Reel time investing in Gulf films
Middle Eastern countries such as the UAE are building a booming film industry, which is starting to offer exciting new investment opportunities.
At a time when even Hollywood is struggling to finance films, a new generation of film directors and producers based in cities such as Dubai are making movies that are now starting to win international acclaim. Meanwhile, with the start of the Abu Dhabi Film Festival on Thursday, the UAE is taking centre stage. But filmmakers here still face major financing hurdles in the wake of the financial crisis and are also finding it tough to secure foreign distribution rights.
"Is the Middle Eastern film industry really booming yet?" asks Ali Mostafa, the Dubai-based director of City of Life. "I think booming is a very big word and 'blooming' or 'blossoming' would be more appropriate words ... the industry is just starting to hatch out of its egg." The main character in City of Life, Mr Mostafa's first major feature film, is the city of Dubai, where a number of characters from different social and ethnic groups live through a kaleidoscope of converging experiences.
Mark Hill heads two Dubai-based media investment advisory companies, The Rights Lawyers and The Rights Management. He advised on City of Life from its inception and is also still involved in the film's international sales strategy. He believes that the UAE film industry suffers from a lack of investment caused by the financial downturn. "The private investor landscape has changed considerably since the economic crisis," Mr Hill says. "If you go back a few years, media was being seen by many investors as an alternative to bricks and mortar. But in the wake of the economic crisis the only real funding was coming out of government initiatives.
"[But] where we stand now is that things are starting to loosen up again." In the absence of more sophisticated methods, one investment route to the UAE film industry is single-vehicle financing, where an investor simply bankrolls all or part of a film production. This means finding a suitable film to back and being forced to bet the entire investment on the outcome of a single production. Like any investment, the shrewd private investor must be able to pick a winner.
The Seventh Dubai International Film Festival, taking place from December 12 to December 19, provides an opportunity to make a close inspection of some new potential investments. Jane Williams, the director of the Dubai Film Connection, believes that Arab cinema is entering a new and more commercially mature phase where it can produce films suited to a much wider international audience. "In the past, private investors were deterred by films that were politically or personally motivated, whereas most investors are looking at the financial returns on films. But now films are being made with a strong storyline," says Ms Williams.
She adds that bankrolling Middle Eastern films in today's market can mean making a modest investment when contrasted with the budgets of US productions, which often run into hundreds of millions of dollars. "It is still perfectly feasible to fund Middle Eastern films with a relatively modest investment," says Ms Williams. "Even a million dollars is still considered a relatively large budget. "December's Dubai Film Festival offers investors an opportunity to meet filmmakers. We welcome private investors looking to help fund new films. They could also approach us [Dubai Film Connection] direct and see what we do and work out the best way of becoming an investor."
But many in the UAE film industry believe that far more sophisticated vehicles are needed in the form of investment funds. "I think the best approach for investors would be more film funds, such as the Al Noor fund in Doha," says Mr Mostafa. "There is definitely room for speculative film funds." Al Noor, the Qatari media group, last year launched the US$200 million (Dh736.4m) Al Noor Fund, an ethically based fund that will invest in international film projects.
Al Noor currently produces Arabic-language entertainment productions and is expanding its operations. It has already committed $40m to the fund and a further $160m through a private placement with private investors. The fund intends to take advantage of the difficult conditions in the capital markets and the film industry generally. It invests in two or three high-profile film projects per year over a five-year period.
Mr Hill agrees that film funds are a good vehicle for investors who may not wish to rely entirely on the success of a single production, but he believes every level of investor should be offered an opportunity to be part of the film industry. "Single-vehicle financing models are not my favourites," says Mr Hill. "For an investor or family trust looking at where to put money, it has got to be more attractive to spread the risk. This is where there is a role to be played by funds."
But he adds that Al Noor's approach to film funding is not necessarily the only investment template suited to the region. "At one end, there is the Al Noor approach with $200m funding. But that is only one level," says Mr Hill. "What I am excited about is seeing funds that cater for across-the-board risk. Funds need only be $10m to $20m. This would generate a lot more investment activity." He believes that funds could also specialise in various types of film, such as genre movies or 3D productions.
"To be credible, funds need good-quality products - films with good stories. At the end of the day, funds need movies that are marketable." A dramatic sea change is now transforming the Middle Eastern film industry, where politics are now taking second place to box-office receipts. "In the past, private investors were deterred by films that were politically or personally motivated, whereas most investors are looking at the financial returns on films," says Ms Williams. She quotes two examples of Middle Eastern films that have been aimed at a wide global audience. One is Amreeka, directed by Al Zain Al Sabah, a member of the Kuwaiti royal family; the other is Caramel, a film by another female director, Nadine Labankie.
"These films both represent a change in filmmaking in the Arab world, a more valid approach to filmmaking. The new films are not without politics, but the politics are not in the foreground," says Ms Williams. Amreeka, or America, is a comedy about a single parent and her son arriving in America from the Palestinian territories. It premiered at the Sundance Film Festival and won The Critics Choice Award at Cannes. It was screened to sell-out crowds in France and opened in New York and Los Angeles in the summer. It is now being rolled out across 50 screens in the US and is believed to be the largest release ever of an Arab-American film.
Despite its success, however, the film was difficult to finance "because it tries to bridge disparate cultures", says Ms Al Sabah. "The producers made a major breakthrough when they won the backing of Arab distributors, Rotana Studios and Showtime Arabia." Ms Al Sabah also directed Journey to Mecca, the first film that was granted unrestricted access to the Holy City of Mecca and the Grand Mosque. She is now hoping to establish a $50m film fund to fuel future Arab films.
Meanwhile, the US film industry is facing a financing desert. A combination of the economic crisis and the growth of film piracy over the internet has made investors less inclined to put up the hundreds of millions of dollars needed to finance a Hollywood blockbuster with special effects and "bankable" Tinseltown stars. Because of the sheer scale of its productions, the US has always looked to the big banks rather than private investors to finance its movies, but is now often being given the cold shoulder.
Where some 40 big lenders vied to bankroll Hollywood movies, the number is now believed to be as low as 12. Ironically, in order to save costs, some US production companies have outsourced much of their work to countries such as Egypt, which has long had a thriving domestic film industry. The problems of internet piracy, astronomical production budgets and a reluctance on the part of banks to bet on future box-office sales are also adversely affecting European film industries. To these woes are added another in the form of slashed government subsidies in countries such as the UK, which is now facing the abolition of its Film Council.
In France, a nation justifiably proud of its cinema heritage, cinemas largely play Hollywood movies rather than French films. The film markets of regions such as the US and Europe are facing the problems of post maturity and are therefore unsuited to private investors. But the Middle East, particularly the UAE, offers investors the opportunity to buy into a "blooming" industry with a huge international potential for growth.