Universal's global presence pays off

New director for movie studio, theme parks

With the paparazzi busy flashing pictures of Clint Eastwood and Angelina Jolie at the Cannes premiere of their new drama, "Changeling," it was easy to overlook the fact that the movie was part of a vastly expanded international strategy at Universal.

This was only the second year that the studio was on the Riviera acting as its own international sales agent and distributor.

That reflected a shift in direction that has encompassed both the movie studio and its theme parks, initiated by Universal Studios president and COO Ron Meyer, Universal Pictures chairs Marc Shmuger and David Linde, and Tom Williams, Universal Parks and Resorts chairman and CEO.

For most of the past two decades, Universal had been partnered in United International Pictures (UIP), a joint venture with other studios to distribute their movies outside North America. That began to wind down after Universal announced the formation of its own international distribution system, Universal Pictures International (UPI), in January 2007.

"If there is a growth business, which I believe there is, it's international," Meyer says. "There's still a chance for home video to grow; and I think there's a chance for theatrical to grow. (But abroad) there's real opportunity."

This philosophy has led the studio not only to handle its own distribution internationally, but also to increase its involvement in local production around the world, distributing some local product worldwide and some specifically in the territory where each film is made.

"It's hugely important," Meyer says. "You pick up films that are indigenous to certain territories, and for a small price can do quite well. At one point we picked up a film for Germany, '7 Dwarves,' and it was one of the highest-grossing films in the history of (that country)." That movie earned $22.3 million in Germany alone.

To further its foreign activities, Universal has signed production deals with filmmakers around the globe. Just before Cannes, it announced a pact with three world-class Mexican directors -- Alejandro Gonzalez Inarritu, Guillermo del Toro and Alfonso Cuaron -- who formed a new venture to produce five movies that will go out through Universal or its Focus Features specialty division.

Other production deals have been sealed with Fernando Meirelles' O2 Filmes in Brazil, Pedro Almodovar's El Deseo in Spain, and Timur Bekmambetov's Bazelevs Prod. in Russia. These are in addition to the studio's long-term relationship with London-based producers Tim Bevan and Eric Fellner's Working Title Films.

It has been less than two years since Universal opened direct operations in 37 countries, where it now employs 2,450 people.

In Germany and a few other territories, Universal took over the former UIP operation, splitting the facilities with Paramount. Elsewhere, it has had to start from scratch. (UIP continues to handle Universal's movies in some smaller territories.)

Linde says Universal purposely chose to operate its own distribution operations in most countries, rather than go through a local distribution partner. There are a few exceptions, such as Japan, where Universal is partnered with Toho-Towa, and Hong Kong, where its movies go through William Kong's Edko Films.

That bold decision has already paid dividends: Universal's international theatrical rentals rose from 31% of its total revenue in 2002 to an estimated 43% in 2008. It spiked at an all-time high of 45% in 2006.

The grosses of Universal's "Bourne" franchise show just how important international has become to the studio. When UIP released "The Bourne Identity" in 2002, it made $92.4 million in markets outside North America. In 2004, "The Bourne Supremacy" did $112.3 million. Last year, "The Bourne Ultimatum," the first of the series to be handled by Universal's new international distribution apparatus, soared to a $215.3 million take outside North America.

"The secret is being able to focus 100% of your effort on every movie and every release," Linde says. "If you're working with a partner (as with UIP), you are essentially co-venturing with another studio and there is going to be some conflict in terms of dating" -- that is, setting a movie's release date in each country. "This gives us total control over the way our films are presented," he adds.

Making this work has meant streamlining some operations and bringing others together. Universal has clustered operations in the U.K., France, Italy and Benelux so that the theatrical staff can communicate easily with home video and international television staffers.

"We're the only studio where all of our international operations -- theatrical, video -- are together," Linde notes. "It's a big deal. It expresses a real commitment to this being a global company."

Universal has been just as bold with its theme parks. But in this case, the studio has diversified ownership: Instead of owning everything, it now licenses the brand.

"We've changed our model," Meyer explains. "We're doing parks in Dubai, in Korea, in Singapore. We will also do park expansions, but we won't be financing those parks. They will be owned by private groups."

In the Meyer era, theme park attendance has grown from 11.5 million to 17 million. Domestic parks have had a 193% increase in revenue, according to the studio, and, led by Williams, the theme park division is on a streak of four consecutive years of record profits.

One element that has helped is Universal's ability to engineer deals with competitors to license their franchise properties, including DreamWorks' "Shrek," Fox's "The Simpsons" and Warner Bros.' "Harry Potter." These deals took clout as well as cash.

"While I was working on the licensing side, Ron was talking to the studio heads," Williams says, "and assuring them we will do a good job."

In some countries, it takes years of meetings and planning before a park is approved, he continues. In cases like these, Meyer's subtle persuasiveness has proved highly effective.

"Ron is willing to add his influence and emphasize to these parties that we are completely serious," Williams explains, "and to let them know, if we do a park, it's going to be a long-haul proposition. His credibility goes a long way."
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