YearEnd2013_badge__131227212819__131230220451The UK emerged in 2013 as an increasingly attractive location destination with new and expanded tax credits – but can it stand the bulge? Hollywood has cozied up to Britain, not only bringing its films there to shoot, but now its TV programs while it also continues to plumb it as a source of original drama to be remade in the U.S. Across the Channel, after a wake-up call in the waning days of 2012 by France‘s influential Vincent Maraval of Wild Bunch, the local industry spent 2013 debating its rich subsidy system that’s spent big (too big?) on talent. Germany‘s local share of the box office is expected to be down for 2013, only slightly, but it’s been fertile ground for the studios working in local language. Meanwhile, Olympics host Russia is seeing its star rise while Italy and Spain are still undergoing financial woes. And yet, nothing seems rotten in the state of Denmark where the box office is top heavy with local films and a new drama series could be the Danes’ answer to Downton Abbey. Here’s a look back at 2013 and some glimpses of what 2014 may hold:

UK
ukflagThe British government has strongly backed the film and television business by increasing tax breaks this year. But in so doing, has it backed the industry into a corner? Arguably one of the biggest stories out of the UK in 2013, and one to keep an eye on in 2014, is the space crunch at studios which are filled to bursting with Hollywood movies seeking prime facilities, skilled crew and soft money.

A tax credit system for high-end TV shows, video games and animation productions went into effect in April 2013 and in December, the government announced a ramp-up in tax relief for bigger-budget movies and its extension to the VFX business. Production was already bustling in the UK in 2013, but the new relief has also created a headache: Britain is having a hard time finding the room – and the talent – to accommodate the boom. Hollywood movies to shoot in the UK in 2013 included Disney’s Cinderella, QED and Sony’s Fury, Fox’s Exodus, Marvel’s Guardians Of The Galaxy, Disney’s Into The Woods, Ron Howard’s In The Heart Of The Sea and Guy Ritchie’s The Man From U.N.C.L.E.. Next year will see the newest Star Wars installment, Bond 24, Alice In Wonderland 2 and The Avengers 2. With all of this activity, Marvel’s Ant Man had to forgo shooting in the UK due to the lack of studio space. The three main facilities, Pinewood, Shepperton and Leavesden, are filled to the rafters, and smaller studios are also picking up a lot of TV work. The new TV credit has brought Fox’s 24 reboot to London, and ABC just announced it would lens the pilot for comedy Galavant in the UK. Pinewood, which also has TV stages, has applied for planning permission to expand – and been rejected twice. The overall consensus at this point is that an appeal of the application will overturn the rejection within a few months. An exec tells me, “Planning permission will go through, but there will be some compromise. It’s too robust. The feeling of the government is that they are thrilled there is all this money coming in. It’s a real success story.” Another says, “There is no doubt space is in high demand… If some of the planning application goes through, it would be great for the industry.”

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But even all of the infrastructure that a decade of Harry Potter movies helped to build up across different talent strands is starting to feel stretched. An exec says, “There is a talent crunch. From DPs to production designers, they are so in demand. There is a strong handful of really high-end people” and if you’re putting together a show, “you need to be organized to be sure to have the right people on the project.” This same person believes the need for talent could help give rise to young UK actors who are ready “to pop.”

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*Distribution Woes And A Lack Of Focus
The financial crisis hit UK retail giants HMV and Blockbuster and the latter shuttered its remaining stores in December, putting pressure on local distributors. Momentum was swallowed by eOne following the latter’s acquisition of Alliance, and specialty urban distributor Revolver disappeared. While those events took two buyers out of the market, two new ones have emerged. Icon is rebooting after investment firm New Sparta acquired Icon Film Distribution UK and Icon Home Entertainment UK from the Icon UK Group. And, Optimum Releasing founder Will Clarke’s Altitude Film Entertainment in October said it was branching out into distribution with Altitude Film Distribution. Both moves bring good news to the British landscape where there is a need for more players. An exec told me recently that producers have lamented a lack of partners while another noted that the major backers like the BFI, BBC Films and Film4 can only do so much. The first markets of the New Year will also shine a light on what effect the absence of Focus Features International, which was shuttered as a result of the shifts at Focus Features, will have on the market.

*Box Office
After being propelled by Skyfall in 2012, the UK box office this year was down a slight 1%. Despicable Me 2 and Les Misérables and Iron Man 3 were the top trio. Stephen Frears’ British-made awards season contender Philomena has been lovingly adopted, but two films many thought would stir up more interest given their British elements were Diana and Saving Mr Banks. The former, about a short period in the life of the late Princess of Wales, was met with harsh critiques and earned only about $3M. The latter, a Mary Poppins origin story, grossed about $4.6M after world premiering in London in October. One exec told me they thought the November 29th release date may have hurt Saving Mr Banks as, “It’s a bad time of year for grown-up movies in the UK. We have all got so much going on and to go out to a movie it’s not the time you do, it’s not urgent.”

In other areas of the British biz, there was continued internal strife at the BBC and the launch of the phone hacking trials. TV drama was big with the success of Broadchurch (now getting a U.S. remake — with the same lead in David Tennant) and the continued fascination with Downton Abbey, Doctor Who and the return of Sherlock. (Not forgetting the controversial cancellations of such popular BBC shows as Copper and Ripper Street – although Amazon’s streaming service LoveFilm may ride to the rescue of the latter.) Kevin Spacey delivered a rousing MacTaggart Lecture at the Edinburgh TV Festival in August, talking up the Netflix model and lamenting a lack of ballsy TV execs. And, Downton network ITV went on a shopping spree, acquiring majority stakes in several production companies at home and abroad, while Simon Cowell re-upped with ITV for three more seasons each of The X Factor UK and Britain’s Got Talent. A question mark remains over whether Cowell will return to The X Factor UK while Fox figures out what to do with the ailing Stateside version. Back in the UK, Fox parent 21st Century Fox’s BSkyB has been locked in a sports rights battle with BT, but that could turn out to be a boon for TV producers.

DENMARK & THE NORDICS:
denmark-flagFor a small country that has less than 6M in population, Denmark keeps making its strength felt across the globe. The country, which continually produces hit TV series and films, now for the second year in a row is in the race for a Foreign Language Oscar with Thomas Vinterberg’s The Hunt on the shortlist. Last year, Nikolaj Arcel’s A Royal Affair, starring The Hunt’s Mads Mikkelsen, was a nominee and the year prior to that, Ole Christian Madsen’s SuperClasico was shortlisted. The year before that, Susanne Bier’s In A Better World won the Oscar. Meanwhile, attention has also turned to the small peninsula as Lars von Trier has critics hot and bothered over his four and a half hour Nymphomaniac. That movie opened Christmas Day after a cleverly teased marketing campaign built foreplay to a maximum. Overall, the year was stellar for local films. There are four Danish movies at the top of the charts in 2013, led by The Keeper Of Lost Causes, the first in a planned franchise written by Arcel and directed by Mikkel Norgaard who signed with WME earlier this year. After that are The Hunt and two family comedies. Magnolia Pictures, which released The Hunt this summer, will bring a number of upcoming Scandinavian films to the States, including Nymphomaniac, Keeper Of Lost Causes, Ragnarok, Pioneer and Lukas Moodysson’s We Are The Best!

*A New Downton Abbey?
On the TV side, look for The Legacy to be the next potential hit from public broadcaster DR which has been behind such internationally popular shows as The Killing, Borgen and The Bridge. The Legacy, a family drama directed by Pernilla August, kicked off in Denmark on New Year’s Day and has already been acquired by the UK, Benelux and Australia. The character-driven portrait of a modern family, which already has a greenlight for a second series, is a 10-part drama written by Maya Ilsøe. It stars Trine Dyrholm (In A Better World), Mikkel Boe Følsgaard (A Royal Affair) and Jesper Christensen (Nymphomaniac) among others. It’s set at the Grønnegaard manor of internationally renowned eccentric artist Veronika Grønnegaard and follows her four grown children who reunite to wind up her estate. It’s expected the drama will air on BBC Four in the UK which has been home to several imported dramas. That channel recently acquired Danish historical epic 1864, which is directed by Ole Bornedal and produced by Miso Film in co-operation with DR. In the U.S., A&E has high hopes for new drama series Those Who Kill starring Chloë Sevigny and James D’Arcy, which is based on the Danish drama, and NBC has put in development Park Road, based on the Danish show Lærkevej.

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*Slow And Easy Does It
Over in Norway, activity has also increased with 20th Century Fox TV acquiring thriller series Mammon whose U.S. adaptation will be executive produced by Peter Chernin and Katharine Pope for Chernin Entertainment. The six-parter, which debuts in Norway in January, pits brother against brother in the worlds of politics, media and finance. This was the first U.S. sale of a scripted drama for Norwegian broadcaster NRK. NRK made a big splash this year with its Slow TV phenomenon. LMNO Productions acquired U.S. rights to the concept that’s a hybrid of unhurried documentary and hours and hours of continuous coverage provided by fixed cameras trained on a subject or an event. November’s National Knitting Evening was a big hit for the broadcaster when it aired 13 hours of knitting discussion and long, quiet sequences of stitching and spinning. Look for more Slow TV this year with such possible subjects as another handicraft or clockwatching.

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FRANCE
french_flagOn December 26, 2012, an editorial written by Wild Bunch co-founder Vincent Maraval whipped up a mini-storm within the French film industry. The exec, who’s had a hand in such films as Blue Is The Warmest Color, The Artist, Pan’s Labyrinth, Fahrenheit 9/11 and City Of God, blasted the state of French cinema, calling 2012 a “disaster.” France enjoys possibly the world’s most generous subsidy system which relies in part on investment by local TV networks, but Maraval said “even the biggest commercial successes lose money” with budgets inflated by above the line costs. He also took actors to task saying they were “rich from public funds and from a system that protects the cultural exception” (an exception France was able to keep out of EU-U.S. trade talks after a hard fought battle in 2013). He wondered why such talent as Vincent Cassel, Jean Reno, Marion Cotillard, Guillaume Canet and Audrey Tautou are paid millions for a French film that may not travel, but are OK with a much smaller fee for a U.S. movie that has a worldwide window. The editorial remained the subject of discussions throughout 2013, with people for and against, though most of the people I’ve spoken with agree on the subject of actors. At the tail end of 2013, the government’s Cour des Comptes said, “Despite achievements and successes it can boast, the French system suffers from deficiencies and excesses that not only weaken it” but also “prove to be less compatible with the current situation of scarce public resources.” That’s according to a document seen by Sunday daily Le Journal Du Dimanche which said the public’s contribution to cinema was 1.6B euros for 2012, presumably via pay-TV subscriptions, a TV license fee (similar to the UK’s) and movie tickets. But Gaumont president Nicolas Seydoux told Le Figaro in December, “Let’s be clear, in no way does the taxpayer finance French cinema! The audience participates via special taxes dedicated to funding. There is no public money or very little… To suggest that the obligations of film funding by broadcasters diverts public money is absurd.” He did allow, however, that the cost of films will continue to rise. Reflecting this and the poor state of the current market, Pathé, of which Nicolas’ brother Jérôme is chief, laid off some staff in 2013 and will reduce its slate by half in 2014.

*Box Office
After a banner 2011 (The Intouchables, The Artist) and 2012 (Sur La Piste Du Marsupliami, La Vérité Si Je Mens! 3), 2013 was wildly devoid of local hits. With only comedy Les Profs in the Top 10, this will be the first year in several that French films did not figure at the upper reaches of the box office. Even Jean-Pierre Jeunet’s English-language The Young And Prodigious Mr Spivet was a non-starter. It’s the first film from the Amélie director that failed to sell 1M tickets. Local market share was down from 40.3% to 33.3% in 2013 and Hollywood’s share was up from 42.7% to 53.9%. Still, this was the first year in a decade that no film, regardless of nationality, passed the 3M admissions mark and overall admissions were down 5.3%.

Maraval recently told me that box office for French films this year is poor because the system of financing means “movies are made for a TV audience and not a film audience” as channels seek big primetime draws. Video is a losing proposition with the market down over 12% and VOD not hitting its mark. Netflix has been held back from entering France in part due to an arcane windows chronology, although it is understood that execs have recently met with government reps in an attempt to crack the market. If it does come, it could present a challenge to Canal Plus – long the film industry’s biggest supporter – which is already facing a full-frontal attack by Al Jazeera-owned BeIN Sport over sports rights. BeIN’s arrival on the market is estimated to have cost Canal Plus 80,000 of its roughly 5.5 million subscribers so far. During a recent meeting of French film industry professionals in Dijon, Alain Sussfeld, head of major studio UGC said, “We are very concerned about the economic equilibrium of Canal Plus.” Wild Bunch co-founder Vincent Grimond echoed the sentiment. “BeIN Sport means fewer subscribers for Canal Plus for football and less money for the cinema… For 10 years, each time Canal Plus sold a subscription for football, we got money for film.” Still, Canal Plus had some solid results this year with The Returned a big overseas hit. It has sold to Sundance Channel in the U.S. and a remake is underway at A&E. It also scooped an International Emmy as Best Drama series.

Meanwhile, Cannes Palme d’Or winner Blue Is The Warmest Color missed the cut-off for Foreign Language Oscar consideration because Wild Bunch refused to move off of its October 9th release date, but it’s got a Golden Globe nomination and eyes are on it during awards season for other major prizes.

Elsewhere in Europe:
europe_flagGermany was hot for Hollywood movies as the year wound down, but local language should slip about 1.5% in 2013. Still, the year was good to studios like Warner Bros and Fox which had respective hits Kokowääh 2 and Schlussmacher (The Break-Up Man) in 2013. And, Germany’s Oscar entry, Two Lives by Georg Maas, was shortlisted. Meanwhile, Europe’s biggest media company, Bertelsmann, says it plans to spend as much as $3.9B on acquisitions over the next three years, a move that reflects the current culture of increased media M&A activity in Europe. Up ahead, look for two new drama series out of Germany, one from UFA Fiction and RTL which are jointly developing mini Killing Berlin; and one from Tom Tykwer who is behind limited detective series Berlin Babylon. At TV markets, Germany is not top of mind, but that could be about to change with this pair of rival series gearing up.

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Stalingrad-2013Russia started off 2013 with a bizarre sort of fanfare when President Vladimir Putin signed a decree to grant Gérard Depardieu Russian citizenship. At the other end of the year, a documentary about jailed punk rock band Pussy Riot is on the Oscar shortlist. Despite Russia’s controversial politics, execs are bullish on the territory where box office has continued to grow and big Hollywood fare performs strongly. When DreamWorks Animation announced plans for indoor theme parks in Russia this year, CEO Jeffrey Katzenberg said, “Russia is one of the most important markets in the world for us.” In 2013, box office was up more than 20% by mid-December, thanks in no small part to 3D blockbuster Stalingrad. The local pic, directed by Fedor Bondarchuk, is Russia’s highest-grossing film ever at about $52M. The U.S. will see a lot of Russia this year when NBC heads to Sochi for the Olympics after broadcasting the Miss Universe pageant from Moscow this fall. The network intends to handle Russia’s so-called “gay propaganda” law during the games via guest commentary, bringing New Yorker editor (and former Washington Post Moscow bureau chief) David Remnick aboard to contribute. Hollywood often moves out of the way when a big sporting event turns up on the calendar, but two different execs told me they expect little or no impact from the Olympics on box office. It’s “not a huge viewership. People who watch figure skating are not people who go to the cinema,” one says.

sole a catinelleWith the financial crisis still rocking Italy, locals flocked to the cinemas in droves for a laugh. Director Gennaro Nunziante and star Checco Zalone’s Sole A Catinelle became the No. 1 homegrown film ever this year with about $70M in grosses. But broad comedies don’t have an easy time traveling. That’s left to smaller films from established auteurs like this year’s Foreign Language Oscar candidate The Great Beauty from director Paolo Sorrentino. The helmer told me in December that he felt a “great responsibility” in representing Italy. “It’s important in this moment when Italian cinema isn’t having a great time in its life… I hope we go ahead not only for me, but also for Italian cinema.” Because producers “are not able to run risks on big drama movies… they decide to do overall comedies” and Sorrentino hopes his film’s international profile will help “stimulate other producers to do the same and not only comic movies.” The future of Italy’s production tax credit should become clearer in the New Year.

pedroWithout a local driver like last year’s The Impossible, box office in Spain looks set to drop severely in 2013, down about 17% in mid-December. Local movies did not figure near the Top 10. Last year’s No. 1 pic, Juan Antonio Bayona’s tsunami drama The Impossible, was a big hit for Warner Bros with about $55M locally. This year’s top movie, The Croods, sold about $19M. However, there were some bright spots for local films which generally hover at around a 12% market share. Among them were horror pic Mama, a Canadian-Spanish co-pro that Universal Pictures International Productions boarded; Pedro Almodovar’s I’m So Excited; Alex de la Iglesia’s Witching And Bitching; and two other Warner pics: La Gran Familia Espanola and Tres Bodas De Mas. The downturn can be chalked up to the financial crisis and heavy unemployment, but also to funding cuts and changes implemented by the Spanish government which hiked a value added tax on cinema tickets from 8% to 21%. At December’s European Film Awards, Almodovar said this has been “one of the worst years for our industry, caused by the awful cultural policy of our government.” But there may be some reprieve on the horizon. The Spanish Film Commission recently agreed in principle to raise tax breaks to around 25%. The Commission also said the VAT would drop, although it did not specify figures. Warner Bros UK, Ireland and Spain President & Managing Director, Josh Berger, tells me of the VAT change, “There is no question that the market is hugely sensitive to (ticket) price given the economy.” A recent promotion, La Fiesta del Cine, lowered ticket prices to 2.90 euros and saw admissions skyrocket more than 98% over last year’s edition, and 663% higher than the comparable days of the previous week. Berger says, “The price promotion results are huge (which show) the pent up demand” for moviegoing. While far from bullish, he says the changes promised by the government are positive indicators, “There is now some cause for hope where previously there was little to none.”