International Business: EUROPE
TINSELTOWN ON THE THAMES
A filmmaking renaissance is sweeping Britain and the Continent
London's Pine-wood Studios Ltd. is bustling these days. But the cast and crew are not making just arty British films in the tradition of such classics as Kind Hearts and Coronets. No, Pinewood has gone Hollywood. Or maybe it's better to say Hollywood has gone Pinewood. The studio is filming a $46 million blockbuster, The Saint, starring Val Kilmer, for release next year by Paramount. Work on The Saint started soon after completion of Paramount's Mission: Impossible, the Tom Cruise hit also made at Pinewood.
Europe, for years an also-ran in film production, is fighting to emerge as a viable alternative to Tinseltown. Yes, government handouts still prop up some European film shops. But Europe, led by the British, is pressing its advantages in costs and plentiful talent. With the strong dollar buying more in Europe, U.S. movie studios including Warner Bros. Inc. and Paramount Communications Inc. plan to shift more production across the Atlantic. And European companies such as the Anglo-Dutch PolyGram, Germany's Bertelsmann, and France's Canal Plus are putting more resources into their own film operations. The goal: "To beat Hollywood at its own game," says Michael Kuhn, president of four-year-old PolyGram Filmed Entertainment.
An exchange-rate swing could certainly slow this revival. But fortunately, a lot more local capital is pouring into the business, especially in Britain. The gradual deregulation of Europe's TV market has spawned a throng of new commercial channels, which are spending more freely on film production. Britain's Channel Four is a champion in this area, having backed such winners as The Crying Game and 1994's Four Weddings and a Funeral--Britain's highest-grossing film ever, at $250 million. Channel Four also provided the $2.5 million budget for Trainspotting, a black comedy about Scottish heroin addicts that's now playing to packed art houses in Britain and the U.S.
Hot for more such successes, six of Britain's largest independent TV stations announced in mid-July a cooperative venture to make at least 10 feature films a year over five years. The number of British-produced or co-produced films jumped to 76 last year, from 40 in 1992.
Across the Channel in France, TV funding for feature films reached a record high last year and accounted for more than a third of the $529 million invested in French films. Germany's ZDF, a national public broadcasting network, has boosted its spending on feature films by 50%, to about $67 million, since the late 1980s. What's more, with the advent of digital television, Europeans soon will be receiving hundreds of channels on their sets. As a result, analysts predict that demand for feature films could expand further. "In a competitive market, having your own product is an important edge," says Richard J. Turner, head of the media consultancy practice at London Economics. The trend is helped by the requirement of some European governments that local TV stations spend a portion of revenues on film production.
Adding to the hope for a turnaround is Hollywood's discovery that in Europe, costs are often lower (table), and stage workers and actors can be less demanding. "Our biggest advantage now is that U.S. prices are out of control," says David Puttnam, former head ef Columbia Pictures and now a producer in his native Britain. Puttnam estimates that labor costs, which can eat up half a film's budget, are 30% lower in Britain than the U.S. In turn, the influx of foreign films shot in Britain helped boost total film investment there by 85%, to $516 million in the first half of 1996, according to industry newsletter Screen Finance.
While most of the big studios are in Britain, the Continent remains popular for location shoots. This spring, the streets of Budapest were transformed into 1950s Buenos Aires for the filming of Evita, starring Madonna and directed by Britain's Alan Parker. And Sylvester Stallone, who boosted the local economy by spending $3,500 a day on his hotel room, recently wrapped action flick Daylight in Rome.
Hollywood is doing more than just renting sound stages. In March, Warner Bros. set up a state-of-the-art London animation studio to use Europe's ample talent in this area. It hired 85 local animators, including Russell Hall from Who Framed Roger Rabbit? Warner is also joining with entertainment group MAI PLC to build a $350 million theme park in rural Britain that will include a film and TV studio. It's planning a similar theme park and studio in Germany. At Walt Disney Co., 150 animators in a studio at the Euro Disney theme park outside Paris worked on The Hunchback of Notre Dame and have now turned to Hercules. Last year, a Malaysian-backed group opened Third Millennium Studios on an old Rolls Royce aerodrome site in Britain. Goldeneye, the latest James Bond movie, was filmed there.
ON THE PROWL. The boom is luring some European directors back from Hollywood. Late last year, British directing brothers Ridley Scott (Blade Runner, Alien) and Tony Scott (Top Gun, Crimson Tide) paid $19 million for ailing Shepperton Studios in London, aiming to turn it into a studio for blockbuster action movies. The Scotts are also part of a joint venture to create a European rival to George W. Lucas Jr.'s Industrial Light & Magic. Based in London's Soho district, Mill Digital Film Co. hopes to be fully running soon.
Meanwhile, several European companies want to join the Hollywood big leagues. Most ambitious is PolyGram, the Anglo-Dutch media company that has so far invested more than $700 million in its Los Angeles-based film unit, which worked with Channel Four on Four Weddings and a Funeral. Even though PolyGram Filmed Entertainment lost out to Kirk Kerkorian's $1.3 billion bid for MGM/UA film studios in mid-July, Kuhn says he's still on the prowl for acquisitions. Startup costs are still hurting results, though, despite such other successes as Fargo and Dead Man Walking. On July 24, PolyGram reported that the unit lost $22 million on sales of $407 million in the first half of 1996.
France's Canal Plus is still smarting from losing ventures in the U.S., including a 17% stake in bankrupt Carolco Pictures Inc. Pulling back from the U.S., it is focusing instead on production agreements with three French studios and such films as Assassins, a psychological thriller from the hot young French director Mathieu Kassovitz. Canal Plus also has a joint venture with Sony Corp. in Britain to produce two or three English-language films a year. "In France, for a long time it was enough to make the critics rave," says Brahim Chioua, chief operating officer of Studio Canal Plus, the company's film production unit. "We're paying more attention to commercial success." That attitude may finally nurture a vibrant film industry.By Manjeet Kripalani in By Julia Flynn, with Katherine Ann Miller in London, and bureau reportsReturn to top