EuropaCorp, French film in the American manner | INA Global

EuropaCorp, French film in the American manner

Article  by  Sophie RAGOT  •  Published 27.09.2010  •  Updated 11.10.2010

Founded in 2000 by Luc Besson and Pierre-Ange Le Pogam, EuropaCorp is one of the largest European independent film studios.

Summary

Founded in 2000 by Luc Besson and Pierre-Ange Le Pogam (former distribution manager and general manager at Gaumont), EuropaCorp is one of the largest European independent film studios. The Besson-Le Pogam duo decided to form this company after Gaumont declined to produce Taxi. Yet, since the release of The Big Blue in 1988 (still #34 on the list of the most successful French films since 1945), Gaumont had agreed to produce several of Luc Besson's movies: Nikita, The Professional, The Fifth Element, Joan of Arc. But in 2000, Nicolas Seydoux's group did not believe in the success of Taxi. Thus, the EuropaCorp venture began with the will of the two men to complete their project by their own means. And that will has propelled the group through each of its evolutions. Luc Besson and Pierre-Ange Le Pogam do not suffer the system of the movie industry; they regularly put every effort to ensure that their vision of cinema comes to life.
 
The formula works: the group's profit grew 7 times between 2001 and 2002 (from 3 to 21 million euros). By its second year of business, EuropaCorp boasted 98 million euros in sales and a staff of 50. Many hits have allowed to keep growing (The Transporter in 2002, Taxi 3 in 2003, Transporter 2 in 2005, then Arthur and the Invisibles in 2006 and Taken in 2008).
 
In France the industry is dominated by four groups that encompass the entire film industry: Gaumont, MK2, Pathé, and UGC. Like its main competitors, EuropaCorp is not confined to mere film production/distribution and derives its revenues from multiple activities:
 
With 181.3 million euros in sales for the 2009/2010 financial year (an increase of 41% over the previous year), EuropaCorp is behind Pathé (770 million euros in sales in 2008) and UGC (sales confidential but around 400 million euros in 2009), but in front of Gaumont (93.7 million euros in sales in 2009) and MK2 (70 million euros in sales in 2008). But the big difference between these groups is their main source of revenue: Pathé, UGC, Gaumont, and MK2 derive most of their income from their “operations [+] NoteThat is to say, the operation of the movie theatres they own.X [1]” sector, something EuropaCorp does not have yet.
 
As a producer, EuropaCorp is the most active company in France since 2008, with 5 “French initiative [+] NoteThe Centre National du Cinéma et de l’image animée considers a film to be a “French initiative” if it is produced and funded wholly or mainly by French partners.X [2]” feature films produced in 2009, with an average budget of 15.56 million euros [+] NoteSource: www.cnc.fr.X [3]. This puts the group ahead of Gaumont (4 films), UGC, and MK2 (3 films each).
 
As a distributor, since its inception, EuropaCorp steadily manages to rank among the top 10 distributors (in terms of distribution-related receipts). The group ranked in tenth position in its second year of business (2001) and managed to hit the Top Ten since then, except in 2009 when it slipped away due partly to the merger between TF1 International and UGC Distribution landing at #7.
 
Year
Rank among top distributors
Market share
Number of films distributed
2001
10th
3.7%
8
2004
10th
2.7%
35
2006
9th
5%
33
2008
10th
2.9%
39

Publicly traded since 2007, the group is majority owned (62% of shares) by the FrontLine company, which is owned by Luc Besson. Pierre-Ange Le Pogam owns 8.05% of the shares, with about 23% held by the public.

A vertically integrated studio

EuropaCorp has chosen to implement a vertical integration strategy that goes further than its competitors. It is set up around 11 different trades:
  • Film production
  • TV rights in France
  • Distribution in French movie theatres
  • DVD publishing and video-on-demand distribution
  • International sales
  • Catalog management
  • Partnerships
  • Ancillary rights
  • Music production and publishing
  • Book publishing
  • Commercials production
EuropaCorp controls the entire life cycle of its films, and this is where its strength resides. The producer and distributor trades are inherently risky: the producer must meet the financial, technical and human resources needed to produce the film, while the distributor is responsible for marketing it. Both must make very large investments early into the project, without having any idea of the public reaction come the release date. They are required to initiate costs that may prove uncoverable in case of failure.
 
If the risks of failure are cumulative, so are the chances of success. Playing both the producer’s and the distributor’s role allow the group to benefit from two types of revenues:
- The distributor’s through the box office (distributor and operator sharing ticket sales proceeds)
- The producer’s: ticket revenues disbursed by the distributor, plus subsequent rights.
 
EuropaCorp carries this logic beyond the borders of the film industry, because it also integrates all the satellite activities orbiting the film. From publishing books that could become screenplays to publishing the music that will make up the soundtrack of the film. In doing so, the group stabilizes its revenues, as it becomes less dependent on box office results (revenues generated this way represented only 12.5% of sales in 2009/2010).
 
The group actually expressly states this as its objective, and presales approaches with broadcasters (especially TV stations and foreign broadcasters) start at the film’s development stage. Thus, a film is already covered at 80% before it is actually shot. Obviously, this ensures a high return on projects. In 2008, Luc Besson announced that out of the 60 films produced by EuropaCorp, only three had not been profitable [+] NoteBesson: Un empire sur pellicule, Catherine Bernard, Les Echos No. 252, Dec. 1, 2008.X [4].
 
The Euromed Center project in Marseille, which includes the opening of a multiplex managed and operated by EuropaCorp, will complete the vertical integration of the company in 2012. This gigantic dolphin-shaped building located in Marseille’s new business district will include 16 movie theaters. The company will then own all the links in the film chain: production, distribution, and operation.
Back to summary

An industrialized production logic

EuropaCorp is known to produce big-budget films (over 60 million euros for each installment of the adventures of Arthur and the Invisibles, 30 million euros for Transporter 3, 31.34 million euros for The Extraordinary Adventures of Adele Blanc-Sec, where the average film budget for French initiatives is around 6 million euros [+] NoteSource: www.cnc.frX [5]), but the company is also known for streamlining production costs, which means it often works with little-known actors and directors. Even John Travolta, who played in the From Paris With Love (a budget of 37.84 million euros) had to lower his demands [+] NoteBesson: Un empire sur pellicule, Catherine Bernard, Les Echos No. 252, December 1, 2008.X [6]. Pierre-Ange Le Pogam said that the film Taken, which cost 35 million euros to make, would have cost twice that budget in the US [+] NoteLuc Besson, capitaine d’industrie, Michel Guerrin, Le Monde Magazine, May 10, 2010X [7]. Moreover, a very specific business plan has been defined: the group must produce one very big-budget film every 10 months and one animated film every ten years.
 
EuropaCorp pushes this rationalization logic even further with the construction of Cité du Cinéma, which will allow the group to adopt the mode of operation of the Hollywood Studio System [+] NoteRational use actors, teams, and settings; focus on large-scale feature film productions, heavy reliance on advertising, conquering the world market, optimization of production and distribution costs.X [8]. This mammoth 160 million euros project will take shape in Saint-Denis. It will have two components. The first one, supported by the Caisse des dépôts et Consignations and Vinci, will consist of 30,000 square meters of offices housing the Louis Lumière School of Cinema and EuropaCorp’s headquarters. The second one will be operated by EuropaCorp (who will invest 6 million euros in the project), Euromédia (European leader in shooting technical services), and Quinta Communications. This complex will include 2,200 square meters of projection rooms and reception areas, plus 9 film sets over 11,000 square meters. All stages of the film production line can be completed inside Cité du Cinéma. All of EuropaCorp’s teams (both permanent teams and the film crews put together for each film) will be gathered there, and additional areas should eventually accommodate other activities.
 
Cité du Cinéma, which should open its doors in 2012, will provide France with a tool that was previously lacking, while capitals such as London (Pinewood Studios), Rome (Cinecitta Studios), Berlin (Babelsberg studios), and Prague (Barrandov studios) have been similarly equipped for a long time and have already made a reputation. It will therefore have to compete with these well-established facilities backed by tax incentives, exchange rate games, and a mastery of the English language. Luc Besson’s goal taking part in this project is not limited to curbing the costs of his productions. He has demonstrated a genuine desire to shoot his films on French territory, which he had to forgo several times for lack of adequate infrastructures. In 2009, 25% of the 5,892 days of shooting for French initiative films have taken place abroad, and only 3.7% took place in French studios [+] NoteSource: www.cnc.frX [9]. This is the trend Luc Besson is trying to overcome, and that is what makes him an “American-style French manager.”
Back to summary

The search for recurring revenue

In this context where risk is everywhere, looking for more regular sources of income becomes a necessity. Recurring revenues allow a cross-collateralization, i.e. the pooling of revenues that can offset losses from one of the group's activities with gains from another activity. With this in mind, EuropaCorp decided to step into the world of television, acquiring Cypango last April. This French company specialized in television series is the country’s seventh drama producer in importance, with sales of 14.6 million euros in 2009 [+] NoteLe titre EuropaCorp perd encore des plumes en Bourse, www.latribune.fr, April 16, 2010.X [10]. It should enable the group to generate recurring revenue. So Besson’s company will be adding TV drama production to its activities. This trade, with its close ties to filmmaking, will benefit from EuropaCorp’s writing and directing expertise.
 
The group’s investment in television does not stop there: last April was announced the beginning of production of a TV series based on the Transporter trilogy. Transporter - The series is a co production between EuropaCorp and Lagardère Entertainment, and, based on the theatrical success of the three feature films (237 million dollars [+] NoteSource: www.boxofficemojo.comX [11] in total revenues worldwide), it should prove fruitful. The series will be shot in English, with a budget of 4 million dollars per episode. Atlantique productions (a subsidiary of Lagardère Entertainment) should be responsible for the financing and executive production, which will leave EuropaCorp with royalties on the series without having to bear the expenses incurred by its production. The reputation of the film and both partners in the venture is expected to draw many international broadcasters with whom discussions are already in progress. Similarly, the Arthur and the Invisibles trilogy will be brought to the small screen as an animated series through a partnership with the French studio Zagtoon.
Back to summary

A pervasive cutting-edge marketing strategy

In a world where the number of productions increases each year while the number of screens is relatively stable, marketing strategies become crucial. And it is precisely from this angle that EuropaCorp stands out from the competition: not only in its choice of screenplays and film budget management policies, but also in how it distributes and promotes its productions.
 
The promotional aspect of the Besson-Le Pogam marketing strategy was already at work in 1997 – long before EuropaCorp came to be – when Le Pogam used new approaches to promote the release of The Fifth Element produced by Gaumont. Since then, the group has been using the same recipe, the first ingredient of which is the signing of all kinds of partnership agreements. The automotive industry is EuroCorp’s primary target: Peugeot for Taxi, then Audi with whom EuropaCorp signed a three-year partnership in 2007 that stipulates the inclusion of the maker’s vehicles in two films a year in return for provision of a fleet of vehicles during shootings. In 2010, for the release of Coursier, the group worked with Honda who provided many scooters, included the one used by lead actor Mickaël Youn who portrays a courier.
 
The timing of the theatrical release is also a key element in the group's strategy, a strategy that has always demonstrated a certain level of originality and innovation in both promotional media and content. For the release of Arthur and the Invisibles in 2006, EuropaCorp relied on mobile phones for its communications – then seen as an emerging advertisement channel. The experiment was repeated for Taxi 4, and again for Transporter 3, with dedicated wap sites (mobile phone sites) and contests to draw a target number of visitors to the site, thus ensuring promotion for the film.
 
The release of the second Arthur and the Invisibles movie (Arthur and the Revenge of Maltazard) in 2009 is perhaps the one that has generated the most partnerships, something justified by the skyrocketing budget committed to the production of the film: over 63 million euros. EuropaCorp first launched an event site based on a virtual reality technology, in partnership with Dassault Systèmes, a 3D solutions publisher. The second partnership was signed with Ubisoft for the production of a video game for PC and the best-selling game consoles on the market: Wii, Nintendo DS, and PlayStation 3. A third partnership was signed with McDonald's for the development of a device handed out with "Happy Meals" giving access to a new world of augmented reality in which children can play with characters from the movie. EuropaCorp went as far as designing a new attraction for the Futuroscope in Poitiers: Arthur, l’aventure 4D. Open since February 2010, this attraction relies on an innovative technology based on the relief projection of an animated film on a dome plus 4D multi-sensory effects.
 
EuropaCorp has always been able to tap into newly available technologies and use them in the promotion and production of its films. The group plans on starting shooting a 3D movie entitled Section 8 in the summer of 2010. This sci-fi movie will be shot in English and should have a budget in excess of 30 million euros. Negotiations are underway to involve American studios in the project.
 
Again, in order to tap into the potential offered by new technologies, the group took an early interest in the video on demand (VOD) market. Aware of the inevitable dematerialization of cultural products, EuropaCorp signed an agreement in 2007 with Glowria to distribute its films on the digital entertainment provider’s partner VOD platforms. Glowria owns a large catalog of nearly 2,000 films, including titles from Warner Bros., Universal NBC, Sony Pictures, Pathé, TF1 International, and Gaumont. This is a very important strategic choice at a time when VOD (+115% in volume and +60% in value in 2009) is starting to revive the home video market that took a hard hit from the Internet film piracy crisis. The physical home video market has resumed its growth only in 2009, after three years of losses. Luc Besson, always of his time, displays a strong opinion on the future of the DVD (he says it is doomed to disappear in favor of VOD) and on how the platform sequence should be managed: he thinks films should be offered on VOD the moment they come out in theatres [+] NoteInterview with Luc Besson, Nathalie Silbert, Les Echos, December 4, 2008.X [12], which of course would satisfy many consumers but goes against the claims of industry professionals.
 
Luc Besson is always anxious to get closer to the audience, so, and keeping in mind the current challenges of digital technology, he announced last May that EuropaCorp and movie theatre operator Orange were launching a community website enabling users to participate in the production of a film. They can choose from five screenplays, and then they will take part in all decisions (choice of director, cast, etc.). Visitors will thus become co-producers through the website Weareproducteurs.com for a minimum initial investment of only €10.
 
EuropaCorp’s latest promotional tool will be using a brand new technology: personal mobile TV (PMTV). This new mode of "television consumption" via the latest generation of cell phones should be operational in France in 2011, and EuropaCorp is among those to whom the CSA has assigned a broadcast channel. The EuropaCorp TV channel will schedule shows on cinema, broadcast movies, and promote new talent.
Back to summary

Successful Internationalization

The “American-style” marketing logic that defines EuropaCorp probably has much to do with how the company is developing internationally. Promotional expenditures for movies have always been bigger overseas than in Europe, and the group’s methods allow it to compete with American studios on their own ground, a feat very few French or European producers have managed.
 
The best example of this type of success is Taken: a 25 million dollar budget, 21 million admissions in the US against only one million in France, 145 millions in revenue in the US (over 121 million euros), for a total revenue of 226.83 million dollars (189.7 million euros). For 2008, Taken alone represents close to 30% of all French films revenues abroad and close to 25% of all French films admissions abroad. This movie has put North American back at the forefront of expansion markets for French cinema. Taken is French cinema’s biggest commercial success in the US – it even reached the top spot at the US box office.
 
The key to this success: a film shot in English, with an actor known overseas (Liam Neeson). The recipe was used again this year for From Paris With Love, whose headliner is none other than John Travolta. The film's budget reached 37.84 million euros, but it grossed over 50 million dollars in worldwide revenues. The Transporter trilogy also did very well in the US, the three installments totaling nearly 237 million dollars in worldwide revenues, including 100 million dollars in the United States alone.
 
These successes make it relatively easy for EuropaCorp to sell its movies overseas and in the rest of the world to movie theatre distributors, TV broadcasters, and home video publishers. For example, distribution rights to Extraordinary Adventures of Adele Blanc-Sec were already sold to several companies in Italy, Latin America and Japan by November 2009, although the movie was coming out in France only in April 2010.
 
The group has managed to build a global reputation. The share of revenues from international sales keeps increasing: 44.1% of total sales in 2009/2010, up 95.1% from 2008/2009. In comparison, international sales account for only 20.2% of Gaumont’s total sales. EuropaCorp has even set up a subsidiary in Japan, headquartered in Tokyo, to distribute its films on the Japanese market. Internationalization is a crucial element, considering the size of the initial investment involved in producing movies. To cover your costs, you have to successfully carry your projects beyond national borders.
Back to summary

Conclusion

The industry is often critical of Luc Besson, especially the French auteur cinema community who accuses him of making “Kiss Kiss Bang Bang” films [+] NoteThis expression was first used in 1968 by American film critic Pauline Kael to qualify Hollywood movies.X [13]. And yet, Besson and his company are far from making only sensational movies: alongside their Hollywoodian mega-productions are lower-budget films like Villa Amalia or The Concert, released in theatres in 2009. These films reflect the Besson-Le Pogam duo’s open-mindedness and love of cinema, regardless of genres. The profits from the blockbusters benefit to more intimate productions. EuropaCorp’s number of César (one for the documentary The Cove) and Oscarnominations (18 in 2009) shows that this criticism is not shared by the whole industry.
 
On the other hand, the group's commercial success reveals the audience’s choice. In only ten years or so, EuropaCorp has managed to climb among French cinema’s top companies. The oligopoly consisting of UGC, Gaumont, Pathé, and MK2 had not been threatened by newcomers in many years. EuropaCorp has created a sort of label that allows it to sell its films to professionals and viewers alike. Its dynamic and innovative strategy is a complete success. EuropaCorp does not see new artistic ideas and new technology as a threat; it embraces them as opportunities, an attitude its competitors have not all adopted.
 
Shareholders may have a different opinion, since EuropaCorp’s share price has dropped much since it started being traded in 2007, going from €15.5to around €5 today. However, the group’s new participation in activities generating more regular income will surely reassure investors and allow the share price to recover a little.
 
Despite the criticism directed at him, Luc Besson has always championed a French expertise and wanted to distinguish himself from what he calls the “American giants [+] NoteInterview by Luc Besson for Futuroscope - see the 2010 press digest on Futuroscope’s website: www.futuroscope.com.X [14]”. He never gave up on being able, one day, to make his films in France from A to Z, an idea he holds dear ever since his earliest films. Already during the production of The Fifth Element – a movie with a very American casting – he had done everything to keep the film French (both in the business plan and by giving key technical positions to French people). Besson remains one of the players most aware of current industry issues, and he actively participates in the recognition of French film abroad. His company, EuropaCorp, which now has a strong voice in the film industry, is an engine of development for French cinema.


 
(Translated by François Couture)
Back to summary

Key Figures

Chairman of the Board of Directors: Luc Besson
General Manager: Christophe Lambert
Development Director: Pierre-Ange Le Pogam
Chief Financial Officer and Human Resources: Raphaël Durand 
 
Sales (as of March, 31 2010): 181.3 million euros
Operating income (as of March 31, 2010): 7.4 million euros
Net income (as of March 31, 2010): 7.7 million euros
Shareholders' equity (as of March 31, 2010): 147.9 million euros
Average admissions in French theatres by film produced : 1 million
Catalog: 500 films
International distributors: 162
Permanent employees: 100
Films distributed per year: 10-15
Back to summary

Bibliography

Catherine BERNARD, Besson : Un empire sur pellicule, Les Echos n°252, 1er décembre 2008.
Jean-Pierre LECLERC et Anne PERROT, Cinéma et concurrence,  Rapport remis à Mme Christine LAGARDE, ministre de l’économie, de l’industrie et de l’emploi et Mme Christine ALBANEL, ministre de la Culture et de la Communication, mars 2008
Dossier de presse de la saison 2010 du Futuroscope de Poitiers

Laurent CRETON, Economie du cinéma – Perspectives stratégiques, Armand Colin, 2009, Paris.
Enguérand RENAULT, EuropaCorp finalise le projet de la Cité du cinéma, Le Figaro, 31 mars 2010.
Patrick LEMOINE, EuropaCorp, un studio français signé Luc Besson, La croix,14 février 2010, 
Christophe CARRIERE, EuropaCorp sur tous les fronts,  Lexpress, 3 avril 2003.
Le titre EuropaCorp perd encore des plumes en Bourse, Latribune, 16 avril 2010.
Michel GUERRIN, Luc Besson, capitaine d’industrie, Le Monde Magazine, 10 mai 2010.

Site Internet Box Office Mojo (base de données sur les résultats des films au box office dans le monde)
Site Internet d’EuropaCorp
 
Back to summary
  • 1. That is to say, the operation of the movie theatres they own.
  • 2. The Centre National du Cinéma et de l’image animée considers a film to be a “French initiative” if it is produced and funded wholly or mainly by French partners.
  • 3. Source: www.cnc.fr.
  • 4. Besson: Un empire sur pellicule, Catherine Bernard, Les Echos No. 252, Dec. 1, 2008.
  • 5. Source: www.cnc.fr
  • 6. Besson: Un empire sur pellicule, Catherine Bernard, Les Echos No. 252, December 1, 2008.
  • 7. Luc Besson, capitaine d’industrie, Michel Guerrin, Le Monde Magazine, May 10, 2010
  • 8. Rational use actors, teams, and settings; focus on large-scale feature film productions, heavy reliance on advertising, conquering the world market, optimization of production and distribution costs.
  • 9. Source: www.cnc.fr
  • 10. Le titre EuropaCorp perd encore des plumes en Bourse, www.latribune.fr, April 16, 2010.
  • 11. Source: www.boxofficemojo.com
  • 12. Interview with Luc Besson, Nathalie Silbert, Les Echos, December 4, 2008.
  • 13. This expression was first used in 1968 by American film critic Pauline Kael to qualify Hollywood movies.
  • 14. Interview by Luc Besson for Futuroscope - see the 2010 press digest on Futuroscope’s website: www.futuroscope.com.
Would you like to add or correct something? Contact the editorial staff