So Israeli officials are promising better tax breaks, terror attack insurance and handouts of up to $400,000 to lure international movie producers to the holy city of Jerusalem. They want to cash in on the multibillion-dollar industry, and want the real Jerusalem on the silver screen - not Mediterranean stand-ins.
"It's absurd. Movies set in Jerusalem are filmed in Malta, Morocco and Greece," said Yoram Honig, an Israeli film director and 10th-generation Jerusalemite. He heads the Jerusalem Film Fund, which was set up three years ago to encourage more moviemaking in the city.
According to conventional wisdom in Hollywood, Jerusalem is too volatile to ensure smooth filming on location. International insurance companies have traditionally refused to provide terrorism risk coverage, or offered it at exorbitant prices.
For a long time, it didn't make financial sense for the producers. While Israel in the 1980s attracted such star-studded productions as Sylvester Stallone's "Rambo 3" and Chuck Norris' "The Delta Force," it later lost out to other countries that started giving big tax incentives to producers.
"If they think it's expensive and dangerous, they won't want to come," Honig said.
That's why the Israeli government enacted a law in 2008 offering tax breaks to foreign film companies that choose to shoot in Israel. And earlier this year Israel introduced an insurance fund to provide coverage to a production in case of disruptions by acts of war or terrorism, said Zafrir Asas, manager of audio visual industries in Israel's Ministry of Industry, Trade and Labor.
But the 2008 law has had little effect. Asas admits the tax incentives are far lower than what other countries provide.
Nava Levin, the Israeli representative to the Producers Guild of America, said the law actually creates obstacles to filmmakers, including a requirement that Israeli production companies purchase goods and services for the producers on their behalf. The law "is written in a way that is almost impossible to take advantage of it," Levin said.
Even Israeli producers have shied away from the city: Out of about 600 Israeli movies filmed since the country's founding, only about 30 have been filmed in Jerusalem, Honig said. That has begun to change recently, with some of Israel's most celebrated new films shot here with the fund's financial support, including Joseph Cedar's "Footnote," which was awarded best screenplay at this year's Cannes film festival.
Now the city is sweetening the pot for international filmmakers, offering cash incentives and a municipal department that will assist with filming permits and on-location logistics. Only four international productions are shot in Jerusalem each year, most of them European, Honig said.
Part of the push to get Jerusalem into movie theaters is to present a more positive image of the city than the conflict seen in the news - "the Jerusalem that more than 3.5 billion people of faith around the world wish to see," said Stephan Miller, spokesman for Jerusalem Mayor Nir Barkat.
Honig said the municipal fund is close to signing a contract with a German producer to shoot a film about the trial of Nazi war criminal Adolf Eichmann, which took place in Jerusalem in 1961. An Italian producer has also proposed filming a comedy in the city about an Italian nun who falls in love with an ultra-Orthodox Jew.
Other projects the film fund is courting include an Indian-Israeli romance, and "Jerusalem, I Love You," an installment of producer Emmanuel Benbihy's Cities of Love series. A delegation of Bollywood producers also recently visited the city to scout out filming opportunities. And a new animation studio in the city, Animation Lab, has courted Hollywood producers to work on its first feature film, "The Wild Bunch," slated for release in 2012.
Tel Aviv and Haifa, too, are developing similar film funds to attract producers to those cities.
In the meantime, most major Hollywood productions have preferred to set up their movies about Jerusalem elsewhere.
Take "World War Z," the forthcoming multimillion-dollar zombie flick starring Brad Pitt. Part of the plot takes place in Jerusalem, but producers have replicated the city on the island of Malta, which offers hefty cash rebates for foreign film productions. Israeli actors have been flown in for the filming, Levin said.
"Robin Hood: Prince of Thieves" opens with Kevin Costner escaping from a prison in Jerusalem - but the movie was filmed in England and France. Mel Gibson's "The Passion of the Christ" was shot in Italy. In Steven Spielberg's "Munich," about Mossad assassinations of Palestinians who killed Israeli athletes at the 1972 Olympics, a Tel Aviv beach promenade scene was filmed in Malta.
Some films taking place in Jerusalem have even been filmed in Middle Eastern countries that don't have friendly relations with Israel. The Crusaders who storm Jerusalem in the 2005 action film "Kingdom of Heaven" were filmed in Morocco, which cut off diplomatic ties with Israel in 2000 when a Palestinian uprising erupted.
Monty Python's "Life of Brian" filmed scenes of Jerusalem in Tunisia, using part of the recreated Jerusalem set built for the Italian miniseries "Jesus of Nazareth." Tunisia only established diplomatic relations with Israel in 1996, but severed them in 2000.
The opposite is true, too. The 1991 thriller "Not Without My Daughter" starred Sally Fields as an American trapped in Iran, but it was filmed partially in Israel. The opening scene of the 1999 film "The Insider," when Al Pacino's character meets the founder of the militant group Hezbollah in Lebanon, was actually filmed in an Arab village in Israel.