Investors to scrutinize each step in production
BERLIN — Since 1997, German media funds have raised some $8 billion. Hollywood got the loot, the Teutonic tax office didn’t. Finally wising up, the government amended the law Jan. 1. “It’s now much harder for German funds to invest in U.S. films,” says Siegmar Pohl, head of German media at law firm Hammonds. “In the future, funds will have to fulfill more stringent requirements.”
The most important one is the advisory board, requiring the investors to take a more entrepreneurial role by playing producer.
The boards, comprising investors, must now make substantial decisions on all steps in the production process including selecting the story, script, main cast and director — in other words, act like a real producer.
The fund isn’t allowed to use the board to simply rubber-stamp its decisions, or make any without the board’s approval.
For months, changes have been at the discussion stage, hampering the launch of funds, and the media community feared the worst: that new regs would freeze out U.S. producers, or set a minimum German spend percentage.
Despite what appears to be a nightmare scenario for filmmakers, the new law has received a general welcome from the moneymen, partly because a decision had finally been made.
Michael Oehme, head of the Assn. of German Media Funds, is happy the uncertain legal situation is settled and new funds can now be established. Tax lawyer Christof Schmidt sees the changes as improving transparency.
At the same time the funds are adapting.
Gerd Kochlin, director of production, development and acquisition at Equity Pictures foresees readjustment and rethinking, but no hindrance.
“Up to now we were our own advisory board. What we will do in the future is to make the selection process even earlier,” he says.
VIP Vermoegensberatung Muenchen CEO Andreas Schmid is setting up two advisory boards, the second composed of three to five experts to advise the first, the investors.
Some funds have had to change their business model.
Alfons Geiger, marketing topper at Hannover Leasing, says, “The classical leasing funds are no longer attractive so we’re now sticking firmly to the entrepreneurial model of the new guidelines.”
Ideenkapital Media Finance’s Christian Middelberg, who topped its Mediastream 4 fund, says, “It’s not certain we’ll use this model for Mediastream 5. We’re still discussing structures.”
Cinerenta CEO Eberhard Kayser says he is waiting to see. “We have various possibilities. We could even move away from the German tax-financed model.”
Although so-called blind pools (funds not preassigned to any titles) are among the production funds that are still allowed, P&A funds and equity financing could gain in importance.
Funds report that, so far, their U.S. partners have yet to run for the hills. That’s unlikely too, says Wolfgang Esenwein, CEO of Studio Hamburg World Wide Pictures. “Hollywood’s famous for adapting to the requirements of money sources.”
Among the other things Hollywood now has to live with, says Hammonds’ Pohl, “is thatfunds have gained experience and expertise: They will use it and really start to negotiate.”
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