Plan to ax film council splits U.K. film scene


Closing stirs British stars, threatens London location shooting

This time last year, events converged to make picking a European shoot for your next project a no-brainer. New European tax breaks dovetailed with a strong dollar to make the numbers work and ever-more-professional local crews provided that sleep-at-night peace of mind so treasured -- and so rare -- for indie producers.

The financials are still strong. The dollar continues its slow climb against the euro and the pound, making a shoot in Madrid, Munich or Manchester a solid, bottom-line alternative to Manhattan or L.A. The fiscal incentives -- tax breaks, state subsidies and the like -- have only gotten better. International productions are just starting to tap new soft money sources on the continent such as France's C21 tax credit, which is providing 20% back on local spending; Ireland's improved tax break scheme, which boosts its rebate from 21% to 28%; Austria's new fund, promising $25 million in financing during the next three years; Norway's $60 million subsidy pot, which has just opened up to European co-productions, or Spain's deep-pocketed and co-producer-friendly film fund, which promises $125 million in financing annually.

The only dark spot on the map is England, Hollywood's traditional back lot, where new government proposals to scrap the U.K. Film Council and changes to the tax code have shaken the industry's confidence in shooting on location in London.

Brit Chancellor George Osborne's plan to ax the council by 2012 has split the U.K. film scene. Many British A-listers, including James McAvoy, Emily Blunt, Pete Postlethwaite, Bill Nighy and Ian Holm, have joined a campaign to save the council, which coordinates all aspects of the film business in Britain, from financing to assisting foreign shoots.

Clint Eastwood has also pitched in, writing a letter to Osborne asking him to change his mind. Eastwood credited the "vigorous support" of the Film Council in helping him shoot his latest picture, the Matt Damon-starrer "Hereafter," in London. If the council goes, Eastwood warned, he'll probably take his next film elsewhere.

"The Film Council gave us the crucial detailed information we needed to make our decision to shoot in the U.K. with information on tax credits, availability of crews and other support," Eastwood wrote in his letter, sections of which were reprinted in the British press. "Without such assistance in the early stages, the likelihood of a London shoot would have been greatly diminished. Locales with active, knowledgeable film commissions are far more appealing to us as producers."

Osborne has also scared the Hollywood elite with his new 50% tax rate for U.K. earnings above £150,000 (about $230,000). That kind of revenue gouging could scare off topliners worried the British taxman will nab half of their inflated salaries.

So far, however, fears of an exodus out of Britain have proved unfounded. In the summer London played host to a number of high-profile productions, including Marvel Studios' "Captain America: The First Avenger," which shifted the production to London to take advantage of the territory's 16% tax rebate, one initiative that has not been touched in the recent tax overhaul.

Martin Scorsese picked Pinewood Shepperton and U.K. locations to stand in for 1930s Paris for "Hugo Cabret." That Scorsese would choose London for his first-ever 3D shoot speaks volumes about the quality of local tech talent.

Steven Spielberg chose to shoot his World War I drama "War Horse" on location in Surrey, south west of London. The feature, about a boy who enlists in the army to search for his horse on the European battlefield, features a Brit-heavy cast including Emily Watson, David Thewlis and Peter Mullan.

England remains the location of choice for most big-budget studio features in part because Britain's tax credit, while lower than schemes on the continent, has no cap. Luc Besson's Cite du Cinema studio, set to open in 2012, hopes to draw some of the tentpole business away from London. But where studios in Berlin, Paris and Madrid really compete is on features in the $10 million-$20 million range where tax rebates, often combined with local subsidy cash and loans, can add up to 50% or more of a project's budget.

For example "Bel Ami," an adaptation of the Guy de Maupassant novel starring Robert Pattinson and Uma Thurman, managed to tap U.K. and Hungarian tax credits by combining a monthlong London shoot with two weeks of exterior work in Budapest.

"We needed a location that could serve as Paris in 1890 and we felt that, both from a financial and from a creative point of view, Budapest was offering the best choice in Europe," producer Uberto Pasolini says.

Elsewhere, Roland Emmerich returned to Germany to make his first movie there since "Moon 44" 20 years ago, shooting "Anonymous" in Studio Babelsberg. Emmerich tapped regional and federal subsidies as well as the territory's 20% tax rebate for his Shakespeare-era whodunit starring Rhys Ifans, David Thewlis and Vanessa Redgrave.

On the other side of the country, David Cronenberg shot the bulk of his Freud/Jung biopic "A Dangerous Method" starring Keira Knightley and Viggo Mortensen at MMC Studios in Cologne with a similar package of subsidies.

Instead of cutting back on funding, Spain's film institute brought in a €85 million ($125 million) film fund for local projects and international co-productions. The fund links support to a project's commercial success -- meaning producers might have to wait a year or more after initial release to claim the full €800,000 ($1 million) per project. But Spain's Instituto de Credito Oficial will advance a full loan for the sum if projected earnings meet certain criteria. In addition, a local or international co-production approved as "officially Spanish" can access a further €1.2 million ($1.5 million) per project, provided the producers' investment exceeds €3.5 million ($4.5 million). To qualify as Spanish, an international producer has to team with a local producer. Funding is capped at 50% of a film's budget or 75% of the local company's investment.

In Ireland, the government softened the blow of 5% cuts to the local film board by increasing Ireland's tax rebate for film and TV productions from 21% to 28%. Projects budgeted at €50 million ($64 million) and under can apply and, similar to Germany's DFFF tax incentive, the rebate is paid up front on Day 1 of principal photography.

Recent projects that have taken advantage of the scheme by shooting on the emerald isle include Steven Soderbergh's political thriller "Knockout," which also shot in Barcelona and "This Must Be the Place," directed by Paolo Sorrentino and starring Sean Penn and Frances McDormand.

Sorrentino also tapped funding from his native Italy to complete financing on the $28 million "This Must Be the Place." Italy's Milan's Intesa Sanpaolo bank invested €2.5 million ($3 million) in the project, the first time an Italian bank has made this kind of direct production investment. It was made possible by a clause in Italy's tax code allowing noncinema oriented industries to invest in films and receive tax breaks.

Combined with Italy's 25% tax rebate for local shoots, the law makes shooting in Rome, Venice or Sicily all the more attractive.

"We can only hope that this instrument will compensate for the cuts to the fund," says Andrea Occhipinti, managing director of "This Must Be the Place" co-producer Lucky Red, adding that the tax shelter will "attracts investors, especially international partners" for Italian-based projects.

Competition between countries -- and between studios within countries -- can be fierce. But with the studio majors trimming their slates and the indies finding it harder to secure equity post credit crunch, cooperation has become the new normal.

At the Berlin International Film Festival this year, Pinewood announced a new joint venture with Studio Hamburg, which operate soundstages in Hamburg and Berlin. Studio Hamburg hopes the Pinewood brand will help attract more international projects but the tie-up could also help suitable projects benefit from financing incentives in both Germany and the U.K.

Cooperation is second nature to Studio Babelsberg, which this year kicked off a production joint venture with Celluloid Dreams and Munich-based financers Clou Partners called The Manipulators.

The arrangement bundles Celluloid Dreams' access to talent and projects as well as presales with German soft money via Babelsberg and private equity brought on from Clou.

"The goal is to combine these three financing elements to secure 100% financing for European projects that shoot at Babelsberg," Studio Babelsberg CEO Carl Woebcken says.

Also gaining importance are regional funding bodies such as HessenInvest, Scottish Screen, Ile De France or Northern Film and Media, which provide subsidy cash in exchange for a commitment to a local shoot.

Joe Wright took the shoot of Focus Features' "Hanna," his assassin-themed thriller on the road across Germany to tap regional subsidies.

"We were encouraged by Babelsberg, that local subsidies would justify the costs involved in moving around the country," says Jane Evans, executive vp physical production at Focus. But given the lag time between applying for regional subsidies and board decisions, Evans advises anyone considering a German shoot "to plan long in advance."
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