In our last post we discussed the basics of how international co-productions work. Now, let’s look in more detail at some of the realities of such co-pro’s in practice.
The Practicalities Of International Co-Productions
International co-productions look wonderful in theory. I can’t tell you how many producers I’ve met over the years who have been assured that, with just a few signatures on a couple of documents, they will have a multi-national co-production up and running in no time.
But co-pro’s can get pretty complicated. They are almost never as easy in real life as they are on paper, and if anyone ever tries to tell you that this is a simple, hassle-free way to mount a production, they’re probably lying.
Thinking Positive
Let me say in advance of this post that, if any of this sounds like I’m being negative, I’m not. International co-productions can be a wonderful way of getting a film or TV show funded! They are designed to be helpful, and I have seen these work extremely well on numerous projects that have left everybody happy.
When international co-pro’s are set up in the right way and by people who know what they are doing, they work great, and are an exceptional way to finance a project. They can take a huge amount of pressure off the equity investors, and can cover a large chunk of a project’s budget with very little performance risk. This really does represent a win-win for all parties.
So, I fully encourage anybody in the production world to learn not only about international co-productions but tax incentives as a whole. Embrace the soft funding that is there for you to take advantage of!
Practical Considerations
That being said… If mounting a co-pro were really as easy as some people make it out to be, then everybody would be doing it. In fact, there are some very important practical considerations to be aware of when setting your next project up in this way, and this process can often require a great deal of patience and flexibility.
It’s hard enough dealing with one local tax authority. When you’re putting together an international co-pro, you now have to deal with two of them. That means two sets of rules, two tax codes (which can often change halfway through the process), two film offices, two levels of bureaucracy, two currencies, two timeframes, and so on… Throw a third country in there and you can really have some fun!
You will also be dealing with different legal codes, as well as different ways of doing business. You are dealing with governmental bodies that distribute public funds, many of whom are not particularly interested in your timeline as a filmmaker, but rather have a responsibility to ensure that these public funds are not misused, however long that takes.
Different Countries, Different Challenges
You may be working in different languages. Perhaps you speak both and this alone doesn’t intimidate you, but remember that you’ll have to create documents in two languages and possibly pay for translators, which takes both time and money.
When on set, will your director have to communicate with crew members or actors in a language with which they are not familiar? How will this affect the final product? If you have a split shoot, you may have two crews - could this create inconsistencies? You might be able to keep your HOD’s, but even then you might also have to travel them from one place to the other, accommodate them, and pay them per diems, all of which could increase your budget.
On the other hand, regardless of where you shoot, you may be required to have a certain number of cast and crew from either country. That could mean sacrificing your first choice for that role or crew position to satisfy the co-production requirements. Are you willing to lose your DP or Line Producer to get the project financed? Only you can make that decision.
You may also be working in different time zones. This has its own challenges, particularly as you approach deadlines and need to get things done.
I always recall a particular producer who once walked into my office confidently claiming that he was mounting a Canada-Germany-Australia co-production that would completely fund his next movie, and that they would be up and shooting within six months.
I think it was about a year later that he finally gave up trying. The simple reason? Between those three time zones, it took days for every e-mail to get answered. Whenever one person made a request, the recipient would be asleep. By the time they replied, the others would be asleep, and so on… Everything was just too far away, and it took him too long to get anything done.
So, think about these practical implications, whether or not the co-pro structure works on paper.
Local Producers
You’ll also need a producer or production company in each country - this will be an essential requirement, both legally and for practical reasons.
That means building new relationships and finding more people that you trust and can rely on even though they might be thousands of miles away - not always an easy task! It means setting up companies (likely an “SPV”, or single purpose vehicle) in different countries and then filing taxes there too. That local producer can deal with a lot of this but your name might still be on the documents.
And if things do go wrong, unfortunately it means finding lawyers in that country and going through their legal system, one which the other parties in the conflict will know much better than you.
Now, all of these are considerations that many people have dealt with before and are still able to deal with every day. Most co-productions go quite smoothly and you won’t have to worry about some of these negative aspects.
But you must be ready for them, and be prepared for a a process that is often long, and occasionally quite arduous too.
Culture Clashes
Just because you are used to working in a certain manner, don’t assume that producers, financiers, crews, or even actors in another country work in the same way. Just as you enjoy the different cultures and lifestyles when you go abroad on vacation, so you may fall victim to different work ethics, standards, and regulations when you work abroad.
Your budget will likely change significantly once you understand any local union requirements in another country, when your days might be shorter than what you had planned, and that lunch breaks in Europe might last a lot longer than they do in the US.
Don’t take these culture clashes for granted. They tell an important story behind the numbers on a spreadsheet.
My old boss once told me of his experience working on a UK-France co-production where half the shoot was in England before switching to France for the remainder. All was going fine until lunchtime rolled around on the first day in France when the French crew members demanded wine with their meals, much to the horror of the English producers (and their insurance policy). Suffice to say that they weren’t impressed by the idea of tens of thousands of dollars of expensive equipment being handled by crew members who had a couple of drinks inside them.
This resulted in a tense stand-off that threatened to delay the shoot, and which was only resolved when the French crew agreed to have only one glass of wine with lunch and the English crew members agreed to abstain completely - not a negotiation that I would ever want to be a part of!
Costs vs Benefits
As we discussed in our previous post, an international co-pro does not necessarily have to entail a split shoot with equal amounts of production in both countries. You may only have to mount a small chunk of your production in one of the locations (if at all), and this may only need to be a unique part of the process, such as post-production or something else.
As long as you meet the minimum requirements of the treaty to qualify for its incentives and keep it within the necessary framework, you can structure your production any way you like.
Just remember that, as with any tax incentive, you need to weigh the costs against the benefits. Traveling people from country to country and mounting separate shoots in entirely new locations can be an expensive business.
You need to calculate quite clearly that the benefits of mounting an international co-pro justify the additional cost and effort of doing so.
Recoupment Positions
Even though this is soft funding, it is not “free”. These countries will likely expect something in return, whether that entails a financial position in the recoupment waterfall, or via promotional activities or even product placement to generate a positive economic impact in other ways.
Some countries’ film programs have more aggressive financial ambitions than others. While some authorities are focused more on local promotion and are therefore willing to take a junior equity position behind the other investors, others treat this more as a financially-driven business deal and will look for a strong ROI (“return on investment”) with strict terms.
So, before you rush to take their money, make sure that it fits in with your finance plan and recoupment waterfall, and works well alongside any other investors that you have in place.
If you’re not sure what any of this refers to, you can check out our book on equity financing, where we discuss all these concepts and much more.
Creative Requirements
Above all, an international co-pro (or any tax incentive) should never come at the expense of the creative aspects of the project.
Of course, sometimes a director or producer must make certain sacrifices to get their project greenlit - that’s just the nature of the industry.
But if you are trying to back your production into a location where it just doesn’t fit and which might affect the final product, then the value of a tax incentive actually becomes counterproductive, and the overall quality of the final product - as well as its financial performance - will likely suffer.
Some scripts, stories, and projects lend themselves naturally to a co-pro structure. However, be careful not to force it if it doesn’t belong.
But Still…
Reading this post might have already put you off international co-productions for life!
That’s not my intention. I never meant to scare anyone off what is a great way to fund productions when they are set up correctly. Thousands of international co-productions have been mounted very successfully, and I believe that - as long as you go in with your eyes wide open - there’s no reason why you can’t do the same.
When it’s worth it, it’s really worth it! And this can be the difference between a project getting made or not.
So, as a writer, director, or producer, where do you fit into all this? We’ll discuss that in more detail in our next post…
Ricky Margolis has more than 15 years' experience in the entertainment industry as a producer and financier of films and TV shows. To learn more about Tax Incentives and how they can help you to get your next project financed and produced, check out his book HOW THE HELL... Do I Get My Film Financed: Book One: TAX INCENTIVES. Still want to know more about film & TV financing and production? You can find the other books in this series by clicking here.
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