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Hollywood on the Danube (The New York Times)
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Hollywood on the Danube (The New York Times)

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BUDAPEST — This picturesque capital in the heart of Central Europe has played many roles over the years.

It doubled for the sultry streets of Buenos Aires in the 1996 film “Evita,” directed by Alan Parker; provided the ambiance of terrorist menace and revenge in 2005 for Steven Spielberg’s “Munich”; and is currently standing in for Rome in “The Rite,” a thriller to be released next year in which Anthony Hopkins plays a priest mentoring a young seminary student in the dark arts of exorcism.

Yet for all of Budapest’s versatility as a film set, it is economic hard times that are helping to turn Hungary into Hollywood on the Danube.

Dozens of foreign film and television productions are choosing Budapest over Prague, Paris, London or Sofia for shooting in Europe, drawn largely by a 20 percent rebate on production costs, a weak local currency and low wages for crews.

“Every penny you can save and put on the screen is a huge boon for filmmakers,” said Steve Auer, the Budapest-based director of operations for Raleigh Studios, one of the largest independent film studios in the United States.

In April, Raleigh — drawn in part by the rebate program — opened a sprawling new 16-hectare, or 40-acre, complex on the outskirts of Budapest. The $75 million facility contains a 3,700-square-meter, or 40,000-square-foot, sound stage that is among the biggest in Europe or the United States.

The studio’s back lot is being used to replicate the opulent Hotel de Paris in Monaco for the film “Monte Carlo,” co-produced by Nicole Kidman and set for release next year, in which three Texas teenagers are catapulted into the life of the überrich when one is mistaken for a British heiress on vacation in Paris.

A co-producer of “Monte Carlo,” Denise Di Novi — a Hollywood veteran whose previous credits include “Batman Returns” and “Edward Scissorhands” — said that the studio was saving millions of dollars by filming primarily in Hungary, rather than in France.

“Hungary has crews who have the same expertise as those in Hollywood, but it is much cheaper to shoot here,” she said, noting that she had not shot a film in Los Angeles in 17 years.

The gradual exodus of film production from Hollywood started with the establishment of so-called runaway studios in the 1980s in places like Utah, Texas and Tunisia.

The new studios — some backed by companies in the film industry, others by real-estate developers — offered filmmakers locations and facilities to rival those in southern California but at a much lower cost, largely because of right-to-work laws that discouraged union labor.

Since that time, cities like Toronto and Prague have marketed themselves aggressively as film sets, backing up their pitches with generous financial incentives.

With the collapse of communism 20 years ago, more countries across Eastern and Central Europe have been jockeying to become Hollywood’s poorer but more economical cousin — a quest that has gained urgency as the global financial crisis has caused a scramble for new sources of revenue to help fill depleted public coffers and pay down spiraling public debt.

Hungary has a film tradition more than a century old. It has produced industry titans like Adolph Zukor, the founder of Paramount Pictures; Sir Alexander Korda, the founder of London Films and producer of “The Third Man,” among other film classics; and Michael Curtiz, the director of “Casablanca.”

But the country began to gain a financial edge in 2004 when the government approved a 20 percent rebate for foreign and domestic film productions. The Hungarians sweetened the incentive in 2008 by extending the rebate to some production expenses incurred outside of Hungary.

A foreign film production in Hungary receives the 20 percent discount through a partnership with a local production company, which typically supplies everything from lighting to crews. The local production company gets the rebate from teaming up with a registered Hungarian company that provides the financing and can deduct the contribution from its income taxes.

Other former East Bloc countries have taken notice, and are fighting back.

In June, the European Union approved the Czech Republic’s request for a rebate program similar to the Hungarian one that will give film producers 20 percent of their costs back.

Nu Image/Millennium Films, owner of the former Bulgarian national film studio, has recreated a New York street on a back lot in Sofia, complete with yellow taxis and diners offering pancakes, in hopes of turning the poor Balkan capital into a simulated Manhattan for penny-pinching directors.

There is a lot of money at stake. Since Hungary first introduced its rebate in 2004, revenue from foreign film and co-productions has increased more than tenfold, to €126 million, or $157 million, in 2009, according to the Hungarian National Film Office.

Beyond the income generated from being host to films, marketing experts and government officials contend, the glamour and allure of becoming a film center can also help burnish a country’s global reputation and attract tourism dollars and foreign investment.

“You could spend a country’s entire gross domestic product on P.R. and still not achieve the kind of exposure that Hollywood coming here can bring,” said Geza Szocs, state secretary for cultural affairs in Hungary.

Of course, not all foreign film productions bring cachet. Villagers in Glod, Romania, are still reeling after the British comedian Sacha Baron Cohen used their remote mountain outpost to represent the impoverished Kazakh home of his character Borat for the satirical film “Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan.” The villagers of Glod complained that they had been grossly misrepresented as backward peasants who kept cows in their homes, and sued the producers; one U.S. case was thrown out because the charges were too vague.

For Hungary, which in late 2008 appealed to the International Monetary Fund and the European Union for $25 billion in emergency financing, the arrival of stars like Robert Pattinson — the “Twilight” heartthrob who came to Budapest this spring to shoot the film “Bel Ami,” to be released next year — is a welcome diversion from the less-than-flattering headlines it has been generating lately for its economic problems.

Hungary’s profile as a film center recently got a lift when Budapest was chosen as host for “The Borgias,” a sumptuous 10-episode television show that will be presented on the American cable channel Bravo! in 2011. The series stars Jeremy Irons as Rodrigo Borgia, the patriarch of the powerful and corrupt 15th-century Italian family who became Pope in 1492.

Bruno Peter Gyorgy, a producer at Korda Studios in Budapest, where “The Borgias” is being filmed, said the $1.6 million cost of reproducing Renaissance Rome on a back lot in Budapest — complete with the entrance to St. Peter’s, a 15th-century palace and the garden of Vatican City — was still lower than filming on location in Rome.

The collapse of the Hungarian construction industry, he added, meant that the production could afford to employ a small army of builders.

Indeed, low wages for experienced Hungarian crews are proving to be a boon to the local industry, along with a post-communist work ethic that includes 12-hour working days and no premiums for overtime.

And because the film industry in Hungary is largely nonunionized, everyone can be employed as an independent contractor, saving on the benefits and other charges that can add 30 percent or more to labor costs in Paris, London or Los Angeles.

For all of Hungary’s economic advantages, however, filmmakers say several challenges remain. Bureaucratic red tape can be daunting, they say, and the general homogeneity of the population means that a film that requires a multiethnic cast may incur some extra costs.

“If you want to make a ghetto movie about African-Americans, it won’t be easy to find them in Budapest and you will have to import them,” said Mr. Gyorgy of Korda Studios. Or pay them more: Because of their scarcity, African extras in Budapest command hourly wages of more than €100 — twice the going rate for Caucasians, producers say.

Some producers are also increasingly jittery about the Hungarian rebate system itself, since it is essentially financed by Hungarian companies, many of which have become unprofitable during a steep economic downturn and may no longer be able to subsidize foreign production. The Czech rebate, by contrast, is financed from the state budget.

There are also growing pains. Beau Flynn, producer of “The Rite,” said that Hungary’s relative inexperience as a host for international productions had led to his spending 16 weeks scouting locations and assessing the crew’s abilities, instead of the 12 weeks it would have taken in Los Angeles.

Yet he stressed that this problem had been more than offset by Budapest’s advantages, including the possibility of filming at sites throughout the city without being overrun by tourists.

Gabor Koltai, a Hungarian producer who has worked on big-budget foreign productions, said that some Hungarian filmmakers suffered from a socialist hangover, especially when it came to money.

“In the socialist era if you ran out of money, you went to the Communist Party and asked for more money, and if the movie didn’t offend the socialist sensibility, then the authorities would say, ‘Yes, how much money do you need?”’ he said. “But in Hollywood you need to stay on budget and you have to account for every penny.”

He also lamented that the due diligence Hollywood demanded was not always up to scratch. On a recent film he produced, the script called for an adolescent boy to appear awestruck as he sees a young beautiful woman rising naked out of a river. The riverbed was covered with jagged rocks, prompting the young actress to fall on her face as the cameras rolled, and the leading man to burst into laughter. The solution was to lower a wooden boat beneath the surface for the girl to step on, delaying the shooting for hours.

Andras Rez, a leading Hungarian film critic, noted that foreign producers also faced resistance from some local filmmakers who feared that a Hollywood invasion was polluting popular culture in a country already considered slavishly pro-American in some quarters.

But he said that, over all, Hungarian filmmakers would benefit from the dozens of foreign productions.

“In the 1960s, there was a film made in Budapest called, ‘Why are Hungarian films so boring?”’ Mr. Rez said. “So this country can learn something from Hollywood.”