Money raising from private sector harder with new regs
CP Medien, which bankrolled Martin Campbell’s “Beyond Borders” and Robert Altman’s “The Company,” has become the first Teutonic film fund to fall victim to the German government’s new film investment policy.
Company topper Roland Pellegrino is exiting to set up a private placement investment outfit, which will fund film projects but will circumvent the red tape that has enveloped the private fund market since the federal finance ministry unveiled its long-awaited media decree in August. New rules make it tougher for film funds to raise cash from the private sector.
Fund managers and industry reps have been up in arms over the government policy, which is set to stop the flow of German money to Hollywood.
Some see bright side
Some Hollywood execs believe the death of German film funds has been greatly exaggerated, however.
“It’s sad to lose a potential partner, but we have been over the new changes and we’re comfortable that we’ll be able to work with them,” said Michael Burns, vice chairman of Lions Gate Entertainment, which utilized CP Medien on 2001 production “The Cat’s Meow.” “We’ve been incredibly pleased with our German partnerships.”
With Germany’s federal government grappling with a recession and looking to pass extensive economic and social reforms, Berlin politicos are eager to quash what they see as unprofitable, tax-sheltering vehicles. Film funds have long been popular among high-earning Germans who write off related production costs.
Pellegrino, who co-produced Jude Law starrer “Enemy at the Gates,” intends to remain active in the business.
But fellow industryites were quick to lament the move.
“It’s incredibly sad that the marketplace has lost someone like Roland Pellegrino,” said Michael Oehme, head of the German Media Fund Assn.
“Pellegrino is not just any fund manager,” he said. “He made concerted efforts to bring projects to Germany. He’s exactly the kind of person we cannot afford to lose.”
CP Medien will continue to handle licensing business from its productions.
A clause in the law allowed firms to continue to operate funds launched before September 2002 through this December. CP Medien, however, had no current funds on the market.
Added costs a disincentive
Another factor that made life difficult for CP Medien was the added costs new regs would bring.
CP Medien was known to have some of the narrowest overhead among Germany’s film funds. Yet one new criterion that funds have to meet is the mandatory appointment of an advisory committee of fund investors that has the power to approve or reject management decisions.
Furthermore, the advisory committee may be selected only after a fund has raised half its targeted volume, making project financing and scheduling arrangements anything but a sure thing.
“Under these conditions, CP Medien cannot offer the security that partners like Lions Gate or Mandalay need,” an insider said.