Russia Moves to Restrict Hollywood and Foreign Movies Further

The measure is expected to primarily hit independent and smaller movies.

Russia has moved to introduce more box-office restrictions that are expected to hit independent movies and big Hollywood blockbusters alike.

A law has been adopted in the first reading by the State Duma, the lower chamber of Russian Parliament, which dramatically increases the exhibition license fee from the currently rather symbolic figure of 3,500 rubles ($69) to at least 5 million rubles ($88,000) in a bid to give preference to homegrown films.

The exhibition license is mandatory in Russia for all movies released theatrically.

Russian films will be technically subject to an increased fee, but it will later be repaid to the producer, according to the culture ministry, which penned the legislation. Meanwhile, exhibition license fees collected from foreign films will be spent to fund local film production, according to the ministry.

The $88,000 figure is the minimum fee, while foreign movies grossing at least 200 million rubles ($3.5 million) will be subject to an exhibition license fee between 3 and 5 percent of their box-office gross, making it at least 6 million rubles ($106,000).

"All of us, participants of the Russian film business, want to support local filmmakers," Natalia Sumina, marketing director at major Russian movie theater chain Karo, told The Hollywood Reporter. "But it is important to make sure that exhibition of art house and independent cinema doesn't suffer."

According to Sumina, distributors of independent movies won't be able to afford to pay an increased exhibition license fee that is commensurate with a movie's expected box-office gross.

"Distributors may totally refuse to buy some movies for the Russian territory, not just for a theatrical release but also for online video services as a theatrical release is often a mandatory condition in a license deal," Sumina said.

Anastasia Sergeyeva, executive director at Russian distributor Volga, which mostly focuses on independent Hollywood and foreign fare, was even more outspoken.

"It is hard to see any logic in the actions of the culture ministry, whose new initiatives just come out of the blue, contradicting each other," she told THR, adding that the measure is set to "kill" the segment of independent Hollywood and foreign movies in Russia.

"Extra expenses for distributors of independent movies will increase by 1.62 million rubles ($27.9 million) a year, which corresponds to 63 percent of their total revenue," she explained. "As a result of the measure, 20 independent distributors will exit the market, and about 300 titles a year won't get a Russian release."

According to Sergeyeva, the exhibition license fee hike could technically benefit Hollywood majors rather than local filmmakers as U.S. blockbusters would take the slots earlier occupied by independent fare.

But the other recent initiative, which limits the maximum number of screenings for each individual movie on any given day, is set to hit big Hollywood blockbusters, which normally make up a large chunk of all screenings during the time they are in theaters.

For instance, Pirates of the Caribbean: Dead Men Tell No Tales, released in Russia on May 25, took 56 percent of all screenings, which helped the movie to gross $36 million in the country to become the year's top-grossing film to-date.

So, if the measure, which is currently a proposal, gets adopted, Hollywood studios are set to see a decline in revenue from their biggest movies in Russia.

"This initiative, aimed to regulate the film industry, could chase it into a corner," Sumina said, adding that the movie exhibition business should be regulated by the market itself.

"Here, there is some target figure, which is difficult to explain or justify as it is not clear what it is based upon," she concluded.

Hollywood majors, eOne, MPAA and IFTA have declined to comment so far.

A date for considering the 35 percent initiative has not yet been set, but the lion's share of measures aimed at protecting the local film industry against Hollywood and foreign competition have not taken long to be adopted.