Strapped for cash, Hollywood is turning to Russia for help.
International Film Finance Associates, a small Los Angeles-based firm, is traveling to Moscow this week to convince bankers and private investors to help it raise $50 million to complete a package of six Hollywood projects — including some with A-list actors — whose funding has dried up during the economic crisis.
On the surface, Russia may seem like a strange target, since domestic filmmakers regularly struggle to finance their own movies. Investors have grown wary of the industry in recent years after numerous high-budget Russian films tanked at the box office or never even made it out of production.
But the promise of famous actors and access to the lucrative U.S. film market could be enough to tempt investors, film industry experts said.
"They are all movies with major movie stars and modest budgets, which are promotionally viable on an international level, yet couldn't get enough funding in the U.S.," Stephen Kerr, chairman of IFFA, told The Moscow Times by telephone from Los Angeles.
Kerr said he and his business partner, Daniel Pansky, first floated the idea to investors in Moscow in November, getting a “very positive” reaction.
The six films, which are set to go into production soon and hit theaters next year, range from a biopic on artist Salvador Dali, played by Antonio Banderas, to a thriller in which a defense lawyer, played by Uma Thurman, is set up by "seductive DNA specialist" Ewan McGregor.
IFFA is the management company for Global Media Fund, which has agreed with the films' producers to provide half the movies' budgets. Participation by all of the leading actors has been confirmed, Kerr said, but the offer is a package, and investors cannot choose a particular title.
"Our goal is to raise $50 million, and we are offering the deal in Russia first," he said. The company is also looking at investors in India and China as a Plan B, but so far there has been "excellent reception" among Russians, he said, adding that IFFA expected to find both bank investors and individual investors.
“We're planning to formalize a relationship with one lead investment banking firm,” said Kerr, without elaborating. The bank will then pitch IFFA’s offer to potential investors, he said.
The minimum investment is $50,000, and Kerr said he was confident that the films could deliver a return of 40 percent to 60 percent profit in two years, after the films show in theaters.
"Movies are really an exciting topic, they're a form of direct investment, which wealthy Russians are known to love,” said Igor Kissel, an asset manager at Pilgrim Asset Management.
But movie investors need to be experts or have an expert they can trust, since “the chance for corruption is enormous, and it’s about as risky as startup venture capital funding,” he said.
While more and more people are plunking their savings into art and wine without knowing the least thing about them, not everyone is as comfortable with the film industry, Kissel said.
On the other hand, a select crowd may be ready to bankroll a film without much hope for a financial return, he said. But the movie would have to be the film equivalent of a Chelsea football team — “a loss-making deal, but one that the whole world found out about.”
Billionaire Roman Abramovich bought the English Premier League team in 2003, and has since spent hundreds of millions on the loss-making purchase.
But the vanity appeal of backing a new Uma Thurman flick remains untested in Russia, experts said.
Many movies in Hollywood are now made with international capital, but this would be the first time that Russian investors would have stepped into the scene, said Alexander Semyonov, editor of trade magazine Russian Film Business Today.
The one exception has been when Russian film industry insiders get behind a film in exchange for distribution rights, he said.
Though any investment is a risk, “it would probably be hard to lose money on this particular batch of films,” Semyonov said. “With Hollywood movies, even if they don’t do well in theaters, they can recoup costs on DVD sales and have other ways of making money.”
Investment in Russian-made films, however, is another story.
A few banks have toyed with the idea of funding Russian blockbusters, Semyonov said, but “they quickly realized that it’s nothing but trouble. Most of them are still made on state money.”
The state-run foundation that finances Russian filmmakers, set up last year after Prime Minister Vladimir Putin criticized the industry for mismanagement, said in March that it would award 250 million rubles ($8.5 million) to each of eight major Russian production companies to make movies this year.