U.S. lures back flyaway productions

Category: The Ugly Truth News | Posted by: admin
Article Date: April 10, 2008 | Publication: Variety | Author: KATHY A. MCDONALD
Publication/Article Link:Variety

Locales offer sleek facilities, buoyant incentives

Like migratory birds, film production is kicking in the afterburners on its continuing return flight to the U.S., given loft by the cratering U.S. dollar and ever-more-competitive state incentive programs. "There's a tremendous amount of interest in North America because of the exchange rate," says Bill Lindstrom, CEO of the Assn. of Film Commissioners Intl., noting an American buck that was trading at 64 vs. the euro and $1.02 vs. the Canadian dollar as of April 1, both historical lows.

"The United States is the best value in the world for film production right now," says Lakeshore Entertainment prexy and co-chair Gary Lucchesi. The vet producer has made films in London, Eastern Europe and most recently New Zealand ("Underworld: Rise of the Lycans"), but Lakeshore's next two films are slated for Los Angeles -- "The Ugly Truth" (teaming Gerard Butler and Katherine Heigl) and Jason Stratham starrer "Crank II: High Voltage."

Now old pros at the incentive game, hot spots like Louisiana and New Mexico are finding that their aggressive programs meld neatly with the meek greenback.

Since 2003, Louisiana has seen film spending in the form of wages, profits, sales taxes, etc., increase from $7.4 million in 2003 to nearly $342 million last year, according to the Producers Guild of America.

New Mexico -- which, along with Oklahoma was one of the first states to enact incentives back in 2002 -- has seen its film rev grow from $1.5 million in 2001 to an estimated $476 million in 2007, with such notable productions as "Transformers," "3:10 to Yuma," "In the Valley of Elah" and "No Country for Old Men" shooting in the state.

And it's not all about the U.S. projects that are choosing to stay home -- a number of them originate abroad.

Miami has hosted three international productions over the past 12 months including the German-produced "Short Cut to Hollywood" (Schiwago Film) and Italy's "Wedding in the Bahamas" (Medusa Films).

"We're almost starting to feel like Canada," says Jeff Peel, director of Miami's Office of Film and Entertainment. "I don't know if I can attribute their filming here to the value of the dollar directly, but I'm sure it factored into the producers' decisions."

Calculating the greenback's decline in value to the intricate formulas of international film financing is not straightforward, however.

Financiers are quick to point out that currency fluctuations are cyclical.

"Although the euro has appreciated by 35% relative to the dollar, more purchasing power doesn't greenlight a movie," says Leomax Entertainment's CEO and chairman Ingo Vollkammer.

The L.A.-based production company is backed by a Swiss hedge fund. What's most important to global financiers is U.S. cast and content, not whether it's shot in the U.S. or abroad, Vollkammer notes.

The complex nature of film financing must also be married with creative decisions.

"There is no major paradigm shift," says Paul Hanson, chief operating officer of film sales company QED Intl. "Realistically, we have to shoot a script as authentically as possible. There aren't many scripts we see where the two realistic alternatives are Munich or Albuquerque."

Those involved in international productions often hedge currency calculations, anticipating shifts. QED is in pre-production on Peter Jackson's sci-fier "District 9," which will shoot in South Africa (where the rand has declined) and post in New Zealand (where the Kiwi dollar is up).

"It's too soon to say the declining dollar is a good thing," says Irwin Olian, CEO, NeoClassics Films, an international distribution company with offices in L.A., London and Vancouver. Mitigating the benefits of the weakening dollar to productions are several factors: sharply accelerating costs of food and fuel, the potential for an actors strike and the instability of U.S. financial markets, Olian explains.

In any event, Jeff Andrick, managing director for Continental Entertainment Capital, notes that producers always weigh soft-money benefits offered by locations -- which are buoyed by increased competition between the states that occurs because of the weak dollar. Indeed, helping tip the balance of production toward the U.S. are state incentive programs that are more aggressive and pervasive -- only a few states lack such programs now -- than ever.

In New Mexico, for example, incentives that effectively reimburse producers 25% of whatever they spend in the state -- not to mention having advanced production facilities, such as the recently opened, $75 million Albuquerque Studios -- suggest that the state could remain on the production map regardless of the dollar's fluctuations.

Meanwhile, a host of new programs in other locales is emerging. Financiers are closely watching Michigan's nascent endeavor that promises a 40% rebate, for example. A bill being considered by the Alaska Legislature would provide a 30% tax credit for all salaries, another 30% credit for goods and services procured from Alaskan vendors, and 40% for cast and crew who are Alaska residents.

In February, Indiana lawmakers overrode a veto from Gov. Mitch Daniels for the first time, approving a $15 million film incentives package. And Wisconsin's first-ever incentives went into effect Jan. 1.