Whilst a fierce battle has been raging in the last few weeks to save the Hollywood sign placed over Origo, named the "Eiffel Tower of Hollywood", only rescued from the plans of property developers by Playboy magazine's founder Hugh Hefner stepping in with a contribution of nine hundred thousand dollars, the American dream factory's international expansion is not in danger. The Americans are trying to match their Indian and Chinese competitors by finding cheap locations overseas.

Hungary was the first country in Central Europe to seize the opportunity and begin development in order to attract international money for film production. Origo film studio, which opened for business last week, is now the fifth film factory in the capital and its environs. Hungary is thus the regional leader in this respect and able to compete with the big European studios. Of course, Cinecittá in Rome and Pinewood studios in London continue to be the kings in the market. However, considering that a facility has now been built bigger than the Barrandov film factory in Prague, which has been the top studio so far, we could apply for the position of queen.

On the outskirts of the city

Take bus 125 to the incinerator at Rákospalota and then it's a five minute walk - so journalists are informed - and who would think that even though this is the outskirts of Budapest, the route leads to the biggest film studio in Central Europe. It is here, next to the site of an incinerator, that the American Raleigh Studios opened up its complex, built at a cost of 17 billion dollars. And why was the Origo film factory built here?  Ferihegy airport is only 18 minutes away on motorway M0, and the luxury hotels in Budapest's city centre can be reached in roughly the same time. Moreover, the conditions are favourable: a varied natural and architectural environment, world class camera crews and experienced, technical staff are available while the icing on the cake is the 20-percent tax concession that welcomes foreign crews to Hungary. This was the list of reasons cited by Michael Moore, the American company's president (who is only the namesake of the Oscar-winning documentary film director).

"The 20-percent tax concession is regarded as industrial support by the European Union, so initially the EU was not happy about this, though in the end they approved it. Since this counts as financial support for a cultural industry, it applies neither to productions with no artistic merit, nor to advertisements," said Péter Ákos Bod, an economist and a member of the Hungarian Motion Picture Public Endowment's advisory board. Although tax benefits are provided all over Europe now (and more recently in some states in the USA, e.g. in Louisiana, where the tax concession is 30 percent), Hungary nevertheless became a pioneer in the region after the Film Act of 2004 was passed. Thanks to this, the film industry in Hungary began to flourish, even though this impetus was restrained to a certain degree by the global economic crisis. This Hungarian initiative is a success since the supplementary spending by foreign crews (accommodation, catering) and the creation of jobs compensate for the shortfall in tax revenue, and at the same time it does the country's image good if stars can be seen ambling down the streets of its capital.

A four-metre dam

However, there are a few factors that the president of Raleigh Studios remained conspicuously silent about. The first of these is the financial background of the Origo film factory, since it is rare for a foreign investor to secure 85 percent of its loans from the state bank of a given country - in our case from the Hungarian Development Bank, and the second is that in comparison to the American and even with the European "troublesome" unions, such representation is weak in Hungary. This is not a situation that can be overlooked if one thinks for example of the three-month script writing strike called by the American Writers' Guild in 2007, which, according to some estimates, lost the overseas film industry 3.6 billion forints worth of income per day.

As Lajos Koltai told Heti Válasz, "Unions really do not need to be taken into account in Hungary. In Hollywood I can't shoot a scene either as a cinematographer, or as a director. This is the cameraman's job and it's a protected profession. I explain the setting and the camera moves to him and after that I have to trust him to implement them. If I am dissatisfied with his performance and take the camera off him, it would be interpreted as my not letting him work. The union would step in immediately and impose a fine on the production. The most I would be able to do is ask for the cameraman to be replaced. But in this case work would have to stop for who knows how long". This happened to Koltai while shooting the film Malena in Italy. Although the crew was satisfied with their working conditions, the head office in Rome informed them that there was a strike so they were forced to stop work for two days too.

However, whatever is going on in the Rákospalota film factory surrounded as it is by a four-metre-high artificial barrier and a barbed wire fence is clearly not for the outside world to know: the dual purpose of the barrier is to insulate the studio from sound and to keep out the prying eyes of the paparazzo. Of course, all of this is just one side of the coin, since the presence of these international crews with their big budgets could conquer Hungary with a new culture. Origo will also establish a new centre to organise training programmes in English to Hungarian film professionals. Although a similar centre was started in Hungary earlier in order to prepare the film profession for the expectations of the industry. "The cinematographers' master course was organised in Hungary in 2009, with Vilmos Zsigmond and Elemér Ragályi being the chief trainers", said Tamás Csapó, the managing director of the Korda Studio in Etyek.

Slaughterhouse or goldmine?

Film education is not the only area in which Origo will enter the Hungarian market as a competitor. Another example - which has left many people baffled since demand is already being satisfied by the capacity of Kodak and the National Film Laboratory - is that from now on another film laboratory will operate in Rákospalota. Cinematographer and director Tamás Sas has likened the new film factory to a "film slaughterhouse", where crews arrive with scripts and at the end of the process take the canned films away with them. Interestingly, however, not too long after the preliminary preparations for the Origo project Sas began to plan the construction of Greenhill Film Studio on the site of a coal washing site in Pécs, which, like many of the other large-scale development projects of the European Capital of Culture programme was never realised. Sas did not cancel his plans but merely changed them: plans have been made to build a film factory in a secret location in Pest that might be opened as early as 2012. Asked if Hungary could cope with so many studios, Sas replied that before his project was commenced studies were made to assess demand, according to which, given Hungary's potential and capacity, the country can cater to roughly one hundred thousand square metres of studio floor space. Together with the new production base at Rákospalota Hungary now has half of this, i.e. 51 thousand square metres.

According to this it would seem that there is still room, although a cautious line should be taken after the stalled Pécs project and the case of businessman Peter Kunos (who spent some time in jail because of the Agrobank affair) against whose company, Imusol Hungária Ltd., bankruptcy proceedings have recently been launched. Plans in this latter case also involved a film factory. Domestic companies have not let on much about the turnover of the existing studios, while gossip on the market is not exactly promising. The owner of the Stern film factory in Pomáz, Róbert Szabados, told our magazine that their facility was operating at 25 percent capacity. Even if there are better indicators than this elsewhere, such data starkly indicates the inherent risk in this sector.

Although Origo is a new competitor in the market, it is expected to boost the Hungarian film industry, since it differs from other studios in running a large number of productions in the USA and at other sites. (Rumour has it, for example, that from now on CSI: Miami might be shot in Rákospalota.) Experience shows that if a big studio gets going, the reputation of the others will be carried overseas. In many respects this situation has a lot in common with the antiquities quarter in Budapest's Falk Miksa Street, which in recent years has become the centre for art dealers. Far from ruining one another's business, the rival shops congregated together in one place to make themselves more visible. As Tamás Sas put it, Hungary could become the "treasure trove" of the international film industry. However, there is a proverb that can be added to this: not everything that glitters is gold.     

Company / Location / Number of studios / Floor space (m2) / Best reference project

Astra / Mogyoród / 3 / 4,800 / La Rafle (Jean Reno)

Korda  / Etyek /  6  / 14,800 / Hellboy 2 (director: Guillermo del Toro)

Mafilm / Budapest, Fót / 6 /  5,900 / Robin Hood ( four seasons of the English series)

Origo / Budapest, Rákospalot / 9 / 20,000 / Monte Carlo (Andie MacDowell)

Stern / Pomáz / 3 / 4,700 / The Nut Cracker (director: Andrei Konchalovsky)
 

Risks and side effects

The cost of building the Origo film factory in Rákospalota was 17 billion forints, 85 percent of which was financed by the Hungarian Development Bank (MFB). In answer to Heti Válasz's question, Zsolt Lakatos, the financial institution's managing director, said: this is commercial credit without a state guarantee and no special allowances were made either. More light is thrown on this statement, however, by the fact that the Hungarian state exercises the shareholder rights of MFB; in other words, if the project's ROI calculations do not work out, the taxpayer could be the one who will have to make up the losses. (Although it was in relation to other deals, it is worth noting that the Hungarian Financial Supervisory Authority had earlier definitively called upon MFB to revise its internal regulations because in "many cases they do not reinforce the assumption of risk practices of a prudent credit bank"). There is 180-million-forint of state support linked to the MFB credit given to Origo, about which Kamilla Szandrocha (wife of János Kóka, former president of the social democrats and ex-minister of the economy), deputy CEO of ITD Hungary, which also comes under the ministry for the economy, said that the reason they contributed to the project was because they are counting on one hundred jobs being created. If - as is hoped - numerous productions are made in Hungary, fifteen hundred hired hands will be needed. In addition to these two Hungarian state companies, another Hungarian interest in Origo is Market Építő Ltd., owned by the Wallis Group, which was the developer for the project.

A serious risk involved in the large-scale development in Rákospalota is that the investors have calculated on a 12-year period of return but the 20-percent Hungarian tax concession approved by Brussels is only valid until 2013. All of the players with a stake in the project hope that the concession will not end in three years; however, the decision is in the hands of the EU. In other words, the formula is simple: if the commissions do not materialise according to the preliminary calculations, the Hungarian state will have invested some 14.5 billion forints in the project through one of its banks and background institutions, which in the case of one hundred jobs would mean no less than a cost of 140 million forints each.