Price is right for Cannes' U.S. sellers

Market appears to have done a 180 from last year

CANNES -- Given the crash diet forced on the international market last year, American sellers streaming into Cannes this week are encouraged that the market suddenly appears very hungry again.

"The pendulum has swung back the other direction," said WME's Graham Taylor, asserting that foreign buyers' appetite for projects is back up. IM Global's Stuart Ford agrees, noting that "it's becoming more of a sellers market again than it has been for the past couple of years."

Last year's market, reflecting the constricting indie film scene worldwide and its nearly empty pocketbooks, failed to ring up many sales. One agent remembers it as "the quiet year." But as a result of the relative dearth of pickups, many foreign distributors are now short of product. At the same time, producers and financiers have been forced to strip the fat from their budgets and play a tighter game with talent. Which means the prices may just be right for everyone this year.

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"People are looking for product, people have pipelines," UTA's Rena Ronson said. "The market's gotten smarter. The films that are being put together now are being put together with appropriate budgets that suit the marketplace and understand the value on a worldwide basis. A lot of these distributors always felt the prices were not conducive to their market value. Now there's been an evening out."

The foreign market is changing as more companies -- such as Gaumont, UGC and MK2 in France, for instance -- are aggressively stepping into production. And as U.S. studios' international arms have put more money into making their own local foreign-language productions, potential international buyers and independent distributors have begun to put more equity into movies to ensure they get made and so they can have a piece of the films' rights.

Gersh's Jay Cohen foresees more models like Reliance Big Entertainment's recent purchase into IM Global. Cohen is repping three equity funds in Cannes that will allow him to operate beyond the traditional pre-sale mold, since he is bringing cash to the table.

"The economics of the market are becoming a little easier than they were a few years ago for independent distributors overseas," Cohen said. "You can actually make the numbers work. Everybody's on the same side right now. Meaning foreign buyers, domestic distributors, talent, agents, managers -- everybody's kind of coming together to understand that there's not a lot of money out there, economics weren't good over the last two years, so why don't we help each other get movies made?"

WME's Jerome Duboz sees foreign territories making more English-language movies, aimed at the international market, where selling rights in the U.S. is just a great bonus instead of the priority. He points to Universal International's successful local French production of "Heartbreaker," which is now being remade in the U.S.

"It's a nice way to test a concept, or a script that didn't sell in the U.S. that maybe can be adapted in a different territory, then turn it around and do a remake in the U.S.," Duboz said.

U.S. theatrical distributors have more leverage as well because there's less competition domestically, and they can cut a better deal now than two years ago, especially as foreign indie distributors reliant on thinning TV deals have been forced out of business.

"There's been a thinning of the distributor ranks, as well, and that's not necessarily a bad thing," Ford said. "Fewer sellers, fewer movies and fewer distributors may mean that the gross volume of business being done is less but it also makes for a leaner, more efficient marketplace."

Added UTA's Rich Klubeck: "Cannes felt like it was at sort of a low moment last year. Whereas this year, the attitude going in is diametrically opposed. People are going in with a lot of optimism and a lot of projects. There's gonna be some serious product there, there's no question."

Last year, in lieu of big-ticket sales, VOD deals moved to the forefront as indie outfits like IFC Films and Magnolia Pictures swooped in to pick up a host of films in an attempt to propel the burgeoning VOD market in the US.

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Hope began to circulate that, over time, VOD could offset falling DVD revenue, and such on-demand entities as iTunes would boost digital distribution. But even though VOD deals are becoming an increasing part of the domestic equation, they've yet to catch on overseas, with some territories staying out of that space entirely.

"In terms of the kind of product that buyers are most comfortable taking, it's product that lends itself to generating some VOD revenue now," Ford said. "But it's still some way off being a major revenue stream."

VOD offers all kinds of new variations in licensing and re-licensing, especially if a compelling all-rights deal is not forthcoming -- or after an initial all-rights deal expires. In some cases, those licensing rights can be split on catalog titles in such a way that they can generate more money in the digital space than in traditional TV or DVD.

"You have a secondary market that is a more sophisticated system now," ContentFilm International managing director Jamie Carmichael said. "We've discovered all these new forms of revenue, and that's making that second level quite competitive. The split-rights version is becoming increasingly competitive in that second tier."

Carmichael notes that the U.K., which has strong online and on-demand viewing habits, is the best territory for the split-rights approach if a project is not fielding all-rights offers.

At the same time, local territories scooping up the traditional all-rights distribution packages are very reluctant to carve off the digital rights since the revenue they add to the total pie has been increasing.

Additionally, those distributors need control over VOD because it will affect the windowing and potential revenue from theatrical, DVD and TV runs if audiences first opt for cheaper downloads on their laptops.

More producers and financiers are becoming open to the VOD, or part-VOD, model. "If you don't have enough P&A for market saturation you're probably going to be better off favoring that model," Taylor said.

"We hope that the VOD rights are going to be able to take over the losses that the DVD market has suffered, primarily because of piracy," said Elisabeth Costa de Beauregard, chair of the Independent Film & Television Alliance's Export Alliance. "It's definitely growing at a fast rate, but it's starting at such a small level we're not there yet. The potential for growth is great. A lot of buyers and sellers are looking to that as a way for the future."