RWS and Pygmalion will go to the cinema together

The film executives in Russia should put their libraries and production facilities together to be able to compete with majors, experts think.

‘RWS will create a film production and theatrical release department which will be headed by Sergey Chliyants, the owner of Pygmalion Production,’ Yuri Sapronov, the CEO of RWS, told Kommersant. According to his statement, in 2009 the department will work on at least six full-length features taken from the Pygmalion Production and RWS portfolios including the film Year of Deceit,' which is currently in post production.

Chliyants has accepted his appointment as a general producer in the new RWS department. The partners add that a new separate film company, based at RWS or Sistema Mass Media (a subsidiary of JSFC Sistema) where Chliyants will have an option and his company assets, will be included is in further plans.

Controlling interest of 51% of Russian World Studios is owned by JSFC Sistema, the rest belongs to Yuri Sapronov and Andrei Smirnov, the CEO of Sistema Mass Media. RWS consists of a production center, studio including seven stages in Moscow, RWS Saint Petersburg Film Studio. According to internal information, the turnover in 2008 amounted to $100 million.

Sergei Chliyants, producer of such films as Mama, Don't Grieve!', Alive', Bimmer. Second Film', The Sky with Diamonds', etc., owns the Pygmalion Production company, and also New Cinema Studio (which includes New Cinema Marketing and New Cinema Distribution). The financial performance is not declared.

‘The companies in fact join their assets and this is profitable for both of them', Eduard Pichugin, the co-owner of Cinema Invest, says. ‘It's important for RWS to launch a new department of full-length feature films; the content will be used with the help of JSFC Sistema channels such as mobile telephony. And Sergei Chliyants, a well-known producer in the market, gets promising prospects within the large corporation.’ Vyacheslav Murugov, the CEO of CTC adds: ‘Joining the libraries and the field experience of two companies will result in a strong competitor who, structurally, will be similar to a major studio.'

Chliyants states that he was looking for a chance to enter into a vertically integrated holding arrangement before the crunch because  the Russian film industry is too split and remains a weak competitor, and so incorporation is the only way of developing.'

In 2007 the joint total revenues of the producers were estimated at $50 million: Russian films brought $135-140 million of revenues, nearly 50% of which were earned by the cinema chains, and 15-25% of the share - by the distribution companies. ‘The share of Russian films in the total box office for 2008 (amounted to $830 million) has not been counted yet; according to the preliminary estimation, the producers' revenues could increase up to $80 million, says Dmitry Rudovsky, the CEO of Art Pictures Studio.

Experts didn't estimate the RWS and Pygmalion Production cost of capital. The deal of selling the controlling interest of Central Partnership to Prof-media in 2005 is considered to be the only sufficient deal in the film production companies market to date: according to the estimation of the market members, the sales price might amount to $50-55 million. ‘The staff and the library of such companies are considered to be their main assets', Alexander Izotov, the CEO of Tsar Pictures, says.

‘I mean they can be estimated in like sales prospects of libraries to TV channels.' According to his opinion, one-time sale of a full-length feature film that was released two years ago to the channel with a right of two screenings within half a year could have brought from $20 up to $100 thousand. ‘Though it is extremely difficult to estimate the library taking into account the current purchasing price reductions of the TV channels due to the crunch,' Izotov underlines.  

Olga Goncharova,

 «Kommersant» , 26.01.2009