Will Asia’s distribution landscape ever return to normal?

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[PICTURED ABOVE: FEFF’s main theatre, Teatro Nuovo, has been packed all week, but what is happening in Asia’s cinemas?]

While CinemaCon participants were having their minds blown in Las Vegas by impending big screen extravaganzas including Jurassic World: Dominion and Avatar 2: The Way Of Water, film industry folk from Asia and Europe were attending the Far East Film Festival (FEFF, April 22-30) in Udine, Italy, where they debated the realities of the post-pandemic theatrical landscape (not that we’re truly ‘post’ anything, but let’s try to stay positive).

On a panel entitled ‘Asian film distribution: Post-pandemic, Pre-what?’, hosted by FEFF’s Focus Asia industry platform and moderated by Variety Asia Editor Patrick Frater, four sales agents and producers discussed whether Asia’s theatrical market will ever rebound back to pre-pandemic levels, and whether selling to the streamers will ever make up the shortfall if not.

As the northern hemisphere heads into spring and learns to live with Covid, most Asian territories are slowly reopening their borders and their cinemas, with the notable exception of China. But producer and former sales agent Michael Werner said there’s still a huge amount of uncertainty, although it’s clear that audience habits have changed: “People are not as inclined to go to the theatre as they used to be,” said Werner, who is a long-time Hong Kong resident. “In Hong Kong, in particular, if young people are going to the cinema, it’s for a Marvel or superhero or genre film, but everything’s changed and it’s not clear it’s coming back in the way it once was.”

XYZ Films acquisitions chief Todd Brown said he believes the market will rebound, although more slowly than anticipated, and noted that in pre-Covid times, films would sell to Asia as a block “for equivalent or larger than Europe”. But after two years of Covid, the landscape has become much more fragmented: “China is very much its own thing. Then you have territories like Indonesia or Vietnam that had explosive growth in the theatrical market, which was on hold during the pandemic, then certain other territories that are just either holding to a very conservative approach to releasing, or kind of stuck in not having infrastructure. What the pandemic has done is really shown up a lot of the fracture lines within all these different systems.”

And now the fracture lines are turning into canyons. One of Hong Kong’s major exhibitors, UA Cinemas, folded during the pandemic; Singapore’s mm2 had to sell Cathay Cineplexes at a loss; Malaysia’s MBO went out of business; and two of India’s biggest chains, PVR and Inox, merged because it wasn’t viable to keep competing. Arthouse cinema looks like the first obvious casualty at the distribution level, as the theatrical space, especially in Asia, was always small and is shrinking even further.

Silvia Simonutti, of Paris-based sales agent Wild Bunch, said the company survived through the pandemic by selling its back catalogue, mostly to streamers, and focusing on discovering new talent. But distributors have become much more selective: “They always ask, is the film English-speaking? If not, what is the cast? Is the director well known? Will the movie be selected in a major festival? They need something stronger, and if you can’t offer that, it’s very difficult.” She added that for certain films it’s very easy – buyers are lining up for films from Studio Ghibli and Hirokazu Kore-eda – but most other titles require a lot of work.

China is currently the Asian market most affected by the pandemic, with half its cinemas closed and box office averaging just over $1m a day for the entire country, as the government sticks to its zero Covid policy in battling Omicron, which is ironic as in 2020 it was also the first major territory to rebound from Covid-19. Cao Liuying of Chinese sales agent Parallax Films said she believes that, despite the difficulties faced by the arthouse sector, it is the narrow range of films in the market, not just the pandemic, that is keeping audiences away from cinemas. “The young audience is not as interested as in the past, simply because there is no diversity in the films,” Cao said. “There are still some players in terms of acquiring foreign titles in China, but the main distribution channel is not cinemas, it’s festivals and then streaming platforms. But while platforms are acquiring a relatively large amount of films, they’re not promoting them as hard as they should.”

Southeast Asia is often cited as a collection of theatrical markets that could one day compensate for the loss of China, but the speakers noted that infrastructure is still very basic in many of these territories. Indonesia, for example, does not have many dedicated distributors, so most films are sold by producers directly to the cinemas. Pre-pandemic, box office was shooting up in markets like Vietnam and Indonesia, as screen count increased due to investment by mostly Korean exhibitors. But all these markets have relatively low spending power and mobile penetration is increasing rapidly, which means streaming platforms could end up being the major distribution channel for films.

The panel also debated how the collapse in theatrical revenue is affecting producers. In Korea, one of the few markets with reliable box office figures, local films grossed $776m in the pre-pandemic year of 2019, but that figure fell to $280m in 2020 and further to $140m in 2021. However, Brown noted that Korea’s biggest players are highly diversified and may have actually benefitted during this period: “They’ve clearly been looking at this as a distressed market where they can start accumulating more assets for when the rebound happens. So CJ ENM bought Endeavor and [JTBC Studios] bought Wiip. These companies clearly still had some juice in the pocket.” In other words, as in so many other areas of the industry, the market is becoming increasingly polarised between big players with resources, and the tiny outfits with low overhead, with the middle ground subsiding in between.

As for selling to the streamers, Simonutti and Cao both said that selling back catalogue either to Netflix or Chinese streamers provided much needed cash flow during the pandemic, but Werner observed that this revenue stream is open to a lot of “collateral damage” as the business plans and strategies of most players are constantly in flux. Brown said it’s already noticeable that Netflix is buying less since it announced that its subscriber numbers had dropped and its share price tanked last week. Cao added that “the VOD audience in China would prefer watching reality shows or TV series, so there’s very limited room for independent films.”

The panel concluded by saying that all this uncertainty and rapid change means that all eyes will be on the sales business at the Cannes Marche next month. Simonutti said she’s very much hoping to be able to meet Asian buyers in person in Cannes, because while online markets have kept relationships going with existing clients, it’s difficult to build new relationships and everyone has reached peak Zoom fatigue. Werner concluded: “We all want to be optimistic, you know as humans, it’s all about hope. But it’s still just a very unclear and unpredictable environment.”