TOUCH OF CRASS: Troma Films, by releasing its over-the-top "Toxic Avenger" series on DVD, has been able to finance somewhat classier acquisitions like "The Stendahl Syndrome," by Italian director Dario Argento. "Toxic" issues on DVD have also gotten shelf space in outlets where VHS versions were shunned.

Perhaps the best illustration of how DVD has changed the fortunes of independent producers and distributors is Troma Films, best known (everything being relative) for its campy sci-fi "Toxic Avenger" movies.

This year, thanks to booming DVD catalog sales, Troma will spend up to $500,000 per film it buys at Cannes, five times the $100,000 cap of prior years.

"If I had this budget last year, I could have bid on Caspar Noe's 'Irreversible,' " says president Lloyd Kaufman, referring to the sensationalist French movie with the 10-minute rape scene.

Troma, while keeping its focus on the outlandish, is adding foreign art pics to its mix of more than 900 movies, thanks to rising DVD coin.

Kaufman wouldn't say how much Troma's revenues have gone up from DVD, but the company will double its catalog release schedule beginning in June.

Troma's success with DVD may be more dramatic than that of other indies, but it's not an uncommon story these days. For bigger independents like Artisan and Lions Gate, catalog sales have supplemented downturns in other areas.

Smaller indies have long relied on their catalogs to fund new acquisitions, but with the rev-boosting DVD boom, the acquisitions have become more sizable. And that in turn has led to even stronger DVD sales. Kino Intl., which has 400 silent movies in its catalog including films by Buster Keaton and D.W. Griffith, started to discern benefits from its DVD catalog a couple of years ago. The company used the money to invest in more substantial acquisitions such as "The Piano Teacher," "Himalaya" and a remastered copy of "Metropolis." These releases have delivered better financial results than some of their previous acquisitions had. "When you have so much money coming from the video and DVD department, it opens the door for us to go and bid for more titles," says Kino Intl. director of sales Frank Tarzi. "Five years ago when we got a big title, we got it because people liked us. Now we've grown and can compete with other small distributors."

First Run Features, which has released many of its foreign and arthouse catalog titles on DVD over the past few years, says this activity has improved the overall health of the company. "With more money in the till, we can more actively acquire a wide range of films," says VP Marc Mauceri. Likewise, Lions Gate Entertainment has benefited from the DVD switchover, but Peter Block, president of home entertainment and acquisitions, says the impact is diffuse. "We've used it as a means for growing the company. We're able to take more production risks." Pricier acquisitions such as "Monster's Ball" and "Frailty" also have helped video sales.

 

Capitalizing on VHS decline

A downside of DVD is that the format has cannibalized sales of higher-priced VHS titles that had been selling for up to $80 each at retail. By comparison, top-of-the-line DVDs sell for $20. Declining VHS revenues means overall DVD sales gains are not quite as dramatic on higher-profile catalog titles as they might appear.

"Companies are able to realize revenues off of library," Block says. But the more notable titles would still be selling briskly in their VHS format. "MGM would still be moving 'Bond.' We would still be selling 'Saturdav Night Live' and 'Natural Born Killers' on VHS."

Independents and others are selling many more copies of catalog movies on DVD because of the sell-through market, which for smaller companies has opened up shelf space beyond the rental stores. Troma, for example, which struggled to get its "Toxic Avenger" series into Blockbuster during the VHS era, has with its DVD versions made it into Best Buy, Virgin and other big sell-through outlets. There is also renewed interest in catalog titles of older classics that sold rarely on VHS.

 

DVD gains should not be considered a cure-all

But not all companies that realize improved revs from DVD releases become more aggressive. Artisan Entertainment has 6,700 titles in its catalog; they've generated $200 million in revenue the last few years. But Artisan hasn't strayed from buying genre-specific films budgeted under $35 million, says CEO Amir Malin. "Our acquisition budget is the same. (DVD) doesn't mean we're going to go out and finance 'Spider-Man.'" Malin says the company will stick to its formula when looking for films at the Cannes Film Festival. "The higher revenues simply increase our company's profitability." Artisan has used improved DVD cash flow to expand its on-disc library, from 2,500 titles in 1997 to over 6,700. With DVD companies can release catalog titles over and over in different editions with different extras. In June, Artisan will put out its third DVD iteration of "Terminator 2" and the company expects to generate revenues of $30 million.

"That doesn't mean," adds Malin, "we say 'let's go pick up three more films now.'"

 

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