’s a great time to sell finished product or one in post. There’s no doubt the pre-sales market is a tough one.’
Before the AFM even starts, there is one clear sign of health: sellers say all of the major buyers are planning to attend as usual, with no notable distributors dropping out. And if a company is paying for a team to come out to Los Angeles, that team is presumably expected to return afterwards with more than just a suntan.
‘People are looking harder at fiscal plans for 2008 and 2009 - they know they need to fill up slates. So you could say people are even more ready to do business,’ says Thompson.
Registered attendees are estimated by organisers to reach about 8,200, down slightly from 2007’s record 8,343. The number of buyers is expected to reach 1,600, about even with last year’s 1,628. Again on par with last year, just over 400 companies are expected to exhibit and about 900 screenings are planned.
‘A little more caution’
Focus’ Thompson sees the silver lining in the economic situation for select companies and films. ‘Maybe there will be a little more caution in the marketplace. That’s actually good news if you have solid footing and a reputation for bringing good films to the marketplace,’ she says. ‘Distributors - specifically in terms of pre-buys - will be looking more carefully at the viability of productions. They will want to be certain that films being set up can get the financing they need. They will want to work with established, reliable partners.’
The reliable names on Focus’ slate include Gus Van Sant (Milk), Ang Lee (Taking Woodstock) and Alejandro Gonzalez Inarritu (Biutiful). But Thompson noted that even a smaller film such as Irish festival hit Kisses sold well in Toronto.
The Film Department’s Steve Bickel says it is not just names, but also the best-developed scripts that will rise to the top. ‘Thrillers and good romantic comedies should continue to sell well internationally. But in this climate they need to be even better, not just in terms of casting but also in terms of story.’
Gary Smith, chief executive of UK outfit Intandem, which has moved into larger, more commercial films (budgets of more than $15m) in recent years, agrees thrillers and action films may continue to perform well, while period drams could be tougher sells.
Buyers looking for films with big names attached will certainly have some options, with new films starring the likes of George Clooney, Nicolas Cage, Mickey Rourke, Mel Gibson, Helen Mirren and Jackie Chan.
Buyers and financiers will also want reassurance the film will sell in North America - which is becoming trickier. IM Global’s Ford says stronger product is still selling domestically but North American buyers ‘are pushing back to later stages. That presents a challenge because foreign buyers want that certainty of a domestic release, so the later the North American deals come in, the harder you have to work for foreign sales.’
But the days of splashy AFM announcements for half-financed or - even more tenuous - new projects could be over, due to tighter financing opportunities.
‘Financiers will be a lot more prudent in which films they invest in,’ says Intandem’s Smith. ‘Equity will be a problem and force pressure on sales agents to achieve pre-sales.’
Ford adds: ‘Buyers have become much more adept in the last year or two to judge whether or not a project is real or one just starting to come together.’
There are also ongoing jitters over a potential actors’ strike later this year. But the Hollywood studios are more likely to be hit; independent productions such as most of those sold at AFM would be mostly protected by Screen Actors Guild waivers.
The bigger projects from very established players are likely to strike the most deals. That may mean some of the middle ground will be shut out. Smith says: ‘It’s not really a question of reducing prices, more (a case that distributors) will simply not buy anything that will not get a theatrical release because they won’t then get DVD sales or a decent TV number. Films with budgets between $5m and $15m will be the ones to suffer as the sales will not support the finance plan.’
Indeed, the hardest hit sector of AFM will likely be the much smaller, straight-to-DVD business that does have a bigger role at AFM than at other markets such as Berlin’s European Film Market.
‘That bargain basement side of the business could be hit,’ Garrett notes. And Bickel agrees: ‘That’s what suffers the most or is the first to be most challenged in an economy like this.’
Michael Morris, media analyst at US bank UBS, agrees: ‘What I’m most concerned about is DVD sales. Historically, the theatrical exhibition business has shown resilience in times of financial crisis. DVD sales have already been in decline in 2007 and that will be compounded by the current economy. I’m forecasting that DVD sales will be down about 7% in 2008 compared to the second half of 2007.’
The currency question
Another factor is the recent rebound of the US dollar, which should be good news for the US - unless foreign buyers are so put off by rises in the dollar that they shy away from deals, which are almost always conducted in dollars.
As of October 27, the US dollar was worth Euros 0.80 and £0.64. That is in comparison to October 31, 2007, when last year’s AFM opened to a dollar worth Euros 0.69 and £0.49.
Garrett says: ‘There have been a few cries from people about how the dollar has gotten stronger against their local currency, and could be the main thing that make sales a little sluggish.’
With markets so volatile, even a week before AFM kicks off it is hard to know at what level the dollar will settle. However, the film business has weathered much greater currency fluctuations in the past - and the dollar has been unnaturally soft in recent years and is now getting back to levels of two or three years ago.
The Film Department’s Bickel for one is not too worried. ‘If you’ve got the right product, the buyer does become aggressive and they know what the value is in their territory.’
The combination of the rebounding dollar, more discerning buyers and a finance crack-down could actually have a positive effect on films being packaged now.
‘There’s a need for production costs to come down and I hope that concept comes home to roost in the production community,’ says Garrett.
Thompson agrees a return to realism in financing and production is a silver lining to the financial crunch. ‘There might be a little belt-tightening but from time to time that’s a good thing,’ she says. ‘One thing that has hurt the sales business has been the glut of movies in the marketplace. There has been too much financing out there to make movies that shouldn’t necessarily be made.’
So there is business to be done, and if it is smarter and more focused than in recent years, that might not be such a bad thing for the film business as a whole. It might not be the strongest year at AFM, but at least film is looking like a more solid industry than other sectors such as construction, financial services, IT and automobiles. As Garrett says: ‘The world is going into a recession, but on the whole the film business is amazingly resilient.’
IM Global’s Ford adds: ‘There’s a lot of talk of doom and gloom, but for the right section of the market, there’s no reason to be too pessimistic about this year’s AFM, or indeed the next few months in general.’
THE ELECTION EFFECT’ MOOD, NOT MONEY
Unless there is a return to the ‘hanging chad’ debacle of 2000 with this year’s presidential election, the opening day of AFM (Wednesday, November 5) could be the morning Americans wake up to hear who has been chosen as the next US president. Whether the Democratic ticket of Obama/Biden or the Republican ticket of McCain/Palin prevails, the election could have an impact, if on mood alone, at the AFM.
The new president will not take office until January 20 and, of course, the US economy will not change overnight no matter who is head of state. But what could come into play is emotion.
The bulk of Hollywood is famously, overwhelmingly, liberal although John McCain has seen support from the likes of Jerry Bruckheimer, MGM chairman Harry Sloan and California governor Arnold Schwarzenegger.
With Barack Obama the candidate of choice for most of the entertainment business, and ahead in the pre-election polls, what could affect AFM is an unexpected McCain win - not in terms of deals but in terms of overall mood. As David Garrett of Summit jokes: ‘If Obama wins, we fully expect to sell out our slate that day.’