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How the Russian film distribution industry survives after the departure of Hollywood giants

After the withdrawal of Western film companies from Russia, most cinemas were on the verge of closing. Hollywood blockbusters and cartoons provided up to 75% of all revenue. Instead of movie theaters, viewers are increasingly visiting pirate sites. Whether Russian films will save the industry and whether cinemas should count on state support, Profile investigated.

A million viewers – a lot or a little

Six months ago, Hollywood giants Universal, Disney, Warner Bros., Sony, Paramount announced the suspension of their activities in Russia and the cancellation of all planned premieres. Cinemas have lost the right to screen the new “Batman”, the Marvel comic book about Doctor Strange and “Jurassic World: Domination”. Each of the films has grossed between $800 million and $1 billion at the worldwide box office. And, undoubtedly, it would bring significant profit in Russia.

Cinema attendance has dropped dramatically. If in the first week of March, Russians bought 2.2 million tickets, then in the second – 1.4 million. Since then, 500-800 thousand viewers a week come to the cinema. Sales spice things up a bit with animated films or family comedies. Closer to autumn, the audience was attracted by the melodrama “After. Happily ever after”.

Last year, in the first week of September, 2.5 million viewers came to the cinema, this year – only a million. The highest-grossing film of the summer – the thriller “One” – collected only 322 million rubles. For comparison: Black Widow, which launched in July 2021, received twice as much.

Showing Korean, Chinese and Soviet films compensated for no more than a few percent of the previous fees. In the re-hire, “Brother” turned out to be the most popular – 300 thousand viewers brought 74 million rubles to the box office. But it is unlikely that such a success will be repeated: the cult film by Alexei Balabanov ideally suited the mood of the audience.

At the beginning of February, a little less than 2.2 thousand cinemas and 5.6 thousand halls were operating in Russia. By July, about a hundred facilities were closed, some permanently, others temporarily, says Roman Isaev, member of the Association of Cinema Owners (AVK), head of the Russian representative office of Comscore Corporation. In the Formula Kino and Cinema Park networks, for example, a quarter of the screens are closed on weekdays. But only a few sites were completely closed, and only where the lease expired.

Visitors to the summer open-air cinema

The main thing for cinemas is to attract an audience. In addition to showing films, these can be lectures, festivals (pictured: open-air cinema)

Dmitry Korobeinikov/TASS

A paradoxical situation has developed with IMAX. The Canadian company that patented the film format closed its Russian office and banned the use of the technology. At the same time, the equipment mainly belongs to Russian cinemas, but they still cannot show films with a “maximum image”. Even domestic ones – “Movement Up” or “Stalingrad”.

Will the state help the film industry

The situation was worse only during the lockdown, when cinemas did not work at all. But during the pandemic, albeit not immediately, the industries provided financial assistance. The state allocated 4.2 billion rubles, dividing them in equal shares between producers and cinema chains. In the spring, representatives of the film industry sent a letter to the government with a request to allocate 6.5 billion rubles, but were refused.

Moscow authorities will reimburse cinemas for the purchase of Russian films

In the summer, Minister of Culture Olga Lyubimova, when asked whether it was necessary to take emergency measures to save the industry, recalled that the cinema networks “lived well, they took American blockbusters and did not put Russian films.” “Now they have to grow up,” she added.

The Ministry of Culture and the Department of Cinematography did not even try to alleviate the situation of the industry, the Association of Cinema Owners notes. However, the sources of the Film Distributor’s Bulletin say that a fundamental decision on financial support has been made in the government. Probably, there is an agreement on the volumes and the operator of the distribution of funds. This can be both direct assistance and benefits and tax deductions.

Film distributors consider the ministry’s reproach unfair. In 2020, ticket sales for screenings of Russian films accounted for 46.9% of the total box office. True, such success was associated with the postponement of Hollywood premieres amid the pandemic. And the Russian “Kholop” collected a record 2.9 billion rubles for domestic cinema.

Hope for Russian cinema

However, now it will be difficult to replace the resulting hole. For six months, Russian producers have not been able to offer a single film with a potential box office of 500 million rubles or more. Hopes are pinned on “The Heart of Parma” – a film adaptation of one of the most famous novels by Alexei Ivanov, which will be released on the big screen on October 6th. And then if the audience can attract.

Film frame

Shot from the film “Heart of Parma”

Profit

“Until the end of the year, we do not see the grandiose scale of Russian projects, we are waiting for the “New Year’s battle” – traditionally, domestic films are shown on these holidays,” says Roman Isaev. – But in order for the industry to exist, and not suffocate, one film with the potential to earn a billion rubles should be released every month. Such locomotives attract viewers to other sessions as well.”

In recent pre-Covid times, about 9-10 Russian films a year have gone to zero or even become profitable at the box office. And if we take into account non-refundable subsidies from the Cinema Fund and the Ministry of Culture, then even more, says Alexander Nechaev, editor-in-chief of the Bulletin of the Film Distributor. If streaming revenues and international sales are calculated, there were at least 20 successful domestic films a year.

But the level of attendance that the Hollywood majors had was still unattainable. “Yes, this is an opportunity for many Russian films to perform better, simply due to reduced competition. Artek, which raised more than 300 million rubles, could only dream of this in a normal situation. The film “One” collected about the same amount, and they played it for a very long time – two and a half months,” says Nechaev.

These stories are good as individual business cases, but in general they do not pull the industry.


Top Grossing Western Films in Russia in 2021

Foreign films in 2021 collected 30.3 billion rubles. – this is almost 75% of the entire annual cash desk. They bought 106 million tickets. At the same time, the Russian project The Last Hero: The Root of Evil, filmed jointly with Disney, turned out to be the most popular. It was watched on the big screen by almost 7.2 million Russians, the total fees exceeded 2 billion rubles.

The American film comic Venom 2 attracted 6.7 million viewers and 2 billion rubles.

“Spider-Man: No Way Home” – 6 million viewers and also almost 2 billion rubles.

“Dune” – 4.7 million viewers and 1.6 billion rubles.


Game of Thrones online services

For online cinemas, the situation is not so critical, but you should not expect big profits there either. According to the TelecomDaily report, in the first half of 2022, the total revenue of legal video services in Russia amounted to 25.9 billion rubles, which is only 5% more than a year earlier. This may indicate a significant subsidence of the market.

The departure of Netflix, which ranked fourth in terms of revenue, and Megogo (one of the top ten) led to a redistribution of the share of domestic players. “Kinopoisk” moved Ivi from the first place, which remained the leader for the last four years. Wink, in turn, managed to push Okko aside and take third place in terms of revenue. It can be assumed that the number of users grew most noticeably on illegal sites, but this figure cannot be calculated.

The companies themselves look at the situation more optimistically. In the first half of 2022, the number of Premier subscribers grew to 2.1 million people, which is twice as much compared to the same period in 2021. “Premier does not sit on the needle of foreign content and produces its own original projects. The audience is attracted primarily by series such as Epidemic, which are released exclusively on the service,” the press service of Gazprom-Media Holding said. In addition, the platform adds Korean dramas and top Turkish series to the library.

Amediateka was even able to offer House of the Dragon, the Game of Thrones prequel, to subscribers. Warner Media Holding, which owns the American streaming service HBO, announced in the spring that it was suspending the licensing of new content in Russia. Amediateka, which owned the exclusive rights to the series of the service, lost several important premieres at once. However, already in July, the fourth season of Westworld was released on the platform – only a few days later than the world release. Under what conditions is unknown. But since then, HBO shows have been regularly released in online cinemas.

How else to attract an audience

Movie theaters are also waiting for Hollywood content to return in some form. More than once the idea of ​​parallel imports sounded. Deductions can theoretically be made to a certain ruble account, and the right holder, having returned to Russia, would have access to the money. In July, for example, Mikhail Shvydkoy, a representative of the President of the Russian Federation, refused to consider such an option as piracy: “It’s like with our debt: there is money, but they don’t want to take it.”

The State Duma proposed to allow parallel import of Western films

But the idea seems to have been abandoned – it would have been guaranteed to destroy relations with Western film suppliers. “Spinning a movie without the consent of the copyright holder is a road to nowhere. Parallel import of equipment or products is one thing – you still pay the copyright holder for these goods. Another thing is copyright,” Alexander Nechaev is sure. He suggests that the content of some studios may return to Russia through intermediary firms: “Like it was at a time when the Russian market was not very important for Hollywood in terms of the box office.”

Movie theaters, in anticipation of changes for the better and help from the state, should not give up and hope for a miracle, Roman Isaev believes. The most important thing is to attract an audience. It is necessary to work with non-standard niches, such as art cinema or lecture halls. And to expand the possibilities of the Pushkin card, which can be used to buy tickets for domestic films.

In addition, independent film studios, including British ones, do not refuse deals with Russia. And, it seems, they do not experience any reputational risks at the same time – no one is boycotting their representative offices in Europe.

Do not give up and the organizers of festivals held in the country. Despite all the difficulties, they manage to include foreign films in the program. So in any case, the viewer will have something to watch on legal sites.

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