Ahead of Cannes, pre-sales in the film market may be declining but not ending

Writing an early obituary is a career risk that aligns with the field of film industry analysis, and few topics attract such concern as the alleged “pre-sale death”.

While executives heading into a market that has seen major turmoil in the past decade from technology and pandemics, industry insiders say it’s too early to play “Taps” in this core market.

Legend has it that the concept of “pre-sale” for the indie film was invented in the early 1970s by financial wizard John Heyman, a man undoubtedly deserving of a role in one of his son’s award-winning “Harry Potter” productions. Funding Advance Distribution Obligations for Independent Titles – or “turning paper into gold” as one veteran puts it – was a charming trick that wasn’t lost on the super-seller market in those troubled times.

To understand the evolution of pre-sales requires going back in time to understand how the world changed gears. The first phase marked the arrival of the VCR, and VHS marked the victory of the living room tape wars that began in the late 1970s. The new horizontal rights offered by video allowed sales companies to pre-sell “video” as a separate package, keeping plays and television for sale later, or vice versa.

Whatever the method, producers and sellers are made like bandits. “The genius in this matter was Arnon Milchan, who, like the best producers, made sure it went all the way,” recalls David Garrett of Mister Smith Entertainment.

The second era was the advent of DVD in 1997, arming distributors with a license to print money. The so-called TV Backstop that supported the buyer’s risk was backed by the high profit margins offered by DVD bonanza; ergo, pre-sales service has continued to be the financing tool of choice.

The financial crisis of 2008-2009 occurred when sales veterans including Michael Ryan felt that “the shift from the sellers’ market to the buyers’ market had already begun”. It became very difficult to pre-sell North America, which created problems for producers as foreign buyers tended to insist on a consistent domestic theater commitment if they were to offer the highest pre-sale dollar prices.

The third era of the film industry was the rapid onset and rise of live broadcasting, and this also shifted from the “quick buy, regret later” momentum of live broadcast novices to a heavy run of originals and their habit of puzzling shows that were bigger than waste, leading to the ugly jaw of any sales Advances made before steaming the broadcast device.

But is the pre-sale really over? Not so fast, say many expert film industry players still working on presales mines.

“The right projects can still sell well in advance,” Garrett says. “Today it’s a longer process, and you can’t count on it the same way. Some of the headlines don’t sell out in their first market but still do very well. Content leads to deals: the clear type, robust packages that fit a well-defined and pre-existing model for buyers. Attractive, movies you can smell and touch.”

Taking the lead, Los Angeles producers like Capstone pay a great deal of attention to the strength of their project’s packaging, from “a commercially attractive story concept to the director’s proven ability to attract the right level of star on screen,” says Christian Mercury’s Topper.

Ariane Fraser, CEO of Highland Film Group, agrees that the package is essential: “Pre-sales [are] A very powerful co-financing model for films. But we have to be really careful about the right items in the package because today’s pre-sale is very specific to the type and delivers and meets the needs and expectations of distributors. The future is hard to predict, in part due to the hybridization of windows and the general impact on profit and loss.” This has reduced financing (lending versus unsold rights) from 20% to 25% in the 1990s to 5% of the budget if the producer is lucky.

The rhythm of the market has changed over the past decade and not just because of the coronavirus. “Acquisition activity has definitely become less market-oriented, with the buying process becoming more of a hazy than a storm of decisions about an event,” says Arclight’s Brian Beckmann. However, suitable films can be very positive despite the market turmoil. We’ve seen Queen Bees have a long run of success at the height of the pandemic thanks to Gravitas, and Neon has done a good job of “Possessor” in the local market.

“With the right talent, we’ve sold 60% of the last title beforehand in just three months. It can be done. But it all depends on the image. Especially the cast. And buyers now aren’t just insisting on the A-list lead, they want the whole group to be Notable names.

Angus Finney’s new book is The International Film Business: A Market Guide Beyond Hollywood.

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