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Strict finance fund regs to be loosened for indies

Plan to help small, medium film co.s setup prod'n coin

TOKYO — Don’t expect a sudden boom in independently produced and financed Japanese movies come April. But a mild surge in fund capital should help bring Japan’s monotone production landscape back to the level of livelier times, once the stifling regulations governing film production funds are liberalized by the beginning of the next fiscal year.

Besides pushing for easier financing, the Strategic Council on Intellectual Property, the Ministry of Economy, Trade and Industry and the local industry are also considering Japanese versions of completion bonds for local films.

“It’s a welcome step in the right direction,” says one producer in Tokyo. “But in the end it will always be the big companies that will profit most.”

That’s not the intention of the plan, which is supposed to help small and medium film companies setup production funds.

Governed by the 1992 law on commodity investment, the present rules for the establishment of a film fund are prohibitive, requiring, among other things, initial capital of at least 10 million yen ($84,746) and involving considerable red tape.

This excluded most Japanese independent producers. In 11 years, only four film funds have been established.

“South Korea’s and Hong Kong’s film industries have made enormous advances because of creative financing and easier rules,” opines another producer who struggles to get financing for two small films.

Indeed, many of SCIP’s recommendations are based on developments in neighboring countries. Ominous examples: 28 film funds with a combined capital of some $477 million were established in South Korea between 2000 to the end of 2002, fueling a booming industry. However, some of those funds lost big money with expensive duds at the box office.

METI is considering lowering the minimum capital requirement and reducing the paperwork for establishing a film fund. Whether this will be enough to dent the entrenched system of so-called “production committees” (PC) responsible for most Japanese films in recent years is an open question. Equally at stake is creativity: with independent film funds behind them, producers would have more chance to push through their creative vision for a film.

This is not the case with PCs. Mostly consisting of major distribs, publishers, television networks, video game and advertising companies, the PCs decide how much a film will cost based on expected returns from theatrical releases, television rights and all ancillary businesses, with exports ranking last, as potential icing on the cake.

Any producer relying on a PC has to bend to its decisions. The PC members usually work with their own producers anyway, either based at a network or at one of the major studios. And a loophole in the tax law allows favorable write-offs for PC members who share revenues.

Another major question facing producers who would like to set up film funds are the actual sources of capital.

Japanese banks are saddled with hundreds of billions of non-performing loans and some are on the brink of collapse. None of them has any experience in film financing, as PCs do not need them.

The stock market still hovers near record lows despite a recent slight recovery. Whether the insurance scheme mulled by METI will convince Japan’s financial institutions and private investors to put their money into film funds remains to be seen.

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