Russia lures Hollywood, raising bar for local film

Russia may not become the next Hollywood, but Tinseltown is definitely coming to Russia, where audience numbers are growing fast and U.S. blockbusters are gaining greater popularity over domestic films.

Recognizing Russia's potential as a rapidly emerging film market, Hollywood has been flying silver screen stars to Moscow for red carpet events, to the delight of avid Russian fans.

Johnny Depp and Penelope Cruz visited Moscow for the Russian premiere of "Pirates of the Caribbean: On Stranger Tides" in May, while the world premiere of Hollywood 3D blockbuster "Transformers: The Dark of the Moon" attracted 80 Hollywood names including director Michael Bay.

"Moscow is an emerging market, it plays a very important international role," Bay said before the premiere. The film made $22 million in Russia in its first week, 3.4 percent of the global box office take so far.

Cinema-going is booming in Russia two decades after the collapse of the Soviet Union put a night out at the movies out of reach for many. Cinemas made a record $1 billion in sales last year on the back of 15.2 percent audience growth.

"We're seeing a solidly positive trend, which shows that people feel comfortable. Russians are adopting the lifestyles and consumer behaviors of the developed nations," said Yevgeny Nadorshin, an economist and former government adviser.

Foreign movies became Russian favorites two years ago, when their Russian returns first outperformed those of domestic films. Last year, U.S. productions made almost five times as much as the Russian ones.

The latest high-profile Russian film "Tired with the Sun-2: The Citadel", heavily promoted at last year's Cannes festival by veteran actor-director Nikita Mikhalkov, flopped, earning less than 4 percent of its $34-million budget in its first two weeks.

"The problem with producers here is they don't co-produce well with other countries, or with each other, and a lot of them get money too easily. They are not as hungry as foreign producers are, they churn out movies with very little quality," said Russian-based independent film director Johnny O'Reilly.

FILM FINANCING

The Russian government invested a record 4.5 billion roubles ($159 million) in the film industry in 2010, nearly twice as much as the previous year.

A similar amount will be put into the industry in 2011, Prime Minister Vladimir Putin said earlier this year,. However, the investment will primarily go on doubling the number of cinemas from 2,246, instead of supporting individual production companies as before.

Independent industry research firm Movie Research forecasts that even if the project boosts ticket sales by a third, domestic filmmakers may still struggle to find funding.

Russian World Studios, Russia's largest independent TV production company, last week obtained a $42 million loan from ING bank and Sberbank, using its library content as collateral, in the first such funding deal in Russia.

And production group Bazelevs launched a fund with broker Troika Dialog last month to raise funds for cartoon film "Smeshariki", which is due for release in December.

"This is the first opportunity in the history of the (Russian) film industry when filmmakers can offer their projects to investors directly," Nikita Trynkin, chief executive at Bazelevs, told Reuters.

But seeking financial backing, especially from foreigners, will not prove an easy task in Russia.

Overseas film financiers are used to making money from DVD sales, which have never been great in Russia as most viewers illegally download films online for free.