Sept. 7 (Bloomberg) -- Julian Schnabel has known Lou Reed for two decades. The painter-film director and rock star live across the street from each other in New York.

``We're kind of best friends,'' says Schnabel. ``We're very close.'' Now they have worked together, filming Reed's 1973 song cycle about drugs and despair, ``Berlin.''

Schnabel, 55, confesses to jetlag after flying in to the Venice festival to premiere the movie, showing a 2006 concert performance of the album. He meets with journalists at the Westin Excelsior Hotel, Venice's Lido island, wrapping himself in a pink shawl against a chill September breeze.

He gained fame in the 1970s with large-scale paintings incorporating broken plates. He now is as well known for his movies as his art. Schnabel won best director at this year's Cannes Film Festival for ``The Diving Bell and the Butterfly.'' His other movies include ``Basquiat,'' based on the life of American artist Jean-Michel Basquiat, and ``Before Night Falls.''

Schnabel explains how he came to work with the Velvet Underground's founder, 65. Did the musician arrange to do the concert before Schnabel was involved, or did he need convincing?

``I didn't convince him,'' Schnabel says. ``You can't `convince' him to do anything. It's something that we had talked about for a long time. And finally there was a date.

``He asked me if I would do the sets and I said how much money do you have in the budget for artwork? It was $16,000. I said we can't stretch the canvas for that.

``So I said don't pay me anything. I'll do it for free. And Lou will play for free. And we'll make a film and I'll take care of that. And later someone put up the financing so Lou and I didn't have to pay.''

Heartbreak Anthem

Schnabel remembers when he first heard ``Berlin'' and the impact it made. ``It broke my heart. I loved it. I listened to it all the time. I think the language in it is just great. It was like my anthem, I was sort of heartbroken at that time. It's the kind of record that you can have as a confidante, that you can march through life with. There's something very satisfying and very melodic about those songs.''

So how did ``Berlin'' fit around the shooting of ``The Diving Bell and the Butterfly''?

``I got done shooting on Oct. 26 (2006),'' he says. ``And then I came home and shot `Berlin' in December -- Lou played, I think, Dec. 14, 15, 16 and 17. When Lou asked me to do it I couldn't say no. I didn't really know that I was going to make a movie. It was like here's the set. And then I thought I'd like to make a record of him playing.''

Hybrid Movie

Was he thinking of a documentary style?

``I really wasn't interested in making a documentary particularly, or a concert film,'' Schnabel says. ``I didn't know what kind of movie this would be -- it is kind of a hybrid. What I find in movies that's very boring is the format that people have. Here's the tight shot, here's the over-the-shoulder shot, we're going to go wider now, we're going to get tighter now. No matter what story they're telling, it becomes extremely boring.''

As for his paintings, he has 120 artworks at museums in Milan; Derneburg, Germany; and in a former tobacco factory in San Sebastian, he said. ``Rather than doing a show in the Guggenheim, I converted that factory and opened the skylights.''

So there's a bit of architecture going on?

``I also built the Venetian Palazzo in New York that I'm going to move back into. I hate all these glass buildings that are going up everywhere. It's a globalization of blandishment.''

Schnabel has also released two books on his life and art -- and a music CD, ``Every Silver Lining Has A Cloud'' (Polygram). What does Reed think about his music?

``When he heard my record he said it sounded like I'd never heard a rock 'n' roll record in my life.''

Was that a compliment?

``I was very insulted. When I would sing the songs to my wife over the telephone on the guitar, I thought it was pretty good.''

(Iain Millar is a critic for Bloomberg News. The opinions expressed are his own.)

To contact the writer of this review: Iain Millar in Venice at id.millar@virgin.net.

Last Updated: September 7, 2007 06:19 EDT