Glitner

In partnership with the Biz and Tech Lab

The day of conferences was concluded with a panel dedicated to the evolutions in film financing, moderated by producer Eric Neve (La Chauve-Souris) and a panel composed of Gael Nouaille (Sales at Wild Bunch), Vicente Canales (Director of Sales – Filmax) Gustavo Ferrada (Head of Cinema – TVE), Bernard Tani (Head of TV and VoD at Orange) and Joaquin Garcia (Head of VoD and PPV at Telefónica).

Even though speakers normally communicate through very corporate presentations on their respective service offerings, Gaël Nouaille from Wild Bunch initiated a reasonable questioning on the current developments of investments throughout the value chain in the film industry, while Gustavo Ferrada called for a more appropriate and “fair” distribution of Spanish public investments.

The three funding crises

Emphasis was placed on the profound changes facing the industry today.  The economic crisis (in particular the credit crisis) has largely dried up the banking resources of national distributors to, on the one hand, pay advances as minimum guaranteed (MG), and, on the other, to fund P&A campaigns associated with theatrical releases following an inflationary trend.  From the perspective of the Theatrical Box office, the figures are certainly encouraging, but as pointed out by the exporter, given the number of films released every week, revenue per film is following a declining trend.  Another effect of the economic crisis, investment funds and venture capital companies, which had invested large sums in film, withdrew from the area after having suffered between 2007 and 2009 global losses of around 2 billion dollars.  Notably, funds that financed the acquisitions at Wild Bunch since the inception of the company, have completely withdrawn from the sector and I quote “are unwilling to set foot in it for a while” .

Nevertheless, focusing on the potential attractiveness of the market, Gaël Nouaille was optimistic about its ability to attract new capital (especially from the Middle East or India). He moreover highlighted the need to streamline production, suggesting a slowdown in the number of films for the independent sector (following the example unanimously implemented by the U.S. studios last year).

Concerning sales, even if U.S. studios saw their international market share reach record highs in 2009, the market share of national productions in each market has also grown substantially during this period, accentuating the market share for non-US foreign productions.  French films are particularly affected by this competition, seeing their international attractiveness greatly reduced (except for a few key titles on certain markets)…  In the United States especially, where, two years ago, award-winning films would find theatrical distributors (Sony Pictures Classics, Magnolia Pictures, etc..) ready to market the film and pay sometimes hefty  advances for such productions.

Today, the crisis in the independent sector has resulted in a disengagement of many distributors in the US.  This leaves the task to IFC Films for finding an audience in the United States, especially through their VoD service.  But these new distribution channels, and their revenue sharing schemes, do not offset the shortfall of MG for exporters and producers (on some titles, it was up to 30% of the production budget of the film).

Another consequence of the economic crisis is directly linked to the reduction in amounts invested from broadcasters.  With drastically declining advertising revenues, many players have announced a sharp reduction in investments in early 2009.  In Germany in particular, 90% of projects “greenlighted” until last year were subject to a pre-purchase from a TV channel. ProSieben, which was a major player in the market, announced, in early 2009, a 80% decrease in its acquisition budget, which has greatly cut production budgets.  Similarly, in Spain, a reform intended to reverse the investment obligations of TV channels in the domestic and European films is currently under way.

On the export side, the underlying trends are showing a decreasing turnover of international sales with national distributors.

They have indeed suffered from a reduction in video consumption, which has, in turn,  significantly cut their resources…  And producers are seeing their resources dried up in both banks, and TV channels.

So, one might conclude that the market is at half mast … But maybe we should consider releasing fewer films in theaters, and perhaps produce less expensive movies… That is to say, produce films with budgets commensurate with their commercial potential.  For smaller films, those that are essential to produce, but do not generate a kopek in revenues, they could benefit from viral marketing campaigns at lower costs…  The expression of cultural diversity can also take new forms at the digital world. No?