Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, ladies and gentlemen,

I read your letters. To be honest, they surprised me. It is clear that the Russian economy, social environment and culture have suffered significant losses in the 1990s and have not yet fully recovered. During the Soviet era, around 300-400 hours of animation were filmed annually; at present, there are only 20 hours. But I would like to direct your attention to the following: in 2000, a total of 200 million roubles was allocated to the Russian film industry. This year, that allocation is 4.6 billion roubles. And it is the job of the agency in charge to decide what percentage of the funds to allocate to which projects. I have just spoken to Mr. Zhukov, and he could not name …

Alexander Zhukov: Two hundred and eighty.

Vladimir Putin: Two hundred and eighty million roubles were allocated for you for this year, is that correct? Certainly, this is an insubstantial amount, completely insufficient, I agree. This is the reason for our meeting today. As I understand, there are many other issues that must be discussed in addition to this one.

It is unfortunate that these issues continue to arise, because everybody in our country loves animated films, myself included. I am certain – and this is simply how things are, a fact of life – that generations of Soviet, and later of Russian people, were raised on our remarkable animated films. These are great traditions. Our animated films are good and gentle, beautiful, colourful. They don’t just inform, but also educate, in the broadest sense. Above all, I’m talking about a foundation that helps shape an individual perspective. Our animated films depict kindness, good versus evil, loyalty and truth. It can all be found in our animation. It is unfortunate that we must devote our time to the routine work that we have gathered to discuss today.

I would like to offer the floor to Culture Minister Alexander Avdeyev, who will present to you his position on the issue, and report on developments and state objectives. I would then like to hear your thoughts so we can make certain decisions.

Mr. Avdeyev, please.

Alexander Avdeyev: Thank you, Mr Putin. I believe that the film-making industry has amassed systemic problems, and we are now trying untangle these knots one by one. These include issues with art-house films and market feature films, and now we have come to grips with the woes of animated films. The reason, in my opinion, is rooted in the fact that our cinema production, as well as our culture as a whole, turned out to be poorly suited to a market economy. This resulted in a rather painful collision of Russia's wonderful and splendid cinema, one of the world's best, with economics, which has its own laws and rules. Currently, this manifests itself not solely through a funding shortfall, but mainly through the gap between cinema distribution and cinema production. Mr Putin, we mentioned this at the cinema board meeting today. It affects feature films, children's movies, animated films and other films. To make things worse, television channels do not take everything that has been produced by cinema companies to broadcast. They do not take the necessary volume of cinema productions, nor do they take animated films for broadcasting.

I'll turn to the figures now, but first I would like to mention Garry Bardin's animated film, "The Ugly Duckling," a wonderful work, one of the world's best – yet it faces distribution problems, with additional fees to be paid to distribution companies to run the film. Instead, they prefer running cheap and self-amortising American movies.

In 2010, Russia produced 136 animated films, including Bardin's "The Ugly Duckling." A total of 331 million roubles have been allocated for their production. This year – you mentioned the figure 280 million, but it turned out to be slightly less, 257 million roubles. The funds have come up a bit short. I will not comment on this – we didn't receive enough money not because they didn't want to provide it, but simply because that's how the situation is. At the supervisory board's meeting this February, a decision was made to introduce amendments to the budget to increase subsidies for the production, distribution and promotion of films for children and youth, as well as for educational films. To date this decision has not been fulfilled. Last year's almost 300 million-roubles reduction in financing children's films has a painful impact on this year's results as well. By conservative estimates, we need 750 million roubles annually for the production of animated films.

But it is not only a matter of finances. This issue has already been settled. It is necessary to handle other issues in parallel, namely the acute lack of technical personnel in the animated film industry. The tradition of fostering, training personnel at studios has been long forgotten. Soyuzmultfilm, once the country's top animation studio, used to train top-class technical specialists, while this year the company marked its 75th birthday in a poor state. This is all very sad, starting from the confrontation over premises and ending with the mediocre level of those few movies that have been recently produced. This mediocrity is rooted not in a lack of talent but in a lack of technical equipment. To make things worse, the division of Soyuzmultfilm in 2001, when the creative and production facilities were divided from the film fund, dramatically affected the animation studio, with the film fund becoming part of the Kinokollektsiya (Film Collection) organisation. This company does not produce any films but possesses rights for film distribution, and it is getting along quite well – while the studio animators receive no royalties for their movie screenings.

Vladimir Putin: What is this organisation? Who runs it?

Alexander Avdeyev: It is ours.

Vladimir Putin: Meaning what?

Alexander Avdeyev: It is a joint organisation run by the Culture Ministry and the Federal Property Management Agency.

Vladimir Putin: Why then have you established an organisation that you think is not required? This only exacerbates the situation.

Alexander Avdeyev: Mr Putin, it was established back in 2001 and now I suggest that this should be reconsidered.

Vladimir Putin: But it is 2011 now, you could have liquidated it long ago.

Alexander Avdeyev: This is exactly what I am suggesting: to re-adjust the financial flow so that royalties will go not to Film Collection but to film production studios, which could use the money to develop their equipment and technical capacities.

Vladimir Putin: What has Film Collection used these finances for?

Alexander Avdeyev: They just kept them for future purposes, for the budget. Here there are some grand old men, old-timers who can explain the reasons why this Film Collection was created, because I have inherited all this. 

Vladimir Putin:  So, people make a film, there is a studio that produces it. They made their product and made a profit and the profit goes to somebody else, am I right?

Alexander Avdeyev: Yes.

Vladimir Putin: For what purpose? If that somebody else does something for the sake of the community, that is one thing, but if he spends it on himself, I don’t understand the rationale.

Alexander Avdeyev: I’ve been told that at the time it was about the privatisation of film studios. To prevent the film studios from grabbing the rights to films in the process of privatisation, the films were handed over to the state Film Collection so that the state could benefit from deductions. While the studios wanted at the time…

Vladimir Putin: But we are now talking about their current productions. I don’t understand why they are being made to pay. Okay, sorry for interrupting you.

Yury Petrov (head of the Federal Agency for State Property Management): They deduct only 25% of the net profit for the budget.

Vladimir Putin: Twenty-five percent of the net profit.

Yury Petrov: Yes, all the rest goes to meet their own needs. I would like to know how that money is spent.

Vladimir Putin: The money is deducted for this organisation?

Yury Petrov: No, this organisation deducts 25% for the budget.

Vladimir Putin: And it keeps 75% for its own needs?

Yury Petrov: Yes.

Vladimir Putin: I don’t understand who needs it. What function does it perform? Can you tell me what function it performs? What is it for? Really, you surprise me. You are all adults and you are sitting and keeping mum about it. You are being robbed and you keep silent. Why have you kept silent up until now?

Response: In 2009, the film community sent an open letter to all the agencies…

Vladimir Putin: Listen, I don’t understand, the epistolary genre is a fine art form. But can’t you just come and demand a meeting with the minister and talk and explain things? By the way, I read your letter by chance. I was riding in a car to the airport and was going over some papers, but it was sheer chance that it caught my eye. Honestly, I don’t understand it. All right, go on. I don’t understand, they have set up this tricky office which takes money, but what does it do? Can you explain to me what it does?

Response: I’ll try to explain it later.

Vladimir Putin: Yes, please.

Alexander Avdeyev: I continue. The situation has become abnormal. The ministry is proposing in the draft resolution to give up this practice and change the cash flow in such a way that money is distributed among the studios that have produced these films.

Vladimir Putin:  How many such studios do we have?

Alexander Avdeyev: The studios that produce films for children and young people are Soyuzmultfilm, Lenfilm, Tsentrnauchfilm, Gorky Studios, Sverdlovsk Studios and Diafilm.

Response: State-owned.

Alexander Avdeyev: Yes, they are state-owned. We do not count private ones.

Vladimir Putin: I see.  

Alexander Avdeyev: According to the documents, as a result of the division of studios into production facilities and the Film Fund, the state will more effectively control the scattered film collections and preserve the legacy and popularise it. But the scheme does not work.

The flip side is that creative associations cannot use that money for their own development and for their technical base improvement. In short, it is a gross injustice. For example, Soyuzmultfilm badly needs money to repair its facilities. They were last repaired fifty years ago. Moreover, Soyuzmultfilm is facing bankruptcy because it owed 18.5 million in 2010. Films whose production began in 2008 have still not been finished. The supervisory agencies – the Audit Chamber, the Prosecutor’s Office and Rosfinnadzor – are urging us to sue Soyuzmultfilm (us meaning the Culture Ministry) because they have such a big debt. I think the animated filmmakers will give you an inside account of that. Of course, we are not going to litigate. But the debt situation has been dragging on for years and is only getting worse.   

Vladimir Putin: Is it a state organisation?

Remark: It is a federal state unitary enterprise.

Alexander Avdeyev: The Culture Ministry proposes the following. To allocate an additional 500 million roubles for the production of animated films and in general to increase the funding for the children’s film industry. Considering that short and animated films bring no profit while at the same time being very important for national culture, they should be 100% state-supported because currently we provide only part of the money needed. We have financed the production of  “The Ugly Duckling”, but about a third had to be raised from private investors. So, there is no certainty and there are money shortages which make film production precarious. As I see it, this cash flow should be eliminated. It was illegitimate from the start and amounts to the Film Collection appropriating other people’s money. The Film Collection can be merged with Gosfilmofond (the State Film Fund). We have Gosfilmofond. Films can be stored there. The conditions there are excellent. You have visited it, Mr Putin. The proceeds from distribution can be divided up among the studios that made them. That is all I have to say.  

Vladimir Putin: Do you have any profits?

Alexander Avdeyev: Yes, last year Mosfilm, which does not report to the Film Collection and is not a member, made 300 million in profits (from its own films) and the Film Collection earned, I think, about 100 million roubles.

 * * *

Final words by Vladimir Putin:

Today, we are discussing a very interesting issue, entertaining at first glance but in fact a very important one. Great animation, full-length or short film, can replace dozens of talented educators, because it is seen by millions. In the hands of talented filmmakers, it can plant the most important fundamental values in a child’s mind and form his or her outlook on life. Above all, it is exciting and beautiful to watch. Certainly, we need to pay more attention to animated films than we have till now.

Allow me to reiterate: in 2000, we were able to allocate only 200 million roubles to the entire filmmaking industry, while this year we came up with 4.6 billion roubles. The issue concerns the proper use of these funds. Though perhaps this is also insufficient? This is probably the case. Then what is proposed?

Following the debates over the United National Film Collection federal state unitary enterprise, it is proposed to start the liquidation process of this company and transfer the rights to the use of its audio and video materials to Gosfilmofond of Russia (film archives). If there is a need for any government resolution, then please prepare a draft, and we will approve it.

Second, we need to decide, in conjunction with relevant federal executive bodies and with the participation of the Animated Film Association, on the need to establish a Centre for Russian Animation. I believe this is an excellent and a timely proposal, perhaps, it is even overdue. This centre could perhaps be based on Soyuzmultfilm. To do so, I believe we should establish a special working group led by Deputy Prime Minister Alexander Zhukov and give this issue a thorough look out of session. Part of these funds can come from the budget; part can be obtained from developmental institutions and other businesses that might be interested in this. A colleague here just spoke about how to arrange things in order to achieve a synergy of creative talent, industry and business. This truly can be done, but we should take things one at a time and think about all the intricacies involved in this project. This is my second point.

Third, we urgently need to provide assistance to Soyuzmultfilm. I have preliminary plans, and the issue concerns several million roubles…

Remark: It would be nice to write their debt off.

Vladimir Putin: How much do they owe?

Remark: 12 million.

Vladimir Putin: All right, we will write off their debt and assist in their repairs. All I’ve got now is 6 million roubles. We simply allocate this money from the government’s reserve fund.

Next. There are representatives here from the company Kino Citi. We need to look further into the issues related to your proposal about showing films in the auditoriums that you are now building. It’s an entire chain of about 200-something auditoriums. Is it 250?

Remark: Two hundred fifty three.

Vladimir Putin: Two hundred fifty three is a large chain. Since you are doing this with our support, including the support of the Vnesheconombank’s government developmental institute, let us outline your future relations with the animation film industry. Agreed?

Finally, the next issue is probably very important to you. This year the ministry allocated 257 million roubles for animated film. Someone here said that still more is needed, 700 or 700-plus million. In 2011, we will release an additional 500 million roubles for animated films. At least 1.5 billion roubles have been budgeted for these purposes in 2012.

Remark: Сhildren's animation.

Vladimir Putin:  Children's animation. 1.5 billion roubles.

As for the establishment of the working group, I think we should move beyond discussing the issues involved in this centre’s establishment and speak about support for the animation industry in general. We have all your proposals (I gave them to Mr Zhukov) regarding the fund and taxation issues. What is your current bracket? 30%? Then you should be in the 30% bracket. We’ll see, maybe we will be able to bring it down to 20%. We'll have to see, the amounts are not large, and the budget losses will be minimal, completely insignificant, so we'll see.

You have other proposals, I have seen them, and there are a lot of them. The working group will look into all of them. Please be mindful that this working group should not consist only of government officials, far from it; it will include people from artistic associations, businesses, financial groups, and so on, so that this group will be an effective tool in order to deal with the task at hand. Of course, I would very much like to see this centre established. This is a good idea, thank you very much. I wish you the best.