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The Film Production Battle: Is the U.S. Losing to the Rest of the World?
by Kirsten Greco

Are the days of the U.S. being the king of the film world over? Many Hollywood executives, directors, producers, and actors are certainly making it sound like that’s the case. Recently, film production jobs have been added to the long list of jobs that Americans complain have been lost to other countries. But is the problem really as bad as it sounds? Are American filmmakers moving out of the U.S. on purpose, or do they have no choice? Is the U.S. partly to blame for this phenomenon? And are studios really talking out of both sides of their mouths? Let’s take a look at some of the issues.

Films are getting more and more expensive to make: It’s probably no surprise that costs for making films are going up. According to the Motion Picture Association of America (MPAA), the average cost of producing a motion picture in the U.S. was about $59 million in 2002, up from $9.4 million in 1980 and $27 million in 1990. As a result, studios are getting more risk averse, preferring to only bankroll films that seem like a sure thing. As Anthony Minghella found out with Berlinale opener Cold Mountain, not even having an Oscar-winning director and a starring lineup of Nicole Kidman, Jude Law, and Renee Zellweger guarantees a film financing. Minghella had originally planned to do all of the production of Mountain in the U.S., but when the projected budget topped $100 million, no studio wanted it. The only way he could get the film made was by moving the production to Romania to bring the tab down to $80 million, and even with that, only Miramax and MGM were interested. Then MGM backed out three weeks before shooting was scheduled to start. As a result, Miramax was forced to shoulder the whole burden, which they could only do by configuring it as a UK-Romania-Italy co-production under the terms of the European Convention on Cinematographic Co-production while also relying on subsidies from a UK sale and leaseback program and other European tax benefits.

What was the result? The picture got made, but there was an American backlash. Minghella revealed that in certain quarters, Mountain is being called “an American film that has been stolen by Europe.” Harvey Weinstein of Miramax, one of the film’s executive producers, revealed during the press conference for the film that he felt that the lack of Oscar nominations for the film, namely for Best Picture and Best Director, was directly due to this backlash. Fortunately for him, the backlash only seems to have come from the industry – the film has grossed $91 million at the U.S. box office and $13.5 million internationally to date.

Filmmakers are having a hard time finding U.S. financing: American filmmaker Brad Anderson had made four indie films in the U.S. before he started trying to find financing for Berlinale Panorama entry The Machinist. Although the earlier films had generated passable box office in the U.S., Working Title Films let its option expire on Machinist, and Anderson couldn’t find any other takers, despite shopping the script to a number of other studios. As Anderson said during the press conference for the film, “most of the executives were intrigued but ultimately . . . put off by the ambiguity . . . and the disturbing nature of the story.” So Anderson turned to Filmax, a Spanish studio which was already familiar with his work. His fourth film, Session 9, was actually a bigger hit in Spain than in the U.S., so the studio was eager to work with him.

Filmax was also eager to be involved in Machinist for another reason – they wanted to show that Spain was a viable option for production if financing was not available in the U.S. As Julio Fernàndez, the Spanish producer of the film, said during the press conference, “we wanted to show how we could make films like this in Barcelona . . . [and show that for] a lot of American films, where studios don’t give them an option to film, . . . it would be quite possible to get [projects] up and running.”

Producer Julio Fernàndez and director Brad Anderson during the press conference for The Machinist.  (Photo by Kirsten Greco)Of course, moving production to Spain was not without its challenges. Machinist is supposed to be set in a nondescript city in the U.S., so the filmmakers had to transform a section of Barcelona into an American-looking industrial town. And then there were the very practical considerations of language barriers: Anderson speaks no Spanish and most of his crew spoke no English. But when I asked during the press conference about the challenges involved in that, Anderson answered, “I found that it made my life less stressful, in fact, shooting with a crew and with a producer whose main discourse on the set was in Spanish, because I was totally oblivious to all the stress situations. I didn’t understand when things were going awry. I just focused on my job, which was directing the film, and stayed away from all the politics. So that was oddly a good thing for me.” If Anderson shares those sentiments with other American filmmakers, a talent exodus might really begin.

The U.S. is not helping itself: Many countries around the world have set up attractive incentives to lure filmmakers to their lands. Some countries use “soft money,” like Luxembourg, Ireland, and Canada, who bankroll pictures through direct cash injections or tax deductions. Others, such as Romania and New Zealand, use the lure of a weaker currency against the dollar or a less expensive labor pool. Then there are also co-productions, which use complicated blends of financing from different countries, all tailored to meet the requirements of each country involved. This can present problems to filmmakers, as the various national incentive schemes and subsidies on which they depend are designed to keep filmmaking crews and talents fully employed in their local countries, yet co-production treaties are meant to encourage cross-border collaborations. For example, European film producer San Fu Maltha was once forced to spend 25% more than his budget on a film just to meet the spending requirements set up by the different countries’ funds, tax breaks and co-production treaties.

But at least these other countries are doing things to stimulate film production in their backyard. The U.S. not only offers no incentives, but the high standard of living in the U.S. means that production crews and special effects teams are often prohibitively expensive. John Sloss of European film company Cinetic Media even says that without its own system of national subsidies to stimulate cinema, “the U.S. is in the Stone Age when it comes to supporting filmmakers.” While certainly some people in the U.S. realize the problem, (California lawmakers in particular note that a 1998 study showed a $10.3 billion hit to the U.S. economy for films shot in other countries, most of which hit California’s economy), Congress as a whole seems loath to do anything about it. In 2001, a California senator chaired a Select Committee on Runaway Film Production (production done outside of California), but the Committee did not issue a report or introduce legislation. In 2002, the Film & Television Action Coalition lobbied Congress to impose an increased tariff on films produced in Canada (to offset the tax incentives Canada offers), but no decisions have been made. Finally, a bill introduced in 2001 that would have provided a 10% refundable income/corporation tax credit for wages paid for movies or TV programs produced in California died in Senate Appropriations.

The U.S. wants to have its cake and eat it too: Despite some legitimate grievances, it is difficult to feel sorry for Hollywood. Even with all of its complaining about U.S. films moving abroad, as of 2003, the majority of feature films were still being shot in California. Plus, Hollywood has long relied on revenues from international film releases to make back the money it invests in films, even if it doesn’t want any of its jobs going overseas. The U.S. only produces 15% of worldwide films, but U.S. films account for about 90% of worldwide film revenues. And for the past several years, overseas box office figures by year have been larger than U.S. box office figures. For example, the top 25 films of 2003 made $3.92 billion at the U.S. box office but more than $4.67 billion overseas. So obviously, Hollywood needs the rest of the world if it wants to stay in business.

So what’s the lesson from all this? First off, things are probably not as bad as they seem. The majority of U.S. productions are staying in the U.S., and that’s unlikely to change in the foreseeable future. And perhaps Hollywood should look at the bigger picture, for better or for worse. For example, if indeed Cold Mountain was denied Oscar nominations due to its European production, then why was so much praise lavished on The Lord of the Rings? After all, the vast majority of the $300 million New Line invested in that trilogy went to New Zealand, not the U.S. Perhaps Hollywood sees less of a threat from the Kiwis than from Europe, but regardless, both have thriving film production industries. Other countries are making their presence known. The U.S. may not like it, but it going to have to learn to “play with the other kids” if it wants to continue exporting its films and reaping box office rewards internationally.