Czechs and Balances

The film sectors in Central Europe have been making gains in recent years.

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MOSCOW -- The film industries of Poland, Hungary and the Czech Republic have been doing pretty well for the past few years.

Strong government funding programs -- complemented by cash from the private sector -- have helped the three fledgling industries avoid major trouble because of the ongoing economic crisis. But lately, private sources of cash for the industry are beginning to dry up and fewer foreign shoots have meant a decrease in business for local service providers.

Major issues differ from country to country. The situation looks a little more stable in Poland, where a new film law was introduced two years ago, making the local film industry almost completely independent of state budget vagaries. In accordance with the law, 1.5% of profits made on any film is paid into a special public fund, managed by the Polish Film Institute. Today, 90% of all public sector funding for the industry is coming from that fund rather than the greater state budget.

In the Czech Republic, the collapse of Prime Minister Mirek Topolanek's government in late March became an obstacle in the path of a planned tax incentive system for foreign productions. For years, the Czech Film Commission had been pushing for the introduction of a tax rebate for filmmakers. Last summer, the finance ministry failed to support a proposal stipulating a 20% tax rebate on production expenditures in the Czech Republic, and work on a new, revised proposal in cooperation with the culture and finance ministries came to a halt after Topolanek's government resigned.

Meanwhile, the Hungarian film industry is hoping to profit from a tax incentive system adopted last summer, but the negative effect of the global meltdown on the film industries of Western countries makes the prospect of providing services to foreign crews increasingly uncertain.



Poland

Thanks to the new film law, the system of public funding for the film industry in Poland hasn't suffered, says Maciej Karpinski, deputy director of the Polish film Institute, which administers public-sector support for the national film industry.

"We are lucky in comparison to our neighbors in Central Europe," he says. "The budgetary cuts which the Polish government imposed lately, have not affected the film fund, which was formed with proceedings collected last year."

And hopes are high that revenue from ticket sales will remain steady, proving the old wisdom that people to turn to cinema as a diversion at a time of a crisis.

"Paradoxically, the market situation is very good," Karpinski says. "It is typical for every type of a crisis that people go to the movies more ... to forget about their problems, and it's the same in Poland. Every weekend of this year has brought a new boxoffice record. Every week has been better than the previous one, especially for Polish films."

In fact, two local titles sit atop the boxoffice leader board for 2009: Bruce Parramore's musical "Kochaj i tancz" (Love and Dance), and Rafal Wieczynski's "Popieluszko. Wolnosc jest w nas" (Popieluszko: Freedom Is Within Us). Wieczynski's biopic tells the story of Father Jerzy Popieluszko, the priest called "The Solidarity Chaplain," who was murdered by the communist secret police in the mid-1980s.

Meanwhile, 130 million Polish Zloty ($38.1 million dollars) will come from the public sector to fund local production -- but that may not be enough.

"We expect that in some cases, especially with higher-budget projects, producers will be able to get financing from us, but then they may have serious problems with putting together the rest of the budget," Karpinski says.

According to Karpinski, what is happening in the private sector is a bit more alarming. Facing a decline in advertising revenue, privately owned television channels, which until recently have been the second major source of funding for theatrically released movies, have substantially reduced investment in features.

Private film producers that have sources of income outside feature film production are finding themselves in a better position.

"Maybe the tsunami is slowly coming towards us," says Ewa Puszczynska, head of development at Opus Film. "But so far, we haven't really been hit by the crisis. Maybe one of the factors that are helping us to go through the crisis is that we also have a commercial division that produces TV ads. It sometimes helps with the cash flow and you can borrow money for a feature production from the ad department."

Another option on Polish radar screens is co-productions. "In October, the shooting of the movie 'Devil's Island' begins in Poland, Norway and Estonia, in which we are a minor co-production partner," Puszczynska says.

But because of a downturn in many country's film industries, finding co-producers abroad often becomes a challenge. "While previously, foreign producers came to us having their cash ready and the difficult part was coming up with local funding, now the situation is almost the opposite," Karpinski says. "There is still money in the public fund in Poland, but problems start when it comes to finding financing from, say, a German, Canadian or British fund."

Recently, the Polish Film Institute has provided funding to several co-productions, including Krzysztof Krauze's Africa-set "The Birds Are Singing in Kigali," Andrzej Bartkowiak's "Street Fighter: The Legend of Chun-Li," Agnieszka Holland's "Hidden" and the Polish/Finnish project "Mannerheim," directed by Renny Harlin.



Czech Republic

Back in the 1990s, Prague was arguably the first place in Central Europe discovered by Western film crews as a shooting location, thanks to relatively well-equipped facilities and inexpensive qualified personnel. But as more and more countries in Europe adopted tax incentive programs for foreign crews, the Czech Republic found itself in a less advantageous position.

"In this world, where everyone has to have an incentive, some think that if the Czech Republic doesn't have one, they shouldn't go and shoot there," complains Ludmila Claussova, director of the Czech Film Commission, which for the last few years has unsuccessfully tried to get a tax incentive scheme adopted in the country. "Still, if you compare Germany, which has tax incentives, and the Czech Republic, which doesn't, we are on the same level, and you can still get good prices in Prague without tax incentives because a lot of things are cheaper, like labor and set construction."

And a tax rebate system is unlikely to come into force earlier than next year, as an interim government, which replaced the collapsed government of Prime Minister Mirek Topolanek, won't be in the office for more than several months and is considered unlikely to deal with such minor issues as tax rebates for filming.

Still, the Czech Film Commission is not yet losing hope. "A wonder may still happen," Claussova says. "This new government will consist of new people, and they may not have many pressing issues to deal with. Since they are in the government for only four or five months, they won't do big things, like reforming the pension system or the health care system. For this tax incentive legislation, you don't need to change much, so they may want to do it. We will try to sell it to them somehow. But it's clear that no changes will come into effect earlier than next year."

Meanwhile, local production is doing relatively well, boosted by an increase in state funding adopted two years ago, under which governmental support for the industry increased from about $5 million a year to $12.5 million.

"When we talk about local production, I don't see any crisis," Claussova says. "About 35 Czech films were made last year, and we will have roughly the same number of Czech releases this year. But there are fewer foreign productions in Prague because of the global downturn."

Meanwhile, Czech companies involved in providing services to foreign crews claim they have yet to be severely hit by the crisis. "The economic crisis has had an effect on just about everyone," says David Minkowski, head of film production at Stillking Films, a Prague-based film producer and service company. "(But) We have taken it as an opportunity to find new partners and expand our relationships with filmmakers in places such as Japan, India and the Middle East."

Minkowski adds that his company has just completed work on the TV series "The Philanthropist" for NBC Universal and begun principal photography for "Masterwork," a TV pilot for Fox, while a Japanese film called "Nodame Cantable" is in the preproduction stage.



Hungary

Despite the global economic crisis, the Hungarian film industry expects an increase in the number of foreign film crews shooting in the country, thanks to last August's adoption of amendments to the national film law, amendments that guarantee 20% cash back to international productions filming in Hungary until 2012.

Last year was a bad one for Hungarian service companies. A legal conflict between the nation's film law, adopted before the country joined the EU in 2004, meant the tax incentive scheme as it existed at the beginning of 2008 was illegal. And things were only compounded by the Hollywood writers strike.

"The global financial crisis has come on the heels of the writers strike and the de facto actors strike, resulting in a very slow 2008 for the entire film industry, and a slow start to 2009," says Diana Vogel, deputy CEO and director of marketing at Korda Studios.

The legal issue was finally resolved in late August, but by then, the global economic downturn was deepening. Still, people in the Hungarian film industry believe the country will still be able to attract foreign film crews.

"In 2008, we had a substantial decline," says Miklos Taba, director of the National Film Office. "Production was becoming more expensive due to the exchange rate of the forint (Hungary's currency), and there was a strike of the Hollywood writers and a legislative problem. But I hope that this year will be better for the service segment."

"After a decline in 2008, we see the trends reversing, and expect the results to be fully felt next year," Vogel adds. "We have noticed once again a high international interest in productions coming Hungary, and it appears that Hungary is once again on filmmakers' radars."

Over the last few years, foreign crews brought substantial cash resources to the Hungarian film industry. In 2007, the latest data available, they spent 56 billion forint ($240.8 million), according to the Motion Picture Public Foundation of Hungary (MMK). But governmental funding, administered through the MMK, remains the primary financing source for local film production in Hungary.

At the beginning of the year, there were concerns that budget cuts might keep the government from allocating the previously agreed to funds. Still, the cash was eventually provided in the amount of 5.42 billion of forints ($23.3 million), MMK spokesperson Kata Olah said.

One prospective area of growth for the Hungarian industry is co-production. Recently, Hungary signed a co-production agreement with the Irish Film Foundation and it already had agreements with Germany, France, Italy and Canada. In 2008, the value of Hungary's co-production market increased to 24 billion forints ($103.2 million), up from 17 billion forints ($73.1 million) a year earlier.
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