Contributing Reporter

When Asia came down with the flu, L.A.'s film financiers, especially those who fund independent films, got the shakes as well.

On average, foreign receipts including box office, television and video account for one-half to as much as 75 percent of total revenues for most films, according to film finance specialists. Alone, the Asian submarket, which has trended toward the action/adventure niche and stars like Sylvester Stallone and Jean-Claude Van Damme, generates 10 percent to 25 percent of a film's total receipts.

But with demand on the wane in the once-hot Asian markets, filmmakers are finding it increasingly tough to land distribution contracts in the region. And that makes film financiers uneasy.

The Lewis Horwitz Organization, a major backer of independent films, expects to finance 10 percent fewer movies this year, compared with the 60-odd films it financed in 1997, said Lewis Horwitz, the firm's president and chief executive.

"The Asian crisis has caused Korea, Japan, Indonesia and Malaysia to pay a little less, be more cautious, not do as many pre-buys," he said. "That means it's going to be a little tougher (for filmmakers) to get the pre-buys."

The margins for many independent films already are so slim that just the slightest shift in the Asia equation can spell the difference between a film's being financed or forever remaining a script, said Morgan Rector, president of Imperial Entertainment Group, the film finance division of Imperial Bank.

Most film financiers agreed that the Japanese market remains a fairly reliable source for film revenues. Indonesia, the country hardest hit by the Asian crisis, has become a virtual non-player for overseas returns, but the loss of that market only has a minor effect on film finance because of its small size.

But it's the Korean market, which was Asia's second largest revenue source for U.S. films, that has virtually dried up following a steep devaluation of the nation's currency over the last year, said Mary Yoel, assistant manager of the entertainment division for City National Bank, which has financed all or a portion of "Braveheart," "Silence of the Lambs" and "The Apostle."

"We are still lending against the Japanese (pre-buy) contract, but we are now more careful as to whom these contracts involve," she said. "The only impact from Japan is a little slowdown on how quick they make their payments. South Korea, on the other hand, has dropped out of the picture entirely."

Horwitz concurred that while Korea once was one of the region's most dependable pre-buyers of films, the number of guaranteed distribution contracts from Korean companies in recent months "has been zero."

So far, the Asian crisis is hitting independent productions the hardest. The major studios have escaped so far because they tend to finance most of their films with their own money, or in conjunction with other studios.

"The crisis in Asia isn't as significant in terms of our decisions on whether or not to make a movie," said David Friedman, associate general counsel at Paramount Pictures Corp. "That's not to say that studios aren't affected by the Asia crisis, but not for financing purposes."

The studios also are feeling less impact in Asia than their independent counterparts because people in economically strapped countries tend to spend their limited money for entertainment on high-profile films with big-name actors, rather than small-budget films starring unknowns, said Yoel.

"The majors have enough clout and distribution to guarantee a return (in Asia)," she said. "The others, the independents that are left, simply don't have enough of the big stars to guarantee a return. I think the lenders who are financing these films are taking greater risk for a higher fee, and some have gotten burned."

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