As U.S. indies struggle, soft money is keeping European productions afloatThe global credit crunch has hurt Europe's independent producers but deep-pocketed state funding bodies, regional tax breaks and recession-proof public broadcasters have significantly cushioned the blow.
Compared with the U.S., where indie filmmakers have traditionally relied on (now virtually nonexistent) private equity, Euro producers are used to tapping soft money for the bulk of their budgets.
Tax rebate schemes like those in Germany, the U.K. and the newly implemented program in France and Italy kick back up to 25% of a project's local spend -- funds producers can use to cash flow their productions. Add in the (almost) free money of federal and regional subsidies, top-up financing from the European Union's co-production fund Euroimages and license fees from the continent's indie-friendly public broadcasters, and it's easy to see why Euro indies are taking the recession in stride.
But not all have escaped unscathed. A recent report by PriceWaterhouseCoopers lists 50 indie U.K. film companies that filed for insolvency in the past 18 months -- with 13 shutting down last winter alone.
"We've seen some impact but there hasn't been this kind of hands-in-the-air, the-world's-coming-to-an-end sort of talk," British film commissioner Colin Brown says. "What has happened, though, is U.K. producers have had to become a lot smarter with their budgets."
Britain has actually seen a slight increase in domestic filmmaking recently, with about 33 U.K. titles produced in the first half, four more than the same period last year.
Brit producers, however, are feeling the financial squeeze. In first-half 2008, the median budget for a British film was $3 million. For local films shot on the island this year, the figure has been $2.2 million.
It's a similar story across the continent. European banks are tightening credit lines, Euro distributors and sales companies are becoming more selective and are shrinking minimum guarantees. From Berlin to Barcelona, London to Lisbon, producers are having to crunch budgets to get their movies made -- but they are getting made.
Karl Spoerri of Swiss-based producer-financier Millbrook Pictures says he has ordered a rewrite on new project, "Barry," a family film about the first Saint Bernard rescue dog, to bring the budget down to a more "realistic level."
"We've lowered our sights a bit. Everything over $15 million-$20 million is difficult," Spoerri says. "And subsidies are key. We wouldn't try any production that didn't have soft money as a part of its budget."
Thankfully for local productions, European soft money has proven rock solid in the crisis. With the very notable exception of Silvio Berlusconi's coalition in Rome, which has proposed a massive 25% cut in film funding, European governments continue to back their local industries, even as they follow Washington in running up massive deficits.
Oscar-winning producer Peter Hermann ("Nowhere in Africa") says finding the $16 million he needed to make "Desert Flower," a biopic of Somalian-born model and human rights activist Waris Dirie, proved "fast and pretty smooth."
"Flower," which will premiere this week at the Venice Film Festival, was set up as a U.K.-German-Austrian co-production, allowing the project to tap subsidies from half a dozen federal and regional funds. By shooting interiors entirely in Germany, while exteriors were done on original locations in Africa, London and New York, the project also qualified for Germany's tax break scheme (the DFFF).
Hermann believes the current economic crisis actually puts European producers at an advantage because "most of our financing sources haven't been touched by the crisis."
But that could still change. Producers are nervously eying such territories as Spain, where a bank crisis and housing collapse have helped push the unemployment level close to 20%; or Iceland, which is fighting to keep its (tiny) film industry from vanishing along with its devalued currency.
For the moment, however, the continent's independents remain safe behind the subsidies of fortress Europe.