Cinema Communication: Consultation Round 3, time for Knock Out? by Claire La Combe

On April the 30th, the European Commission has launched a third public consultation for reviewing the state aid criteria it uses to assess national support schemes for films and other audiovisual works. After two years of discussion and tensed negotiations with stakeholders and Member states, this consultation is meant to be the last. Indeed, regarding the revised roadmap of the Commission, there is a pressing need for the definitive text to be adopted before the summer break.

A long last struggle on why subsiding European Cinema

On the one side, European Cinema. Its character is complex: artisanal and industrial; too culturally ambitious to be economically powerful for using market forces only. For creative diversity’s sake, states were authorized, within the frame of the 2001 Cinema Communication, to implement a set of supporting policies. Breathing apparatus: such state aids enabled new funding entries and regional air spots. Today, compensatory territorial spending funds are supporting the co-production system; the co-production system is one of the supporting pillars of the trying-to-stay-fit industry.

On the other side, the DG Competition. Under the presidency of Joaquin Almunia, this DG follows one objective: to ensure a unique and free European market, as well as fair trade among Member States. In theory then, the Internal Market must ensure free movement of goods and workers, freedom of establishment, freedom to provide services and freedom of movement of capital. In such principles, any territorial criterion is fundamentally contradictory with competition: it creates goods and services discrimination among Member states and encourages rentier economy[1].

In 2004, 2007 and 2008, the Commission already tried to remove or modify this inconvenient territorial criterion, but in the absence of relevant figures, the fierce opposition made by Member States and the film sector got the better of any reform. In 2009, all parties agreed that the Study on the Economic and Cultural impact of territorialisation clauses[2] was inconclusive on the subject. However, the Commission stuck to it. The fight is perversely rooted on a sophist[3] logic: the EU is allowed to fund works but not industries; Cinema is works and industries; the EU is allowed to fund Cinema but not Cinema.

On the ropes and back again

Since 2011, the Commission has offered three drafts and redrafts for a new Cinema Communication. EU Member States, citizens, cinemas, film distributors, film producers, filmmakers, post-production facilities, film sector associations, as well as national, regional and local film institutes, all participated in the two previous consultations. As many as they are, they all agreed. The audiovisual world is already trying to face many challenges. The race for making-profit creations is rapid and worldwide. Changing a well-oiled process in these troubled times is more than risky.

Struggle for position. On the 31st December 2012, the state aid assessment criteria expired. One could hope a white flag situation. But it was none. This third and last version published has hardly been modified according to responses given to the Commission…

(A bit) for better, tough: state aids are not only covering the production of a film, but all phases of the creation from development to distribution and promotion. European Cinema suffers from a lack of public, and two solutions can be considered. The first one consists in better financing script – so the story gains richness and attractiveness. The other lies on wisely supporting local distribution – so the film, benefiting from a primer solid audience, could travel in other territories. This new line is easy but deserves credit. What’s more, a higher maximum aid intensity level is recognized for European co-productions (60% instead of 50% of the production budget). This rule fits better with the actual European film production system that crosses more and more different euro-regional funds to complete budgets.

(But much more) for worse: territorial expenditure requirement should be tied to the financial commitment of a Member State and not anymore on the production budget. From 2001 to 2012, State aids were allowed to be conditioned to a spending obligation on the territory up to 80% of the production budget. In this third draft, the territorial expenditure is limited to a maximum spending requirement of 160% of the allocated aid. Amounts authorized are not even comparable. This loss for territories will impact considerably on the infrastructures on site, and to a certain extent, on the (already being cut) public spending. At the end of the chain, Cinema would simply run out of cash, skills and talents.

Not a fair fight

“The objective is to encourage creation and cultural diversity in all parts of the EU and to foster a genuinely European cinema, where cross-border productions can be set up easily” says the Commission. Fair enough. On the cultural side, it is great. The Commission must take the lead on Member states. The 15-page draft communication does contain irreproachable general considerations…

Meanwhile, on the industry side, specific rules and ratios, specified with no empirical or study figures backing up, are way more damaging. Assessing state aid rules is not a fluffy process. It needs profound impact analysis of everything that is being touched. True, figures and behaviours are not easy to measure in film production and they vary a lot depending on the country. Transparency should be applied on both sides. The Commission can lead the way: from where does this radical 160% spending ratio comes from?  Is it possible to set a proper formula based on inner Member state studies? Why not working on a transitional rate[4]?

Only fair and gentle modifications can preserve the system from crash.

Final countdown…but rendezvous in Cannes?

“This new draft also attempts to reconcile the different points of view expressed by Member States about what rules are needed at EU level.” Reading this third draft, it seems that the Commission does not trust the audiovisual sector quite much. How to prove there is no subsidy war, not even a race among different European cinemas?

Considering the Culture creation process, does it seem logical for producers not to choose in terms of price and quality other collaborators or locations? It is not, they might be limited sometimes, but quality will always be a priority when it concerns artistic works. Attracting major productions on a territory has always been part of the game. No matter the nationality. What counts at the end are work, production and peer to peer creation.

This third contribution deadline is set on the 28th May, right after Cannes’ fortnight. Time is short and the period is really not a rest for the entire profession. Looking forward at the 67th selection, there are so many films present that are children of the prodigious European film coproduction way of funding. On Tuesday, May 21st, the Director’s Fortnight is organizing an assembly on The European crisis and its consequences on its Member States’ cultural policies. Well, let’s bet on a last minute (report) punch.

[1] Film producers are then tempted to inflate their budgets to win a grant.

[3] Classic sophism: Cats chase mice. Dogs chase cats. Cats are mice.

[4] Some analysis made on the French system (leading granting and production country in Europe) showed that a ratio of 400% aid spending obligation would bring in around 60% of the actual expenses done under the 80% production budget ratio – a loss but not drastic.