Producer Igor Tolstunov has recently become one of the newsmakers in the film industry. His company «PROFIT» has been named one of the eight companies that will receive state funds from the Fund for Social and Economic Support of Domestic Cinematography. Shares in the «Kinotavr» festival have passed into the sole ownership of Alexander Rodnyansky. We met with Igor Tolstunov and spoke about «pressing matters» - about what awaits the film industry in connection with the reform of the state financing system.
Correspondent:
My congratulations, after all «PROFIT» is among «the chosen ones». Is it known, at least approximately, when the budget money will be credited?
Igor Tolstunov:
Now, probably, no one can give a precise answer to this question, as to many others. So far the package of documents of the Fund necessary for providing state support is only being developed. Everyone expects that the work will be finished by the end of April, but I think that, at best, this will happen after the May holidays, by the middle of next month.
There is nothing wrong with a delay in information. If everything is done in a rush, there is a great likelihood that many mistakes will be made, and we are talking about budget money, responsibility for which is great. Therefore it is better to spend some more time on working out the documents. Moreover, organizing the Fund's activities itself is also not a quick process. For the Fund to function normally, first of all it needs to determine a place for work, which, as far as I know, does not yet exist.
Correspondent:
In your opinion, how will or should the system of returning funds look?
Igor Tolstunov:
So far the return mechanism has not been officially discussed. But on this topic behind-the-scenes conversations are actively under way. We are expecting proposals from the Fund any day now. Since, not knowing the conditions of return of funds, it would be wrong to conclude an agreement with it: for example, today we sign the papers, and tomorrow it turns out that the repayment is one hundred percent. How to pay? Unclear. The return mechanism is one of the most important conditions of future relations with the Fund.
All preliminary conversations testify to the reasonable approach of the Fund and its Board of Trustees to this problem. After all, the system of state support for film production exists in our country only because the cinema market does not function. Including for reasons that are within the competence of the state and that have been repeatedly voiced by everyone. Two major ones: «piracy» and the impossibility of organizing film exhibition in small towns. There are also a number of smaller reasons. For example, tax legislation that does not take into account the specifics of our industry. The state could reduce the amortization period from ten to one or two years. Otherwise, under the current taxation system, it turns out like this: I made a film, let's say, for a million and sold it during the initial tax period – in the first year, for example – for five hundred thousand. At a minimum, I will have to pay tax on four hundred thousand, despite the fact that I am at a loss.
In my personal opinion, the mechanism for returning funds should rely on the following scheme. It is assumed that about 30% of the film's budget should be non-state money. Therefore, it seems to me, to attract investors to cinema or for banks to provide loans, it is necessary to guarantee the return of this 30% of private money first, from the first ruble of revenue. After the debt to investors or banks is paid off, funds will remain, small – we understand this. And already from this share it makes sense for the state to take a certain percentage. If all 100% of this revenue is taken, the producer will be left with very insignificant funds – it will be very difficult to develop on them, and companies need to increase production, to build up libraries. A producer's fee is usually from 20 to 50% of net income. I think the optimal would be if, of the 100% of funds due to the state's share, the return were up to 15%. The rest, after paying taxes, should be allowed to the producer to invest in new projects, to reinvest funds. Then the new system of state support will be effective.
To simply «divvy up» state funds, as unfortunately a certain part of my colleagues believes, will not work. Consolidating a portion of budget funds allocated for support of cinema within a certain small number of companies will lead to responsibility for the use of this money immeasurably increasing.
Correspondent:
What scenarios of the development of producing in the new conditions do you see? What about producers who are not entitled to budget money?
Igor Tolstunov:
I think the situation will develop as follows.
Each of the eight companies is due 250 million rubles. This means that in total the Fund will allocate two billion rubles to the majors, and it will have 800 million left for a number of other purposes and obligations not connected in any way with the independent activity of the leader companies. Eight producer centers, having signed an agreement with the Fund, will get the opportunity to draw up project plans for at least two or three years ahead. Previously this was unrealistic, since we all received state financing on an ad hoc basis. Of course, I can be objected to: the tender system exists precisely so that funds are allocated or not allocated depending on the quality of the project. There would probably also be fairness in this, if we knew exactly that the Ministry of Culture announces a competition in specific time frames, for example, in October-November of each year, the winners of which will be given money. But such stability has never existed, does not exist, and will not exist.
Under the Ministry of Culture remains about a third of the state support budget for this year – very substantial money. Just recently, in fact, this sum was the budget of the state financing of the entire cinema. And if we look at the sum given by the Ministry of Culture in 2008 in reality, and not as it was planned, then it slightly exceeds the figure of 1.4 billion rubles, since in 2008-2009 the crisis broke out, and financing was reduced. All right – everyone survived. I think that the Ministry of Culture, understanding that it has fewer opportunities to support cinema, will organize the work of the Expert Council so that its verdicts will have a tougher character. This, however snobbish it may sound, will push away from state money companies that by definition can do nothing good, and will deprive them of the opportunity to make obviously failed films.
I should note that this year, most likely, there will be no major changes in the distribution of the Ministry of Culture's money, because there are still obligations under agreements of past years. But in the future they will be able to actively support feature-length fiction cinema! Over more than twenty years of work in the film industry I have observed all the zigzags of the life of state money. Things are always not quite right with it, the funds never arrive in the pre-planned mode. All the time — it's either feast or famine.
For example, last year the Ministry of Culture began issuing money under previously concluded agreements. I can assure you, these were agreements from 2007-2008. In 2007 we wrote the script of the film «Number 13», at the end of 2007 the tender took place, in May 2008 the agreement was signed, the money under it began to arrive at the end of 2009. In 2010 we «come hell or high water» have to deliver a finished film, but the Ministry of Finance banned allocating funds to studios in connection with an audit by the Accounts Chamber. At the same time, in a few days I have filming.
So, in our film industry there will be companies that have received funds from the Fund, and producers able to claim state support from the Ministry of Culture. Those who want to use state money only as means of ensuring their own existence will «miss the mark». All eight leader studios can make films even without state support – we have demonstrated this more than once. State financing is important, necessary – no argument, but, nevertheless, if I see an interesting project at the ready but I have not been given state support or cannot wait for it due to time constraints, the picture will be shot with private funds. We made the film «Everybody Dies But Me» at our own expense, now we are completing production of the picture «The Stranger», which «PROFIT» is making jointly with the companies «K3» and «Fox International».
If it had been decided that the number of leader companies should be not eight (I don't know how that figure came about), but twelve or thirteen, then beyond that line there wouldn't be any «major players» left at all. There are no more companies in our industry that over many years have systematically made quality cinema.
Correspondent:
Will you be ready to cooperate with independent producers? Will they be able to approach «PROFIT» with their projects?
Igor Tolstunov:
I would be sincerely glad if colleagues approached me with proposals, and I could accept them: that is, if the projects were interesting, the conditions acceptable and so on. The scarcest thing in our business is not even money. There are investors, there are own working funds, but there are no projects. Everyone says that there are no worthy scripts, there are no professionals – directors, actors. This is the plain truth. When your task is not to churn up state money but to make a quality film, then suddenly, looking around, you begin to understand that the situation is dismal.
The leader companies are obliged to release or launch three projects a year. Multiply this figure by eight – this year the production of no fewer than twenty-four films must be begun, films that, when later everyone asks «Where did the money go?», it will not be shameful to present. It will be difficult to find twenty-four teams capable of making quality cinema. We do not have twenty-four free directors, actors of both sexes to perform the lead roles, etc. all at the same time. In the following year we will have to launch production of another twenty-four films. The figure is multiplied by two. It turns out that forty-eight teams of professionals need to be found. This is already not even funny.
Correspondent:
How are things today in the film industry with private investment? Who is ready to invest in Russian film projects? On what terms?
Igor Tolstunov:
There was a period, before the crisis, when investors invested many millions in films that initially had no hope of success. Now there is less private money in the industry. However, partners are to be found. We conduct negotiations practically constantly. These are serious people who are ready to invest money in cinema, but they want to understand on what terms they will be working with them. These are not investor-sponsors – as is customary to think in our film community – not «suckers» to be «shaken down» and then before whom one can throw up one's hands and say «it didn't work out». We, frankly, are not interested in such «cooperation». We try to talk with investors who can become strategic partners, working not on one but on several projects. Such people exist, and they are ready to take risks only if they understand how everything will happen. And here state support is very important. We say: «Colleagues, the budget of the film will be two million, the state gives a million, and you are required to give the same. We will return your money first. How? We will sell rights to television, to DVD showing – and that will already practically «recoup» this million». State support gives the opportunity to speak with investors about their joining the work at the final stage: investing not for a year and a half, but for the last six months. There is also a mechanism for drawing an investor into the release of a picture. Each producer for each situation chooses the scheme needed.
Correspondent:
How significant is the support of Russian cinema by TV channels? What, in your opinion, is their role in the development of the film industry?
Igor Tolstunov:
Channels, in my opinion, have started to play a less active role. Because of the crisis they also have less money. If earlier channels could afford to invest in an unfinished product simply because they liked it and wanted to buy it at the production stage, then today large TV channels invest in film production more cautiously and selectively. Because of this, as far as I understand, the competition of projects has greatly increased.
Correspondent:
Please tell us about future projects that you intend to make with state financing?
Igor Tolstunov:
It is still difficult for me to talk about upcoming projects. It is assumed that first companies must present projects to the Fund: they will go through the Expert Council and be approved by the Board of Trustees. After all, legally the money is allocated all the same for projects.
If we speak in general terms, then for the next couple of years I see our company's program as a balanced combination of genre, commercial cinema for a mass audience and films of interest to cinema lovers, to festivals.
Right now we have three pictures in the post-production stage: «About Luv», «The Raider» and «The Stranger», and we are beginning filming of the film «Number 13». All these films are made by debutants.
Correspondent:
Last year your film company became one of the founders of the distribution company «Our Cinema». What prospects are opening up for this distribution organization?
Igor Tolstunov:
Now, when the films produced by the companies «STV», «PROFIT» and «Krasnaya Strela» will be coming out in a fairly predictable volume and pattern, «Our Cinema», we hope, will take a worthy place in the list of leading distribution structures.
Correspondent:
Can you sum up the results of your five years of work on the festival «Kinotavr»?
Igor Tolstunov:
It seems to me that over these years Alexander Rodnyansky and I have managed to turn «Kinotavr» into a working mechanism of the film business. I think it will remain so. The authority that «Kinotavr» had even before our arrival has acquired a certain business coloring. A festival is a festival, and business is business. Our task was, in particular, to balance these two components of the film festival.
Correspondent:
Please tell us about the interaction of «Kinotavr» and the Film Market. How do you evaluate what has been done, and what prospects for the development of this partnership do you see?
Igor Tolstunov:
I believe that this cooperation is already quite successful. Over the last five years, a fit between the Film Market and the festival has occurred: most of the important problems hindering the convergence have been resolved. In my opinion, the coexistence on one platform of the market and the festival is extraordinarily significant for the industry as a whole. It is necessary that people standing along the entire chain (film production – distribution – film exhibition) can meet and communicate not only at premieres. We are engaged in a business whose object is a unique commodity. The opportunity to look at the product through the eyes of representatives of different areas of the industry is extremely important. In recent years, serious presentations of films have begun to take place, which never existed before, communication has arisen, and once communication has arisen, mutual understanding can always be found.
Correspondent:
Last year, as far as we know, there were some difficulties with the financing of the festival. Do you think the situation has now changed?
Igor Tolstunov:
Financing of the festival by the state was last year carried out in reduced amounts. If in recent years we received ten million rubles, then last year – only five. Krasnodar Krai has been helping and continues to help the festival – annually allocating several million rubles. State support is always wonderful, but in sum it amounts to no more than 10% of the budget, maximum. All the rest is private, sponsor money. Last year, as in 2009, the festival budget was 100-110 million rubles. This year's budget is not known to me, but, I suspect, it will be no less. We have repeatedly discussed with Alexander Rodnyansky that a festival can be done «on the cheap», but that is not necessary. «Kinotavr» must be a celebration of cinema.