Boom or Bust


The Russian and CIS (the Commonwealth of Independent States) film industries are coming of age. Indeed, film production and distribution -- which bottomed out around the time of the August 1998 financial crisis -- have rebounded with exponential growth since the turn of the 21st century. The industry has become more predictable, but has entered a phase where an overabundance of players and product make it ripe for a weeding-out process. In the meantime, Russian cinema is starting once again to make its way back to the international scene in terms of both foreign sales and festival action.

This year, two Russian companies are foremost in moving product onto the international market -- CTB Film Company and Central Partnership.

CTB will see the international release of the Oscar-nominated "Mongol," a $20 million Russian-Kazakhstani-German co-production which CTB initiated and has been years in the making. The film took CTB to the new level of working on a massive international production in a foreign language (Mongolian) and getting their fingers into the pie in Kazakhstan, which is a budding production and exhibition mecca.

CTB also has a film at this year's Berlin Film Festival, which did not feature any Russian feature films in 2007: "Nirvana," a cyberpunk kitsch oddity with an undisclosed budget is part of the Berlinale's International Forum of New Cinema. It is the feature debut of thirtysomething filmmaker Igor Voloshin, a graduate of the VGIK (All-State Institute of Cinematography) in Moscow.

Founded in 1992 in St. Petersburg, CTB is one of Russia's longest-running and most prolific private production companies. Led by Sergei Selyanov, one of Russia's leading producers and vp of the Producer's Guild of Russia, CTB has produced more than 50 feature films in a range of styles.

Central Partnership is Russia's largest independent film producer and distributor. Founded in 1997, the company has amassed a library of more than 1,200 films and 3,200 hours of TV series programming, and distributes films in Russia and the CIS from Hollywood studios including Universal and Warner Brothers and such European majors as Gaumont and EuropaCorp. Each year, the company produces about 80-100 hours of television and about five to eight theatrical features. It also buys up the rights to most of the biggest Russian productions, and is one of two principal Russian companies selling foreign rights to new Russian films. The other company is Intercinema Art, which handles CTB's product and a variety of arthouse fare. One of Central Partnership's hottest foreign sales properties is likely to be Nikita Mikhalkov's Oscar-nominated "12."

In 2005, Prof-Media, the media division of Russian metals magnate Vladimir Potanin's Interros holding company, bought a 50.5% stake in Central Partnership for an estimated $40 million. Prof-Media's ownership of the Cinema Park chain of theaters gives Central Partnership an edge since it is not bogged down with owning and managing its own cinema chain as some competitors are.

Central Partnership's strategy is shaped by its CEO, producer Ruben Dishdishyan, and his cousin Armen Dishdishyan, president of the sales arm of the company. Central Partnership clinched a number of deals after the American Film Market in 2007, including the $6 million boxing-themed thriller "Revenge" and "Wolfhound," a $20 million Slavic sword-and-sorcery yarn, both of which were sold for undisclosed amounts for English-speaking territories to the Weinstein Co.

Like CTB, Central Partnership also has a film in this year's Berlinale by a relatively young VGIK graduate. In 2004, Anna Melikyan made a bit of a splash with her quirky debut film "Mars," which had a healthy festival tour. Now Melikyan returns with her sophomore effort, "Mermaid," a female coming-of-age tale marked by plenty of magical-realism. "Mermaid," which has already produced some buzz due to its directing award at the Sundance Film

Festival, is the Panorama opener at Berlin and will kick off international sales at the European Film Market there.

The success of the two companies comes at a time when the Russian production sector continues to evolve, but there are indications that the growth spurt within the industry is having an adverse affect on quality.

In 2007, there were 350 films released theatrically, 85 of which were domestic. According to figures from the trade weekly Russian Film Business Today, the total gross of the Russian films released in 2007 was $148.5 million, or 26.3% of total CIS boxoffice in 2007. This is 27.3% more than in 2006 ($108 million). However, the 85 Russian films were a subset of a much larger group -- the total number made in 2007 was roughly 200, the majority of which were released straight to video and TV.

The rise in the volume of domestic product is both a blessing and a curse. On one hand, it is a sign of a resurgence of filmmaking and the relative health of the industry. On the other, the increase seems to be mostly about quantity and not quality. The glut of films limits the time a film can make money and even squelches films with advertising muscle since they must be shoehorned around specific dates, such as the busy New Year's season. Russian films typically spend a month to three months in theatrical release before going to DVD.

"Films have to make most of their box office in three weeks," says Sergei Lavrov, boxoffice analyst at Russian Film Business Today. "After that, everything dissolves. Films with massive ad campaigns can go as long as five weeks in wide release. You can have a release go on for as long as six months, but it will be in cinemas that don't yield any decent returns. With only around (1,500) modern screens, there's a serious lack of space."

In light of too many films competing for too few screens, a trend that has emerged in 2007 is big-budget productions in Russian terms (over $10 million) coming in at a loss or breaking even, while modestly-budgeted films ($2 million-$4 million) are making small profits (between $6 million and $10 million). Films with considerable outlay in terms of production and promotion were frequently loss-making, even if the boxoffice take was substantial.

"I hope that a lot of people draw conclusions from this," Selyanov says. "Some players will even leave the market, because it's exceptionally risky and not producing significant return on expensive projects. The market is just not developed enough for it."

Adds Yulia Solovyova, general director of Prof-Media since November 2007: "There still are a lot of hobbyists investing in films. They don't know how much to spend and how much in the way of receipts to expect. I hope that with time, such types will leave and only the professionals will remain."

Dishdishyan believes that it will become harder for such independents to compete with these larger companies, since the big players are better equipped to absorb the rising costs of production.

"The budgets of Russian films are getting very expensive," he adds. "And there's too many of them. There are a lot of new producers, and production prices are going up 20%-30%. For us, it's a priority to keep these prices down, because basically, if you go to $6 million, that's the highest budget you can recoup in Russia without significant risk."

While "Wolfhound" -- Central Partnership's highest-grossing film yet -- earned $20.02 million on a finalized production budget of $14 million, the film's $6 million advertising budget meant that even with DVD, TV and $2 million in foreign sales, the film only broke even.

In looking at the relationship between films' subject matter, their budgets and resulting boxoffice receipts, winning and losing genres are starting to come into view.

The real losers have been, somewhat unsurprisingly, historical films. The $10 million Peter the Great historical drama "Servant of the Sovereign" grossed only $5.34 million domestically, while "1612," which is set in the Time of Troubles (roughly 1598-1613), cost $12 million to make and earned just $5.8 million in box-office. "1814," about the early years of Russia's greatest poet, Alexander Pushkin, was relatively inexpensive to make at $3.5 million, but only grossed $2.5 million.

The clear winners were comedies, some of which even set records. The parody of contemporary Russian cinema, "The Very Best Film," had a budget of $6.5 million and took $16.5 million in its first weekend. "The Very Best Film" beat the previous record for highest-grossing weekend, which was set just a few weekends before by "Irony of Fate: The Sequel," a $5 million comedy that took $9.4 in its first weekend.

Nevertheless, despite the popularity of comedies at the domestic boxoffice, Irina Arvanova, Central Partnership's head of sales, says they're limited appeal abroad does little to raise Russia's profile on the global film scene.

"From the point of view of Russian box office, such returns could be deemed a success," she says. "But from the point of view of international sales potential, they are not, since they were made for the domestic market and Russian comedies are not in demand abroad. Russian filmmakers have their best chances to make money at the Russian box office, home video and TV. Returns from foreign sales are still negligible."