On the first of the year, the world started electronically trading in euros, the new monetary unit set to replace the local currencies of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. Although the European Union (EU) wont put the currency into circulation until 2002, local stores and municipalities started preparing Europeans for the big conversion over a year ago. Retailers in France, mostly supermarkets, started sponsoring Euro Weeks, when consumers could pay in francs and receive change in mock euros, to get people accustomed to handling the new currency. All participating countries have been pricing merchandise in both euros and local currency, while bank statements and cash register receipts also list balances in both. In less than one month, the slow integration of the euro, valued at about $1.10 to $1.20, has already pervaded the lives of approximately 290 million
Europeans in 11 countries. The Europeans are prepared. But are the Americans?
According to The Los Angeles Times, the conversion is shaping up to be the most ambitious venture in applied economics since the free market supplanted communism in Eastern Europe and the former Soviet Union. For Europeans though, this is an exercise theyve been through before, with the conversions of weights and measures to the metric system, for instance.
Europe has been standardizing different things for decades so they are kind of used to this process, said John Garland, English-born director of broadcast production at TBWA/Chiat/Day, New York. But for Americans, who have had the consistency and consequent security of the dollar for 200 years, adjusting to the eurozone and its growing pains may prove more of a challenge.
In the U.S., companies in the business of trading money have been preparing for the euro for a long time, but in the commercial industry, the euros impact on international spot production is still the great unknown. Many producers have taken a wait-and-see approach contending that until the actual currency goes into circulation in 2002, nothing will really change. But for all the nonchalance encountered on the euro subject, opinions and guesswork are proliferating throughout the industry.
Orthodox Conversion
The prevailing wisdom among U.S.-based international spot shops is that the euro will eventually make overseas production a lot easier. A three-country shoot will no longer entail the conversion of dollars to multiple currencies, causing a potential 15-point percentage loss. Weve done several bids in the past that covered several different countries where every time you cross a border youre losing money. On a sizeable budget that can add up to thousands of dollars, so itd be nice to see the end of that, said Howard Woffinden, founder/executive producer of L.A.-based Milk & Honey Films, whose division Milk & Honey Production Services offers comprehensive production support to American companies shooting abroad. M&H has additional offices in Mexico City, Montreal, Toronto, Moscow and Prague.
It seems as though the immediate nightmare lies on the bidding side of the equation. Business managers are facing a two-step conversion process known in financial circles as triangulation, which converts amounts from a local currency to the euro and then back to the dollar. But in addition to figuring cost in euros, a production company will also have to calculate a bid in the local currencies during the three-year transition period. In the end, the single currency will become more cost-effective for production, but until the euro stabilizes, some money will be lost in the translation. Usually, when you go from one currency to another, you lose some money in some way, shrugged Garland.
Fortunately, software programs exist that can help handle the additional conversions. For example, Paul Rosen, executive producer at Cine International Associates, a New York-based shop active in global production, uses MediaBid software (manufactured by Media Services) and believes the adjustment to the euro will be as simple as plugging in another conversion rate. Its just another currency to deal with. Im more worried about the Y2K problem, because who knows if our programs are compliant? mused Rosen, who said he would make allowances in his bidding system when the currency becomes available. How are you going to pay a crew in euros if they dont exist yet?
One disadvantage producers did cite was a loss in the ability to manipulate different exchange rates to find the most cost-effective place to shoot. For instance, Spain has traditionally been an inexpensive place to shoot compared with France and Germany because the dollar always performed very well against the peseta. Now, the euro will always be held to the strongest currency in Europe, making it impossible for the peseta to drift. When things start to level out, neither place will become more or less affordable, and the cost of shooting will settle out at the strongest link. I cant see that anything is going to become cheaper, because increased trade just means more wealth, added Woffinden.
Euro Envy
There are mixed feelings among producers about EU countries that will remain outside the eurozone. Woffinden believes that although the Czech Republic would like to become a part of the new economic and monetary union, his Prague office could benefit from any delay. From where we sit, the value of our money and services are always going to fall way below that of what is happening in the EU, so inevitably it means that by crossing the border [into the Czech Republic] youre going to save money, he predicted.
But the U.K.s monetary abstinence is another story. Its such a prickly question in the U.K., related Garland. I think it has nothing to do with economics and everything to do with emotions.
Kathrin Lausch and Lise Ostbirk, co-executive producers (both European born) at Compass Films, New York, represent three European directors, London-based Dan Nathan, Berlin-based Nico Beyer and Copenhagen-based Jan Gleie. Neither Lausch nor Ostbirk is concerned about Englands choice to remain autonomous: They think the English pound will eventually be, in their words, gobbled up by the euro.
John Ginnes, president of production services company First Avenue Films, Venice, Calif., recently did a shoot in Ireland and England and rented cameras in both countries. His hope is that the conversion goes smoothly so that England will want to get involved. England is part of a core of European countries and right now a lot of production goes through England or back to England from Europe, so it would be good if they could sign on, Ginnes said.
Woffinden agreed it could only help the film industry for England to get involved. You look at Europe and you see all these little fragmented film industries and right in the middle of it is London, which dominates the entire scene. So I look at the situation and say, AAnything that brings a union of interests into play can only help streamline the whole process, he asserted.
Moviezone
Whether or not an international film community will grow in the eurozone remains to be seen. A prominent sign of a unified industry in Europe is Venice, Calif.-based Digital Domains joining a global consortium that has a controlling interest in High Definition Oberhausen (HDO), Germanys huge effects facility in Oberhausen, just outside of Dusseldorf (SHOOT, 1/8, p. 1). The consortium is composed of L.A.-based film/TV production house Kushner-Locke Co., London-based Capitol Films, Tel Aviv-based effects shop Gravity and DLIN Ltd., an Israeli banking firm. While Digital Domain CEO Scott Ross envisions HDO becoming a center of visual effects for all of Europe, Digital Domain COO Steve Fredericks sees the euro as opening the borders in Europe to more talent. Its astounding how easy it is to cross borders in the EU now, and, from our perspective, talent is not country-specific, said Fredericks. The opening up of Europe will attract people from all over, including the United States.
According to Fredericks, no other country has supported film production in Europe more than Germany, which is now positioning itself to become the center of film production for the whole continent. But despite Germanys efforts, Fredericks noted, the possibility for an entirely unified film industry in Europe is still out of reach. Even with the euro, the national spirit of each of these countries is so strong that they are doing nothing to unify themselves beyond the currency, he said.
So U.S. producers will sit on the sidelines and wait. They will carry on business as usual and take the hits as they come. Producers are there to solve problems, said Garland, so all the euro becomes is just another problem to solve.
