Mideast eager for Hollywood business

Money currently flowing from U.S. to Emirates

By ALI JAAFAR

DUBAI -- The enticements are irresistible: Abu Dhabi has its Film Financing Circle. Neighboring Dubai is building its own Studio City. Big bucks beckon.

At the Cannes Film Festival, starting this week, representatives of the Emirates will be a center of attention. Huge deals will be discussed and the wine will flow.

But Hollywood these days has been making a reality check of its relations with the Emirates, and some interesting conclusions have been reached:

To date, the flow of money seems to be from the U.S. to the Emirates, not the other way around. And the reps of Abu Dhabi and Dubai have turned out to be as much competitors as they are brethren.

Further, the deals being made so far are more about theme parks and hardware than about film funding.

Abu Dhabi and Dubai -- the two best known of the seven members of the United Arab Emirates -- are rivals in attracting Western attention and, in their competitive eagerness to lure Hollywood, both have hinted at opportunities that sound delicious but are not so easy to pull off.

Both are eager to set up deals, but investing in films is a distant goal. Hollywood is looking for a quick fix. Abu Dhabi and Dubai both want long-term relationships in which Hollywood will help educate their people in the nuts and bolts of the business (everything from talent management to film-crew staffing) and bring U.S. productions to the area.

Film funding? That's part of the deal. But in the Middle East, patience is a highly prized virtue, and more than one exec in the oil-rich region has spoken vaguely of 20-year plans.

As one wealthy Abu Dhabi exec says with a subtle smile, "They come to me and they all have that look in their eye: Money!" He pauses. "But I am not an ATM machine."

Execs in the Abu Dhabi government admit they contributed to some confusion by labeling their plan the Abu Dhabi Film Fund. (A more appropriate title might be Creative Partnership Opportunities.) The problem was exacerbated at Abu Dhabi's first film festival last October when one of the associates got over-enthused and told the media the fund was "unlimited."

Abu Dhabi honchos groan that they are still dealing with the repercussions and dashed hopes caused by that one word.

Even without the quick-fix funds, the area would seem to have plenty of potential for Western congloms as they look to find new areas of revenue.

Paramount, Universal, DreamWorks Animation, MGM and Marvel have inked megabucks deals to open a theme park in Dubailand, an epic-scale destination center that will feature 22 theme parks in an area the size of Singapore. It is skedded for a 2010 launch and due for completion in 2020 (yet another reminder that, in the Middle East, the key word is patience).

"Investors are still distracted by real estate," says Gianluca Chacra of UAE-based distrib Front Row. "The money is definitely there. In fact, it's overflowing. It's almost like Germany in the mid-'90s, but Germany had a film culture while here it's something totally new. It's going to take time to develop that understanding and know-how of the way the film industry works. Europe is an old continent. This place is only 30 years old."

In the 1970s, the oil boom created a breed of petro-rich Arabians who were happy to invest in Western films as long as they could party with celebs and starlets.

Many in Hollywood were hoping for a repeat. But those days are gone, and the new generation comprises savvy businessmen who want to see a hefty return on their investment.

"I think the idea of just going in there to get money is a big mistake," says Richard Fox, exec VP of Warner Bros. Intl. "We're looking at this as a two-way street. We see great potential in the Arab-speaking world, and it's not just that money will come to the studios."

The entire Arab world is perhaps the planet's biggest untapped entertainment market, with a population of roughly 300 million, two-thirds of whom are under the age of 30. Since all speak the same language, albeit with different dialects and different cultural sensibilities, the region should be on a par with Western Europe or Japan in terms of box office revenues.

"It's tremendously exciting when you look at the demographics over there," says WB's Fox. "They're young, they all speak Arabic, they're all Internet-savvy, there's a sophisticated base in the bigger cities. But it has to come from within. There's no way we'll force-feed them American or European stories."

It won't be easy. Religious traditions and censorship are factors. Despite its mild nature, "The Queen" was given an adult rating in some Gulf states because it included references to Princess Diana having sex outside marriage. So salty U.S. hits like "Superbad" or "Knocked Up" often find themselves heavily cut or, in some cases, not released at all. "Borat" was denied a release by the UAE censor who observed that if all the offensive scenes were removed, all that would be left would be a half-hour movie.

Meanwhile, "Spider-Man 3" struggled to reach $10 million thanks to piracy and an underdeveloped distribution-exhibition system. Many local laws favor indigenous films; for example, Egyptian legislation limits foreign films to a maximum of eight prints.

In Saudi Arabia, the most conservative of all Gulf states, cinemas have been banned for three decades, although pressure has been growing in recent months for the ban to be lifted. (Satellite dishes were officially illegal in the country until 2002.)

As for the goal of luring Hollywood filming, the Emirates must solve some problems. There are no incentive plans. And, unlike the Vancouver boom in the 1970s, there are not a lot of experienced local crews and it's not cheap to find housing for an entire imported workforce.

And then, of course, there is political instability across wide swaths of Arab countries such as Iraq and Lebanon. (The Arab world spans Gulf states such as Saudi Arabia, the UAE and Kuwait; North African countries such as Algeria and Morocco, and Levant countries such a Lebanon and Syria.)

As a result of this regional situation, Dubai and Abu Dhabi have become important markets for producers and distributors.

Many hope that the two are the shape of the future for the Arab world. As new cities -- Abu Dhabi did not have a paved road until 1961, and Dubai got its first skyscraper in 1979 -- they are more experimental and open to innovations than most of their Arab neighbors. In showbiz terms, their number of multiplexes and screens is mushrooming.

The two Emirates have offered opportunities for American film execs in unexpected areas. Hollywood's top agencies have sent over reps for meetings with the existing media companies there. As one Mideast exec says, "We have local stars, but we need to learn how to build careers."

The New York Film Academy has established a school helping to train aspiring filmmakers, with hints that other U.S. film schools may similarly come to the area.

And they are interested in working with the Hollywood majors on films. But, as one exec says, "A violent cop movie that films entirely in L.A. -- what does that have to do with me? I'm not really interested in funding that." He says he is interested in films that will interest local audiences, or ones that depict their region and their people. Arab characters don't necessarily have to be the leads in the film; he just wants "to see us depicted as something beyond terrorists or Ali Baba."

Abu Dhabi and Dubai are sometimes spoken of as if they're a unit, but in fact, they're quite different.

Abu Dhabi has a population of 200,000 who control 10% of the world's oil supply. Local investors and the government have money, but so far, their coin is flowing to banks, not filmmakers. The city, situated on an island in the Arabian Gulf, is pretty, with a cosmopolitan sophistication. Residents there seem to talk about Dubai as if it were a nouveau riche upstart.

Dubai, which is a 90-minute drive east of its rival, has significantly less oil, so it is banking on tourism. Its location makes it a hub for European, Asian and Australian financial trading and travel. It's a much better promoter than its rival Emirate, grabbing publicity by bringing celebs like George Clooney and Sharon Stone to its film festival.

Dubai is jam-packed with buildings that are recently completed, under construction or due to break ground. It has the sprawl and the constant traffic of Los Angeles, the newness of Las Vegas (but without the neon), and the eye-catching high-rises of Hong Kong. All are blended with an international flavor. English and Arabic are the main languages, but 80% of Dubai's residents are non-natives, with emigres from dozens of countries.

Aside from showmanship, Dubai has one key asset: real estate. Every day, the English-language newspaper Gulf News carries 300 pages of real-estate listings. It is this construction bonanza that has attracted so many of the U.S. studios into Dubai. One key attraction is that the Hollywood companies will own the land they buy (unlike in China, for example, where a foreign company must partner in any ownership).

Yet in some ways, Dubai has become a victim of its own success, with the cost of living skyrocketing and hotels operating at near capacity. A number of high-profile studio projects that had looked at lensing in the bustling metropolis, such as Fox's "The A-Team," were deterred by the expense involved and lack of incentives offered.

Dubai is building its own Studio City, a proposed one-stop-shop for production that will contain three state-of-the-art soundstages. The project has been plagued by delays and design problems, and promises that the first soundstage will be ready by the end of this year may be overly optimistic.

But when the soundstages do finally open their doors, they may offer a regional rival to the studios in Morocco's Ouarzazate for the affections of international productions.

More important, the Studio City will offer a foundation for the much-needed financial incentives that Dubai authorities will need to offer foreign productions to come and lens there.

All this is not to say that deals aren't being made already.

Hollywood startup the Film Dept. (from Mark Gill and Neil Sacker) has pacted with Dubai-based media giant MBC to fund films. Sheik Waleed -- a Dubai-based Saudi Arabian who turned his satellite channel MBC into one of the area's biggest media empires -- is a board member of the Film Dept.

"I think everybody realizes that the Wall Street money is going to be a lot harder to come by now, and there will need to be fresh sources of capital," Gill says. "In our case, Sheik Waleed had a strategic interest to invest, because he owns MBC and buys a lot of movies for his channels. Working with us also gives him a way to look at the movie business more thoroughly without costing himself hundreds of millions of dollars."

Rumors out of Dubai also suggest that officials there are holding talks with Disney execs about the possibility of establishing a multimedia fund that will include making coin available for Pixar features based on Middle Eastern-themed stories. Those talks are still at an early stage, and it would likely be months before any deal is formally inked or announced.

Abu Dhabi hasn't publicized its media growth as much, but people there are just as serious about its film future.

So far, much of the energy has gone into the fine arts, building its own branches of the Louvre and the Guggenheim and commissioning works by Frank Gehry.

Though the area is fiscally cautious, its first major deal was a doozy. In one fell swoop last year, Abu Dhabi pacted with the world's biggest conglom, Time Warner, in a multibillion-dollar, multimedia deal that includes a $500 million film fund and $500 million vidgame fund, plus coin for local-language production for three to seven films a year with budgets of less than $5 million each. It also will entail production facilities and cinemas.

Last October, the Emirate unveiled the inaugural Middle East Intl. Film Festival and Film Financing Circle, with the latter event attracting figures such as Harvey Weinstein, Relativity's Ryan Kavanaugh and Hyde Park Entertainment's Ashok Amritraj.

The Emirate recently announced the appointment of former Disney Intl. exec VP Ed Borgerding as chief exec of the Abu Dhabi Media Co., which will oversee the implementation of the Warner Bros. deal.

The feelers have been sent out for a high-profile figure to become head of Abu Dhabi's Film Commission and attract foreign production into the Emirate. That appointment will be made public in the next two months.

Abu Dhabi's Film Financing Circle will also be expanding its scope as it brings international film execs together with Middle Eastern investors.

Other deals may not be so rich, but this one sets the tone: Abu Dhabi wants to be in business with the West, but all the plans have to be broader than simple film financing, and must be mutually beneficial.

Weinstein has held a number of discussions with Abu Dhabi officials about the launching of a joint venture similar to the film funds the Weinstein Co. has inked with Latin America and Asia.

"We've been approached by a few countries in the Middle East, such as Egypt, Qatar and Abu Dhabi about building a similar infrastructure, and are considering the opportunity," Weinstein says. "The Middle East has a keen understanding of both the creative and financial aspects of the film industry. We remain impressed by the ongoing growth of the local production capabilities and facilities in the region, and will consider producing future projects there as well."

With hopes for a long-range relationship with Hollywood, the question remains whether Arab investors are ready to take the big step and really invest in Hollywood. In other words, would an oil-rich company buy a studio, the same way that other foreign businesses, such as France's Vivendi or Japan's Matsushita and Sony did?

"I think the region is already a player as an investor," says Tarak Ben Ammar, the Franco-Tunisian maven and dealmaker who counts Rupert Murdoch, Prince Waleed Bin Talal and Silvio Berlusconi as close business associates. "There are private funds and very rich states that are competitive and investing their money shrewdly.

"The question is will they be a player or a leader. Will they do what I've always recommended and go out and buy a company the way Matsushita or Sony did? I think that will take time. They're being smart, taking minority positions and developing locally. They have the cash and they have the patience."

Once again, it's that word to Hollywood: Patience.