Hungary pitches itself as Hollywood East
New $204 million studio complex will woo international filmmakers with cheap labour
BUDAPEST — On a hillside that overlooks the village of Etyek, 24 kilometres west of Budapest, yellow bulldozers and backhoes are working at full speed to dismantle abandoned missile silos. They’re clearing the way for Korda Film Studios, Hungary’s biggest movie- making project and the inspiration of Sandor Demjan, one of the nation’s richest men.
“ We could have used explosives to blow up the concrete emplacements,” says Laszlo Krisan, managing director of the $204 million project on the former military site, a relic from Hungary’s four decades under communist rule. “But that would have upset the locals.”
In the race to attract investment from the $ 27 billion- a- year global motion picture industry, Eastern Europe is going to almost any extreme to muscle out Canada, Ireland, the U.K. and the U. S.
Demjan, 62, founder of TriGranit Rt., Hungary’s biggest real estate developer, and partner Andrew Vajna, 61, co-founder of Rambo producer Carolco Pictures Inc., also plan luxury apartments at the Korda site and a casino to attract tourists. In Budapest, a 25minute car ride away, Demjan is building the $ 1.3- billion Millennium City, the largest- ever complex on the Danube River. It will feature a national theatre and Palace of Arts museum.
“We need the actors to be in a good mood,” says Demjan. “If we are serious about film, then we need to treat it as an industry.”
For Hungary, the film industry — from studios to experienced cameramen and electricians — will bring in as much as $218 million in the next three years, or about five per cent of the nation’s foreign direct investment in 2004, Krisan says.
In all of Eastern Europe, film production revenue will reach $ 340 million in 2006, bolstered by the entry of the Czech Republic and Hungary into the European Union in 2004, which removed trade and employment barriers.
In the U.K., home of Pinewood and Shepperton studios, revenue from movie production fell to an estimated $930 million in 2005 — less than half the $2.3 billion in 2003.
Hollywood is feeling even more of a pinch. The U. S. Department of Commerce estimates the economic toll of so-called runaway production, or the part of the film and television business that has moved outside American borders, at more than $10.3 billion in 2001, the latest figure available.
“You shoot in Eastern Europe because the labour costs are low and you have great locations,” says Wyck Godfrey, 36, a producer at Brentwood, Calif.- based Davis Entertainment Co., who is filming children’s fantasy story Eragon, taken from the novel by Christopher Paolini, in Hungary for 20th Century Fox, a unit of News Corp. He also produced Behind Enemy Lines, with Gene Hackman, in Slovakia and Alien Versus Predator in Prague.
Prague kicked off Eastern Europe’s hustle for film money in 1996 by providing the set and crew for Mission Impossible. In 2005, the Czech Republic’s capital became the 19th-century London backdrop for Roman Polanski’s Oliver Twist, and will take on a hard-edged 21st-century look for the James Bond thriller Casino Royale.
Bulgaria, Hungary and Romania are racing to upstage Prague by offering incentives, tax breaks and labour costs as low as $23 a day for a carpenter compared with $ 230 a day in the U. K. In 2004, Hungary began providing a 20-per-cent rebate on production costs, the most generous giveback in Europe. Demjan is also enjoying a 50-per-cent tax refund on his costs to build the infrastructure at Korda.
Big Hollywood names are taking the bait. In July, Steven Spielberg, co-founder of DreamWorks SKG and director of Jaws, E. T. and Raiders of the Lost Ark, began shooting his latest movie, Munich, in Budapest.
The Hungarian capital beat out Prague as the setting for the drama about the 1972 attack on the Israeli Olympic team, Veronika Finkova, head of production at Czech company Etic Films, says. Krisan estimates it would have cost Spielberg as much 20 per cent more had he shot in a different location.
Not everyone praises Demjan’s plans to create Hollywood on the Danube, even with the region’s low labour costs and generous tax rebates. Robert Halmi Sr., chairman of Hallmark Entertainment Inc., says building a studio is risky enough. Combining it with a casino and apartments — as Demjan is doing — makes little sense, says Halmi.
“ The movie business is very fickle,” he says. “If the government changes and removes the subsidies, then nobody will go to Budapest.” In 2004, the Hungarian parliament approved a 20 percent tax rebate on film production costs incurred in Hungary. Halmi and Spielberg have both benefited from the program. The EU will review state subsidies for film and television production in 2007.
For Hungarians Vajna, who was behind Collateral Damage and Terminator 3, and Demjan, the Korda studio is a way to further distance their country from its communist past.
Demjan grew up under the regime of Janos Kadar, who held power from 1956 to 1988. Demjan amassed a $460 million fortune by building shopping malls and business centers in the waning years of communist rule. His Skala chain of department stores lured customers by selling Japanese stereos, German athletic shoes and Italian fashions that weren’t available in state-owned shops. Vajna, who fled Hungary in 1956 after Russian troops and tanks invaded to quash a revolt against communist rule, found his niche in Hollywood. There, he produced action movie blockbusters such as Rambo and Total Recall.
Vajna met Demjan in 1990 and says both were eager to invest in their homeland at the end of the communist era.
A larger issue may be how long Hungary can prosper as Hollywood East before an even-lowerpriced area catches fire. “Sooner or later, Budapest and Prague will get too expensive, and you’ll have to look for the next cheap location,” says Steve Norris, British film commissioner and head of the U.K. Film Council’s international division. Bloomberg