As they prepare to set up shop in Berlin for the first big international market of 2012, film sales companies can look forward to a challenging year and an interesting future — in ways both good and bad.

To thrive, sales outfits will not only have to work their way through economic times that are putting the squeeze on their traditional customers: independent theatrical distributors in big and small markets around the world. They will also have to evolve, by cultivating relationships with a new wave of buyers and by adapting to what may be their changing role in the wider industry.

As seasoned international seller Lisa Wilson, who comes to Berlin’s European Film Market (EFM) as founder of new Los Angeles-based sales and financing company The Solution Entertainment Group, puts it: “We just have to keep, as an industry, re-inventing ourselves so that we remain relevant.”

‘We aspire to become more and more efficient and more like a studio’

David Garrett, Summit International

Trends already affecting the way sellers do business include the rise of multi-territory buyers such as eOne, StudioCanal and Alliance. Multi-territory deals can allow sales companies to simplify their banking arrangements and sell rights for difficult territories such as Spain on the back of rights for healthier territories such as the UK. On the downside, such deals often involve cross-collateralisation and can put relationships with other buyers at risk. And because multi-territory buyers often acquire bigger projects co-financed by the Hollywood studios, their rise may be making it more difficult for smaller independent films to get released.

Kirk D’Amico, president and CEO of Myriad Pictures, suggests that multi-territory buyers “prefer to buy the bigger titles and thereby they’re reducing the number of theatrical slots that are available for purely independent films”.

Meanwhile, the role of sales companies in the financing of independent films has been affected by producers’ increasing use of private equity over other types of finance. “Private equity companies want to know there is an experienced sales company on board,” says D’Amico. “They want to look at estimates and see some level of pre-sales in order to test the commerciality of a project. Whereas the bigger institutional money in the past just made certain broad-stroke assumptions.”

Those sales companies that pass muster with financiers can now have a greater influence over what gets produced. And that, even sellers admit, can have the effect of putting reliable genres and stars above creativity.

“That is one of the problems of the international sales business,” says Alex Walton, president, international sales and distribution at Exclusive Media. “A lot of our values are based, contradictorily, on originality and things that are proven in the marketplace — stars that give us insurance on foreign television networks, for example.”

Some sales companies are becoming more influential as marketers. Bigger companies with ongoing deals in international territories are putting more emphasis on their marketing function.

“We aspire to become more and more efficient and more like a studio,” says David Garrett, president of Summit International, whose parent Summit Entertainment was recently acquired by Lionsgate. “We are establishing more finesse in the way we handle our marketing, tailoring it more to individual markets.”

Newer companies, meanwhile, are making marketing a central part of their business. “The ability to help service the distributors, to help them position the movie, are vital components of the function we serve,” says Nick Meyer, president and CEO of Sierra/Affinity. “It is more important because the distributors are demanding it — and they should.”

‘In the last year, our percentages of traditional and new media have changed dramatically’

Alex Walton, Exclusive Media

Perhaps the most significant change affecting the future of the sales business will be the emergence of television-based and digital video-on-demand (VoD) platforms such as UK-based, Amazon-owned LoveFilm, which also operates in Germany, Sweden, Denmark and Norway, and the US-based Netflix, which has expanded into Latin America and the UK. So far, the new platforms have presented opportunities mostly to traditional distributors who buy all rights to films and now have alternative outlets to which they can sub-license pay-TV rights. “It is a huge boon for the independents to have more opportunities for what was traditionally the pay-TV window,” says Meyer. “So it’s a big plus for the overall industry.”

But the new platforms are also beginning to present opportunities to sales companies, which can get a bigger share of revenue from a VoD operator because the distribution mechanism involves no prints and advertising costs and minimal advertising spends.

Exclusive’s Walton, for example, says that at his company “in terms of library and maybe some premium library titles, we’re dealing directly with the new digital platforms. In the last year, our percentages of traditional and new media have changed dramatically.”

The big question now is whether sales companies will try to take the next step and license new films directly to the new digital platforms. Doing so would disrupt the traditional model whereby independent films are partly funded through minimum guarantees from local distributors who can then hedge their theatrical bets by selling on television, DVD and digital rights. But if international digital platforms can become as widespread as those in the US — where some smaller independent films earn most of their income through VoD and where bigger releases such as Lionsgate’s Margin Call have managed to thrive with simultaneous VoD and theatrical exposure — the risk might, some sellers suggest, be worth it.

“It will make sense to go through [all-rights buyers] for as long as the basic distribution model requires exploitation across multiple media platforms,” argues Stuart Ford, CEO of IM Global. “But if and when the core of the distribution model entails monetisation via digital platforms, it would make sense for sellers to deal directly with VoD operators.”

Ford recently took a step towards, in his words, “getting under the skin of the new distribution platforms” by joining the board of US film marketing and distribution platform Prescreen.

‘It’s not unforeseeable that VoD and digital rights aggregators will sooner or later become the lead buyer’

Stuart Ford, IM Global

Traditional theatrical buyers are understandably concerned about the prospect of sales companies dealing directly with new digital outlets. Many of them have been hit hard by the decline of DVD markets around the world, “and the next platform that’s going to replace that is VoD,” points out Mirjam Wertheim, head of Los Angeles-based foreign buyers consultancy Orange Entertainment. “So it’s really important they get that.”

If sales companies sell VoD rights directly then local distributors, Wertheim warns, “would only get theatrical and TV and that’s not going to be enough for the pricing that is going on right now”.

Many sellers are sympathetic — seeing, in the words of Summit’s David Garrett, that theatrical distributors “are hardly going to want to spend all that money releasing and marketing a movie from which we then extract the value by retaining VoD rights.”

Some sellers, though, see the possibility digital distributors will one day operate like their theatrical counterparts do now, becoming the initial buyers in a territory for independent product.

“It is not unforeseeable that VoD and digital rights aggregators will sooner or later become the lead buyer, not a sub-distributor, and themselves decide where and when to sub-distribute locomotive titles theatrically,” says IM Global chief Ford. “None of us yet know when the tipping point will occur or which overseas territories will get there first. Right now the rate of evolution varies significantly across the world. But at the rate of change the digital revolution is experiencing, those territorial discrepancies could even out or switch around very quickly.”

Sellers speak

A group of sellers respond to the question: what is the biggest challenge facing the international sales business?

Buyers speak

A range of buyers respond to the question: what makes a good international sales agent and how is the conversation between seller and buyer changing?