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Financiers leverage libraries to provide filmmaking funding

Copyright to one of Russia’s largest film and TV libraries will see Sberbank and ING provide financial support for the film making subsidiary of AFK Sistema in a move which could increase funding for Russia’s film making industry.

Movie making can be profoundly expensive, with Russian moviemakers often starved of funding for new projects. But that could be changing, with access to intellectual property, in the form of film libraries, potentially providing a significant new revenue source for the industry.Hans Grisel, General Director of ING Russia, says that ING is committed to making a funding model which works in North America and Europe work in Russia.

“ING and Sberbank together are providing a financing facility of around $42-$43 million.We are taking the film rights as collateral.We do this because the market is developing very quickly.ING has a lot of experience with doing this in the US and in Europe.In this market we are developing the same way”

With the majority of movie makers in Russia strapped for cash, the move could prove a panacea.But industry players note that most producers don’t own the copyright to their product – which generally resides with TV stations, or larger media groups. Russian World Studios, part of Sistema Mass Media, has built up an extensive big copyright library and is the first to use it as collateral for funding.Andrey Smirnov, from Russian World Studios, says producers need to make content that audiences will pay to see, and become corporate in their thinking, so that margins can be maximized for those have copyright to content.

“Producers should be interested in the audience voting for their films with money, and to make that happen we need to make film production an industry, so that we have a turnover of capital.”

The deal between ING, Sberbank and Russian World Studios comes at a time the Russian film industry is under pressure. While box office revenues are growing the share of domestically produced film is sliding. Only 6 of the 69 locally produced movies made a profit last year.

A recently developed joint venture between Sistema Mass Media and the European Film Bond Company is a model for the Russian domestic industry.It will oversee shooting processes and guarantee spending discipline and a focus on product completion for investors.Evgeny Sevostyanov, Senior Vice President of Sistema Mass Media says this too will see financial backers leveraging copyright to provide funding.

“We established a new venture. It will be the first in Russia to guarantee for everybody that the shooted movie will be completed.The establishers of the companies.From our side – Sistema Mass Media – and on the other side – the European Film Bond Company – will provide the financial institute the full scale copyright.”

The widespread adoption of the funding model may possibly limit the scope for art house and avant-garde filmmaking, or anything which drifts too far from the mainstream.

But with Russian filmmakers of all types currently starved for cash, the opportunity, for those who can make product which delivers a suitable return on investment for financiers, to open the purse strings and get the cameras rolling, can’t come too soon.