European fund conundrum

Will studio money make arthouse an afterthought?

LONDON — Art or commerce? It’s the perennial question, and one with which Europe’s public funding orgs are wrestling in the wake of U.S. studios increasing their investments in European films.

European filmmakers have traditionally depended heavily on public subsidies to fund their projects — with the typical complaint that public money tends to focus on arthouse projects unable to find a home in the commercial marketplace.

With U.S. studios now beefing up their local language production outfits in Europe and beyond, however, the role that public funders should play is coming under renewed scrutiny.

Should the public orgs move closer to the mainstream, for example, or has the growing number of more mainstream, studio-backed projects freed them up to fund even more esoteric fare?

The answer, it seems, is both.

“Having the studios more involved in local productions could take the pressure off public funders to deliver slam-dunks,but at the same time the pressure is on everyone to be more commercial,” says Film4 senior commissioning editor Peter Carlton.

Across Europe, public funding orgs are feeling pressure to invest in more mainstream projects.

Spain’s film world, where it is rare to find a film without public coin, has been rocked by two key funding players — pubcaster RTVE and Catalonia’s Institute of Cultural Industries (ICIC) — announcing more commercially minded funding initiatives.

The launch of a Galician risk equity fund, SempreCinema, targeting films with commercial potential has also raised the stakes for arthouse producers.

“t’s very important to balance our objectives of generating an economic return as well as performing a public service,” says TVE head of cinema Gustavo Ferrada.

The reason for this shift to the center ground is simple. Spain produces around 170 films a year. Only a few cut through the distribution crush and really get seen. Entities no longer seem willing to spend money on pics that only a handful of people will ever watch.

The same appears to be true in Italy, with the Italo government changing the way coin is dished out to favor more commercially viable pics. These days producers must put up half the budget, and projects must qualify in terms of box office potential based on the track record of director, scribe and talent attached.

In Germany, primary focus for public funders isn’t a cultural test but whether a project can generate positive economic effect. That was the justification used by the German Federal Film Fund (DFFF) when handing out coin to Roman Polanski and Quentin Tarantino “Ghost” and “Inglorious Bastards” respectively, as well as the distinctly un-Teutonic “Speed Racer” last year.

While U.S. majors like Sony and Universal recently set up local-language production units in Germany, it’s too early to tell what kinds of film they’ve got in development.

The majors have long been involved with German producers as distribution and co-production partners.

Warner Bros. Entertainment in Hamburg co-produced Til Schweiger’s boffo hit comedy “Rabbit Without Ears” with Schweiger’s Berlin-based Barefoot Films, with Warner Bros. also distributing.

The film, which received $3.2 million from regional and federal coin, was basically a product of Schweiger’s production team — it was written by Schweiger and Anika Decker, with Schweiger directing — as opposed to one developed by Warner Bros.

Schweiger’s upcoming medieval comedy “1½ Knights — In Search of the Ravishing Princess Herzlinde,” which he is also directing and starring in, will only be distributed by Warner Bros.

Pic received $565,000 from the German Federal Film Board, $1.2 million from Bavarian subsidy org FFF, $1 million from the Medienboard Berlin-Brandenburg and $425,000 from eastern German film subsidy MDM.

In some countries, studios need to tread carefully. Warners faced challenges accessing public funding France for Jean-Pierre Jeunet’s “A Very Long Engagement.” The studio had to carefully structure a separate French-owned production company that would funnel profits back into Gallic production.

In Russia, public funding commitment to domestic productions runs to some $160 million annually.

A reorganization in the ministry of culture’s film department earlier this year has led to speculation that bigger producers would benefit more in the future, but deputy culture minister Alexander Golutva denies that will be the case. Beginning in 2009 the $160 million available will mostly be available to smaller producers with only $40 million earmarked for the bigger companies, he said earlier this month.

In contrast Denmark has launched a fund, Rafilm, for experimental low-budget pics. Money will only go to films costing less than $2 million that probably won’t reach more than 75,000 admissions. The films are not meant to have a broad, general appeal.

Claus Ladegaard, head of production and development at the Danish Film Institute, says, “Our ambition with Rafilm is to make different films that trek new paths.”

At first glance the studios and public funders might appear to be interested in diametrically different commercial models, but the two parties are in fact more interested in finding common ground, at least in Europe.

“We’re trying to find partners of all shapes and sizes, including public funding bodies,” says Fox Intl. Production prexy Sanford Panitch. “The public funders and studios are collaborating where appropriate. Fox is interested in making commercial films from around the world. I don’t think that is in conflict with making good movies.”

John Hopewell, Ed Meza, Nick Vivarelli, Gunnar Rehlin and Nick Holdsworth contributed to this report.