The dramatic reorganization of Paramount Pictures International, which will see 80 people lose their jobs in the UK, raises big questions for all the studios’ international businesses.
On Jan 12 2012, Paramount Pictures International (PPI) closes down its London operation and all 80 of its UK-based staff lose their jobs. It’s five years to the month since PPI was established out of the ashes of UIP, the Paramount-Universal joint venture which was scaled down in 2005 so that the two studios could ramp up their own international distribution organizations.
Paramount is reforming PPI in Los Angeles under former Disney international distribution chief Antony Marcoly who stepped in when PPI’s highly respected London-based president Andrew Cripps opted not to relocate to LA.
So what exactly led to such a dramatic move? PPI after all is one of the most successful international units and its grosses in 2011 could pass $3bn – the first time that a studio has ever crossed that international milestone. 2011 smashes include Transformers: Dark Of The Moon ($771m), Thor ($268m), Captain America: The First Avenger ($192m), The Adventures Of Tintin ($161m, shared with Sony and still going strong), Super 8 ($133m) and Rango ($121m), while Kung Fu Panda 2 from DreamWorks Animation (DWA) cleaned up with a cool half billion outside the US. Still to come: two potential megahits in Puss In Boots from DWA and Mission: Impossible – Ghost Protocol.
But when PPI and Universal Pictures International were hatched in 2005, the world and the film industry were a lot more robust than they are today. At the time, the international business was soaring and both studios wanted to take control of their increasing grosses. UIP remained in place in to handle 17 smaller territories, but in the larger territories each studio was prepared to invest in its own office and staff.
With each studio producing around 15 to 20 films, their classics divisions providing up to ten more and burgeoning local production and acquisitions groups working to increase that volume, the model made sense. There was enough product for each to handle – and too much for UIP.
At the end of 2011, international theatrical grosses continue to dwarf domestic for studio tentpoles, but the ongoing economic crisis combined with the swift decline in DVD sales, falling revenues from pay and free TV and the uncertain value of VoD has devastated the traditional business model. Tens of thousands of jobs were eliminated in LA, classics divisions were closed and recently both Paramount and Universal radically scaled down their local production and acquisitions ambitions. Fewer movies are being made in general - Paramount is domestic and international market leader in 2011 but it will have released only 14 titles in the US market by the end of December.
In that context, the closure of PPI’s London operation is perhaps easier to comprehend, and raises the question: will these or other companies ultimately return to a UIP-style joint distribution organization which shares the considerable cost of offices and distribution teams in multiple territories?
The economics of the business have changed and if the studios continue to limit production to a handful of tentpoles each year, the sense of operating a costly international distribution infrastructure for 10 movies a year becomes increasingly questionable.