Indies’ New Foreign-Presale Rules: Tight Budgets, Tough Calls — and Jason Statham

Which Territories Still Pay (and Don’t)

When sales agents lock in commitments from international distributors in reliable markets like Germany, France, Italy, the U.K. and Canada, filmmakers can then use those presales as collateral against a loan. As uncertain and unstable as Hollywood may feel at the moment, this model is working, and banks still feel confident about lending against foreign presales.

“The distributor signs a document that basically says I will pay you no matter what else happens so long as I get delivered a film, and they’re putting up a deposit, usually 20 percent of the minimum guarantee,” explains Chris Spicer, head of Akin’s entertainment group, who works with clients like Comerica, East West Bank, MUFG and Fifth Season. “That’s a safe deal.”

For a time, namely when Netflix and Amazon came in and started paying a premium to buy worldwide rights, the idea of selling a dozen or so territories piecemeal started to feel a bit antiquated and risky for producers. And the reticence cut both ways. International buyers, who could no longer assume a theatrical run was a given, became wary of committing as much money.

Those sentiments are softening, and streamers are growing more comfortable with strategically targeting only part of the globe in an effort to spend less. So, regardless of whether a movie is headed for 1,500 screens in the U.S. or straight to consumers’ homes via streaming, many of those territories are back in play for distributors — but now it’s a tougher sell.

“It does seem as though the international buyers are more sensitive to potential risks, going into things being much more careful and deliberate on determining the [minimum guarantee],” says Robert Darwell, Sheppard Mullins’ head of global media, who advises clients including Amazon MGM Studios, Gaumont and Sun Distribution. “Whether it’s Cannes this year or AFM, there’s less of that market frenzy. Deals still close, but they’ll close a week or two afterwards.”

Still, adds Roeg Sutherland, co-head of CAA’s Media Finance department alongside Sarah Schweitzman, “With fewer movies coming from studios and streamers, the international distributors are looking to the independent marketplace, and they’re buying for really, really healthy numbers.”

The consensus seems to be that Asian markets are still challenging, but there’s a lot of enthusiasm around Western Europe, especially Germany, France, Spain and Italy. Dealmakers also noted — somewhat reluctantly because of larger geopolitical issues — that Russia is also spending “hefty” amounts.

The Rise of Local-Language Films

One factor making international sales more challenging is that part of the void created by Hollywood contraction is now being filled by local-language projects.

“Local production has gotten stronger and stronger and streaming has fueled that,” says Walton. “Foreign buyers generally now can be a little bit more selective because they have either set up their own production businesses, creating their own content, or have supply lines locally. In most places in the world now the percentage of local performance is rising against Hollywood imports.”

He continues, “When I began, 80 percent of the Japanese box office was imported Hollywood movies and 20 percent was local. It’s now the opposite. Jason Statham is one of the very few stars that cuts through that.”

This is when it hits me that Walton is the third person to cite Statham as not only an example but the example, and I told him as much.

“Honestly, he’s a unicorn at the minute,” says Walton. “Statham has bigger television value in most places in the world than pretty much every star. That’s why he’s so in demand, and people will buy Statham as a loss leader.”

Like Spicer, Walton emphasized the significance of downstream revenue, explaining that box office success usually just means breaking even.

“It’s not often that you make money from the theatrical window,” he says. “Home entertainment — now transactional VOD, premium VOD, SVOD, pay TV — that’s how you really make your money.”

Now there also seems to be less correlation between what performs at the U.S. box office and what will drive TV revenue overseas, which means international buyers may not worry as much about whether any given movie will get a wide release here.

“The time of the universe of film being centered around the U.S. is gone. It used to be, ‘The movie needs to be released on 2,000 screens in the U.S. or else we’re not going to buy it.’ It’s not like that anymore,” explains Sutherland. “They don’t ask about the number of screens in North America, unless we’re talking about really big movies. They really think independently about their markets, about how it affects their own TV deals, how it will play in their own specific territories.”

Adds Rena Ronson, partner and head of UTA’s Independent Film Group, “Every territory can be strong if the genre or the package makes sense to them. Buyers don’t want to tie up their presale dollars if they don’t see a real market for the film.”

The New Presale Checklist

Convincing buyers that a film will work in their market was never exactly easy, but you might say there used to be a lot more Stathams.

“There was a time when you could presell a film off a single A-list actor, but that’s no longer the norm. Now, everything matters — the script, the filmmaker and more cast,” says Ronson. “Buyers want to see a full, realistic package as they’re evaluating whether the film is truly going to go. Will it get made? Where and when is it shooting? Are the pieces in place? They want the confidence that the project is real and moving forward.”

That’s where Darwell says a domestic release plan and theatrical marketing campaign can move the needle for international distributors.

“If you have to build a campaign for a movie from scratch because either it didn’t come out in the U.S. or it bombed in the U.S., that’s expensive,” Darwell says. “You want to piggyback off of all of the other press, and the success and the buzz from the U.S. and all the other territories where it’s been released before you or simultaneously with you.”

As for genres, some are easier to sell than others, notably action and horror. Comedy doesn’t travel — but romcoms do, and they’re in demand.

“I can’t tell you how many international buyers have said, ‘We need a great romantic comedy,’” says Ronson. “We don’t see enough, but when they work, they really do.”

Meanwhile, there’s a perception in the U.S. that dramas aren’t working — Richard Rushfield is one voice sounding the alarm as dramatic films keep fizzling at the box office — but I’m told the international community is responding well to the packages at AFM.

---

Related:

---

“The big question was really, ‘Is there a space for dramas?’ — because dramas obviously have not been performing in the U.S. — and the answer is a resounding yes, which is music to our ears,” says Sutherland.

Of course, it doesn’t hurt that the AFM lineup includes Meryl Streep (Useful Idiots, from Fifth Season, Black Bear and Closer Media), George Clooney (In Love, from Anton, Sight Unseen, Depth of Field and the star’s Smokehouse), and an absurdly starry ensemble with Jessica Chastain, Don Cheadle, Mikey Madison and Chris Pine (My Darling California, from Anton and 2AM, which shuttered suddenly on Nov. 12).

“As long as the scripts are great, the filmmakers are people that people want to bet on, and you have high-end talent, dramas have a life because at the end of the day people still want to watch great films,” says Schweitzman. “The minute there’s a great drama that overperforms, buyers won’t be so reticent.”

Budget Is Still the Bottom Line

But none of this matters if the movie isn’t budgeted appropriately.

“Even three years ago, people would take a package and overpay just so it didn’t wind up at a competitor. Now it has to make good business sense,” says Darwell. “Movies in the $10 to $20 million range are the tough ones.”

Adds Ronson, “We must be more disciplined in our budgets because buyers are very attuned to value.”

And remember that half the point of preselling territories is to convince the bank to lend you money — and even with reputable, established distributors that’s not going to be dollar for dollar.

“Generally speaking, everything in continental Europe is traditionally bankable,” says Spicer. “If you get $5 or $6 million from those presales, banks will lend you $4.5 to $5 million against those territories.”

There are bank fees too, of course, and the rest of the budget needs to be made up with tax credits, equity investments or gap financing. All of this means keeping costs in check is more important than ever.

“Part of the recalibration in our business has been aligning the financial structure with market value,” says Ronson, adding that filmmakers, producers and financiers seem to be more collaborative as of late. “We can share a finance plan and walk everyone through why the numbers may not add up — and therefore why the budget may need to come down. Producers and filmmakers are increasingly receptive, rather than insisting, ‘I need $15 million to make this film.’”

Schweitzman sees a silver lining in these conditions.

“When the times are the toughest, that’s when you see people being the most scrappy and innovative. When people are forced to think in different ways, the art gets even better. That’s in part why we feel so hopeful,” she says. “It’s becoming a running joke for us because we’ve spent our entire careers hearing people say, ‘It used to be so much better.’ But that’s not the case. It’s just become all the more important that the movies are good. If something is great, people will go out and see it.”

Image credits: Jeff Spicer/Getty Images, Unomat/Getty Images, Ramberg/Getty Images