CHALLENGES IN A CHANGING CONTEXT

Transcription

1 Public policies for film: CHALLENGES IN A CHANGING CONTEXT Background paper August 2008 Council of Europe Film Policy Forum SHAPING POLICIES FOR THE CINEMA OF TOMORROW Kraków September 2008 This paper has been prepared by the European ThinkTank on Film and Film Policy and does not necessarily reflect views and positions of the Council of Europe.

2 1. Preamble The Council of Europe s initiative to organise the Film Policy Forum, Shaping Policies for the Cinema of Tomorrow, is build on its film policy work, a notable milestone of which was the 8 th Conference of the Ministers of Culture, held in Budapest in October 1996, devoted to European Cinema. In its conclusions, it evoked the need to take account of the cultural and economic differences between member states with regard to assistance in the production, distribution and use of moving images. 1 In 2004, the European Audiovisual Observatory, in collaboration with the European Investment Bank, published its report on public funding for film 2. In June 2006, the Danish Film Institute organised and hosted the three-day Copenhagen ThinkTank on European Film and Film Policy that gathered together 170 decision-makers from 32 countries. This led to the publication of The Copenhagen Report in February The Copenhagen event led to the establishment in June 2007 of the ThinkTank on Film and Film Policy. The Council of Europe decided to convene the Film Policy Forum in consultation with the ThinkTank, for which it obtained the support of the Polish Ministry of Culture, the Polish Film Institute and the City of Kraków to hold the Forum in Kraków September In the preparation of this background paper, the ThinkTank has benefited from considerable input from the European Audiovisual Observatory, but the views expressed in here are those of the authors. CoE Kraków Film Policy Forum Background Paper 1

3 2. Overview As the title of the Film Policy Forum Shaping Policies for the Cinema of Tomorrow indicates, its purpose is to provide a basis for an assessment of film policies in Europe, in particular of the ability of those policies to take into account the changes taking place in the conditions of production, distribution and use of film. The Forum takes place in the context of the Council of Europe s basic activities in the film sector: The Convention on Co-Production Eurimages European Audiovisual Observatory. This background paper offers an assessment of established and evolving public film policies and considers the extent to which those polices meet the challenges for cultural policies in general,.. The paper consists of six sections: i. Survey of film support systems in Europe ii. iii. iv. Taxonomy Aims and Objectives Interventions Outside of Production and Distribution Distribution Perspectives of key stakeholders (producers and the industry; the broadcasters; governments and public film bodies; the public) Investment in the value chain how support is allocated Performance of European films how success is measured v. The objectives and performance of co-productions vi. Reaching out to audiences internationally. CoE Kraków Film Policy Forum Background Paper 2

4 3. Survey of film support systems in Europe Taxonomy The term, film policy, relates to a complex of measures affecting every aspect of cinema. In its 2004 study 4, the European Audiovisual Observatory distinguished between seven kinds of intervention: i. direct intervention in the form of subsidies in the strict sense of the term ii. iii. iv. tax relief on income, aimed at promoting investment granting of preferential credit organisation of a system of financial guarantees aimed at covering the major risks associated with investment in production v. financial transfers ordered or assisted by the public authorities in order to ensure the transfer of resources from one branch of the industry to another (particularly from television to production) vi. vii. viii. provision of practical aid to promote filming through the establishment of film commissions organisation of film promotion measures (festivals, international promotion, etc) organisation of legal and economic measures aimed at encouraging cooperation with economic players from other countries. 5 The distinction made in the Observatory s understanding of subsidies in the strict sense of the term, preferential credit and financial guarantees (ii iv) rests on the legal formulae of these different schemes. Furthermore funding of film archives, film education, market research and audience development would now seem to be essential aspects of film policy. How film is supported should also be looked at in the context of overall public policy interventions in the audiovisual sector. One attempt at setting out this context is shown in the addendum to this paper 6. This puts film support alongside interventions in broadcasting and shows the importance of regulatory measures such as production quotas. It distinguishes between industrial, cultural and pluralism objectives, on the one hand, and regional policy objectives on the other. Film support is a function of all three sets of objectives. In practice, however, European film policy very largely concerns one aspect of film: directing public money into film production: if tax incentives are taken into account 7, around 80% of all public funding for film is devoted to the production. Support for distribution, exhibition, training, archives and film education is limited to the remaining 20%. In many countries, however, support for training, archives and film education is not reflected in figures for public expenditure on film, being the competence of other agencies, for example those responsible for education or museums and libraries. When it comes to public spending explicitly devoted to film, in many countries, the percentage of funding devoted to supporting production will exceed the 80% figure, even without taking tax support into account. For the 23 of the 31 countries that gave a breakdown of film support in their response to the European Film Policy Survey prepared for the Forum, the average figure was 80.1%. For nine national funding bodies the 80% figure was significantly exceeded. This is shown in Table 1 overleaf. CoE Kraków Film Policy Forum Background Paper 3

5 Table 1 The allocation of support across the film value chain 2008 Country % Script Project Development % Production Support CoE Kraków Film Policy Forum Background Paper 4 % Distribution Support % Promotion Support Austria Belgum (Fr) Croatia Czech Republic Denmark Estonia Finland Germany* Greece Hungary Iceland Ireland Italy Latvia Luxembourg Netherlands Poland Portugal Serbia Slovakia Slovenia Spain Sweden Switzerland Average (unweighted) * The breakdown for Germany only relates to support for Development, Production, Distribution and Promotion. It does not include support for advanced training and exhibitors This breakdown can be compared to the European Audiovisual Observatory 2004 study 8 analysis of intervention by the funding bodies in Europe that presents data for The purpose of this comparison is to look at how changes in the allocation of support across the value chain reflect the evolution of public policies between 2002 and A caution is that the methodologies of the two surveys are different and so the comparison cannot be taken too far. The Observatory percentages are calculated on the basis of actual expenditure, while the ThinkTank figures are solely percentages as reported by the film funding bodies. The Observatory results (like the new survey) exclude tax-based support (which in 2002 was less widespread than it has subsequently become) and are strongly influenced by the figures for France: French film support accounted for nearly half of film support throughout Europe at the time. Support for distribution and % Total

6 exhibition in France, Germany and Italy is notable, compared to all other countries in the study (see tables below and Distribution in the next section). This is shown in Table 2. Table 2 25 national agencies % of total allocations % of total excluding France, Germany and Italy Value of support in percentages by phase of intervention by country, 2002 Production Screenwriting & Development Distribution Exhibition Promotion Totals 79.4% 2.6% 7,0% 10.4% 0.6% 100% 92.5% 4.6% 2.0% 0.5% 0.4% 100% Production Screenwriting & Development Distribution Exhibition Promotion Totals France 73.7% 0.85% 4.9% 20.25% 0.3% 100% Germany 76% 3.8% 10% 8.4% 1.6% 100% Italy 56% 44% 100% Analysis based on European Audiovisual Observatory study 2004 When we look at individual countries, there is a clear tendency for support to be spread more widely across the film value chain meaning that the percentage of funding flowing into production falls while that flowing into distribution and promotion increases. In a comparison between the 20 countries that feature in both the 2002 and 2008 surveys, 10 of those countries provided support for distribution in 2002 while, in 2008, this figure had grown to 19. Promotion support was available in 7 of the 20 countries in 2002 as against 19 in Coupled with what we believe to have been a significant increase in overall levels of funding, notably in central and Eastern European countries, the moves indicate that more comprehensive film policies are being established. These results are shown in Table 3 overleaf. CoE Kraków Film Policy Forum Background Paper 5

7 Table 3 Comparison of how film support is allocated, 2002 versus EAO Survey %Script/Project Development 2008 ThinkTank Survey %Script Project Development 2002 EAO Survey %Production Support 2008 ThinkTank Survey %Production Support 2002 EAO Survey Promotion, %Distribution and Exhibition Support 2008 ThinkTank Survey %Promotion & Distribution Austria Belgium FR Czech Republic Denmark Estonia Finalnd Germany Greece Hungary Iceland Ireland Italy Latvia Netherlands Poland Portugal Slovenian Fim Fund Spain Sweden Switzerland Average Sources: For 2002, European Audiovisual Observatory; for 2008, ThinkTank European Film Policy Survey Taxonomy of production support Production support follows three paths, often in parallel: Direct subsidy to lower the producer s cost production Para-fiscal levies on film-related revenues that are distributed to national film producers Tax incentives for investors in film production. Direct subsidies are allocations made to productions that fulfil criteria ranging from the perceived artistic value of the project to the economic benefits of investment to either the national, regional or local economy. Often, the subsidy takes the form of a soft loan: the money is to be repaid from the revenues generated from the exploitation of the film. In practice, money is repaid only rarely, with public film funds across Europe recouping less than 10% of the funding they grant. CoE Kraków Film Policy Forum Background Paper 6

8 The second path, para-fiscal levies, is exemplified by the French system. A percentage of revenues derived from the different forms of exploitation of film cinemas, home video, television broadcasters, and video-on-demand services is collected and paid into a central fund. National producers earn entitlements to draw down on the fund on the basis of the budgets of the films and the performance of their previous films. The fund is also used to subsidise theatrical distribution and exhibition. This system serves to re-direct the revenues earned on US films. The third path tax incentives can be illustrated by the example of the United Kingdom. Initially, investors were allowed to write off their investment as it was incurred rather than having to wait until they earned taxable profits on that investment, deducting from their tax liabilities amounts corresponding to how much they had spent making the film. Since the films seldom if ever went into profit, no tax was ever paid. This form has been replaced by one involving tax credits corresponding to a percentage of the amount invested. The change aims at making the cost to the public exchequer more predictable and the benefit to the production more direct. Other areas of support Other areas of the film food chain attract very limited support as compared with production. Information regarding the other areas of support is also very limited. Distribution support tends to be restricted to the release of national films in cinemas and takes the form of subsidies of prints, advertising and marketing costs. Initiatives relating to audience development, film education and the film heritage are even more limited than those relating to distribution. Film industry training is not generally included in the responsibilities of film bodies and is supported by government agencies charged with education and training in general. CoE Kraków Film Policy Forum Background Paper 7

9 4. Aims and objectives of film support systems in Europe 9 Divergent objectives for film support can be found between national policies, regional policies and from European policies. Different countries film support policies have different legal bases due to specific constitutional aspects 10. In particular it is important to make a distinction between community support in States in which regions, communities or territories have a cultural competence (Germany, Belgium, Spain, Switzerland, UK nations etc.) and regional support which is a function of the only economic competences of regions (UK regions, Belgium etc.). The divergence of objectives is especially evident when it comes to competition policy, industrial policy and policies to foster both cultural sovereignty and cultural diversity. For film policy, European competition policy aimed at preventing the distortion of the marketplace by state intervention often collides with national and regional industrial policies that aim to preserve and increase levels of investment 11. At the national and regional level, cultural policies tend to be expressed in terms of cultural sovereignty and at the European level in terms of cultural diversity; cultural sovereignty, the objective of which is the promotion of national identity, may not always be compatible with cultural diversity that is concerned both with the promotion of specific cultures and exchanges between those cultures. The European Commission has sought to achieve equilibrium between the goals of competition policy and those of cultural policy with the formula it uses in approving national support schemes: these schemes do not distort the market or, to the extent they do distort the market, they are not contrary to the public interest. The Commission s analysis of film support schemes is carried out by people whose chief concern is not to put in place systems that assist and promote film culture but rather to limit the amount and extent of subsidy that flows into the sector. For many European governments, also committed to restricting public expenditure and encouraging the emergence and operation of liberalised markets, a national film sector reliant on public support is also difficult to tolerate. National film agencies argue that the promotion of cultural diversity depends on maintaining strong national cultures, and strong national cultures depend on strong national film industries. A distinction, therefore, needs to be made between selective schemes (set up at the national level or by communities with cultural competences such as the German Länder, the Belgian and Spanish communities, the Nations in UK) that aim primarily to foster the production of films that embody cultural and artistic values automatic schemes that aim to stimulate production of national films, usually seeking a mixture of employment and economic benefits regional schemes that target economic benefits attracting investment into the region, stimulating employment, raising the profile of the region and encouraging companies and individuals to relocate there. Challenges for film policy due to changes in the ways we get to see films As noted above, Europe-wide around 80% of public support flows into the production of individual films. Around 20% is devoted to other links in the film food chain: The 20% is broken down into project development (mainly to pay script writers), distribution (mainly to cover the cost of releasing films in cinemas), promotion (chiefly support for films in festivals) and exhibition (contributing to the CoE Kraków Film Policy Forum Background Paper 8

10 running costs of cinemas through support for renovation and modernisation and for educational and promotional activities). Support for distribution is based on the traditional principle that films are first presented to the public in cinemas; how a film is received will be affected by the promotion and advertising of the cinema release which, in turn, will determine the film s reception in subsequent release windows: DVD rental and sell-through, paytelevision and free-to-air television. Thus most support is directed towards the cinema release: assistance with the cost of prints and advertising, and support for the cinemas that show the films. Thus two kinds of support are given, respectively, to theatrical distributors and to exhibitors. Support also takes the form of covering the costs of festivals that are considered to be the launch-pad for theatrical release. Over the past twenty years or so, the ways in which people get to see films has been transformed. This transformation began with the emergence of the home video market followed a few years later by the introduction of film channels on paytelevision. Until the beginning of the 1980s, there were only two ways of seeing a film: in the cinema on first release, with some films enjoying re-release or going into repertory programmes, and then when the film was shown (and possibly repeated) on television (which in Europe meant public service television) some years later. Theatrical distributors gradually moved into home video distribution, not least as a way of exploiting their back catalogues, but the distributors approach to getting films to audiences has changed very little in response to the evolution in the behaviour of those audiences. Figure 1 illustrates this evolution, drawing on the UK Film Council s analysis of film audiences in Britain. Figure 1: The film audience in the UK, 2007 (average number of films watched by a person in the year by medium Video on demand (including pay-perview), 1 Cinema, 3 DVD/video, 18 Film on Television, 56 Source: UK Film Council, Statistical Yearbook 2008 On average, a person in the UK watches 78 films in a year, three in the cinema, 18 on DVD/video, one via video-on-demand, and 56 on televisions. (This analysis does not include films that are not legally-supplied.) We have come to the situation in which it is very rare for European films to earn enough at the box office to cover even the cost of releasing the films, let alone to enable revenues to flow back to the producer to cover the cost of making the films: CoE Kraków Film Policy Forum Background Paper 9

11 in the UK in 2007, of the 516 titles released in the cinema, 100 accounted for 91% of the box office revenues. This means that the other 416 titles earned box office revenues totalling 84.9 million, an average of 200,000 per title, versus release costs averaging around 350, In France, for which the most complete data are available, a film on average needs to sell approximately 309,000 tickets in order to cover its release costs, a threshold reached by approximately 150 (26%) of the 573 films released in The prevailing principle throughout Europe is that the subsidy for production is sufficient to cover the difference between what films cost to make and how much they earn in the market place. The migration of film audiences from the cinema to the home has led to a decline in the ability of distributors to channel revenues into production, a decline intensified by the increase in release costs. Still, the traditional business model requires that films be released theatrically and this means that theatrical distribution and exhibition now, like production, need to be subsidised. In most European countries, national film agencies support the release of national films and, in several cases, for the release in their country of some foreign films. Of the 24 countries that provided a breakdown expressed in percentages of their funding in their responses to the European Film Policy Survey, 21 said they provided distribution support. On average, such support accounted for 7% of public film funding. However, the major challenge for film funding systems is how to adapt to changes in the way films are distributed and accessed. Funding systems, currently, are devoted to the production of feature films for theatrical release even as the technologies for digital distribution, notably via the internet, are establishing themselves. The emergence of these technologies raises questions about the suitability of established industry structures characterised by very small production and distribution companies handling a limited number of films usually on a national basis. Few distributors are geared up to launch on-line (video on demand) services. Those that are tend only to offer access to their services in their home territory. Some agencies notably in France, Norway and the UK are making available titles from their national archives (again, mainly only to the public in their own country). Few schemes are up and running to support on-line services; one such is the MEDIA Programme action line, established in 2007, for on-line distribution. Distribution support is generally structured around the conventional release of films in the cinema. A vital exhibition medium for film is the television broadcaster, specifically the public service broadcaster. This is considered in the next section Historically, the dominance of Hollywood films has increased with the advent of each new media, from Home Video and DVD to Cable and Satellite. European film companies and public film bodies have not responded to these challenges and opportunities other than to look to public money to fill the growing gap between the cost of making films and the revenues they can earn in the market place. CoE Kraków Film Policy Forum Background Paper 10

12 5. Perspectives of key stakeholders (governments and public film bodies, industry, broadcasters, the public) Public film bodies have four sets of stakeholders: the government (national, regional or local) on behalf of which they administer public support, the companies, chiefly film production companies, the broadcaster and lastly the public. Furthermore film bodies are also themselves stakeholders, institutions with employees with other institutions, such as film festivals, dependent upon them. Producers In practice, as is generally the case with funding bodies, their most active stakeholder relationship is with the organisations and individuals who receive funding: their clients, the producers. Therefore most of their efforts are directed towards ensuring that their clients appreciate the support they receive and so they set objectives and targets on the basis of the well-being of film producers. The producers have come to represent (or eclipse) the other constituents: the directors, writers, actors, film crafts and technicians, as well as the other parts of the value chain, the distributors and exhibitors. It is producers who tend to apply for and manage the funding. Their objective tends to be to ensure that as many national films as possible are produced. The film sector traditionally considered itself as an industry or a business with the connotation of a commercial enterprise that generated profits by providing goods and services to the domestic and international audience. In addition, its goods and services were artistic and had social and cultural value. With the decline of the cinema-ticket-selling business model, the industry became increasingly dependent on public service broadcasters as a source of finance and as a way of reaching audiences, and on the government. Broadcasters Television generates most of the revenue for feature films and has been responsible for most of the investment, apart from the public subsidy, as well as being the main medium via which the public accesses film 14. For these reasons, the single most dominant force in European cinema has been Canal+. By virtue of the terms of its broadcast licences, Canal+ is the biggest single investor and biggest buyer of film rights in Europe. Not far behind Canal+, in terms of importance to the industry, are the public service broadcasters, most notably ARD in Germany and RAI in Italy. ARD is a federal organisation of Germany regional broadcasters. Two of these regional broadcasters - Bayerischer Rundfunk and Norddeutschen Rundfunk are among the largest film production companies in Europe (through Bavaria Film and Studio Hamburg, respectively). RAI has built onto its active involvement in film production a powerful theatrical distribution company, O1 Distribution. The broadcasters relationship with film centres on the acquisition and the scheduling and subsequent transmission of films, most of which, in terms of both volume and expenditure, they license from the Hollywood studios. Historically, feature films were a major way of filling schedules and of attracting audiences, but the tendency has been for both the number and the rating of films to diminish. Broadcasters commitment to film even in the case of public service broadcasters and even for national films is becoming increasingly difficult to sustain. The reasons for this trend lie with tendencies both in the television market and in the way people watch films. As with the cinema, the business model for television, CoE Kraków Film Policy Forum Background Paper 11

13 notably its ability to sell audiences to advertisers, is breaking down under the assault from the internet. But even before the large-scale take-up of broadband internet, the development of pay-tv film channels and of the video/dvd market was accompanied by the erosion of generalist broadcasters commitment to film, often devoting slots that had previously been filled by film with television series that could command viewers loyalties 15 Television is less and less able to mobilise the very big audiences that were its hallmark. Most broadcasters are facing a squeeze on their revenues that is in turn squeezing their programme budgets. Simultaneously, they are looking to transmit more and more hours of programming, adding more and more channels and developing their services for the internet. Not only their commitment to film but also to other kinds of cultural programming documentaries, high-cost fiction, programming devoted to the arts, ambitious children s programmes are all being tested. Meanwhile, the ability of feature films to act as magnets for television viewers is declining as viewers move to more interactive kinds of content (from the user-generated offerings of YouTube to the participatory joys of Pop Idol and Big Brother). Taken together, these two, very inter-related tendencies are leading to fewer transmission slots for films, especially on the most popular, generalist channels, and lower ratings for the films that are transmitted. There may be nothing inevitable about this downward spiral, one that raises questions about television s contribution in the long-term to social and cultural policy purposes (policy purposes which the cinema shares). Broadcasters have tackled such challenges in the past one thinks of the process of winning back mass audiences for sporting events such as football and motor-racing. Like the music industry, television needs to adapt to new business models and the new ways in which people use television; there is no reason a priori why cinema cannot build a new, fruitful relationship with television. Government Starting in the mid-1980s, when television broadcasting in Europe was liberalised, the film industry argued that, in addition to its cultural value, it contributed to society as a source of skilled employment and a generator of exports. This argument is exemplified by the European Commission s white paper, Growth, Competitiveness, Employment: The Challenges and Ways Forward into the 21 st Century 16 a main recommendation of which (page 132) was to encourage, while respecting existing competition policy, specific sectors such as the audiovisual industries, which could have a strong impact in terms of inward investment, export revenue, and diverse types and levels of employment in a growing media/leisure market. Pump priming finance can be important particularly where high potential profit is balanced by high risk. Here, in one bullet point, was the economic rationale for using public money to support the film industry. It was accompanied by the threat that, were this investment not to be forthcoming, European jobs and European content would be replaced by content from and jobs in other parts of the world. Singling out the audiovisual industries was the result of effective lobbying by film producers led by David (now Lord David) Puttnam. 13 years later, the durability of this view is illustrated by the guidelines for the German Film Fund issued by the German government 17. This sets out the scheme s objective as follows: The objective of the measure is to improve the economic framework conditions for the film industry in Germany, to preserve and promote the international competitiveness of enterprises in the film industry with the CoE Kraków Film Policy Forum Background Paper 12

14 object of achieving long-term effects for Germany as a production location in conjunction with further effects on the macro-economy. In the intervening 13 years, however, the promise that the audiovisual industries in general and the film industry in particular, would be an engine for European competitiveness, employment and growth on the basis of pump priming finance became increasingly difficult to sustain. This did not discourage national and regional governments from committing increasing levels of support through automatic schemes that served to top up and eventually replace commercial investment. However it led to the film industry putting increasing emphasis in its arguments for public funding on the other benefits of film apart from its effects on the macro-economy notably, to quote the German film fund guidelines, a German and European film culture which is both creative and successful in the long run. Public film policy, therefore, is based on a belief on the part of governments in the economic contribution made by film supplemented by a commitment to its cultural importance. The governments belief and commitment are complemented by the support given by broadcasters which stems in part from their public service obligations and in part from their recognition of the ability of national films to attract audiences. Neither the ability to make broadcasters honour their public service obligations nor the attractiveness of national films to audiences can be taken for granted. As for the public s support (as taxpayers) for film, there is a question of how conscious that support is. Against this background, a vital aspect of the relationship between public funding bodies and film producers is the work they do together to demonstrate to other stakeholders the merits and necessity of the public support for film. Public The last set of stakeholders in public film policy is the public. In addition to buying tickets to the cinema, DVDs and pay-tv subscriptions, it is also responsible, by paying taxes, for most of the investment in European cinema. It is unlikely, for example, that many of the British people who went to see the Harry Potter films in the cinema or bought them on DVD realised the amount of public investment that the producers, Warner Brothers, of the films had already received; the tax-payers contribution to the budget of just the third Harry Potter was 150 million ( 225 million) 18. Rather than win to the political arguments for greater direct funding of cinema, the film industry and the film institutions in many European countries have preferred the stealthy route of persuading politicians and finance ministries of the supposed benefits more economic than cultural to use the fiscal system to fund film. It is very seldom that the public or even other important stakeholders, such as cultural organisations, education and social activists are reminded of how much the cinema has to offer across the side cultural, educational and social agenda. Even though film is a vital element in formal education, in few countries do film and educational agencies work together to develop joint objectives and programmes. As described above in relation to film s relationship with television, the film sector runs the danger of seeing the public s expectations of film becoming narrower and shallower with the result that cinema loses its centrality in people s lives, CoE Kraków Film Policy Forum Background Paper 13

15 6. Investment in the value chain how support is allocated Public film support in Europe has tended to be allocated as a function of the influence of film producers who have argued that the cultural and economic purposes of film policy are best served by enabling the maximum number of films to be made in the country with the highest possible level of investment. In 2007, the EU 27, this influence has translated into 921 films being made 19 at a cost that we estimate at approximately 2.5 billion. The increasingly high level of production up from around 754 titles four years ago 20 has coincided with the maintenance of a market share (based on cinema admissions) for national films of around 18% 21. The market share for European films outside of their national market has been around 8%. Production for production s sake brings benefits, but the purposes of films being produced are not served unless the films are able to get to audiences who want to see them. There are three possible reasons why films are unable to get to audiences: A combination of insufficient number of screens with the domination of those available screens by the US Studio product Few distributors, understanding the market situation mentioned above, believe financially in national and European product the audience for the film does not exist. What are the interventions that have been used to address these three problems? Essentially, they are promotion support, support for the conversion to digital exhibition and screen quotas. Access to screens The deployment of these strategies comes in the context of the cinema sector having been thrown into crisis. The first strand of this crisis was the collapse of cinema audiences that accompanied the growth of television, and the second was the arrival of multiplexes. Both factors led to the closure of established cinemas and a reduction in the opportunities to see anything but the most mainstream films. Support is needed to increase the number of screens that are built, kept open or refurbished, enabling cinemas to exist in localities where the market might otherwise be too small to sustain them, and to facilitate the adoption of digital projection technology. An example of this problem is encountered in the former communist countries where the transition to a market economy had serious repercussions for the cinema sector. The privatisation wave left most countries with 10-20% of the previous number of cinemas. Improving access to cinema screens is an obvious objective for a film policy aimed at increasing the range of films offered to audiences. Such a policy would also need to ensure that there are increased resources available to market and promote these films. Digital projection is another aspect that European cinema that is constrained. The obvious asset to the cinema is that digital projection (and distribution) offers the possibility of greater flexibility in the programming of a larger range of titles and, with it, a more efficient use of the screens. Unfortunately, the sector has been slow to realise this potential. A case in point is that, in 2006, the US had 2,000 digitalready screens and in 2007, 4,100. However, in the EU in 2006, there were 500 digital-ready screens, in 2007, 700. CoE Kraków Film Policy Forum Background Paper 14

16 Creating the audience The willingness of distribution to be modernised assumes that there are audiences that the films are capable of attracting. The enduring success of films the central role they occupy in people s lives and their ability to seize the public s imagination may be challenged by other forms of content, in particular interactive content, but there is nothing to suggest that it will disappear. This is why activities aimed at involving young people in cinema, especially through in-school programs, have an important place in effective public film policies. These activities need to balance three sets of objective: making sure that the cinema is an important part of the contemporary cultural and social experience exposing young audiences to a range of films that reflects the importance of the film heritage for the maintenance and development of people s cultural identities enabling young people to engage critically and creatively with film. This third set of objectives enables both the creation of the audience and the renewal of cinema s talent base and its primacy in people s lives. Performance of European films how success is measured In May 2008, the European Audiovisual Observatory published Focus 2008 World Market Trends 22. This showed that the number of 100% national and majority co-produced feature films produced each year in the 27 countries of the European Union had increased by 22% between 2003 and The number of 100% national films had increased by 33%. The number of majority co-productions averaged 207 with no clear upward or downward trend. The most widely-used performance indicator often the only performance indicator is market share at the cinema box office. The market share of European films at the box office in Europe remained relatively stable over the period. This is shown in Table 4 overleaf. CoE Kraków Film Policy Forum Background Paper 15

17 Table 4 In millions Cinema admissions to European Union produced films in the European Union (EU 25), Total admisssions for EU produced films Admissions to EU films on their national markets Admissions in EU outside national market % Total EU admissions analysed % % A B C C/A D B/D C/D % % 10% % % 8% % % 8% % % 6% % % 8% 2006 prov % % 8% Source: European Audiovisual Observatory Note: This table is based on an analysis of data collected in the LUMIERE database ( ). LUMIERE has a coverage rate of around 92% of total admissions in the 25 EU countries for the period in question. Films produced in the European Union with US investment are excluded from this analysis. The C/A column shows the share of admissions achieved by European films outside of their national market. The C/D column shows these films share of total admissions. So, on average, European films achieve 30% of their audience outside of their home country, and audiences in Europe for films from other European countries represent around 8% of the total market. The increase in the number of European films did not result in an increase in the market share of European films either inside or outside of their home country. This leads to the question, why has the increase in the number of European films produced not resulted in a corresponding increase in either the number of admissions to European films or their market share? Public funding bodies measure success through their declared aims and objectives and through the data available. The indicators used to assess performance, generally focus on the level of investment in film production and the revenues generated by the exhibition windows (e.g. cinemas and home video). The 2006 survey of national funds in Europe carried out by the ThinkTank in preparation for its maiden event in Copenhagen in June 2006, asked for respondents to choose between one or more of five objectives. These covered the level of national production, the sustainability of the national film industry, the quality of the films produced, the ability of the funding body to add value, and the stimulation of employment and commercial activity 23. Asked how the funding bodies evaluated the success of their support scheme, respondents put the emphasis on festival awards and prizes followed by the national audience achieved by national films. The European Film Policy Survey carried out by the ThinkTank for the Kraków Forum revealed the same picture. This is shown in Figure 2 overleaf. CoE Kraków Film Policy Forum Background Paper 16

18 Figure 2 Criteria used to assess success of interventions: aggregate scores given by national funding bodies as a percentage of the maximum score Festival selections and awards 87% Audience response theatrical release 85% Distribution to other countries/territories 71% Critical acclaim 67% Audience response television release 58% The film s profitability 57% Employment in the production sector 51% Return of Public Support 39% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: European Film Policy Survey, European ThinkTank on Film and Film Policy, August 2008 As with the 2006 survey carried out by the ThinkTank and published in The Copenhagen Report, most importance is placed on whether films are selected by festivals and win prizes. Unlike the survey in , performance at festivals is closely followed by the response of audiences to the theatrical release. How films perform on television and their commercial performance represented in terms of films profitability and the return (i.e. re-coupment) of public support are relatively less important, In comparison to the national funds, Eurimages and the Nordic Film and Television Fund give greater importance to critical acclaim and to the audience response to the film on television. The other major difference is that Eurimages puts less importance than either the national funds or the Nordic Film and Television Fund on Employment in the production sector. Being selected for festivals is an indicator of quality for certain kinds of films; however, the films that are most popular with national audiences, for example local comedies or thrillers, are seldom selected for festivals or awarded prizes. DVD sales figures are seldom used as an indicator as they are rarely available. According to sales agents, this is a result of distributors, having paid a Minimum Guarantee that both parties assume will never be recouped, neglect to report those figures and, unless the film is an extraordinary success, the sellers do not pursue them. Going forward with online VOD, transparency, being the very nature of the internet, should allow that information to revert to the sales agents in real time. It is there, at least, available to the producers and the institutions to access. Information about the performance of film production and distribution companies, of the number of people they employ, or about the frequency with which directors get to make films, is seldom collected. Across Europe as demonstrated with the data compiled by the European Audiovisual Observatory the focus tends to be on the CoE Kraków Film Policy Forum Background Paper 17

19 theatrical performance of films, as those are the only data consistently available. Given the way the market has developed, data on theatrical performance are less and less satisfactory as a way of describing how films are faring. To address the problem of data availability, public film bodies need to obtain better co-operation from the companies they fund. They also need greater access to market data collected on behalf of the dominant players in the market place: the US majors and the larger distributors (including the broadcasters). These data would relate not only to the size and characteristics of the audience, but also to turnover and profitability. As the focus moves towards new distribution platforms, the operators of these platforms need to become more forthcoming with the data they collect about what their customers are doing. Only in this way can the aims and objectives of film policy be refined and assessed. Only in this way can the policies develop to take into account emerging realities of how the public is behaving and the factors that influence the public s behaviour. The gaps in information collected are evident throughout the value chain: the effectiveness of training is not assessed, the impact of support for project development is unexamined, and the extent to which production companies are able to build up and exploit their human and financial assets is unexplored. Film policies often operate in a void so that, if they are challenged, for example by governments seeking to make savings or broadcasters questioning obligations placed on them to support the national film sector, it is generally difficult to marshal evidence to demonstrate the effectiveness of those policies. These challenges apply in a pressing way when we come to consider the cultural diversity angle of film policies. Throughout its nearly 20-year history, the European Union s MEDIA Programme, devoted first and foremost to the circulation of European films outside of their national markets, has struggled to quantify the impact of its actions. The Council of Europe s Eurimages programme which supports co-production, fully documents how much support it gives, project-byproject, and the European Audiovisual Observatory does collate data on the theatrical performance of Eurimages-supported films in European markets and in North America, but there are no data relating to the total budgets of the films, the performance of the films in other release windows, or to the success in licensing the films in different markets. For the Kraków Forum, the Observatory has sought to provide additional insights into the ways in which co-production (including coproduction undertaken with the support of Eurimages) contributes to film policy goals, notably to the circulation of films outside of their principal country of origin. In its 2006 analysis published in the Copenhagen Report 24, one of the ThinkTank s focuses was on the sales agents responsible for the international distribution of European films. Although vital to the international commercial life of a film, sales agents work seems still to be inadequately quantified by the research efforts of public film bodies. Finally, as hard as it may be to describe the commercial performance of European films, this is nothing as compared to describing the films artistic performance. What, in artistic terms, are the goals of public support? Are they to broaden and deepen the range of subjects addressed by the cinema? Are they to foster new ideas for how cinema can address those subjects? Are they to involve in cinema a richer and more diverse range of artists? And how would one go about evaluating the effectiveness of the policies and the activities pursued by the public film bodies once these artistic goals have been defined? CoE Kraków Film Policy Forum Background Paper 18

20 7. The objectives and performance of co-productions Co-production occupies an important role in a set of film policies that seek to maximise the number of films produced. Since, by definition, co-production is about official co-operation between nation states, it is bound to be a pre-occupation of the public bodies administering that co-operation. It is also evident that for countries that, because of the small size of their national market, look to other countries to help fund their national production, co-production is central. But beyond the objective of maximising production, what does co-production contribute to the achievement of the goals of public film policy? For example, are co-productions likely to result in films that audiences want to see? Are co-produced films more successful artistically? Are they easier to sell to other territories? Are they a more efficient way for public funding bodies to allocate their resources than 100% national productions? These questions are addressed at least in part in the analysis being undertaken by the European Audiovisual Observatory specifically for the Kraków Forum where the results will be presented. In order to address these questions, a first step is the quantitative analyses of coproductions, such as the level of investment in co-productions, the proportion of that investment which is public funding, and the success of co-productions relative to 100% national productions. These data have historically not been compiled. Many funding bodies publish how much money they commit to productions but they often omit data about the total cost of those productions. Data provided on the theatrical performance of films seldom if ever distinguish between the performance of co-productions and 100%-funded national productions. As described in the previous section of this background paper, the data do not include information about where the co-productions have been sold, let alone for how much. The absence of data for these indicators might illustrate the extent to which the support of co-production requires more of an evidence-based approach. In 2006, the ThinkTank prepared an analysis of a sample of European films that had been in official selection in the Berlin, Cannes and Venice film festivals in the years , along with those selected for Toronto in 2004 and This sample included 133 French, German, Italian, Spanish and British films that were released in each other s country. Of these 133 films, 32 were films co-produced with the country releasing the film (e.g. a French co-production with Germany released in Germany). The results of this analysis are shown in Table 5 overleaf. So, for example, of the 59 German, Italian, Spanish and British films released in France, four were Franco-Italian co-productions and two were Franco-British coproductions. None of the German or Italian films released in France were coproductions with France. The details of the ThinkTank analysis are published in The Copenhagen Report, pages See endnote 3 for the full citation and web-link. CoE Kraków Film Policy Forum Background Paper 19

21 Table 5 Five large European countries co-productions with each other relative to the number of releases from the other 4 countries Releasing country Producing country France Germany Italy Spain UK Total no. of releases from the other 4 countries Total no. of releases of coproductions with the other 4 countries France Germany Italy Spain UK Co-pros as a % of all releases from the other 4 countries 10% 16% 8% 8% 8% Source: European ThinkTank on Film and Film Policy, Copenhagen Report, 2006 In discussion at the Copenhagen event, the conclusion that co-productions had greater difficulty accessing the market was widely challenged. The argument was made that what might be true of co-productions between the major European countries (the analysis was limited to co-productions between France, Germany, Italy, Spain and the UK) was not necessarily true of co-productions involving smaller countries. Certainly, we lack the data to establish whether this situation is a mark of a trend, and whether one would encounter a similar situation with regard to co-productions involving smaller countries or with films which were not selected for festivals. The European Audiovisual Observatory s The place of third country film and audiovisual works in European markets 26, notes the generally positive role played by co-productions with regard to market access. Furthermore it states that, an analysis of the findings in terms of the number of admissions clearly suggests that films co-produced between third countries and EU countries are more successful than those that have not been co-produced. In analysing the impact of co-production, it is worth distinguishing between two types of co-production: Type 1: Where a film has demonstrable market value for example because of a star director or star actors it can be pre-sold to a number of different markets. The production is financed by co-producers raising money against the value of the rights in those markets. Producers can access public funding and/or bank loans on Sales Agents projections. Examples: Perfume: The Story of a Murderer (Tom Tykwer, 2006); Astérix aux jeux olympiques (Frédéric Forestier and Thomas Langmann, 2008), Les invasions barbares (Denys Arcand, 2003) Persepolis (Vincent Paronnaud and Marjane Satrapi, 2006); L Avocat de la terreur, (Barbet Schroeder, 2007) CoE Kraków Film Policy Forum Background Paper 20

22 Type 2: Rather than raising finance against the eventual market value, funds are raised by combining public funding from different countries, or regions, as well from Eurimages and the MEDIA. Films are less a function of the economic value in the market place than a way of satisfying the criteria of the different contributing funds. Examples: Grbavica (Jasmila Zbanic, 2006); Irina Palm (Sam Garbarski, 2007). Most European co-productions are of the second type but both types are dependent on public funding and, almost invariably, on funding from one or more public service broadcaster. Type 2 co-productions are vital for countries whose public funds are too small to support a viable level of production; in order to get closer to such viability; these countries combine the support from their funds and from the funds from larger countries. All seven films cited above were successful in that they were seen at film festivals and sold to many countries. An analysis of the performance of co-production obviously needs to be related to the discussion of the aims and objectives of film policies as a whole. It also requires drawing on evaluations based on the performance indicators associated with those aims and objectives. In particular, it would need to distinguish between co-productions contribution to the industrial goals, for example, to the way in which co-production helps to strengthen the companies involved, and its contribution to the artistic goals (as summarised at the end of the preceding section). It might be considered that the aims and objectives of co-production were not limited to increasing the size of the audience for European films outside of their principal country of origin but to some other outcome, such as enabling films to circulate in more markets or even to create opportunities for producers, writers, directors, cast and crew from different countries to work together. It might also be considered whether, if one of the goals of co-production is to increase circulation, it can do this automatically and alone or whether other mechanisms need to be put in place to encourage European circulation in general and releases between co-producing counties in particular. CoE Kraków Film Policy Forum Background Paper 21

23 8. Reaching out to audiences internationally For the pursuit of cultural diversity goals as well as to enable films to fulfil their market potential, the success of measures pursued by public film policies to get films before audiences in other countries, and to get films from other countries before local audiences, is key. The scope to draw on the digital technologies in relation to theatrical markets as well as via broadcasting, DVD distribution and online, to the home ought to be significant. Reaching audiences in other countries, however, involves overcoming structural as well as cultural obstacles 27. An important obstacle for European films in Europe is the fragmented nature of distribution, with very few distribution companies able to cross national borders and the business of exploiting a film involving a rights-licensing regime that means, for example, the task of preparing a film for release in each territory notably subtitling and dubbing, but also preparing marketing materials is generally the responsibility of a company in that territory. This fragmentation introduces delays in getting films to market; the longer it takes to release a film, the more the value to audiences of the film is likely to decline. As with distribution generally (as discussed in Section 4), international distribution of European films may be adversely affected by the shortcomings in the capabilities of the firms involved. A positive development, however, is the emergence of sales companies that are adept in marketing films that previously did not fare so well in the market place, such as films from small countries and feature documentaries. Both of these two kinds of films make a significant contribution to cultural diversity goals. Another positive development is the organisation by the producers of organisations to exploit their films online, for example, through Universciné in France and Egeda in Spain. However, the fear that success in promoting on-line will be at the expense of established revenue streams, such as the licensing of films to local distributors (including broadcasters) has discouraged these organisations from offering customers in foreign territories access to their online platforms. Public film bodies have yet to confront these issues themselves or to encourage the distributors they support to do so. The exception to this proposition is the MEDIA Programme that in 2007 increased the support it gave to companies offering catalogues of films on-line although, even here, the services tend to be operating only in individual territories. One major focus of public policy intervention in the arena of international distribution is the funding of film export promotion bodies, such as Baltic Film, German Film and Unifrance, along with the activities of cultural bodies such as the Instituto Cervantes and the British Council which facilitate and often organise themselves screenings in other countries of films from their home country. Through European Film Promotion, a federation of film promotion bodies in the countries that take part in the MEDIA Programme, events are organised to raise the profile of Europe s cinematographies that target both professional audiences and the public. But the most significant activity aimed at reaching out to audiences internationally is through film festivals. In common with so many other areas of film policy, film festivals are slow in adapting either to the challenges or the opportunities represented by the changes in technology and in the market place. For example, they largely continue to operate as if their main purpose was to offer a platform for the theatrical release of films in the territory where the festivals take place. In addition, the main national festivals are seen as a launch pad for national films into the international market. CoE Kraków Film Policy Forum Background Paper 22

24 In Europe as a whole there are around 700 annual film festivals each year 28. There are no comprehensive data about how much they cost. There are no assessments of their impact or effectiveness. Very seldom have the organisers or funders of festivals articulated the objectives of the events for which they are responsible. However, the importance of festivals, both for cinema culture and business, is undeniable. Also undeniable is the need and scope for festivals to evolve to respond to the changes in the market place described in early sections of this background paper. For example, festivals already play a major and increasingly significant role in identifying new talent and assisting in its development through initiatives like Cinemart and Hubert Bals in Rotterdam; the Talent Campus, Co- Production Forum and World Cinema Fund in Berlin; or similar initiatives at the Thessaloniki and San Sebastian Film Festivals, not to mention at Cannes. Possibly because of funding pressures, few festivals have been able to develop a convincing presence outside of the few weeks that they run each year or the city in which they are based. Few festivals are reaching out to new audiences, instead concentrating on traditional communities of cinephiles. Public film policy needs to engage with the likelihood that for all but a small minority of films, the only opportunity to see a film in the cinema, especially one from another country, is when it is shown in a festival. Rather than having a theatrical release or being transmitted on television, the film will subsequently be available online. CoE Kraków Film Policy Forum Background Paper 23

25 Addendum Examples of how policy instruments relate to policy objectives Instruments Subsidies/tax breaks for e.g. film industry Privileged treatment by national/local regulators State investment/regulatory privileges for infrastructure creation Independent production quotas Quotas for national and European production Public Service Broadcasting Right to cultural diversity to be recognised on a worldwide level e.g. human rights conventions [augmented subsequently by the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions] Production quotas for nations & regions Programming requirements for nations & regions Controls on media ownership Competition Law Positive content obligations e.g. to broadcast a range of programme genres and provide impartial news coverage Licensing of broadcasters Advertising controls e.g. limits on minutage/separation of advertising and editorial Sponsorship rules Negative Regulation of Content - e.g. control of violence or pornographic material Regulatory requirements for investment in European content, a degree of public funding and a regulatory approach to access issues. Objectives Industrial policy Cultural Sovereignty and Diversity Regional policy Commercial or political influence Political impartiality etc. Consumer Protection Pluralism CoE Kraków Film Policy Forum Background Paper 24

26 Endnotes Cited in Lange, A. and Westcott, T., Public funding for film and audiovisual works in Europe A comparative approach. European Audiovisual Observatory, Strasbourg, p. 12 op. cit. Ed. Davis, J., The Copenhagen Report, Danish Film Institute, Copenhagen, 2007 see Lange, A. and Westcott, T., Public funding for film and audiovisual works in Europe A comparative approach. European Audiovisual Observatory, Strasbourg, 2004 op.cit. p. 23 The breakdown is taken from the British Screen Advisory Council, Trade and regulation issues relating to audiovisual services, September Jonathan Davis was the main author of this paper. For the original taxonomy, see Levy, David, Europe's Digital Revolution: Broadcasting regulation, the EU and the nation state, 2nd edition Routledge/Taylor & Francis, London 2001, p38 As the Observatory has noted, there are no data for the amount of support given to film production through fiscal incentives. Since 2002 when the Observatory carried out its study, the number of fiscal incentive and tax credit schemes operating across Europe has increased from four (in France, Ireland, Luxembourg and the United Kingdom) to eight (these four countries plus Belgium, Germany, Hungary and Malta). These schemes tend to contribute around 20% of the production costs. This would yield an annual benefit to production of the order of 250 million. The 2002 study found that support for film in the 25 countries it examined totalled roughly 780 million ( 1.04 billion minus excluding $261 million in support for television production). If the 250 million were to be taken into account, the total value of film support would rise to 1.03 billion of which film production support (including scriptwriting and development) would represent 783 billion, that is, 78% of film funding. This estimate is provisional, since the 2002 data need to be updated and an accurate assessment of the value to production of the fiscal incentives needs to be carried out. Breakdown of support by phase of intervention 2002 (Lange, A. and Westcott, T., Public funding for film and audiovisual works in Europe A comparative approach. European Audiovisual Observatory, Strasbourg, 2004) For a more subtle analysis of the political objectives of film policies and the statutes, aims and tasks of film agencies, see Chapters 3 and 4 of the Observatory s 2004 study. See Chapter 3 of the 2004 Observatory report and Nikoltchev, Susanne and Cabrera Blázquez, Francisco Javier, National film production aid: legislative characteristics and trends ( ), European Audiovisual Observatory, IRIS, See Cambridge Econometrics et al, Study on the economic and cultural impact, notably on co-productions, of territorialisation clauses of state aid schemes for films and audiovisual productions, on behalf of the European Commission, May 2008 ( CoE Kraków Film Policy Forum Background Paper 25

27 UK Film Council, 2008 Statistical Yearbook pp.11 and 65. The 516 titles were released theatrically at a cost of million (approximately 250 million). This estimate is derived from statistics published by the Centre National de la Cinématographie (CNC) according to which million was spent in 2007 on releasing 148 French films, an average of 745,000 per film. The average ticket price is 5.95, of which the producers and distributors share was 40.44%. The number of films that crossed this threshold is only an estimate because the CNC does not publish a figure for the number of films achieving the 300,000 admission threshold but rather a figure for the 100,000 and the 500,000 admissions thresholds. See Broadcasters' Obligations to Invest in Cinematographic Production, IRIS Special, European Audiovisual Observatory, Strasbourg, See for example Chaniac, Régine and Jezequel, Jean-Pierre, Cinéma et télévision: le desenchantement, Nathan, Paris, 1999 Growth, Competitiveness, Employment: The Challenges and Ways Forward into the 21st Century - White Paper. Parts A and B. COM (93) 700 final/ A and B, 5 December Bulletin of the European Communities, Supplement 6/93 Guideline Issued by the Federal Government Commissioner for Culture and the Media: Incentive to Strengthen the Film Industry in Germany. 21 December p.3 Corresponding to the tax write-off taken by Warner Bros. European Audiovisual Observatory, Focus World Market Trends, p. 6 There may be an extent to which the increase in the number of films is attributable to a change in how the films are funded: films that were previously funded by broadcasters and that would only have a life on television are now being designated as films for the cinema and receiving support from film funds. For the years Source: European Audiovisual Observatory (data shown in Table 3 below). p.94 et seq Op. cit. p.79 et seq. These are discussed, for example in the article, Crossing Borders by the ThinkTank, in FILM, the Danish Film Institute s magazine, May See When the then-director of the European Audiovisual Observatory, Nils Klevjer Aas, addressed this issue in 1997, he estimated that there were in Europe 1,000 film festivals. See CoE Kraków Film Policy Forum Background Paper 26