With B.O. on rise, co-productions, incentives mulled

MOSCOW — Right now, Russia is the new China. With a surging box office that shows no sign of slowing, a busy production sector and a proliferation of billionaires, it has become irrestible to global players in the entertainment industry.

But, like China, piracy, the lack of a transparent film finance infrastructure, red tape and a dodgy government make Russia a risky place to do business.

“There are very few co-productions here, because in Russia, things are very vague,” says Russian-born Anna Kokourina, VP of production at Twentieth Century Fox Intl. Prods. “To this day, I have no idea who I (need to) go to; what I need to do to get (government) money,”

Kokourina, who has produced wholly Russian-language movies in Russia for Fox, has yet to venture into English-language international co-productions here.

But new players are looking at private money as the key to the Russian market.

“There is a lot of money here. The idea is to develop participation with investors who see how they can make a profit in the movie business,” says Harris Tulchin, who exec produced “The Devil’s Double,” at St. Petersburg’s inaugural Kino Forum, an international film festival that unspooled in early July. Tulchin says private money and interest is abundant — but that the government needs to incentivize such investment.

Tulchin says there is no need to seek public money, but rather a need to give wealthy investors a reason to put a portion of their portfolio into a slate of movies.

He acknowledges that films are a high risk investment, but believes Russia is ripe for backing film slates, where risk can be balanced across a number of films.

Hollywood’s plea is not being ignored. Sergey Tolstikov, head of Russia’s national film fund, is planning to lobby for tax incentives to increase the attractiveness of the country as a location for international productions and co-productions, saying it’s time Russia stepped up to the international level.

Tolstikov says the Kino Fund — which distributes around two-thirds of the $175 million of public money earmarked annually for Russian filmmakers — is drawing up plans for tax breaks and other financial incentives.

“It is important to introduce rebates or incentives (similar to those) in Europe and individual states in America,” Tolstikov says, adding that incentives would be aimed at “inter-national producers in Russia in order to attract more movie productions.”

City leaders in St. Petersburg, where a government office has been set up to deal with shooting permits, hotel discounts, security and red tape, also say they are looking to create local tax breaks.

Alla Malinova, the city’s deputy governor, says grants worth $1.5 million a year had already been introduced to support children’s films and local directors. That figure was expected to rise to more than $2 million next year.

Regional tax incentives are to be discussed after parliamentary and city elections scheduled for December have taken place.

“We’ll work with the government of St. Petersburg to create a very modern, European cinema,” Malinova says. “Tax incentives will soon be on the agenda.”

Manilova adds that reconstruction of the city’s Pulkovo airport, the region’s status as a free-trade zone and “a very tough anti-corruption program” combined to make St. Petersburg a film-friendly city.

The moves are part of a window of opportunity opening up in Russia where, thanks to Hollywood blockbusters, box office broke the $1 billion barrier last year. But co-productions remain the exception rather than the rule.

A series of developments this year — starting with Russia joining European co-production club Eurimages, as well as a co-production agreement with Italy and one pending with Germany — have increased interest from foreign producers and financiers.

Also more accessible are private investors and the funds that are beginning to emerge to attract their money, such as one recently launched by Russian investment bank Troika Dialog and director-producer Timur Bekmambetov’s Moscow production company Bazelevs.

Leslie Sheldon, company founder and managing director for London’s Forrest Motion Pictures, established to do business in Eastern Europe, says his shingle is looking to partner with Russian filmmakers, and is seeking local financing for a transglobal film fund “to link U.S. and U.K. opportunities with Russia and the Russian market.”

Forrest is aiming to raise $100 million, Sheldon says. “We are keen to share knowledge, experience and contacts with Russian partners to open up and showcase Russian talent and facilities to British and American filmmakers and Western audiences.”

The company wants Russian partners interested in planned investment and strategic growth with medium- to long-term results, Sheldon says.

Although much financial infrastructure still needs to be established in the region, Graham Taylor, head of WME Global, says the opportunities still outweigh the challenges.

“Russia and the former Soviet countries (constitute) such an important market both creatively and financially, that it is important to spend time here to understand the inner workings of the (territory) and Russia’s role in the global film economy.”

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