Soft money helps drive co-prods across Continent

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Backlots aren’t just for filming anymore. After years of being passive providers, studios have suddenly become active producers, eager to forge international partnerships as they seek cooperation rather than competition in a quickly shifting market.

In February, Germany’s Studio Babelsberg and Studio Hamburg both unveiled unprecedented pairings, Babelsberg with Paris sales-production shingle Celluloid Dreams and Munich-based equity investor Clou Partners, and Hamburg with London’s Pinewood Studios.

At the crux of both alliances is Germany’s generous film incentives — federal and regional subsidy coin amounts to some $360 million a year — which has not only galvanized local filmmakers but continues to attract major international talent to the country. Included in that figure is the $80 million-a-year German Federal Film Fund (DFFF), which offers up to 20% tax breaks to international shoots lensing in Germany.

Studio Babelsberg inked a co-production deal with producer Joel Silver’s Dark Castle in 2008 that provided equity financing against a share of the profits generated by the shingle’s current slate, which includes two recent productions that shot at the studio, Jaume Collet-Serra’s “Unknown White Male,” starring Liam Neeson, and Todd Lincoln’s “Apparition.”

Likewise, Roland Emmerich’s Shakespeare drama “Anonymous” has nabbed $8 million from federal and regional subsidy orgs. Studio Babelsberg is co-producing.

Joe Wright’s thriller “Hanna,” starring Eric Bana and Saoirse Ronan, just began production at Babelsberg and is also expected to land local coin.

In view of the current state of the credit markets, however, those types of deals are no longer possible, says Studio Babelsberg CEO Charlie Woebcken.

“The kind of equity deal we did with Dark Castle is more difficult today. There’s no debt financing available.”

Woebcken had been in talks with other Hollywood producers to ink similar agreements, but those will likely have to wait until 2011.

Yet Germany’s generous subsidy funding has allowed Studio Babelsberg to continually bring soft money to the table.

Silver’s “Unknown White Male” just secured an additional $280,000 in backing from the DFFF after already having received nearly $5.3 million from the fund, in addition to another $600,400 from regional office Medienboard Berlin-Brandenburg.

TheManipulators will insure yet more productions at Babelsberg. What sounds like a crack team of chiropractors is actually the cross-border production entity launched by Babelsberg and Celluloid Dreams and based at the studio in Berlin’s neighboring city of Potsdam.

Subsidy coin has also helped make ventures like TheManipulators possible. In addition to providing Babelsberg with access to the French production market, the strategic alliance allows 100% funding for joint projects, says Woebcken.

“Co-productions can receive soft money from us, gap financing from Clou Partners and marketing and distribution through Celluloid Dreams,” says Woebcken. “We’re taking a long-term strategic view rather than just going project by project.”

The venture’s first endeavor is “Waiting for Azrael,” Academy Award-nommed Marjane Satrapi and Vincent Paronnaud’s live-action follow-up to “Persepolis.” Pic is an adaptation of Satrapi’s graphic novel “Chicken With Plums,” which chronicles the life and death of her great uncle, a renowned Iranian tar player who decides to die after his wife destroys his beloved instrument.

Toplining Mathieu Amalric, the French-language “Azrael” will shoot this summer at Babelsberg.

The new partners aim to produce medium- to larger-budgeted European and international co-productions, according to Celluloid Dreams founder Hengameh Panahi, who adds: “We’re aiming on creating a film financing facility powerhouse which can aid producers.”

Panahi points out that the joint venture bridges two very important production hubs.

Both Germany and France boast production expertise, private equity, tax and soft money and strong markets.

The new shingle, headed by Studio Babelsberg’s Woebcken, Christoph Fisser and Henning Molfenter and Clou’s Tosten Poeck, already has a “handful” of films in the works.

Woebcken says TheManipulators allows for an expansion of operations that includes distribution and financing avenues.

Likewise, Studio Hamburg and Pinewood’s joint venture ensures more international feature film production in Germany by allowing foreign filmmakers to take advantage of the studios’ joint infrastructure and services there as well as in the U.K.

The newly created Pinewood Studio Berlin Film Services will have access to Studio Hamburg’s production and studio facilities in Hamburg and at the Berlin Adlershof complex as well as those of Pinewood, which include Shepperton and Teddington Studios.

It also opens the doors for Pinewood productions to access German coin.

“The DFFF is a generous and attractive fiscal incentive and was a very important point in the decision-making for the partners,” says Pinewood Studios Group CEO Ivan Dunleavy, who has indicated that Pinewood has lost some productions to German competition in the past.

The alliance, Dunleavy adds, will result in more cost efficiency and greater opportunities for filmmakers.

In the state of Saxony-Anhalt, politicos have been eager to get in on the action, and the state government is offering bank guarantees to lure major projects.

Regional film board Mitteldeutsche Medienfoerderung (MDM) recently increased its annual film support budget to nearly $18 million for pics shooting in central and eastern Germany, including Saxony-Anhalt, Saxony and Thuringia.

Leipzig-based MCA studios has converted part of an exhibition center in the nearby city of Halle into a soundstage that has served a number of recent productions, including Olivier Assayas’ upcoming terrorist biopic “Carlos the Jackal.”

While Bavaria Film is largely focused on TV, it too is eager to expand theatrical production. The group’s production shingle Bavaria Film Partners has joined Diplomat Films on Kevin Costner and Kevin Reynolds’ latest pic, “Learning Italian,” a spy comedy set to shoot at Bavaria Film Studios and around southern Germany. Pic has received $1.5 million from regional funders FFF Bayern and the Bavarian Bank Fund and will likely be eligible for a tax rebate.

With the industry booming in Germany, it’s not surprising studio bosses in Central and Eastern Europe are eyeing the Teutonic model with interest as they search for ways to remain competitive.

Execs at Prague’s Barrandov Studios say they are keen to co-produce with Babelsberg or other German studios.

“The (German) federal funding program certainly makes Germany more attractive for international production,” says Jan Macola, Barrandov’s head of marketing. “Therefore, Barrandov Studios intends to find a partner for a long-term cooperation there.”

Nevertheless, Macola points out that several international productions are set to shoot the Czech Republic in the next year, adding that Prague is still considered to be one of the most attractive locations with highly professional infrastructure: “The only thing we are waiting for is the final approval of the 20% rebate.”

Despite the extremely competitive environment, Macola says Prague and the Czech Republic retain their location advantages with buildings and scenery that could “replace most European cities and countries.”

In Romania, flexibility is seen as the key to riding out the current economic chill.

At Castel Film Studios in Bucharest, a trend towards more European business is noticeable, although U.S. productions still represent the majority of the projects the studio attracts, marketing director Bogdan Moncea says.

“Castel Film has expanded the core business, which now include a more significant co-production element rather than just service providing,” Moncea says. “This is part of our strategy of offering our clients more advantages and incentives in coming to us. Romania being part of the European co-production treaty and a member of the E.U. is of course more interesting now for European productions.”

Castel is “open to any kind of partnership or collaboration,” he adds, along the lines of the German model or “even a potential investor in the company.”

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