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Another branch of the Murdoch media empire is increasing its reach in a notoriously un-lucrative business: foreign films. The movie "Sarah's Key" was last year's highest-grossing foreign-language film here in the U.S., and it made less than $8 million. NPR's Neda Ulaby reports on the new studio, called Fox International, and its remarkably simple business model: Think local.

NEDA ULABY, BYLINE: How does Rupert Murdoch expect to make money given the tiny audiences for foreign movies? Well, it turns out Fox is making them for their own local markets.


ULABY: A Chinese film called "Love in Space" earned $10 million in China.


ULABY: A German hit called "What a Man" made $12 million in Germany.


ULABY: And a hugely scaled Russian epic about the Bolshevik Revolution pulled in a very aristocratic $50 million in Russia.


ULABY: None of these hit local films saw a real release in the United States. All were co-produced by Fox International and local partners. Sanford Panitch runs the division from Los Angeles. He says if you want to make money selling films internationally, you might assume you do it by exporting big Hollywood blockbusters. But overlooking local movies is overlooking significant markets.

SANFORD PANITCH: China is the second or third biggest market in the world, at 50 percent local; India, the fourth biggest market in the world, at 90 percent local; France, at 40 percent local; Germany, at 30 percent local; Korea - billion-dollar market, 50 percent local; Japan - actually, Japan, the biggest international market in the world, 64 percent local.


ULABY: Fox International Productions actually started off about three years ago with a Japanese version of the movie "Sideways," the one about two guys touring wine country.


PANITCH: When we originally got into the business, we thought, well, we have this great library; let's take advantage of it. And ironically, the local markets don't really want recycled Hollywood content.

ULABY: And really, why would they? Bollywood hardly needs old American ideas. And "The Girl with the Dragon Tattoo" has refreshed Hollywood's interest in stories from abroad. That's not a Fox picture. But Panitch says his division is introducing foreign books, scripts and directors to the larger Fox ecosystem.

PANITCH: There's a new aesthetic that's coming out of people that weren't schooled in traditional Hollywood ways. And I think there's an incestuousness - creatively - here, where we're all reading the same publications and listening to the same music.


ULABY: One of Fox International's latest successes comes from Mexico. "Miss Bala" is an arthouse film that crossed over to find wide audiences in Mexico. It's about a naive beauty queen who falls in with a drug cartel. It opens in the U.S. on Friday.


PANITCH: This guy is really talented - this director, Gerardo Naranjo.

GERARDO NARANJO: I said, I won't change anything - that was my first reaction.

ULABY: Director Gerardo Naranjo was suspicious when he first got a call from Fox. At that point, he'd basically finished the movie, but he needed money to reshoot a few key scenes. Naranjo says he was not sure how much Fox would interfere.

NARANJO: What we felt the first moment was that we had to protect the film. I guess I was very concerned about, you know, not changing the content, or not changing the movie, for it to be a Fox film.

ULABY: By which Naranjo means he did not want John Williams music or a sentimental ending. And he was surprised that a Fox News sister company would support a Mexican film critical of America's role in the drug trade.

NARANJO: To my surprise, they were great people. They were very supportive of us.

ULABY: Fox International found "Miss Bala" through a Fox executive in Mexico.

PANITCH: Fox has 28 offices around the world.

ULABY: And, says Sanford Panitch, a global network of executives managing Fox-owned TV stations, and distributing Fox movies. That gives them an edge in finding and working with local talent. Many of these movies will be available to Americans through video on demand and DVD, but their success really does not depend on audiences here.

PANITCH: I think that's a shift that is a little scary sometimes because it means, well, wait a minute, it means - you mean Hollywood movies, American movies aren't the only thing people want to see? And thank goodness.

ULABY: Movie audiences are on the rise in the important emerging economies known as BRIC in business circles: Brazil, Russia, India, China. Here, they're dropping like a brick. Neda Ulaby, NPR News.

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