Ahead of Cannes, Film Market Pre-Sales May Be Down but Not Out

Penning a premature obituary is an occupational hazard that goes with the territory of film industry analysis, and there are few topics that attract such hand wringing as the alleged “death of the pre-sale.”

While the execs headed to the Cannes Market have seen major disruptions in the past decade from technology and pandemics, industry insiders say it’s a little too early to play “Taps” on this market mainstay.

Legend has it that the concept of indie movie “pre-sales” was invented in the early 1970s by the financial wizard John Heyman, a man no doubt worthy of a role in one of his award-winning son’s “Harry Potter” productions. Bankrolling upfront distribution commitments for indie titles — or “turning paper into gold” as one veteran puts it — was a magician’s trick not lost on a hot sellers’ market in those heady times.

To understand the evolution of pre-sales requires taking a step back in time to understand how the world has shifted gears. Epoch one was marked with the arrival of the VCR, marked by VHS winning the living room tape wars starting in the late 1970s. The new horizontal rights offered by video allowed sales companies to pre-sell “video” as a separate bundle, holding theatrical and TV to sell later, or vice-versa.

Whichever way, producers and sellers made out like bandits. “The genius at this was Arnon Milchan, who, like the very best producers, made sure he went to all the markets,” recalls Mister Smith Entertainment’s David Garrett.

Epoch two was the advent of DVD in 1997, arming distributors with a license to print money. The so-called TV backstop that underpinned a buyer’s risk was shored up by the high profit margins on offer from the DVD bonanza; ergo, pre-sales continued to be the financing tool of choice.

The 2008-09 financial crisis is when sales veterans including Michael Ryan felt that “the switch from being a sellers market to buyers market really kicked in.” North America became extremely hard to pre-sell, creating issues for producers given the propensity for foreign buyers to insist on a firm domestic theatrical commitment if they were to offer top dollar pre-sale prices.

The film industry’s third epoch was the start and rapid rise of streaming, and that too has shifted from the early streamers’ “buy fast, regret later” momentum to a preponderance of original commissioning and their habit of making perplexing offers that were too large to refuse, leading to the ugly unwinding of any pre-sales made prior to the streamer steaming in.

But are pre-sales really over? Not so fast, say many of the expert film industry players still working the pre-sale mines.

“The right projects can still pre-sell well,” Garrett says. “Today it’s a longer process, and you cannot rely on it in the same way. Some key titles don’t sell out at their first market but still do very well. Content drives deals: clear genre, strong packages that fit into a well-defined, pre-existing model for buyers are attractive, films you can smell and touch.”

Taking Garrett’s lead, L.A. producers such as Capstone pay a huge amount of attention to the strength of their project packaging, from the “story’s commercially appealing concept to the director’s assured ability to attract the right level of on-screen stars,” says topper Christian Mercuri.

Highland Film Group CEO Arianne Fraser agrees that the package is crucial: “Pre-sales [are] a very strong model to co-finance movies. But we have to be really diligent about the right elements in a package as pre-sales today are very specific to genre, cast and meeting the needs of distributors’ expectations. It’s hard to anticipate the future, partly because of the hybridization of the windows and the overall impact on P&L.” And that has led to gap finance (lending against unsold rights) dropping from 20%-25% in the 1990s to a paltry 5% of budget if a producer is lucky.

The rhythm of the market has altered over the past decade and not just because of COVID. “Acquisition activity has definitely become less market-orientated, with the buying process more of a blur than a blizzard of decisions around an event,” says Arclight’s Brian Beckmann. “Yet the right films can be so positive despite market disruption. We’ve seen ‘Queen Bees’ have a long run at the height of the pandemic thanks to Gravitas, and Neon did a fine job on ‘Possessor’ in the domestic market.

“With the right talent we pre-sold 60% of a recent title in just three months. It can be done. But it all depends on the picture. And especially the cast. And the buyers now don’t just insist on an A-list lead, they want the whole ensemble to be marquee names.”

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

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