Why Russia May Impose Further Restrictions on Hollywood in 2016

Snow Queen
Courtesy of Wizart Animation

'Snow Queen'

Moscow hasn't imposed quotas, but it meddled with foreign releases, making it harder for Hollywood to compete.

For the last couple of years, Russia has threatened to introduce quotas for Hollywood films.

And with Russian movies still struggling at the box office, Hollywood studios and international producers looking to crack the Russian market may have to expect more protectionist measures in 2016.

Russia started discussing restrictions for Hollywood and other foreign fare in mid-2014, as relations between Russia and the United States soured over Russia's invasion of Crimea. But a quota was rejected after even the local Russian industry opposed the idea.

"The Russian film industry has proven that it is competitive enough without minimum quotas for local films," culture minister Vladimir Medinsky said in February, explaining the decision.

But it was too soon to celebrate. The year didn't start well for homegrown movies. Weeks after Medinsky's announcement, the culture ministry demanded — and obtained — the right to reschedule Hollywood and foreign releases to avoid competition with major local releases.

The ministry hasn't yet used its power to shift a tentpole release, but the threat of it apparently convinced Disney to voluntarily move up the Russian release date of The Avengers: Age of Ultron to late April to avoid a head-to-head with Russian WWII drama The Dawns Here Are Quiet.

The rescheduling did little good. The Avengers still grossed $33.8 million and became the year's third-top-grossing film as of mid-December. The Dawns Here Are Quiet, made on a budget of $6.8 million, grossed only $5.2 million.

Overall, 2015 was a bad year for Russian films. Box-office figures for many major releases, including $20 million fantasy film He Is a Dragon, produced by star director/producer Timur Bekmambetov, fell substantially short of expectations.

As a result, local movies' share of the total box office is expected to decline this year, which could push the government to take further steps to protect local films.

For the last few years, Moscow has talked about a target of 20 percent of the total box office for homegrown movies. Over the last two years, the figure has been closer to 18 percent. In fact, in recent years, Russian films have only twice accounted for more than 20 percent of the local box office: in 2008, when they accounted for 27 percent of total theatrical revenue, and in 2009, when homegrown titles reached just over 25 percent of Russia's total box office.

This year looks likely to be another disappointing year for the Russian industry. According to trade website Kinobusiness.com, in the first 50 weeks of the year, Russian films accounted for 16 percent, or $102 million, of the overall box office of $631 million. With Star Wars: The Force Awakens ensconced in Russian theaters through the end of the year, that figure, if anything, looks likely to fall.

Meanwhile, some international players are beginning to worry about the Russian government's protectionist measures for the film industry.

"China has a very clear view," said one source working with companies in international distribution, including in Russia. "It has 34 slots [for foreign movies per year]. Russia is leaning a little bit more that way than we would like. We hope it doesn’t go any further.”

Moscow has tried to push theater chains to voluntarily introduce quotas for local fare. This past October, several Russian cinema chains, including Luxor, Five Stars, Kinomax and Mirage Cinema, gave in to the pressure and allotted 20 percent of their screens to Russian titles starting in 2016. 

A number of chains, including Cinema Park and Formula Kino, refused to adopt the quotas, arguing that for Russian movies the "release schedule is unstable and their quality is unpredictable." Guaranteeing 20 percent of Russian screens, they noted, wouldn't guarantee 20 percent of the box office.

The government has looked to buy more leverage with cinemas, allowing $31 million in subsidies to upgrade movie theaters in smaller towns and cities across the country. In exchange, the theaters must agree that at least half of their screenings over the next three years will be of Russian films. 

Russian producer Oleg Teterin, whose credits include the 2014 hit Viy, which grossed more than $34 million in Russia, has started a similar venture: offering to build more than 100 theaters in small cities, with the condition that they screen only Russian fare. 

Russia has made 2016 "the year of cinema," and it is using that to boost local film. On Monday, the government said that all subsidies released to filmmakers next year will be non-repayable, for example. Any possible co-productions between Russia and Hollywood studios are technically also eligible for a state subsidy.

As 2016 kicks off, Moscow is expected take a long, hard look at the Russian box office. If the government doesn't like what it sees, Hollywood may need to expect a cold winter ahead.