How Planned Russian Restrictions Would Endanger Hollywood Indie Movies

Cafe Society-Still2-Photofest-H 2016

Local distributors fear that a planned hike in exhibition license fees would close the market for U.S. and European indie films.

The Russian government plans to dramatically raise the exhibition license fee for Hollywood and foreign film releases, a policy that could pose an existential threat for local distributors of movies by the likes of Woody Allen and the Coen brothers, industry insiders say.

Under the culture ministry's plan, details of which were unveiled in April, the exhibition license fee for each movie would go up from 3,000 rubles ($53) currently to 5 million rubles ($88,420), making most releases of independent movies a loss-making enterprise. The measure is expected to come into effect later this year, but the exact date has not been set yet.

"Certainly, if the ministry goes ahead with its plans, there will be no more independent distributors in the Russian market," Sergei Spiridonov, general director of Volga, which distributed, among others, Allen's most recent movie Cafe Society, told The Hollywood Reporter. "Some will shut down earlier, some may be able to stick around a bit longer, but the end will be imminent."

According to Spiridonov, that would mean the end of local distribution of independent Hollywood and European movies in the country.

"Our partners in the United States and Europe are worried, and we are already in contact with representatives from MPAA, IFTA, Unifrance," he concluded.

The ministry has looked to dampen industry concerns by promising that movies released on fewer than 120 screens will be exempt from the fee hikes. But industry folks say that doesn't come as any consolation for local indie distributors as most Hollywood and European indie films are released on 200 to 400 screens.

Observers say the government plan could drive the local segment of indie distribution to extinction. If the exhibition license fee goes up dramatically, possible box-office revenue, which is much smaller for indie films than for Hollywood blockbusters, won't cover distributors' costs, which also include the costs of translations via subtitling or dubbing and promotional spending.

The list of last year's top indie films in Russia includes Cafe Society, which grossed $2.2 million, becoming Allen's biggest Russian box-office hit in the country, and Pedro Almodovar's Julieta ($307,000). One of the country's highest-grossing indie releases so far this year is Paul Verhoeven's Elle ($280,000).

"If this plan is adopted without any qualification, it could lead to a decline in the number or even total extinction of foreign indie releases," Alexander Semenov, publisher and editor of  local trade journal Kinobusiness Today, told THR.

He added that the ministry's steps are most likely triggered by the poor box-office performance of local films, the lion's share of which fail to break even in theaters. Against that backdrop, the government is looking to put local releases, for which exhibition fees will remain at the current 3,000 rubles ($53), in a privileged position compared with foreign films.

A final decision is scheduled to be made by the culture ministry in the near future, and it doesn't have to be approved by parliament or anyone else. Currently, Russian indie distributors are discussing possible steps to persuade the ministry to make changes to its plan.

Said Semenov: "We hope that the ministry will eventually adopt a balanced regulation differentiating various categories of films."