Gaumont Winds Down U.S. Operations, Anticipates Big Losses (EXCLUSIVE) – Variety
Variety can reveal that the company has all but shut down its TV distribution operations in the U.S., recently axing 12 employees, including Vanessa Shapiro, president of worldwide distribution, and her team.
Shapiro was hired in 2017 and reported to Gaumont vice-CEO Christophe Riandée, and Gene Stein, who took over as president of Los Angeles-based Gaumont Television U.S. in 2015, following the exit of Katie O’Connell Marsh, whose latest venture, TV outfit Platform One Media, was acquired by Canada’s Boat Rocker Media in September.
Shapiro was in charge of spearheading sales of the Gaumont Television catalogue, including drama and animation series, as well as French shows. She was also in charge of international co-productions.
Variety understands the executive has now set up film and TV-focused co-production and distribution business Nicely Entertainment out of Los Angeles.
Shapiro’s exit comes as Gaumont Television pivots to focus increasingly on streaming partners – a move that has lowered its commercial prospects for international distribution.
The company is believed to have around 12 shows in various stages of production set up at streamers, said a senior source. However, of this batch, only one stems from the U.S. operation: “El Presidente,” a true crime series exploring the FIFA corruption scandal produced with Fabula (“A Fantastic Woman”).
Other shows, including Netflix’s “Arsene Lupin” with Omar Sy, originate from the company’s European outpost.
Gaumont’s drastic cuts out of the U.S. are set against a troubling financial period for the business.
The banner, which is listed in the French stock exchange, issued a profit warning last week. According to two industry sources, the company is anticipating losses in the range of €40 million ($48 million) in 2019, with the biggest dip coming from TV distribution income.
The yearly financial report will be unveiled in late February. Gaumont declined to comment.
During the first half of 2019, Gaumont saw a 28% drop in revenue to €47.4 million ($52 million), while reporting a loss of €18 million ($19.8 million). A chunk of those losses were attributed to the delayed delivery of season five of “Narcos,” which will be taken into account during the second half of 2019.
The financial report also shows that while the company ramped up its investment in TV production by 47% and film production by 55% to €56.5 million ($62.3 million) and €14.6 million ($16 million), respectively, during the first six months of 2019, TV production and distribution generated a loss of €1.16 million ($1.28 million), excluding overheads, while income from film production and distribution fell by 58% to €6.9 million ($7.6 million) during that period.
Explaining the results in its latest financial report, Gaumont said 2018 and 2019 were “transition years” after the company sold its exhibition business in 2017 to invest in series production in the U.S., U.K. and Germany.
Why has Gaumont struggled in the U.S.?
Under O’Connell Marsh’s leadership, Gaumont was once regarded as the first French company to establish itself in the highly competitive U.S. TV market, with a slate of popular shows such as “Hannibal” for NBC, and “Narcos,” which quickly became one of Netflix’s biggest hits and the first Spanish-language show to become a global success, years before “Money Heist” came along. It also produced “Hemlock Grove” and animated series “F is for Family” for the streaming giant.
However, the collaboration between Gaumont and O’Connell Marsh ended on a sour note. Nearly three years after leaving the company, the executive sued her former employer in Feb. 2018 for millions of dollars in contested profit participation. Gaumont filed a cross complaint in June 2019 alleging that O’Connell Marsh breached her termination agreement and wrongfully disclosed the company’s trade secrets to its detriment.
During its heyday, Gaumont’s U.S. biz alone brought in €40.7 million, which represented one-fourth of Gaumont’s revenues. On the heels of this early success, the firm staffed up its U.S operations with seasoned executives and partnered up with high-profile screenwriters and filmmakers such as the Oscar-nominated writer, director and producer J.C. Chandor (“Margin Call”) and Christopher McQuarrie (“Mission: Impossible”). But these first-look deals have so far failed to bear fruit. In the last few years, the company got few greenlights away in the U.S. apart from the Spanish-language series “El Présidente.”
The rise of streamers and the accompanying competition among U.S. producers to secure shows has also made it more difficult for Gaumont to consistently grow its business Stateside.
Seeking to expand its production scope beyond the U.S. and across Europe, Gaumont launched operations in the U.K. and Germany in 2018 from scratch and hired key executives in both offices, but both entities have yet to deliver. A handful of shows from the two outposts are, however, believed to now be in production.
In order to finance this strategic shift, Gaumont sold the remaining 44% of its exhibition business to Pathé (headed by Jerome Seydoux, the brother of Gaumont founder Nicolas Seydoux) in 2017 for €380 million ($420 million), which allowed Gaumont to repay its debt of €205 million ($226 million).
Sources point to the sale as a grave misstep, as selling its exhibition business – once a lucrative source of recurrent revenues, as well as the most profitable segment of Gaumont’s activities – has now put the firm in a vulnerable position given the number of players banking on premium content production.
Back in France, Gaumont is also looking to ramp up in-house production to control all rights to the films it produces and draw more upside. Since 2018, the banner has made several in-house productions, including Franck Dubosc’s “Rolling To You,” which was a box office success and traveled to many territories.
This year, it has a few titles lined up, including “Tout Simplement Noir,” a comedy directed by Jean-Pascal Zadi and John Waxxx, and “Rogue City,” a crime thriller directed by Olivier Marchal starring Jean Reno.
Gaumont plans to do four or five in-house movies per year going forward, as Dumas told French trade Le Film Francais. A recent executive shuffle in the Paris headquarters may reflect this strategic shift, according to several sources.
The company is chaired by Dumas, who owns 89.7% of the company’s shares. Other leading shareholders are from the U.S., notably New York-based firm First Eagle Investment Management LLC with 15.8%, and the Los Angeles-based Capital Research & Management Co. with 2.6%.
London-based firm S.W. Mitchell Capital LLP and the French outfit HMG Finance have 2.44% and 2.24% stakes, respectively.