BERLIN — A chill is setting on Germany’s once-sizzling private film fund biz that has financed Hollywood mega pics like the “Lord of the Rings” trilogy and “Terminator 3: Rise of the Machines.”
Germany’s federal finance ministry issued a long-awaited media decree this month making it tougher for film funds to raise cash that goes primarily to Hollywood productions.
At the same time, the ruling finally provides clear guidelines on how exactly funds can operate, something that has until now been up in the air.
Much of the industry has been quick to denounce the legislation as unworkable and even detrimental to Germany’s role in international film production, but others have welcomed the clarity and transparency that the new regulations offer.
The new law outlines criteria that private film funds must meet in order for funds to qualify as “production” companies and for investors to be able to write off related costs — the main reason behind the popularity of film funds among high-earning Germans.
Most controversial for funds is the mandatory election of an advisory committee made up of investors (usually people not in the film industry) that will have to approve or reject decisions made by the management. Another doozy: The advisory committee can only be selected after a fund has raised 50% of its targeted volume.
Andreas Konle, finance chief at Internationalmedia, which co-produced “Terminator 3” with Munich-based fund IMF, says that will be tough. “A lot of investors come forward in November, realizing they need to invest in order to get tax advantages. Setting up the board at that point and having it decide on a film project before the end of the year will be a real challenge.”
Konle adds, however, that the approximate $2 billion that flows annually from Germany to Hollywood is simply too important to do without, and solutions are bound to be found. “At least we now know what we’re dealing with, but I don’t see the sense in having dentists and pediatricians deciding on whether a starring role should go to Julia Roberts or rather to a Berlin stage actress.”
For Michael Oehme, head of Germany’s association of film funds and a spokesman for IMF, which is currently backing Oliver Stone’s upcoming “Alexander” for Internationalmedia, the new law means film fund financing as it is currently known will cease to exist.
“What do you do as a fund manager when the advisory board does not agree with the projects you intend to support?” Oehme asks. “With big films like ‘Terminator 3,’ fund managers have to deal with major studios, with international distributors — it would be very difficult to do that if you have to run everything by an advisory committee made up of people who know nothing of the film industry. There are too many questions left open, and this decree will likely have to be reworked.”
For the time being, industryites are putting their faith in creative and savvy lawyers to find ways of legally bypassing the stringent regulations, like the possibility of having advisory committee meetings online or developing open-ended funds with lower provisional target volumes which could be reached much quicker.
The regulations may result in funds doing away with big slates, focusing instead on cheaper single projects or moving into TV production. Others, like Ideenkapital, which is partnering with 20th Century Fox on Will Smith starrer “I Robot,” has decided to quit producing and will instead acquire worldwide rights to film projects.