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Moscow Business Square: The BRIC Nations

Photo of Sydney Levine By Sydney Levine | Sydneys Buzz June 22, 2010 at 9:35AM

FILM PRODUCTION FINANCING FOR THE BRIC COUNTRIES
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FILM PRODUCTION FINANCING FOR THE BRIC COUNTRIES

Brazil, Russia, India and China are all vast countries whose large population and size can support and maintain their own production, which is good and bad. It’s good because they can maintain their own industry without going beyond their own borders. It’s bad for the same reason because it results in an insularity of film culture. Countries showing little interest in the rest of the world in turn create little interest culturally in their worlds. As the world becomes more globally connected, these countries have to struggle to integrate themselves into the growing vibrant internationalism of world cinema.

The BRIC nations are fast growing. According to the recent (3 days ago!) publication by Price Waterhouse Coopers of film media entertainment 2010-2014, the business brings in revenues of US$ 37 billion of which $11 b is from theatrical box office and $26.2 billion is home video including VoD.

Brazil’s share is $1b and its growth rate is 5% per year.
Russia's share is $1.2b and its growth rate is 8%.
India's share is $2b and its growth rate is 14%.
China's share is $1.2b and its growth rate is 16%, though in their presentation they calculate it differently.

In 2014 the BRIC countries will have 15% of the worldwide entertainment market. While this sounds monolithically impressive, each one of the BRIC countries has iits own unique issues. These issues are the points of discussion of the Moscow Business Square.

Brazil
Because Brazil is a Portuguese speaking country, it is often excluded from the current Latin American initiatives in co-production taking place throughout Europe. Brazil’s former colonial ties with Portugal has made Portugal its big brother so to speak, mentoring it as a co-producer so that it is brought into the European co-production treaties. It is working to expand its films’ appeal beyond its own borders. FiGa in the U.S. is also working hard to represent its most universal films in the international market as the only Brazil oriented international sales agent. However, Brazil also seems conflicted in whether the value of their films should be to making films that will draw tourists or to create tax schemes for film investment. The two strands of conversation take place on official levels when trying to find how to position itself in the film world. So far neither initiative has been definitively put into place.


Russia
The government Ministry of Culture established the Foundation for Cinema Promotion in 2009 for financing art house films, children’s’ films and debuting directors’ films. Commercial films and large major studio films are outside the foundation’s purview. New rules regulating the foundation’s allocations were announced yesterday and grants may be applied for starting July 1. There is a website giving more information. Russia has no co-production treaties, though there is a protocol with Chile for co-production and there is a co-production treaty with Germany now being negotiated. In addition, Russia has applied to the Council of Nations’ Eurimages for support as well. Russia’s new openness to co-production comes just as its President Dmitry Medvedev has announced at the St. Petersburg International Economic Forum that, “We have changed – first of all because the whole world has changed”. With these words Medvedev echoed recent Kremlin signals that it was adopting a friendlier foreign policy. Medvedev kicked off the theme earlier this year when he said Russia should display a smiling face instead of gnashing teeth that frighten others. Medvedev announced a lower capital gains tax on long term direct investment starting in 2011 and a huge reduction in the number of strategic companies with restrictions on foreign investment. See The Moscow Times for more detail. Let us hope that his plan to stimulate private equity and venture capital investment affects the film industry and that the smiling face and decreased teeth gnashing applies to the consulates where everyone must go for visas as well…This way of working was often a topic of discussion among participants from U.S., some of whom paid up to US$600 to get their visa, U.K., Germany – myself included -- and other countries.

India
India was quite strong expressing its NON-reliance on government funding. For as Ajay Goyal of (www.norasco.eu) Norasco Films said, if they relied on the government, the industry would not be what it is today. The films have been funded up to now by rich families but now are becoming corporately funded. US$ 100 million is traded on the London Stock Exchange with 20 companies listed on the stock exchange.

TV as well as theatrical features in no shortage of multiplexes are both growing businesses. Their economy is in no crisis and is growing at 8% but the entertainment industry is growing at 16%. They are looking at investing US$ 3-4 billion in Hollywood.

Everyone knows of Big Reliance's investment of US$500 million in DreamWorks and now Hollywood Reporter reports that Reliance Broadcast Network Ltd. said Sunday that it is proposing to enter into an equal joint venture with CBS Studios International in India “for the purpose of owning and/or operating a portfolio of television channels.” The JV will be called Big CBS and aims to “bite into a sizable pie” of India's TV industry which was estimated at $5.7 billion in 2008 projected to grow at 15% to touch $11.5 billion by 2014 according to a recent report by consultants KPMG India and Federation of Indian Chambers of Commerce and Industry. RBN, previously known as Reliance Media World Ltd., is owned by one of India's top conglomerates Reliance Anil Dhirubhai Ambani Group, which also owns Reliance Big Entertainment. The joint venture initially include English language general entertainment channels, and the parties will explore owning and/or operating Hindi language and regional language general entertainment channels in the future,” added the statement, issued to the Bombay Stock Exchange. The JV aims to include “certain programming rights across the countries of India, Nepal, Bhutan, Sri Lanka, Bangladesh, the Maldives and Pakistan for now, and this could see further geographical spread on mutual consent.”

Reliance Big Pictures' Raavan collected 530 million rupees (US$11.7 million) from its three language versions during its June 18 opening, on 2,200 screens worldwide. It is being sold by U.S. based IM Global. Produced by Ratnam’s Madras Talkies, Reliance and IM Global, the film was set for a worldwide release in 58 countries on June 18.

Moreover, the Indian films themselves play exceedingly well not only within India, a country of 24 languages all with films, but to the Indian Diaspora, the Middle East and Russia. Currently 3 Idiots is playing in 1,000 multiplexes in India and in the diaspora scored US$3 million in box office receipts with 54 prints in U.K., 110 in U.S., 50 in UAE and Egypt. My Name is Khan brought in US$73 million from abroad. It was a 20th Century Fox local production (that is, a co-production). It delivered impressive results reaching US$38.4m in China and setting record opening weekends for a Bollywood film in the U.K., Australia, Germany, Spain, Holland, New Zealand and the UAE.

The National Film Development Corporation & Film Bazaar is supportive of "art" film. National Film Development Corporation of India is the central agency established to encourage good cinema. The primary goal of the NFDC is to plan, promote and organize an integrated and efficient development of the Indian film industry and foster excellence in cinema. Over the years NFDC has provided a wide range of services essential to the growth of Indian cinema. The NFDC (and its predecessor the Film Finance Corporation) has so far funded / produced over 300 films. These films, in various Indian languages, have been widely acclaimed and have won many national and international awards.


China
Co-production is the only way films from other countries can sidestep the strict quota system of 20 foreign films per year (which are major studio productions). In becoming co-producers with Chinese production companies, the filmmakers must conform to China's strict and sometimes spurious censorship practices. Some producers have left China for this reason, such as Sylvain Bursztejn while others are willing to accept it and work within the system like Emmanuel Benbihy (Shanghai, I Love You) or Timo Lahtinen of Smile Entertainment in Denmark.

Jacqueline Liu of Hong Kong International Film Festival and HAF spoke of Hong Kong's reliance on China for the sheer numbers in the audience as well as the fact that many digital theaters are now being established in China and Hong Kong. A current Hong Kong-China-Korean co-production gives security to the investors, allows for larger budgets and strengthens the box office potential considerably.

Cindy Mi Lin, CEO of Infotainment China Media spoke about the need to co-produce in China.

Why co-produce in China?
1. Costs are much lower.
2. It's the only way to get distribution there.
3. You can make bigger films.
4. There is active co-financing.

The second largest grossing film in China was Avatar which had a box office of US$194 million. There has been 30% growth yearly since 2005 and they predict a 65% growth rate with a box office of US$490 million by 2012, the second largest box office after U.S. And for Chinese films, 38-40% of the box office goes to the producer whereas for the few foreign films allowed in 13% goes to the producers. The box office receipts are currently split 50% for foreign films and 50% for Chinese films.

Finally, Why co-produce in China? You need a Chinese co-producer to understand how to use the system, how to meet censorship issues, and how to get around in China in general. If you find the right project and the right producer, then you will have a great experience!

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