State support remains the key pillar of Russian film finance, but big changes in the way money is distributed and new opportunities for international co-productions is fast changing the production landscape.
In a country where Hollywood blockbusters dominate the cinemas and box office broke through the $1 billion barrier last year, change is ripe for film finance.
The state funding system channels money through the culture ministry for projects deemed to be of national cultural importance and films for children and young people, debuts and artistic and experimental films and documentaries.
Last year $35 million was spent from culture minstry sources on 54 features, although only 23 of those have yet been released. Box office returns for those films are currently around $3 million.
Feature film subsidies — paid out through a new body, the Federal Fund for the Social and Economic Support of National Cinematography, also known as the Cinema Fund — totals just under $73 million and is distributed through eight leading production companies. The fund supported 60 features in its first full year of operation last year, seven of which have been released.
The fund is designed to channel money to top producers who can then work with other producers to create a cascade effect for the funding, but has met with criticism.
Olga Mirimskaya an investment banker who is chair of the board of Corporate Finance Bank — and a speaker at the Film Finance Forum Moscow presented by Winston Baker in association with Variety — says film financing in Russia remains “a very immature market, broken down into relatively primitive government funding and private financing.”
The state soft money system is, she says, “completely dysfunctional, with government funding leading to further vertical integration among the large players as opposed to creation of an independent film production infrastructure.”
Designed to help push funding throughout the industry, it has instead concentrated it.
“Instead of providing services to outside firms, the ‘top 8 (producers)’ are focused on proving to the government that they adequately spent all the monies and coming up with reason for why they would need to be given more. As there are no significant regional funds, tax credits or other programs; unfortunately, all of the support the state does provide is not helping the industry develop,” Mirimskaya says.
It’s not all gloom: Mirimskaya, whose Corporate Finance Bank is one of the few banks actively involved in film finance in Russia, sees opportunities for developing a more sophisticated market.
Commercial banks in Russia tend to prefer lending against material assets rather than intellectual property and generally charge interest rates of around 30% for loans to producers. The lack of an effective system of film completion insurance also hampers funding prospects.
“In everything that we currently find challenges, we also see future opportunities,” Mirimskaya adds.
• Russia’s open-door policy