Europeans nervous about U.S.-like shake-up

Mini-majors including Filmax, Senator in troubled times

CANNES -- The Croisette-pounders of Old Europe are shaking in their shoes amid signs that the industry here is already mirroring the dramatic shake-up of the U.S. indie business a few years back.

Business at the Marche du Film in the coming days is likely to reflect this uncertainty, as buyers from Berlin to Barcelona try to make the numbers work.

Europe is coming off its best boxoffice year ever -- a 12% jump to some $8 billion -- but across the continent, independent distributors are struggling.

The well-publicized troubles at European mini-majors including Spain's Filmax, Germany's Senator and France's Bac Majestic evoke a sense of deja vu for industry watchers, who still recall the shake-up of the U.S. indie business a few years back.

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Many of the trends that reconfigured the domestic market are at work in Europe as well: a falling demand for traditional art house films, a decline in ancillary markets -- particularly television sales -- and rampant piracy. But while American companies such as IFC are pioneering new distribution strategies, with a heavy focus on VOD and all-platform release, Europe has been more cautious, preferring to hold onto traditional windows and find new ways to finance acquisition and distribution.

Teaming up with a partner to spread the risk is an increasingly popular strategy. Filmax, which is rushing to restructure some €110 million in debt to avoid bankruptcy, has just signed a deal with Warner to cooperate on DVD distribution in Spain. Under the agreement, Warner will handle rental distribution of some 1,000 Filmax titles, while Filmax continues to do sell-through itself. Reducing its exposure on the home entertainment front is only logical in piracy-rampant Spain, Filmax president Julio Fernandez said.

"Everything related to home video in Spain has dropped 70%-80%," Fernandez told THR. "Filmax saw its home entertainment revenue drop from €30 million-€40 million three years ago, to €5 million in 2009."

Filmax has let go more than 100 employees and is now focusing more on production, particularly English-language titles such as the Emilio Estevez-directed "The Way," and Jaume Balaguero's upcoming "Sleep Tight."

"We are restructuring and being much more selective in the films we buy and plan to distribute," Fernandez said.

Senator, which lost €6.5 million last year, also is looking for partners. Company CEO Helge Sasse told THR he is in negotiations with other indie distributors as well as "banks and some non-traditional financing groups" to find new ways to bankroll acquisitions. Senator's new $4 million line of credit from Germany's Bankhaus Bodensee was "the first new cash we've been able to get in 18 months," Sasse said, emphasizing the need for new models.

On the distribution side, however, few European companies are willing to collapse windows and do multiplatform releases. Just weeks before Cannes, Metrodome faced a fire fight in the British media after the theatrical component for its multiplatform release of Uma Thurman starrer "Motherhood" garnered just $150 on its opening weekend. This, despite the fact that the title sold a healthy 6,000 plus units on DVD and VOD.

"We feel that in this economic climate we should be applauded for experimentation and not scalped for trying something new," Metrodome CEO Mark Webster said.

In France, some distributors are cautiously experimenting with multi-platform models. Wild Bunch, which launched their "Filmo TV" interactive VOD service last year, plans to make Jean-Luc Godard's Un Certain Regard title "Socialism" available for Internet users at the same time that audiences view the film in Cannes via Filmo TV's interactive website.

French pay TV group Canal Plus also is following a similar distribution model. Studiocanal title "Carlos" will screen out of competition in Cannes the same day it is aired to Canal Plus subscribers.

"We are testing things; we have been doing VOD through iTunes since the beginning of the year but we want to keep the windows where they are," said Andreas Klein, head of Germany's Splendid Film. "Revenue from VOD and the other new models just aren't a replacement for DVD sales, at least not yet."

Even Paris-based Bac, which saw boxoffice revenue dip some $8 million last year thanks to flops "La Folle Histoire d'Amour de Simon Eskenazy" and "Commis d'Office," is not planning any major changes. Bac is slimming its slate to just 10 titles this year and moving to more audience friendly fare such as "Eyes of War" with Colin Farrell and the Michael Cera starrer "Be Bad." But aside from editing between 40 and 50 of its DVD titles for multiplatform digital download, Bac is sticking to what it knows.

The brave new world of digital distribution might be coming, but in Old Europe, tradition still trumps experiment.

Rebecca Leffler and Stuart Kemp contributed to this report.
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