Battle for Streaming Dollars Is Being Waged in Eastern Europe

(Bloomberg) -- When Amazon Studios wanted to shoot a fantasy-world Victorian city grappling with racial strife over fairy war refugees and goat-like servants, it turned to Prague.

It was here that sullen-faced Orlando Bloom tromped through Carnival Row searching for a vicious killer in the eight-part fantasy series. Around the same time, an equally grim Henry Cavill hunted monsters across the Polish countryside in the Netflix series The Witcher and a dour Daniel Bruhl stalked the alleyways of Budapest as the protagonist of the TNT drama, The Alienist.

Eastern Europe is making a play for a piece of the global streaming windfall, expected to reach about $125 billion by 2025, according to a market study by Grand View Research. Having built reputations as reliable and cheaper alternatives for film production, they are now pitching themselves as the affordable option to feed the relentless demand for small-screen content.

“The industry definitely is expanding and there’s definitely a very large volume of projects coming” to the region, Tomas Krejci, the Czech-born founder of Los Angeles-based Milk and Honey Pictures, said in an interview in Prague. “It is far less expensive doing it here, in the center of Europe, than doing it in the U.S.”

Prague and Budapest in the past 30 years have turned into key hubs for the industry, in part thanks to government rebates on production dollars. Romania introduced a similar measure in 2018, Poland followed last year, and Bulgaria’s government also started pushing for one.

They are pitching advantages beyond the monetary that make them stand out from other lower-cost locations with burgeoning film industries from Latin America to Africa and Asia.

Poland’s trump card, for example, is its varied scenery from the Baltic coast to the Carpathian Mountains. Hungary brings an array of new studios and one-stop administration. The Czechs have a deep bench of crews and a 1,000-year-old metropolis. And they all have proud filmmaking traditions from Andrzej Wajda to Milos Forman and Istvan Szabo.

Record Revenue

They are in an intensifying battle for streaming dollars with the explosion of services including those of Netflix Inc., Amazon.com Inc. and Walt Disney Co.Studios might be inclined to look for savings on the production end as they try to outdo each other with coveted adaptation rights, flashy designs and big-name stars like Bloom, experts and executives say.

“Tastes are shifting more in how they perceive the audio-visual landscape and not being too bothered about the differences between film and television,” said Jindriska Blahova, an assistant professor Charles University’s Film Studies Department in Prague and industry analyst for the weekly Respekt.

For countries in eastern Europe -- cheaper than the West and just as easy to reach from the U.S. -- the economic impact can be substantial.

One of the biggest beneficiaries, so far, has been the Czech Republic. The country recorded an all-time high 8.9 billion koruna ($393 million) spent by the industry last year, with 80 films and series under the incentives program, according to the Czech Film Commission.

Including services such as catering and moving, the nation’s companies pulled in 104 billion koruna ($4.6 billion) in 2018, the equivalent of 1.1% of the country’s gross domestic product, according to a study by the local unit of the accounting firm Deloitte.

Hungary said total money spent on film production in the country was $364 million in 2018, with 85% coming from foreign filmmakers. It isn’t clear if that figure uses the same methodology orif it includes ancillary services like those provided by the Czech Republic.

Hollywood Calling

In any case, Hungary is a fast mover, with 84 foreign projects in 2018, compared with 50 in 2016. In a way, the country is making up for lost time, with its industry having come to a standstill for a decade after the end of communism in 1989, according to Csaba Kael, the nation’s film commissioner.

For the past 20 years, the region mostly competed to host the production of big-ticket Hollywood movies - from Mission Impossible in Prague to The Martian in Budapest -- which remain an important plank for the industry.

But 80% of production in Prague is now for television, according to Pavlina Zipkova, head of the Czech Film Commission. With decades of experience in setbuilding and warehouses full of costumes, Prague is custom-made for the golden age of television, she said.

“We have a great tradition of film making and Czech crews are incredibly skillful,” said Zipkova.

Still, there is concern the boom won’t last. One threat is an inevitable glut in material that a global audience will be unable to keep up with, said Milk and Honey’s Krejci.

Golden Bubble

Rick McCallum, who produced the Star Wars prequels and now is based in Prague, began his love affair with the city when he produced the Young Indiana Jones Chronicles out of Barrandov Studios in the early 1990s. He just wrapped up filming the first episodes of Shadowplay, set in post-War Berlin, using Prague locations.

“It is a golden age,” he said. “But it’s a bubble that will burst.”

The pace is unlikely to abate for the next few years, though, as the multi-episode format with an average total running time of about 10 hours allows deeper character development than a two-hour movie, said Hungary’s Kael.

Up the road from Zipkova’s office, the sound of hammering echoed across Prague Studios, a complex carved out of a former airplane factory and owned by Krejci. Carpenters were busy slapping together a curved hallway for a shoot, the title strictly classified.

“Sometimes it happens that there is a gap” in production, “and then suddenly it explodes and it’s full,” said Jan Kalousek, the managing director of Prague Studios. “In a second everything changes, there are caravans parked all over, people running around with walkie-talkies. It’s awesome.”

--With assistance from Zoltan Simon.

To contact the reporters on this story: James M. Gomez in Prague at jagomez@bloomberg.net;Lenka Ponikelska in Prague at lponikelska1@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Andras Gergely

©2020 Bloomberg L.P.