Report shows drop in B.O., plex building

The recession is taking a bite out of the once-overheated Russian film biz, according to a new report from the European Audio-Visual Observatory.

The report — due to be presented to Russian film industry executives Dec. 1 at Moscow’s 80th international film market, Kino Rynok, by Observatory executive director Wolfgang Closs — shows that although box office is still growing, the film biz as a whole is threatened by the impact of the global economic crisis on other industry sectors.

The report shows that rapid recent growth in Russian box office receipts, which grew an average of 32% annually between 2004 and 2008, had been based on an expansion in the number of modern screens — which has grown at an annual average rate of 24% since 2004 — and a boom in popularity of cinema as average incomes rose. But although the 2009 B.O. may continue to grow, the big boom may be over, as the rate of new cinemas being built is declining, and the local currency has been devalued.

By the summer of 2009, Russia had 1,949 modern screens in 756 sites with more than half located in shopping malls or entertainment complexes.

“Growth shows signs of slowing as the economic recession curbs commercial construction and as major urban centers reach screen saturation,” the report says.

Digital cinema and 3D exhibition — which has spurred strong growth in box office where it has been introduced — is a small but growing part of Russian exhibition that offers hope for the future. More than 160 digital screens — 8% of the total — have been opened in the past three years, with a quarter concentrated in Moscow.

But local production is in trouble.

Domestically produced films have contributed strong growth since 2004, when fantasy sci-fi movie “Night Watch” broke box office records. In the five years between 2004 and mid-2009, investment in local television and movie production totaled some $2 billion. Slightly more than half that figure went into television films and series.

But as they have in every other part of the world, sources of funding have dried up: the Ministry of Culture, a major investor in local production, froze the financing of all new projects this year, instead channeling available money into the completion of existing films, while national television channels have cut back on production and the prices they pay for rights.

“Changing conditions have sparked consolidation among production companies, and concerted efforts have been made by the newly created Assn. of Film and TV Producers to contain spiraling production costs. In the services sector, plans for the construction of new studio space have been postponed or canceled, and existing facilities are operating below capacity,” the report says.

Russian producers and studio chiefs have reacted by trimming budgets, forcing down wages and fees for crews and stars and by being much more selective in choice of projects.

In June, Russian World Studios launched a $20 million fund to kickstart up to eight commercially viable but cash-strapped projects over the next year and half.

The fund would help projects at any level of development or production.

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