Over 8,000 industry leaders from over 80 countries converged in Santa Monica November 5-12th for eight days of deal‐making, screenings, seminars, and events at the American Film Market (AFM), produced by the Independent Film and Television Alliance (IFTA). Three billion dollars were spent by participants to produce 2,000 new projects; over 400 distributors were on-hand to purchase the rights to those projects. SSN analyzed the data, sifted through reports, and sat down with AFM Managing Director Jonathan Wolf, to break down the trends at this year’s market.
The VOD and SVOD Disruption
On the tip of everyone’s tongue at the deal tables this year was how important video on demand (VOD) and subscription video on demand (SVOD) are to today’s contracts. VOD has dramatically impacted the financing of films, but to understand just what kind of impact, you have to look at the past.
In the era of a video store, the model was different. A retailer like Blockbuster would make an advanced payment of around $50 dollars for a film to sit on their shelf. But where disc rental was a consignment business, VOD is not, says Wolf. ”The producer lives or dies by the success of the retail transaction, and are no longer in the wholesaler business.” SVOD still goes through an advance or license that’s being paid through subscription service, but if a title doesn’t sell via VOD, then the studio doesn’t make a profit. This takes away a huge chunk of upfront change.
Because the VOD platform lacks exclusivity, it means that, “while it’s still a significant revenue stream, VOD plays a smaller role in the pre-sale process as companies won’t provide guarantees and advances in most cases,” says Wolf. The theatrical distributor can bundle VOD and discs within a rights agreement, but VOD companies by themselves don’t, by-and-large, include guarantees.
Not only does the platform’s structure affect financing, but according to the COO of a major international distribution company, distributors have to be extremely exact on deal points. The COO in question made a deal for film rights in Belgium that included VOD and SVOD. But as Belgium uses Netflix France and not a platform specifically for their home territory, Netflix France streamed the film ahead of its theatrical release, thus angering Belgium’s theater owners. As this new technology progresses at a rapid clip, distributors must stay abreast of the finer points to protect their interests.
The Disappearance of the Mid-Budget Film
Part and parcel with changes in home video distribution, mid-budget films are declining at an accelerated rate. “The change we’re seeing more of is what we call the bifurcation of the industry,” says Wolf. “We’re seeing more films with bigger budgets and more films with smaller budgets, and fewer films in the middle.”
AFM was created to showcase independent films, but that doesn’t mean those films lack big budgets. Take for instance, the sci-fi action film Inversion, sold by Foresight Unlimited, with a budget of $120 million. That budget puts the film in line with a major studios’ bankroll. “Its great news that a picture of this dimension can come out of the indie sector,” says Foresight CEO Mark Damon. “The indies are demonstrating that they can do this kind of movie.”
On the other hand, new technology like inexpensive HD cameras, coupled with new avenues to financing like crowd-sourcing and online equity funding sites, and the use of social media, has brought about opportunities for new filmmakers to make their mark. Production companies that finance these indies can actually do solid business. “We’ve got 50 companies who are in what we call mini-booths, where they only spend $3,900 for the space,” says Wolf, “yet they’re bringing films and having a commercially acceptable experience. If you can make a couple films for $300,000 and sell each for $600,000, you have a business.”
Dramatic Shifts in Genre
Analyzing the films that screened at this year’s AFM, the majority, 115, were dramas; thrillers numbered 79; action/adventure films, 63; comedies, 61; and 43 were horror films. This shakedown is due in part to budget and translatability. In comparison to other genres, dramas like Hungry Hearts or The Gambler were produced at lower cost due to a lack of reliance on visual effects. The same holds true for most thrillers.
Meanwhile, the fiery visuals and heart-pounding chases of action-adventures make them easier to market as fewer words are needed to entertain audiences. But those explosions come with a higher price tag; just ask Paramount about Michael Bay’s budget needs. Thus, there are fewer at the market, but plenty were still to be found, like Stratton with Henry Cavill, or The Nice Guys with Russell Crowe.
Comedies and horror films run into trouble when traveling, due to cultural differences. “Comedies that are based on the visual parts like sight gags do better while those based purely on jokes that are more difficult to translate,” says Wolf. Animated films are also at AFM, though in less supply. While some, like Yellowbird from SC Films, will do great business overseas, the production process is lengthy. “It’s a big investment of time,” says Wolf. “Just like going out in theaters, you might see one animated film released every few weeks, it’s the same at the market.”
Territories on the Rise
Among the 70 new exhibitors and 46 new buyers at AFM this year, there’s one country making big strides in the global marketplace and that’s South Korea, with 71 buying companies, it’s the largest of any territory outside the U.S. “South Korea continues to take a leadership role and it’s driving tastes throughout Asia, including Japan. We have more first time buyers from South Korea than from any other country,” says Wolf. “It’s a very transparent economic system that’s very vibrant country and marketplace.”
China of course remains on the rise, up 19 percent from last year with 31 buying companies at AFM and 51 companies if Hong Kong is included, although difficulties abound both in securing financing and in distributing films. “It’s a difficult market to get to know from a Western standpoint,” says Wolf. “The middle class is growing; it’s somewhat like a gold rush, some will be tremendously successful and a lot of people will just sell maps and shovels and become very successful.” New to the market this year were buyers from China’s Tianjin North Film Group and Broad Green Pictures, who picked up the rights to Samba at TIFF.
Unlike other U.S. companies jumping on the China bandwagon, IM Global is one company that has played the long game. Thanks to CEO Stuart Ford’s years of work, IM signed a groundbreaking agreement for their new film The Ghouls. The New York and China-spanning horror flick brought together three of the largest film companies in China to co-finance—Wanda Pictures, Huayi Brothers, and Enlight Media. International sales of the film kicked off at this year’s market.
Thousands of miles away, there’s another growing region that may surprise you—Africa. This year, AFM held a roundtable to discuss African co-productions. “Africa is a growing marketplace,” says Wolf. “The middle class there, proportionally, is growing faster than any other area of the world … Africa’s film industry is growing at a rapid pace.” Africans producers and distributors have been making inroads at the market in recent years, as South Africa’s Department of Trade and Industry sponsored a trip for 12 filmmakers last year that involved copious meetings wherein one filmmaker walked away with a deal.
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Even with the technological changes in distribution, content remains in demand, especially with the influx of multiple platforms. Film isn’t dying, it’s just a type of content with fluctuating methods of travel. The companies that survive will be the ones, like always, that see opportunities in the shifting landscape, whether finding funds in China or making a slate of films on a nickel and selling them for a dime.
Stay tuned to SSN Insider for coverage on upcoming markets and festivals. To read SSN’s pick of the 10 most bankable films at this year’s AFM, click here.
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