Lights, camera, and lots of big-screen action… Prodcos look for feature opps as series market cools

Necessity, it's said, is the mother of invention. So with the kids television market crawling along at such a sluggish pace, an increasing number of production companies are investigating new opportunities on the big screen. And it's not just a handful of risk-happy mavericks. One recent Cartoon Media Forum attendee pegged the number of animated features currently in production or development in Europe alone at over 50, suggesting that a significant subset of the industry has come down with silver-screen aspirations.
October 1, 2003

Necessity, it’s said, is the mother of invention. So with the kids television market crawling along at such a sluggish pace, an increasing number of production companies are investigating new opportunities on the big screen. And it’s not just a handful of risk-happy mavericks. One recent Cartoon Media Forum attendee pegged the number of animated features currently in production or development in Europe alone at over 50, suggesting that a significant subset of the industry has come down with silver-screen aspirations.

Most of these dreams have been fueled by a little indie title that could. The success of Les Armateurs/Odec Kid Cartoon’s 1998 feature Kirikou et la Sorcière (distributed by Cecchi Gori) has had an undeniable effect on the mindset of European producers. With a budget of less than US$4.4 million, the 74-minute film attracted more than 1.2 million cinema-goers and has sold upwards of 500,000 videos and 100,000 DVDs. Kirikou has bewitched producers into hoping similar magic might happen for them too.

But optimism aside, there’s a simple dollars-and-cents argument prodding producers to consider alternatives to television. Broadcast money for new kids series has become scant as outlets strive to tighten their belts. Observes Natalie Altmann, head of children’s programs at France’s M6: ‘Advertising revenues for children’s slots are getting scarce, [so] one of the first programming budgets to be cut is children’s. Broadcasters are putting their money into other types of shows, like reality and live action.’

And it’s not just broadcasters doing the cutting. Several small-screen funding resources have taken a hit in the last two years, perhaps the most important being the Sale and Lease Back scheme in the U.K. – a funding system that allowed producers to effectively ‘sell’ their projects to financiers in exchange for investments that reached as high as 10% of production costs. While funding is still available for feature productions (at least until 2005), S&LB was lost to television producers due to abuse (or maximization, depending on your perspective) of the system. Some producers applied to the fund for each episode in their series, and the system quickly got bogged down by the extra paperwork.

On the other side of the Atlantic, Canadian producers saw one of their main sources of funding, the Canadian Television Fund, suffer a 25% cut this year. Although the fund was partially bailed out in response to the uproar caused by the initial announcement, it was a Faustian compromise, as the ‘new’ money came from 2004′s budget. Unless the arts get a boost from a newly elected government, Canuck producers could soon be drawing from a fund reduced by one-third in under two years.

But it’s not good to look a gift-horse in the mouth – at least the U.K. and Canada have television funding bodies. Although there are federal schemes available for Italian feature projects through the Direzione Generale per il Cinema (Director General for Film), there’s almost no support for television production in Italy, save those funds offered by public broadcaster RAI. Spain has a similar system in place with the Institute for Cinema and Audiovisual Arts through the Ministry of Culture, although some regional funds are coming on-line for television. Germany offers substantial support for film on the federal level, with subsidies arranged through the Filmforderungsgetz and other such organizations, but producers working on the small screen can only find support on the regional (or lander) level.

Going to market

While the market for series continues to tighten, features are on several kidcasters’ wishlists. M6′s Altmann is on the hunt for films that hit the six to 12 demo; Super RTL’s head of acquisitions and co-productions Frank Dietz is after animated family features for his prime-time slots; Zoe Jane Scurfield, acquisitions manager at Disney UK, is open to live-action and toon features; and Terry Kalagian, VP of programming for Cartoon Network US, is scouting for feature-length animation – produced in English or pre-dubbed.

Broadcasters are not working in a vacuum; their yen for features is being fueled by viewer demand. In Canada, for example, when Family Channel introduced a noon to 3 p.m. Sunday Pick Double Flick block in March 2001, it spiked ratings with kids two to 11 for the time slots by 56% (the noon movie) and 17% (the 1:30 p.m. movie). In 2002, the channel added a Saturday block to make it a Non-Stop Weekend Double Pix, as well as airing one movie on Friday nights in a Popcorn Pix block.

YTV expanded its Three Hairy Thumbs Up movie block last season because it generated a healthy family audience the season before (changing the adult to kid ratio from 1:3 to 1:2) and boosted the slot’s audience by 30% over the previous year.

Some networks are even getting into the act themselves. M6, which broadcasts the second-highest number of animated children’s features in France after Canal+, is producing a US$25-million 2-D animated flick called Asterix and the Vikings with Denmark’s A. Film. The 75-minute feature will be ready in 2006 and distributed by M6 subsidiary SND in France, and a network of international distributors will find homes for the film abroad.

The increase in kids feature production also owes some of its momentum to the fact that the European theatrical market is in growth mode. A surge in the conversion of traditional theaters into multiplexes has created a hunger for product. Says Mondo TV international VP Ricky Corradi: ‘In order to generate profit, these multiplexes have a very quick turnover. If a movie doesn’t click in two weekends, it gets taken out. That means that they need [a constant supply of] fresh blood – like vampires. At the same time, it means that if the opening of a movie is decent enough to keep up, then more [screens in the] multiplexes will show it.’ According to numbers from MEDIA Salles (a film support arm of EU MEDIA and the Italian government), the number of European theaters with eight screens or more rose almost 9% from January to October 2002 (jumping from 745 to 811 outlets). During that time, the number of screens rose 9.4% (from 7,957 to 8,705). The average size of a single multiplex in Europe is now 10.7 screens.

Kids features also stand to benefit from a white-hot DVD market. According to Zoom, a Telefilm Canada publication out of France, the total European video and DVD market grew nearly 20% between 2001 and 2002, with sales topping US$11 billion. Much of that growth can be chalked up to a giant leap in DVD sales in France, the U.K. and Germany. Those territories moved 53 million DVDs in 2000, but jumped to 122 million in 2001. In the U.S., the home video market could top US$25 billion this year, with DVD sales driving the category. Home entertainment is an important part of a film producer’s business model, with many players reporting that video/DVD sales account for as much as half of their expected feature revenues.

While video has always been a strong market for kids, skyrocketing DVD sales have not gone unnoticed by producers. In Toronto, Decode Entertainment partner and VP of production and development Beth Stevenson observes that ‘in Q4 2002, the publishing market didn’t do very well and the gaming market was so-so, but the DVD market went through the roof. Obviously the market could change, but currently, if a kid has US$15 to US$25 to spend, they are buying DVDs.’

Beyond home entertainment, features fare less well in the realm of licensed consumer products. The big in-store presence might be pivotal for the studios, but as Stevenson observes, ‘I think it would be unwise for independents to try to accompany a first-time feature with a major roll-out. You’d probably be better off being a little conservative and see how it does when it is released… When Stuart Little hit, [for example], there was plenty of time to get product out to accompany the video release.’ Stevenson sees industry concern over missed licensing opportunities as a red herring. On top of that, she notes, rushing to get merchandise out can mean a box-office flop is underscored by full lines of product that sit on shelves unsold. Licensing plans should only be included as part of a comprehensive and long-term strategy, she argues.

The prospect of returns from licensing and home entertainment, coupled with government funding support and a rise in broadcast demand for features, have caused many producers to reconsider the medium. ‘Three or four years ago, I would have said kids features were only right for Disney or Warner Bros.,’ says Philippe Delarue, CEO of Paris-based studio Futurikon. ‘But not today.’ Futurikon is hard at work on two features that will be completed in 2005: a US$13.2-million, 75-minute feature based on its series Dragon Hunters, to be distributed by Bac Films (France) and animated by Paris-based Sparx; and an 80-minute, US$7.7-million big-screen spin-off of Malo Korrigan and the Space Traders.

Making cents of the funding

Like series, feature production involves a substantial long-term investment, and for those who don’t happen to be connected to a U.S. studio with lots of dough, film finance can be a complex game in which it pays to stay grounded in reality.

‘I strongly believe that you can make an extremely good [live-action] family film for under US$8 million that will recover its income on video and DVD,’ says Richard Langridge, head of children’s and youth at London’s Wark Clements. (In point of contrast, producers say animated films cost in the range of US$20 million to US$30 million, once talent and miscellaneous production expenses are factored in.) Wark Clements has partnered with Canada’s Nomadic Films to tackle The Last Wolf, a US$5.9-million, 100-minute film based on a book by British Children’s Laureate Michael Morpurgo about the last remaining wolf in Scotland and his friendship with a Jacobite boy on the run from the British. The film is currently in development and has the support of Scottish Screen, a Glasgow-based film and TV support center that provides training, info and funding for filmmakers.

The typical kids feature business model involves the financial participation of a distributor (or distributors, as the case may be) and at least one major co-producer able to trigger funds in their domestic market and eventually land a local broadcaster. For indie filmmakers, the first piece of the puzzle that gets locked in is the distributor. ‘In Europe, we don’t have the amount of cash required to produce a movie and then make option sales with the distributor,’ says Sparx CEO Guillaume Hellouin. ‘Usually, you secure your distribution deal upfront, and then you deliver the movie.’ Futurikon’s Delarue says this arrangement minimizes the financial involvement of the prodcos (dropping their direct participation to something like 5% to 10%) and lets them concentrate on making a movie that meets creative expectations. Beyond being able to bankroll the film, major distributors also generally chip in for larger advertising spends, more prints and higher minimum guarantees.

Instead of going with a single large distributor that will handle all international sales, some prodcos prefer a different approach. Decode is getting ready to start developing a movie based on Graham Oakley’s classic Church Mice book series about mice and a cat who live in a British Anglican church. The prodco hopes to enlist several localized experts to help secure theatrical berths for the flick in a select number of markets. ‘We’re looking at attaching co-producers that can handle their own theatrical distribution,’ says Stevenson. ‘That will be part of the package upfront.’

No matter what strategy floats a producer’s boat, caution is the name of the game, and so the typical film deal has become a complex animal indeed. Consider a recent deal signed by Mondo and German prodco NDF for two animated features and a 26 x 13-minute series based on the book property Letters from Felix. The US$5.5-million production cost will be equally divvied up between Mondo TV (Italy), Mondo Igel Media (Germany) and NDF (Germany), with NDF tapping into two German film funds (the FFA and FFF), and bringing to the table a presale to German pubcaster ZDF and the services of Munich prodco Caligari Film. NDF has also signed Universal to manage theatrical distribution in Northern Europe and BMG Areola for video distribution. The entire project will be finished in 2004.

Mondo’s Corradi says he tries to cover at least 80% of costs upfront whenever he can, leaving the least amount possible to be made up at market. As might be assumed, deals this complex are not easy to forge. ‘Months and months are spent in negotiations,’ he says. ‘You practically spend more time trying to complete the whole financial puzzle than you do producing the damn thing. It was never like that before.’

And enticing all that money to the table takes some doing. ‘People take more risks on the television side,’ says Decode’s Stevenson. ‘On the features side, it’s: ‘We need this. We need that. You need to attach a director. What’s your casting? You need to start to package.’ And stunt-casting (i.e. locking in celebrity voices that will bring marketable cred to your film) is critical, especially for animated features.’

Wark Clement’s Langridge believes star power can occasionally help attract funding bodies too. ‘Even in the kids market, you still need to go in with a name: It’s a ‘We’ve got a kid-plus-animal movie that stars Sean Connery’ type of thing.’ But even a good package is sometimes not enough. ‘I took a film project to the British Film Council that had the director of Sweet Home Alabama (Andy Tennant), the producer of Leaving Las Vegas (Paige Simpson) and a well-known British screenwriter attached, and it still didn’t get development funding,’ says Langridge. ‘I think there’s still a little bit of a snobbery against family movies. I think funding bodies only recognize the movies that are heavily driven by effects and CGI…Their understanding of family movies is Chicken Run.’

Langridge points to Carlton’s adaptation of Michelle Magorian’s book Goodnight Mister Tom (a live-action film about a man who befriends a boy during World War II that aired on ITV in 1998) as an example of how it should be done. ‘It was a very simple story. It wasn’t a big budget, but it got a huge audience. And that to me is the template.’ The film starred the late John Thaw of Inspector Morse fame and reached more than 13 million viewers. ‘There is a tendency that British films have to be about gangsters or rather sad men in the industrial wasteland,’ says Langridge. ‘We’re constantly playing out past successes like The Full Monty or Trainspotting. We need to get realistic and we need to get commercial.’

That’s not to say that the U.K. is the only territory with idiosyncrasies that come into play with children’s films. ‘For animation to grab the U.S. market,’ observes CinéGroupe president and CEO Jacques Pettigrew, ‘it needs to be a U.S. movie.’ The strongest proof of that was demonstrated by the State-side performance of Hayao Miyazaki’s US$19-million, Academy Award-winning feature Spirited Away. Reported worldwide gross: US$261 million. U.S. gross: US$10 million.

Montreal’s CinéGroupe is trying to grab as wide an audience as possible for the 2004 debut of its 3-D CGI feature P3K: Pinocchio 3000. Produced with Castelao (Spain) and Animakids/France 2 (France), this 80- to 84-minute film will be distributed by Carlton in the U.K., Mocos in Korea, Christal Films in Canada and Filmmax in Spain. At press time, CinéGroupe was in negotiations with distributors in several other territories, although the U.S. is its Holy Grail. ‘The U.S. represents around 60% of the potential market, and the rest of the world is 40%. If you make a play for only 40%, you will never be profitable,’ says Pettigrew. ‘It’s not my equation, but it is the equation.’

But with the odds stacked against scoring a hit in the U.S., most producers are cautious when it comes to relying on that territory in their business plans. M6′s Altmann says a U.S. sale for Asterix is not a requirement for the film’s financial success, but the company is working with a well-known American story editor and script writer to try and increase its chances of making the translation.

Proceed with caution

The success of films like Kirikou and Spirited Away have proven that non-Hollywood films can do extremely well on the international market. But it can also lead to an over-confidence in the medium. Just like TV series, features require long-term planning to build and gain momentum.

When Paris-based Xilam debuted its CGI feature film Kaena: The Prophecy in France this past June, box-office results were somewhat disappointing. Budgeted somewhere in the range of US$16 million to US$17 million, the movie launched in 192 French theaters and pulled in less than US$500,000 in its first two weeks, according to French cinema ticket sales tracker CBO Box Office.

But Xilam president Marc du Pontavice says Japan and U.S. were always the primary targets for the project theatrically, and he has stronger expectations for box-office sales in those two territories. Du Pontavice says Kaena will launch in Japan in March 2004 (along with a video game by Namco), and a U.S. theatrical debut is pegged for sometime in the spring.

The film has also helped Xilam establish distribution relationships that may be tapped again when the studio begins to sell its next feature. Stupid Invaders is a CGI family comedy flick based on Xilam’s Space Goofs TV franchise. The US$22-million film project should head into production at the end of the year once the financing is locked into place, and du Pontavice is eyeing a spring 2006 release.

But M6′s Altmann cautions that even producers who have a hit TV series on their hands should step carefully when it comes to adapting the property as a feature film because a built-in TV audience will not necessarily stay on the bus to the end of the line. ‘I think it’s very important that a producer has the humility to know [if their project is better-suited to TV] from the start,’ observes M6′s Altmann. ‘You have to be really modest and realistic with your ambitions because some programs are good, but they’re just not good enough to be put on the big screen.’

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