For a Few Dollars More
A stronger dollar is sending American filmmakers abroadSince it began aggressively seeking movie and TV business nearly five years ago, the 226-year-old Bank of Ireland has provided structured film financing for such features as "Michael Clayton," "Match Point" and "The Painted Veil," as well as dozens of independent English and European productions.
That all ended abruptly in February, after the Dublin-based institution revealed it faced huge losses on its loan portfolio, which led to an Irish government bailout to the tune of billions. As a result, says Bank of Ireland spokeswoman Anne Mathews, "The bank intends to exit from film finance."
This is just part of the fall-out from a global financial crisis that has sent shock waves through the movie business, especially impacting independents.
"I have never experienced a market like this," says Michael Ohoven, CEO of Infinity Media and producer of "Capote," "The Human Stain" and "Just Friends." "The presales market is down by probably 40%-50%, so it's very hard to get any presales. And if you get a presale, banking is a whole different scenario. Getting a gap (loan) for a one-off production is almost impossible."
"It's definitely affecting the indie space," says Ingo Vollkammer, principal and co-CEO of Leomax Entertainment, a film finance and independent production company. "Certain movies are completely falling out of the market, especially anything that is small and has no essential cast attached, that has no distributor in place."
For those promoting their city or country as a place to make movies, the economic crunch is the latest setback. "We've had a whole suit of problems," says Sue Hayes, film commissioner for Film London. "We had the dollar against the pound, the writers strike, and now this crisis."
Hayes says after a banner year in 2007, foreign investment in movies made in the U.K. fell 35% last year and the outlook for 2009 remains cloudy. It has changed the way she approaches her job: "You have to be much more proactive."
Even then, having great locations, studio facilities and experienced crews may not be enough. "What I'm seeing right now -- that I haven't seen for the longest time -- is that, in the independent market, everything now is about chasing soft money and chasing subsidy money," Ohoven says.
Soft money means finding production locations where the government will kick back cash or tax credits, and provide free locations and services, which lowers the film's cost.
"For an independent company, the incentives are the most important," says Boaz Davidson, a producer and head of production for Nu Image and Millennium Films. "We don't go to shoot in a country because they have a beautiful mountain. We go there because it's affordable."
Nu Image makes movies all over the globe, including its large studio facility in Bulgaria acquired about three years ago, where "The Black Dahlia" and "Day of the Dead" were made. "We are shooting back to back there all the time," Davidson says. "We have developed a base of local filmmakers and crews. Through the years we have educated a lot of people so now we have great crews there, and salaries are much lower than, say, London."
Mark Gill, CEO and co-founder of the movie finance, production and sales company the Film Department, says today there are four key elements in choosing where to shoot a movie: "The incentives are crucial. The currency is crucial. The established crew base is really important ... And finally, the cost of the crew."
A year ago, adds Gill, the weak dollar made it nearly impossible to shoot outside the U.S., which was a benefit to such states as Louisiana, Michigan and New Mexico, which offer generous incentives. "With the dollar getting stronger, it tends to make things tip more toward going overseas again," he says. "Now we look at Canada more, at Eastern Europe, South Africa and so on."
For countries where there aren't a lot of incentives, location shoots have all but stopped. That is the case in Korea, says Kevin Kang, operations manager for the Asian Film Commissions Network, based in Pusan. "Definitely it affects (foreign) productions coming here," he says. "Compared to last year, it's very weak."
Fluctuations in the value of currency also are a factor. For instance, while GK Films made the Emily Blunt starrer "The Young Victoria" in London in 2007 because producers Martin Scorsese and Graham King wanted authentic locations, "It was the worst exchange rate in 20 years," co-producer Denis O'Sullivan recalls. "When we were in preproduction, there was a week when I went to bed one night and woke up the next morning and -- because of the fluctuation -- our budget increased by about $200,000 with nothing having changed in the budget itself."
O'Sullivan says they did consider a currency "hedge," where the producer either makes an agreement with a bank that sets a value for the currency in advance but pays a stiff fee, or buys all the local currency they will need in advance. In this case, O'Sullivan says, the decision was made not to hedge or buy ahead, but to "ride out the fluctuation" because "they thought it would kind of even itself out." It didn't.
While Eastern Europe can cost less, the currency fluctuations can be even more difficult to manage. That's what happened in Romania last summer during production of the action thriller "Bunraku," starring Josh Hartnett and Demi Moore. "It was very hard to hedge between dollars and the Romanian currency," producer Keith Calder recalls. "While we were shooting the Romanian currency got stronger against the dollar and we did take a hit."
Of course it can work the other way, too. Vollkammer says they normally buy all the local currency in advance to insure costs are fixed, but not always. "We've actually speculated on certain currencies," he says, "and actually made more money on the currency than we did with the eventual movie."
Producer Judith James recalls that before shooting 2006's low-budget movie "The Forest" in India, she studied the currency situation during the five previous years to figure out when to convert her investor's dollars and pounds into rupees. "I made a bet," James says. "I locked in at a certain figure and I was right. Today, with the economic changes, I couldn't do that."
The sure thing today is the incentives, with producers playing one against another. "The global financial crisis has, in many ways, made us feel a little like air traffic controllers: Lots of planes looking to land on our runway, but many in a holding pattern for reasons beyond our control," says Alex Sangston, head of producer offsets and co-productions for Screen Australia.
Germany currently offers among the most generous subsidies. "Germany seems to be Europe's Michigan at the moment since the launch of their 20% national incentive," says David Lewis, group editor of the Location Guide, a resource on international location shooting.
Vollkammer says in Germany they can get back up to half the cost of making the movie. For that reason, he says, "In this economic crisis, it's most important for producers to be as flexible as possible and not be limited to any one country or location because of the material. Nowadays you don't have that luxury. If you have to change the movie to fit the circumstances, then do that."