Hollywood Starts To

Tailor Films To Foreign Markets

7/30/10 - The rising clout of international audiences is a sea change for Hollywood. Decades ago, a movie's foreign box office barely registered with studio executives. Now, foreign ticket sales represent nearly 68% of the roughly $32 billion global film market.

The result is that one of the most American of products is now being retooled to suit foreign tastes. Studios have begun to cast foreign actors in American-themed blockbusters like "G.I. Joe." Scripts are being rewritten to lure global audiences. And studios are cutting back on standard Hollywood fare like romantic comedies because foreign movie-goers often don't find American jokes all that funny. Several Hollywood studios have gone as far as financing, producing and marketing original movies for markets like South Korea and Brazil.

The rise of the international box office has as much to do with a shifting global economy as with the evolution of the movie business. For years, Hollywood's bottom line was propped up by double-digit growth in DVD sales. From 2000 to 2005 home-video sales increased by 91% in the U.S. But during the tough economy of the past two years, home video—which used to account for the bulk of a film's profits—fell more than 20%. Dwindling in-theater audiences in North America also have contributed to the shift.

The Chinese government is expected to support the opening of roughly 35,000 more screens over the next five years, up from the current 5,000 in the country. The Chinese government recently announced that the country's box office had spiked 86% in the first half of 2010, after several Hollywood imports, from "Avatar" to "Alice in Wonderland," proved popular with Chinese moviegoers.

IMAX has opened 66 big-screen theaters abroad in the last three years, including 25 in Asia. The company last week unveiled its first foreign-language film: "Aftershock," a Chinese film that IMAX executives hope will increase the company's brand awareness in Asia. Early next year, IMAX will target rural viewers abroad with portable movie theaters—domes equipped with IMAX screens.

When American Paul Heth first arrived in Russia in 1993, the number of commercial movie theaters had fallen to less than two dozen. The collapse of the Soviet Union had decimated the local film industry, which depended on government support. Desperate theater owners began converting cinemas into casinos, car dealerships and grocery stores.

Today, the company he owns with Shari Redstone, Rising Star Media, has 75 screens in Russia. Those screens generate about 10% of the country's box office, which Heth estimates will hit $1 billion for 2010. He has plans to expand Rising Star in the coming years, tripling the size of the circuit by 2013 to capture about 30% of the country's box office.

Satisfying foreign audiences has been tricky for Hollywood. Years ago, audiences in Japan or South Korea would faithfully go to the multiplex to watch movies that were written, produced, and cast out of Hollywood. Now, increasingly sophisticated local films are giving Hollywood a run for its money.

In South Korea, ticket sales to local movies accounted for about 10% or 20% of box-office revenue in the 1990s. Hollywood movies grabbed the lion's share. Now, local fare makes up nearly 50% of South Korean ticket sales.

Hollywood experts claim that it's not about bringing Hollywood tactics to the foreign markets. It's about participating in a local culture enough to create a product that those audiences will actually want to watch.

Last summer, Paramount was worried that its 2009 summer release, "G.I. Joe," which cost $175 million, might flop overseas. People questioned whether it would travel outside the U.S. because the original formulation is a strong U.S. military theme.

The solution: Stuff the cast with international stars. Byung-hun Lee, a major Korean movie star, was put in one of the film's title roles. A South African actor, Arnold Vosloo, played another key character, Zartan.

In the end, "G.I. Joe" grossed slightly more abroad than at home, taking in $152 million of its world-wide $302 million in ticket sales overseas. In South Korea alone, the movie grossed nearly $16 million.

Insiders predict that Hollywood will start tweaking movies for U.S. markets; one version for the Midwest, another for the East Coast, and one for the South.