On a hot summer night this week in a historic Moscow square, a delegation of Hollywood celebrities headed by director Michael Bay and actor Shia LaBeouf marched past the 33-foot tall Alexander Pushkin monument and up the green carpeted stairs to the movie theater, a drab Soviet-era cube of concrete and glass.
In a poorly air-conditioned auditorium filled well beyond its 2,000-seat capacity, the Hollywood contingent went on stage to introduce the opening film of the 33rd Moscow International Film Festival: Paramount Pictures' "Transformers: Dark of the Moon," the latest in the series of critically pummeled but wildly popular extravaganzas featuring giant battling robots, fiery explosions and scantily clad young actresses.
If the festival, conceived as a showcase for films extolling the Soviet Union, seemed an unlikely marketing venue for Hollywood's quintessential summer event movie, it actually reflects how emerging markets that were a backwater for the American film industry only a decade ago have become its primary growth engine.
"Ten years ago Russia had only a few dozen screens, and now it is enjoying such enormous growth that we think it's fitting to have the opening of one of the biggest franchises in the industry there," Paramount Chairman Brad Grey said in an interview. "Russia is just one of several new markets opening up that are driving most of the increase in demand for our movies."
Box-office growth in countries such as Russia, Brazil and China (Europe and Japan have long been fertile ground for American movies) comes as theater attendance in the U.S. and Canada has flattened and once-lucrative DVD sales have plummeted.
Overseas ticket buyers now account for nearly 70% of Hollywood's box-office revenue, and it's quite possible for a movie to flop in the U.S. yet still be a hit because of its international appeal. For example, the Johnny Depp-Angelina Jolie thriller "The Tourist" earned only $68 million domestically after its December debut. But the movie, directed by a German, filmed in Venice and Paris, featuring a largely British supporting cast and remade from a popular French film, did a healthy $211 million overseas.
"We have to make up for the shortfall in DVD spending somehow, and the principal way we are doing it now is international," said Michael Lynton, chairman of Sony Pictures Entertainment.
The trend has changed how Hollywood does business, including deciding which movies get made, where they are filmed, who gets cast and how they are marketed.
In the expanding global marketplace, the sensibilities of moviegoers in Shanghai and St. Petersburg count as much as — if not more than — those in St. Louis and Studio City.
In Sony Pictures' "The Green Hornet," for example, executives tapped Taiwanese pop star Jay Chou to play the Hornet's sidekick despite his lack of Hollywood experience and limited English. He and co-star Cameron Diaz, who is popular in Europe, provided balance to star Seth Rogen, who didn't have a strong track record overseas.
"When it comes to casting decisions … we certainly take into account how well the character will play in international markets," said Neal Moritz, a producer of "Green Hornet."
Another movie Moritz produced, "Fast Five," takes place in Brazil, "not only because it was right for the movie, but because it was right for the international marketplace," he said.
The film had its world premiere in Rio de Janeiro and has grossed $21 million in the country, twice as much as 2009's "Fast & Furious."
In some cases, it's just a matter of branding. The film sold to Americans last fall as "Battle: Los Angeles" was called "World Invasion: Battle Los Angeles" in most of the world. This summer's "Captain America: The First Avenger" will be known simply as "The First Avenger" in Russia and South Korea.
In Disney-Pixar's just-released animated feature "Cars 2," which is set in several international locations, "there was originally a Russian villain, but there was concern about that," said Nathan Stanton, story supervisor on the film. The bad-guy car character was changed to a monocle-wearing German.
Animated family films like "Cars 2" and "Rio," as well as 3D, special-effects-laden spectacles with easy-to-follow stories like the "Transformers" sequel, are typical of the kind of movies that play well overseas, particularly in emerging markets. Live-action comedies and dramas, meanwhile, tend not to translate well, a key reason studios are making fewer of them.
"The movies that work overseas tend to be big action films, the type that don't require viewers to necessarily pick up on the nuances of the language or culture," said Lynton.
Kirill Razlogov, the Moscow film festival's program director, said he scheduled the "Transformers" premiere to boost the festival's international profile and doesn't really consider it an American film. "There is nothing American in 'Transformers,' and it is far more like a Japanese video game than a U.S. movie," he said.
Bay said Moscow was the ideal stage for the launch of his latest movie.
"I grew up with the Cold War and I think it is wonderful that we are here in Moscow," said Bay, whose grandfather was Russian. "It is a very important place in the film market today."
France, Germany, Britain and Japan remain the most lucrative foreign markets, but are fast losing ground to countries where rising middle classes with more disposable income have fueled a multiplex building boom.
In China, where box-office receipts hit a record $1.5 billion in 2010, according to research firm Screen Digest, the number of screens doubled to more than 6,200 in the last four years and is projected to double again by 2015. In the last decade, China has gone from the world's 23rd-largest movie market to No. 6.
Russia crossed the $1-billion box-office mark for the first time in 2010, a more than fifteenfold increase since 2001. The former Soviet Union now has about 3,000 commercial movie screens, with 1,000 equipped for 3D, which remains more popular overseas than in North America.
"People now flock to movie houses on weekends to watch U.S. blockbusters not only to get entertainment but to get some encouragement and hope," said Daniil Dondurei, editor in chief of the Art of Cinema magazine. "American movies teach people to be honest, kind, patriotic, brave, to work hard, be good friends, respect family values and be tolerant — something a Russian series or movie no longer aims at."
One of the early players in Russia was Shari Redstone, president of Norwood, Mass.-based National Amusements, who launched a chain of luxury multiplex theaters in Russia in 2002 that was recently sold to a local circuit.
"When we first went in, there were very few opportunities for people to have a high-quality moviegoing experience," Redstone said. "I felt like we could be pioneers in building a transparent exhibition industry in the country."
National Amusements is expanding rapidly in Latin America, which saw the world's fastest growth in box-office revenue last year, according to the Motion Picture Assn. of America.
"The purchasing power of the population has really grown over the last four or five years," said Alejandro Ramirez Magana, director general of Mexican-based Cinepolis, the world's fourth-largest theater chain. "There aren't enough theaters in these countries to meet demand."
To be sure, there are drawbacks in many emerging markets, including currency fluctuations, limited television licensing revenues and rampant piracy, which severely limits the ancillary revenues studios fetch from DVD sales. In China, the government limits the number of foreign theatrical releases each year to about 20.
But even as they count on at least several more years of rapid growth in Brazil, China and Russia, studio executives are eyeing other potential markets, especially India, which has a population of about 1.1 billion. It was the world's seventh-largest movie market in 2010, with $1.4 billion in box-office grosses. However, most of the ticket sales are currently for locally made Bollywood pictures.
"India could be a fantastic market for us," said Patrick Wachsberger, co-chairman of Summit Entertainment and a veteran of foreign movie distribution.
Verrier and Fritz reported from Los Angeles and Loiko from Moscow. Times staff writer Rebecca Keegan in Los Angeles contributed to this report.