Vietnam, Cambodia and the Philippines are helping drive the foreign box office
When “Lone Survivor” executive producer Mark Damon saw the ticket sales out of Asia he couldn't believe what he was reading.
It wasn't because the film was blowing the doors of the box office in China, where it has yet to score a release. No, it was that a movie that lionizes a group of heroic U.S. Navy SEALs was being embraced by audiences in Malaysia and the Philippines – picking up $400,000 in Malaysia and $300,000 in the Philippines since opening there this month.
“These are incredible results for what were considered smaller countries,” Damon, whose Foresight Unlimited has also backed “2 Guns” and the upcoming Rob Reiner film “And So It Goes,” said. “A few years ago they were practically invisible and now they're vying with much bigger countries.”
The box office contributions of Russia and China have been well-documented and continue to be robust, but producers, financiers and analysts say emerging markets in Asia, Latin America, Eastern Europe and Africa may hold the promise for future growth.
“There's nothing like the golden goose story that is China,” Brad Kembel, executive vice president of international distribution at Lionsgate, said. “But studios and independents are maximizing a lot of smaller markets where there is still a tiny amount of theatrical rollout in places such as Africa, Vietnam, Cambodia, Mongolia and Myanmar. They're not sophisticated markets overnight, but they're being built up into modern markets.”
Growth in countries such as Poland and Turkey have helped off-set continued softness in markets such as Portugal, Spain and Greece that have been hit hard by the Euro Crisis. Indeed, the government debt issues in several European outposts have prompted a lingering economic malaise that is turning avid moviegoers into infrequent ones.
“There's a lack of investment in theatrical infrastructure and the broader economic situation is reducing the spending power of the audience,” Stuart Ford, CEO of the film finance and sales agency IM Global, said. “It's really been a bleak decline for several years and there's not a huge amount of light at the end of the tunnel.”
Despite those European headwinds and the fact that the top 20 international films in 2013 grossed 14 percent less than the previous year, Rentrak is estimating that the foreign box office will grow by 3.3 percent in 2013, to $24.7 billion compared to 2012's $23.9 billion. It will just get there in a different way. Instead of huge blockbusters such as “The Avengers” and “Skyfall” doing the heavy lifting, more mid-sized pictures are making up the difference.
Warner Bros. last year became only the second studio to top the $5 billion mark globally, and international was the driving force, accounting for $3.14 billion of that total. “The Hobbit: The Desolation of Smaug” ($585 million), “Gravity” ($418 million) and “Man of Steel” ($397 million) were blockbusters, but the studio had 10 movies top the $100 million mark abroad.
“It is our strategy to offer a diversified slate,” Veronika Kwan Vandenberg, president, international distribution for Warner Bros. Pictures, said. ”This summer, we had our superhero film with ‘Man Of Steel,’ a big action movie with ‘Pacific Rim,’ but then we also had a couple of comedies with ‘The Hangover 3' and ‘We're the Millers.’ ‘The Great Gatsby’ started the summer strong, aimed at a slightly older, more female and less obvious target for this time of year, and we were thrilled to end the summer on a high note with the horror film “The Conjuring.'”
Yet superhero movies and special effects extravaganzas still serve as Hollywood's most effective calling card in foreign markets.
“The worlds of these movies don't look so American and the casts are more diverse,” Keely Gillman, president of consumer insights at Worldwide Motion Picture Group, said. “As the world becomes more industrialized, there's less of a foreignness to these films, but it also helps that these stories are about themes that resonate beyond a specific geographic location. They're about human stories of good versus evil.”
Just as smaller films have helped plug the hole left by wobbly tentpole features, emerging markets are maintaining and driving the growth of the overall international box office. Other places that are being buzzed about include African countries such as Nigeria, Ghana and Kenya, where the middle class is ascendant and important economic indicators such as the rise of mobile-internet availability are promising.
“These are the next emerging markets,” Gillman said. ”It's early and they're not there yet, but the signs are there.”
Others are more cautious, with Alex Walton, president of international sales and distribution at Exclusive Media, noting of those African countries, “it can only get better. I'm not seeing any great returns.”
Hollywood is not done obsessing over China or Russia. Final international figures have yet to be released by the Motion Picture Association of America, but the Asia Pacific region grew by 15 percent in 2012 and is expected to increase again.
“It used to be you couldn’t get $2,000 for a movie [in China], but now it’s number one,” Avi Lerner, producer of “The Expendables” and founder of Millennium Films and Nu Image Entertainment, said. “When I look at a movie now, I think first of how much can make it through the censors there, and then will the subject be of enough interest there?”
China has already eclipsed Japan as the world's second largest source of box office revenue, and could surpass the United States as the dominant contributor by 2020, analysts say. Russia, which was the eighth biggest international market in 2012 will likely continue to climb the ladder as more theaters are constructed.
“Russia will rival the U.K., France and Germany,” Ford predicts. “It's going to go up to number four and have a huge leap in the next few years.”
The growth in both markets will come from the rural areas. Ford notes that major cities such as Moscow have modern theaters, but the same is not true with more remote parts of the country.
It's a similar story in China, where smaller cities are now augmenting the box office take of major metropolises such as Shanghai and Beijing. These roughly 300 third and fourth-tier cities accounted for 34 percent of ticket sales last year and are expected to hit 42 percent by the end of 2015, according to DMG Entertainment.
India, however, remains a tantalizing, but elusive market for Hollywood. The country has a sizable middle class and an avid moviegoing culture, but while it contributed $1.4 billion to the global box office in 2012, audiences there are primarily interested in Bollywood productions.
“The reality is the local films have a rock solid grip on the box office,” Ford said. “There's room for growth, but as of now any increases have been modest.”