Reporting from Barcelona…

european unionStudio executives and international exhibitors are gathered this week in Barcelona for the annual CineEurope conference. Akin to CinemaCon, the event is an occasion for studios to tubthump their upcoming slates through the rest of 2014 and into 2015. On the ground are reps from DreamWorks, Warner Bros, Universal, Fox, Paramount, Disney, Sony, Mister Smith, Studiocanal and eOne. There are also representatives of some Chinese, and other non-European, companies on the trade show floor as international box office increasingly expands. Year-on-year, the overseas box office is up about 5% from January to May. The top market increases are estimated to be China (+17%), France (+17%), Brazil (+16%), Mexico (+8%), Russia (+5%) and Italy (+3%). Still, with seemingly every week a new record broken in China, and the growing impact of markets like Brazil, Russia and Korea, folks say Europe nevertheless continues to be the major overseas driver for Hollywood.

“The UK, Germany and France remain a critical part of our business,” says a studio exec. Like the U.S., they are mature and not growing in the same way as the emerging markets, but are “hugely important to our overall international business, if not more important.” Because emerging markets will eventually mature as well, I’m told the studios can’t “afford to rely” on them alone. “We need to focus on making our movies work in these mature markets, so they remain strong consumers of our movies.”

Importantly, another studio exec points out, the UK, France and Germany are three of the top home entertainment and TV markets, so theatrical success has a greater impact on the bottom line than in China or Russia, for example, even though they sometimes throw off bigger theatrical numbers. The exec says, “Europe continues to be, not just from box office, but from an all-rights standpoint, 65% of our net take of the world, even after overhead. In the next five to 10 years, even if other markets grow at projected rates, and putting China aside, maybe it goes down to 60%.” The reason? European TV values are “a huge percentage of the pie of revenues we all collectively get.” With a projected growth of 2%-3% a year in Europe, and unless China becomes “regularly a place where we do $300M movies,” Europe will be “by far the biggest driver of the international marketplace, box office or not.” Many Europeans, especially in France and Germany, lament the decline of the TV and home entertainment sectors in helping to subsidize their industries. But studio movies slot nicely into primetime – and ad rates are going up.

Amazing Spider-Man 2Despite this, Asia certainly isn’t being ignored. “For Hollywood films, last year Asia overtook the rest of the world as the largest region as a whole. This year it’s shaping up to be about 45% Asia and 45% Europe,” an exec estimates. A few years back, the split was 53% Europe and 39% Asia, I’m told. The biggest box office growth is certainly China, and Korea continues to emerge in the region. Films that tend to work there are action and/or effects-driven — witness the recent success of The Amazing Spider-Man 2, X-Men: Days Of Future Past, Captain America: The Winter Soldier, Edge Of Tomorrow, Noah and The Hobbit: The Desolation Of Smaug. (Last year, a funny thing also happened with Richard Curtis’ About Time. That small English comedy made little noise elsewhere, but ended up to be the biggest foreign romantic comedy ever in Korea – giving Universal a tidy $23M+ at the turnstiles.)

Another exec says, ”Certainly it is shifting and Latin America, Asia, Southeast Asia particularly, and Eastern Europe, all of these areas are really expanding and starting to become such an important piece of the box office.”

While mature, the UK, France and Germany remain huge moviegoing markets. The UK had its biggest hit ever with Skyfall in 2012, but in 2013, lost a percentage point. “They can have these stunning results, but it’s got to be in their DNA,” says a source. In all of Europe, audiences “tend to be more selective, but it doesn’t mean you can’t have an action pic work, you just have to know they’re going to have more discerning taste.” Another adds, “If you hit, some of the biggest territories can be the UK, France and Germany.” According to Rentrak, No. 1 in the UK through June 10 is The Lego Movie ($56.8M); in France‘s it’s local comedy Qu’Est-ce Qu’On A Fait Au Bon Dieu?! ($80.9M); and in Germany The Wolf Of Wall Street ($30.2M).

spanish-affairs__140406144022In France, local films generally perform very, very well. But 2013 was a fallow year, giving the studios a solid 53.9% of the marketplace — the biggest such piece in a decade. This year is looking far better for the home market with six of the Top 10 movies born under the tricolor flag. But even when local movies are goosing the box office, it’s good for the gander. Execs agree that the runaway success of a movie like Universal’s culture clash comedy Spanish Affairs – the highest grossing Spanish film of all time with about $76.6M, and the 2nd biggest film ever behind Avatar – has helped a recently limp box office experience a surge. Part of that is down to lower ticket prices this year, but it’s also because with so many of millions of people going to the movies, that’s a lot of eyeballs in front of trailers and lobby cards.

One Hollywood-based exec notes that studios are all the time tracking what local product is doing in any given market. “If you see a spike in France or Germany, a lot of that has to do with how strong the local films are. What’s great about local films is that oftentimes they are different genres and different audiences. So you get a broader mix of people coming to see a movie and that’s great for the marketplace overall.”

fipStudio divisions are also wisely, and increasingly, getting in on local language either by producing or taking distribution rights in markets where homegrown box office can rival that of Hollywood pictures. Fox International Productions is very active in the business which can require relatively small investments for potentially big payoff. FIP makes homegrown movies in 11 countries with more than 20 non-English films expected this year. In 2013, it pulled in more than $230M on local-language. An upcoming foray is spec script The Forger which may be shot in Turkish — Turkey, a potential emerging market on the TV front, is also eyed as a comer in terms of box office.

Warner Bros is also quite active in local language, including this year’s top Italian grosser Un Boss In Salotto ($14.7M) and Germany’s Vaterfreuden ($24M). Universal Pictures International just partnered to co-produce Chinese kung fu actioner Rise Of The Legend with Edko Films, and also had a hand in last year’s horror hit Mama. Through June 10 of this year, it has the top local movies in such markets as Russia (Viy 3D, $34.1M); Germany (The Physician, $29M); and Spain (Spanish Affairs, $76.6M) — although the two former titles were produced in English, they still drew massive local crowds.

Says a Hollywood studio player, “Whether local productions or U.S. productions, on either side people going to the movies is a good thing. What may not feel good for a minute is good for the long haul.”