17 May Interview with György Rajnai, CEO of Korda Studios, Hungary
BF: In 2022, the Hungarian film industry boasted a record revenue of $691.8 million, a 20% increase year-on-year. This means Budapest has become the second-biggest player in the European film industry, in terms of revenue, after London. Could you give us a brief overview of the industry? What have been some of the key factors behind this success, and what are some of the strengths and competitive advantages of the local film industry?
György Rajnai: Hungary is a manufacturing base for foreign films. We are acting as a production service provider for international companies and projects. The majority of the large budget projects come from the United States. A fun fact is only 2% of all U.S. movie production spend is coming to continental Europe. The UK gets more than 3%, so overall 5% comes to our continent as a whole. The potential is extreme. Compared to the UK, where 50% of their tv and film production value is for local, in Hungary 95% of the value produced is foreign production while only 5% is local production.
Korda was established in 2006 and it took us more than one and half years of lobbying to get the Hungarian government introduce the film tax incentive. You can have the best location and the best facilities, you can have the best weather and you can have the most stable legal system, but if you’re not offering the tax incentive, your industry won’t develop. This is the major magnet in the decision-making of producers in terms of where they would like to spend that money. We are now in the top tier of Europe because we offer 30% cash back of your production value.
What makes us unique compared to many other countries is that Hungary doesn’t have a cap on the overall annual spend that is allowed to be spent by government. So, in the 30% rebate we have a so-called ‘unlimited’ fund, which is topped up by taxes and can also be reported to the next year. In other countries, there is a fixed amount of money to be had and if you missed out, you cannot get it. That’s unique.
Another unique aspect of the rebate system is that you are also entitled for the 30% tax rebate for 25% of the money you spend from your Hungarian entity to a non-Hungarian entity. So, if you establish a project company in Hungary, and if you decide to go to Croatia to shoot the sea, the ocean, or a beach, if you spend that money from your Hungarian entity, you are entitled to this 30% refund. If you have actors that are taxed in the UK, you can pay them from the Hungarian entity and still get 30% back. Therefore we have a unique business.
Our film industry is quite unique because our previous film commissioner had a hands-on approach, not a bureaucratic approach. He was a well-known film producer with an over 30-year track record of producing in the U.S. and the UK. Our process in Hungary is streamlined: there is a single window you can access for all your tax benefits, your registration, your legal requirements, your shooting location permits in Budapest, anything. You don’t have to go to different offices in different districts. What’s more, the devaluating currency has given everybody more buying power, and producers are grateful for that. All in all, Hungary is about 25% cheaper than the UK and 35% cheaper than the U.S. So, between the tax break and the lower cost, producers can save about 50% of their budgets compared to the U.S. or UK.
After the financial engine comes the technical engine: our state-of-the-art facilities. While most facilities throughout Europe are very aged — in spite of the recent investments, most of the UK’s facilities are 100 years old — Hungary’s facilities are brand new, and this gives us an advantage. The large projects can come here and fit. Our crew has also evolved in the last 15 years, matching the very high-level projects. They have learned from the best, so now they are becoming heads of departments, beefing up the entire talent ecosystem.
We still have four seasons, albeit not so much snow anymore, and everybody appreciates the vast options of entertainment, hotels, great food, and people’s attitudes toward foreigners. Apart from the tax rebate, facilities and all the tangible aspects, people just enjoy coming here. Hungarians have always served foreign entities.
BF: Korda is one of Hungary’s most impressive studios. It’s a state-of-art, well-equipped and modern film studio complex, located about 30 kilometers from Budapest. Can you expand on the unique expertise, services, and facilities that Korda Studios has built over the past 10 years? How does it differentiate itself from other players in Europe and Hungary?
György Rajnai: In the UK, Americans don’t have a language barrier, so when a producer goes to the UK, they go to a studio and hire a ‘fixer’ to manage all their production needs. In Hungary and everywhere else in Europe, the foreign producer will find a production service company to do that. The facilities are basically in contact with these production service companies. Then the producers come, look at your facilities, and get an understanding of what’s possible and what’s not.
Everybody tries to level up and keep their facilities to the highest international standard. This includes the morale, the quality of your equipment and facilities. We are not competing against one another, but only competing to keep our services and facilities up to the highest standards so that we can get the best price for the square meters that we rent. Most of the lighting, camera rental or costumes are also controlled by affiliates of Western companies like Panavision or ARRI, the largest German camera manufacturer. So, in that aspect we do not get a piece of that pie like in the UK, where the facility itself services the production. We cater to providing the best logistics, workflows, and keeping our equipment to the highest standards, so that whenever they turn on or off, it really turns on and turns off and we do not cause any delays by not having maintained our facilities up to the highest standard.
Productions decide not to shoot on location but go to a facility because they want to build a world that does not exist elsewhere. Our facilities need to cater for building these sets. We need to have good workshops. We need to have good logistics on the plot. We need to have the best air conditioning and the best air filtration systems and we need to make sure nothing explodes when they paint their set. Health and safety need to be controlled by ourselves, not only production. At the end of the day our job is to make sure that within that short period of time that the actors are here, and everything works perfectly. As an example, for a $100 million project that comes to us for 6-8 months, we are prepping for 3-4 months, so that the actual shooting is just three months. The highest paid actors will only come in for a few days, so you really need to make sure that on those few days there is no delay. Our concentration goes into those few days and to make sure that shooting is smooth. We work side by side with constant contact with production companies.
What make Korda unique is that most of our competitors are near Budapest. We are outside of Budapest. We have huge plots of land that we have started to build together with the productions. We have a medieval village, we have a Renaissance town, we have a New York street. We try to negotiate with the production companies to keep the value of what’s been built here for the long term. Our engineers are also involved in their set to make sure that things are weatherproof and not just temporary. We positioned ourselves as the outdoor guys: a lot of productions want to shoot outdoors in the green landscapes and we have a great offering. We have a great number of business partnerships with forests, mountain ranges and lakes, and many splendid locations that are worth traveling to.
BF: What are some of the achievements of Korda that you feel most proud of?
György Rajnai: When the tax rebate was increased from 20% to 25%, a whole flood of productions came. The former film commissioner then raised the rebate to 30% before passing away. When it went from 25% to 30%, we had a huge activity boom; we did not know what was going on, we could raise prices but still people were coming.
The greatest achievement for Korda was attracting people like Ridley Scott and high-level producers, even before the rebate was raised to 25%, because of the way we structure our facility. Our former owner who also passed away wanted to have the biggest studio in Europe. The UK built a larger one later but, as the UK stands out of Europe, we can say that we have the biggest studio in Europe! It’s the size of a football field, 6,000 square meters. We call it the “White Elephant.” When Ridley had to build Mars for The Martian from a smaller budget, he had no choice but to choose our facility because this was the biggest one where he could create a controlled environment and bring his stars, Jessica Chastain and Matt Damon. It is to date, our biggest unique selling point.
Korda studios also boasts a water tank that we have built in. You do not need divers or special camera men to record things because you have a lot of windows throughout the tank, and you can film dry on foot. The director of photography can drive the film just next to the water. That’s also unique.
The first seven years, before the tax rebate was increased to 25%, were very tough. We spent most of our energy and time optimizing our workforce and the systems, but after that we managed to nearly repay all our debt to the bank and all our suppliers because back in 2014, we implemented ERP Systems. My perspective as a financial person was to have a more technical approach and work smarter, rather than just increasing or optimizing the headcount.
Today we have these outstanding backlots, and we maintain them up to perfection. For example, our medieval backlot has been used for all five seasons of the Last Kingdom plus their feature film. We had a very good relationship continuously with the producers, Carnival Films. We’ve always supported their investment in the backlot and catered to their needs to best we could.
Three or four years ago, we started to negotiate with a very large Paramount Plus production on a special business deal during COVID. The relationship that we have with the production service companies and the production companies is the key. That is an edge that we have in Hungary; we really work from the heart. A lot of people want to just recoup their investment and be rich. Our mother company has a huge property portfolio in the region of about €4 billion. Yet our aim is not about making more money, but about building trust. That is a very different angle that we have because of our own owner and the family behind our investment. That is unique in Europe and in Hungary as well.
BF: From its six soundstages to its water tank all the way to post-production division, Korda seems to have it all. How is your company adapting in terms of new technologies and catching up with the new production and post-production requirements from clients?
György Rajnai: It’s important to be careful about what you invest in. I worked at Sony in the UK and Belgium for more than 10 years, and I recall when things turned from analogue to digital: things went absolutely crazy and very small, lightweight, unheard-of companies simply started to excel. What I learned is to be cautious when investing in technology and leave it to smaller companies who are specialists, who have an emotional attachment, and the drive. At Korda we always think partnerships, and we are very careful to spend our owner’s money in anything like facilities and infrastructure. Many facilities for instance have invested in LED wall technology and virtual production. It’s sexy, it’s cool, but if you don’t know how to run that product and you get millions of dollars tied up in technology that will evolve extremely fast over the next six months, that’s very high maintenance, the overall opportunity to exploit this tool that you invested in remains very small compared to your investment level. So, I always look for smaller size enthusiasts and always link them up to very brave investors and try to be a middleman. I then pitch their services to producers. A lot of these companies have grown up over the last 3-5 years and now take a larger chunk of the pie from foreign companies.
There is a lot of demand, but it’s also very fragile. You really have to be careful and serve all producers with your heart and soul. I think that is what has been key to our success. I was very scared when we went to 30% and when a lot of streaming companies started up and a lot of crew members started their own productions services. It was like our train was going 350 kilometers per hour and people who had been serving us on the side now wanted to drive that train. I also think that there is simply too much money going into content. Everybody wants to produce their own stuff, but there are not enough capable producers and crew, so everybody is getting out of place. People that have been assistants are now heads of departments.
BF: What is your perception on the rise of global streaming platforms and the effect it has on film studios in Hungary?
György Rajnai: This craze about streaming has accelerated with COVID and lockdowns and people being forced to stay at home. Today everybody wants to enter streaming, and everybody wants to be the biggest in streaming. I believe that we will see a consolidation begin in major ways this year and next year. But overall, it’s never been so good; it’s a gold mine, and we are enjoying the ride while it lasts. We are one of the only facilities that have started production services by ourselves. I was brave enough to go against the production services companies just to show them that whatever they are doing, we can also do.
We are now also entering into content development: apart from the hard investment and hard cash and operations, we need to go into the smart intellectual property world as well, using all our strengths that we have built in the last 10-15 years. We take a step-by-step approach, starting to look at the Hungarian market first, which is very small but can serve as a good test bed.
My vision is that we are all human beings with the heart and soul that is eager for stories that touch the heart. No matter if you are Chinese, Israeli or Canadian, you are still a human being, you want stories that touch you. That’s the kind of edge we want to exploit. It’s international because of the human soul.
BF: Korda also opened a film park, which was the first movie-themed visitors center in central Europe. Can you tell me more about the Film Park. What was the goal behind it, how successful has it been, and how many visitors is it attracting?
György Rajnai: The film park has been around for about 10 years and has an excellent track record, of about 15,000 visitors a year, which is very reasonable for a non-Budapest based facility. At Korda Filmpark, we explain the industry, we explain the stories behind movies, the optical tricks and the special effects that you see in movies. Visitors can learn for example how the movies are shot, they can learn about the stunts, decorations, and post-production.
We also started an events business which is now generating about €200,000-€300,000 per year. These are offering people the opportunity to go on sets. We really show what is happening on set, what is happening in the preparation phase of a project, with this idea to educate our guests, rather than entertain them. We show them how the locations are selected, how a book is transferred to a script, what to do when you read the script out, how each department needs to react, from the prosthetics department to the décor department. They learn how to breakdown a script into actual materials and actual production. We explain what the producer does, we explain the structure of the budget, we explain the rebate, how decisions are made, etc. We even built a whole set where you can film with lighting and camera.
When you enter this experience, you are given a daily shooting schedule like every film crew gets. You walk up to the center and it’s really dark, you don’t see anything. Everybody gets a role to play, so they are not passive but actually play a role in the set, on location. We have hidden little cards and puzzles to solve throughout the whole game. For example, we created a red card for the travel coordinator saying that this actress coming from Paris had her flight cancelled; she is due to come on film in two days but there are no flights from France. What do you do? Although you spend four months planning for the production, these sorts of problems arise; things don’t always go to plan, and that’s where you need the expertise. That’s why big film projects need 300 people in the crew: 300 people can solve problems much more quickly, and this helps when the actors are getting $5-10 million.
BF: What is your final message to the readers of USA Today?
György Rajnai: We need to drop our egos and start working together within all aspects of our life. We need to collaborate and do partnerships and help each other, and unite to restrengthen ourselves, our businesses, our countries, the world itself. That’s the only way forward. I see there has been too much ego, too much fighting, too much threatening, too much war, too much economical competitiveness, and craziness for growth. I think the next 100 years will be about creativity and sharing.