To most, Portugal is simply a southwestern European country located on the Iberian Peninsula. Soon Portugal may be referred to as the country that brought the independent film world to its knees. The runaway production problem is about to be replaced by an evaporating production crisis.
Last week, Portugal's credit rating slipped from AA to AA-, the euro fell to its lowest point in nearly a year against the dollar ($1.33), and the euro-zone nations, led by Germany and France, along with the International Monetary Fund (IMF), approved a contingency plan (a no-bailout bailout) for debt-ridden Greece. But before you scratch your head and say to yourself, "What's this got to do with me and the movie I want to make right here in U.S.?" Let me assure you - it's got everything to do with the state of filmmaking worldwide and no one is talking about it.
Independent producers, still reeling from dried-up senior and gap lenders, and an equity exodus, have been scrambling to cobble together the financing for their films, which has put a greater emphasis on state tax credits and an even greater dependence on pre-selling foreign territories to cash-strapped and credit-crunched buyers.
Not all buyers are equal. Europe, as a whole, is the No. 1 international buyer of U.S. independent films and the UK, France, and Germany reign supreme among them. Germany alone is the 5th largest market in the world and, as such, has been placed in the driver’s seat for bailing out Greece, a fellow EU member whose debt has been spiraling out of control.
While every country that uses the Euro has pledged to help Greece, Germany and France - the most prosperous - will kick in the most. This might have been okay, except now Portugal is teeing-up to be the next bailout recipient. EU members are justifiably balking at taking on that much more debt and some have called for the International Monetary Fund (IMF) to step in. If the IMF does intervene, then the value of the euro will most likely plunge to new lows, because the EU will basically be telling the world that it can’t take care of its own and that their currency is only stable during the good times.
So the tightening of credit and the reduction of capital will affect all the euro-zone countries and will have an impact on filmmaking here at home. European buyers will have much less buying power, which means much less buying of American films. They will be forced to look inward for more European films that they can purchase for Euros instead of dollars.
The repercussions could begin almost immediately. Recently, I saw a contract provision from a European buyer that stipulated a Euro exchange rate that, below which, they reserved the right to reduce the value of their minimum guarantee (purchase price) by $100,000 USD.
It’s bad enough that fewer foreign sales (and pre-sales) are going to be made, but now the value of those sales (and overall value of Europe as a whole) is decreasing.
