New Russian culture minister backs tax on foreign films

Vladimir Medinsky, the short, bespectacled, soft-spoken historian appointed in May by Vladimir Putin as Russia’s minister of culture, does not look like a man who could threaten Hollywood’s interests in the region.

But Medinsky, now in charge of Russia’s $170 million Cinema Fund after what many in the local film industry regard as a palace coup, is determined to steer more Russian state coin to a greater number of commercially viable homegrown pics, and grab marketshare from the Hollywood hits that dominate the territory.

With the 2012 local box office hitting a record-breaking $1.24 billion — 8% higher than 2011 — Russia is a big market for Hollywood. The territory’s top five films last year, led by “Ice Age: Continental Drift’s” $50 million, are from U.S. studios, which account for approximately 60% of the total box office; Russian films took an 11% share, with the top local pic last year, love story “Soulless,” grabbing $13 million (on a budget of less than $3 million).

The United Russia party, which is loyal to Putin and dominates the lower and upper houses of parliament, wants at least one in every five movies shown in the region to be homegrown. The party also wants to lift value added tax (VAT) exemption from foreign films — adding 18% to exhib and distrib costs — and impose fines of between $3,000 and $12,000 for non-compliance.

Those changes are being discussed by lawmakers in the new parliamentary session, which reconvened Jan. 13.

Medinsky believes that by encouraging Russian producers to make more commercial films on a specific range of subjects, he can use state money to improve the box office of Russian films. A list he circulated to government officials last month specified 12 “socially relevant” topics that should be prioritized for state funding. It included war films, historical costume dramas and those devoted to commemorating national events, such as the 400th anniversary of the Romanov dynasty in 2013.

Some worry that will herald a return to the Soviet system of films made-to-order, and do little to improve box office. Sergey Lavrentiev, a film historian and festival programmer, says the same sort of approach practiced in Soviet times created hundreds of such films.

Others are more blunt. One leading producer told Variety: “The list of topics prove the Ministry of Culture is becoming the Ministry of Propaganda … and they are only proud of it.”

Recent box office numbers suggest Russian moviegoers are tired of films that glorify the nation’s past: Oscar-winning director Nikita Mikhalkov’s “Burnt by the Sun 2,” released in 2010, cost $55 million to make but took just $7 million at the box office. This year’s $5 million budget costume drama “1812: Ballad of the Uhlans” flopped, earning just $1 million in its theatrical release.

In late November, Medinsky assumed overall control of distributing government coin to major film producers, running Russia’s international movie promotion apparatus and supporting international co-productions. Until then, his ministry had been in charge of a $25 million budget restricted mainly to funding youth films, experimental projects, documentaries, animation and participation in international film festivals.

Most public film funding — around $90 million — has been channeled through the Russian Cinema Fund, set up in 2009 to distribute money to a group of leading Russian production companies, and to support international co-production. Much of the money for the fund came from the Ministry of Economic Development — regarded as more liberal and market-oriented than the culture ministry, which favors centralized control and is more ideologically bound to the Kremlin.

That system, which replaced an earlier scheme run by state film body Goskino that doled out funds on a project-by-project basis, was designed to prime the market for Russian movies by encouraging the big production companies to make domestic tentpoles.

A group of first eight, and later 10, major companies shared an annual kitty of $64 million.

But Medinsky, backed by Kremlin ideologist and deputy prime ministry Vladislav Surkov, says figures show that expenditures rose as box office share for those top companies fell: from a share of 8.7% in 2010 to 7.5% this year.

Although films like “Vysotsky — Thank God I’m Alive,” a lavish $12 million biopic on Soviet-era singer songwriter Vladimir Vysotsky, produced by Kino Direktsya — one of the favored companies — minted $28 million, most Russian movies failed to cover their budget: In 2011, only 10 out of 63 local-language releases made any money. Film funds and support offices in Poland and the Czech Republic told Variety that few publicly funded films cross a threshold at which grant money is returned, but specific figures are not kept.

Medinsky’s ascension puts Russian state film funding under the auspices of a man whose only previous related experience was as chair of a parliamentary culture committee. It’s a shift that has left many in the Russian film industry unsettled.

“I am afraid that it will be almost impossible for independent producers to access state funding for international co-production projects through the Ministry of Culture,” says producer Yevgeny Gindilis, whose films include Vladimir Kott’s “The Fly” and Dutch director Jos Stelling’s “Duska.”

Gindilis views the new developments as the disruption of a system that had started to support international co-operation via the Cinema Fund and other initiatives.

“The main problem is that the Ministry can’t interact properly within the European system of film financing,” Gindilis says. “It was always the case before 2009, and there are no signs that the Ministry can do it now.”

Fears that the international activities of the fund would be dismantled were stoked when Medinsky, in a meeting with a hand-picked group of foreign journalists, suggested that co-production coin might dwindle under the new system.

Looking confident and relaxed at the Nov. 22 presser, Medinsky insisted that Russian state money should go only to approved projects, and that coin should be spent within Russia.

“If a film is a commercial product, you can make whatever film you want — we do not have censorship,” Medinsky said. “If you want money from the state, we have to know what is in that film, what it is about.”

But the Cinema Fund itself set out to smooth anxieties two weeks later, when it announced that co-productions would remain a feature of the new system. Production support worth a total of $6.5 million for eight co-prods, including “A Month in the Country,” a Russian-German project starring Ralph Fiennes, was announced at the time. On Dec. 18, it was announced that the Russian Cinema Fund had joined European Film Promotion, an organization that unites 35 promotion bodies from 36 countries to market Euro films and talent; EFP is funded by the European Union’s Media Program EFP member orgs.

Alexey Guskov, who co-produced German director Achim von Borries’ “Four Days in May,” maintains that producing commercially successful films — including co-productions, is still the Cinema Fund’s goal.

“Thanks to an agreement between Germany’s largest film-support funds and the Russian Cinema Fund, all my problems with co-production between Germany and Russia were solved in three months,” he says.

Others are less sure of the long-term picture.

When approached by Variety for comment, key figures in the Russian film industry — those in receipt of state funds and those involved in purely commercial ventures but closely connected to the Kremlin, declined to talk.

One senior figure simply says: “This topic is a little bit too hot to handle for me now.”

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