HARD TIMES: How Europe’s Financial Crisis Is Affecting Each Country’s Film Industry

It’s not just the UK movie business that is suffering from draconian budget cuts because of the global financial crisis. Europe has an enormous hangover, too. And other European film industries are also suffering as EU governments scramble to reduce their debt mountains:

France’s cinema unions say the French Senate finance committee’s plan will have “catastrophic consequences” for French film and TV funding. That’s because France’s government wants to divert €128 million ($175 million) of revenue away from state film agency Centre National du Cinéma et de l’Image Animee (CNC) into its own coffers. This won’t actually be a cut in CNC funding, just limiting next year’s funding increase to a 7.6% improvement on this year’s €575 million ($800 million) budget. The CNC is funded through a levy on cinema admissions – which are estimated to hit 210 million this year, the best for 20 years — as well as a levy on DVD sales, a levy on broadcaster income and a levy on internet service providers. “Internet providers and VOD services are also now paying into the CNC coffers for the first time,” says Franck Priot, deputy head of inward-investment agency Film France. The CNC had been expecting an extra €171 million in income next year.

The government is also making its Sofica tax scheme – which raises money for film production through wealthy individuals – less attractive from an investor’s point of view. Last year 98 French films were financed through Sofica, which injected €36.2 million into French production. Still, says Priot, the scheme is so oversubscribed each year, even if the government does tighten things up, it won’t make a difference from a producer’s point of view. The scheme is always oversubscribed. Film France says that it doesn’t believe its own €920,000 budget – 90% of which comes through the CNC — will be cut next year. Neither does it think that any of France’s 40 regional film commissions, 22 of which are financed by cities or the regions, will go out of business in 2011. Priot says there are always budget fluctuations, but that’s the same for any year. “Globally, it’s quite stable,” he tells me.

Local producers are afraid for the future of both national screen agency Filmförderunganstalt (FFA) – Germany’s equivalent of the CNC or the UK Film Council – and national film fund the DFFF. Germany was the European country which has suffered least during the global financial crisis. It also has a robust film sector. At least for now. Germany provides $400 million worth of soft money each year to producers, through a mixture of national and regional funds. English-language movies that have tapped German funding recently include Hanna, Unknown White Male and The Ghost Writer. But Germany’s Federal Constitutional Court is deciding whether payments made to the FFA by Germany’s cinemas have been unconstitutional. And Germany’s broadcasters are now able to pay less to the FFA than they have been annually – again because of a change in the law.

Although the FFA expects its annual €70 million budget to remain the same next year, it could go down after that. Last year the FFA spent €52 million overall, of which €28 million was spent on local production. That amount will almost certainly go down if TV broadcasters give less. The German Federal Film Fund (DFFF) was launched at the beginning of 2007 with an annual budget of €60 million. This fund usually offers foreign and local producers grants of up to €4 million ($6 million) per film as long as 25% of a film’s production costs are spent in Germany – although this can be upped to e10 million ($15 million) in special cases. The DFFF was extended last year to 2012 but there’s a question mark after that.

Matthias Schwarz of the German Producers Alliance tells me: “It seems okay for next year but we’re afraid for the future of DFFF and FFA. If both schemes are ruled unconstitutional, then it would be very bad news. And we have budget concerns for the DFFF from 2013 onwards.”

Meanwhile, Germany’s regional funds lend €146.4 million ($204 million) annually between them. Regional funding is divided up as follows: FFF Bayern (€27.6 million), Filmforderung Hamburg Schleswig-Holstein (€12.4 million), Filmstiftung NRW (€35.8 million), Hessen-Invest Film (€5 million) Medienboard Berlin-Brandenburg (€29.2 million), Mfg Baden-Wurttemberg (€8.3 million), Mitteldeutsche Meidenforderung (€16.5 million) and Nordmedia (€11.6 million). The total amount regional funds offer is approaching their historic high watermark of 5 years ago – after which funding declined. The funds expect producers to spend 100-150% of the amount they borrow locally. Loans are repaid over the exploitation of the film. Whatever a producer repays does not disappear into a general pot – rather, it’s set aside for the producer to re-use on his future project. And new regions such as Saxony-Anhalt, which is having a local boom, are coming online adding to what’s already on offer.

Another cloud is the amount German broadcasters invest in feature films. This percentage of the average film’s budget fell from 14% in 2007 to 7% last year. Broadcasters contributed €16 million to features co-funded by the FFA last year — public TV injected €11 million, private channels €5 million. Schwarz says: “That’s a real problem. We have agreed with [public stations] ZDF and ARD that we need to talk about a number of issues including the number of Germany films on TV and how they’re scheduled, co-production levels and the amount broadcasters invest in local films.”

Not part of the European Union, but a member of the wider European Economic Area, Iceland’s government slashed state film funding agreed for 2010 by 36% to IKR450 million ($3.4 million). This means there’s only enough money to back 3 features in 2010, plus a couple of feature documentaries. Iceland released 11 home-grown films last year. State broadcaster RUV announced it was reducing its investment in local film production due to budget cuts. Ari Kristinsson, head of the Association of Icelandic Film Producers, says that local film industry has collapsed and called the cuts “a massacre”.

Simon Perry, CEO of state agency the Irish Film Board, expects his budget will be cut again next year by 15% to €14 million ($19.4 million). This year’s IFB budget of €16.5 million is already 5% down on last year’s. Such swinging cuts are necessary because there’s a €19 billion gap between what Ireland raises in taxes and what it spends each year. Last month, Ireland bailed out the Irish banking system to the tune of €44 billion. The country’s budget deficit is projected to equal 32% of GDP – 10 times the amount permitted under European Union guidelines.

The opening night of the International Rome Film Festival was disrupted last month as Italy’s film industry protested over government cuts. Over 1,000 incensed actors, directors, producers and other film professionals invaded the red carpet at Rome’s Auditorium Parco Della Musica, angered that the Berlusconi government has reduced Italy’s single arts fund, FUS, down to its lowest level in 20 years. This year the arts fund budget is below €300 million ($416 million) compared with €500 million 3 years ago. Cinema’s share of this year’s FUS funding is around €60 million. That’s small beer compared with what’s on offer in France and Germany. On top of that producers are still owed €50 million from previous years’ funding rounds, which means there’s hardly anything left this year for the entire Italian film industry. The protest was also fuelled by fears that Italy’s new tax breaks, both for local and international production, may not be renewed. Silvio Berlusconi’s government introduced longed-for tax breaks last year, overhauling Italy’s old subsidy system which backed lots of films nobody went to see. But the government has included the new tax breaks on a list of possible recession cutbacks. Riccardo Tozzi, president of Italian producers’ association Anica who also runs Universal’s Italian outpost Cattleya, tells me confirmation of tax credit legislation is expected by the end of this month.

The Dutch film industry is facing a horrendous crisis. It is estimated that cultural funding in the Netherlands will nearly be halved, once national and local cuts take effect. The cuts won’t really bite for another 5 years however. The new Coalition between the right-of-centre Liberals and the centre-right Christian Democrats has agreed to cut culture funding by €200 million ($277 million) a year from 2015. The government has described the arts and culture as “left-wing hobbies”. Cuts will be staggered until then: beginning with €30 million next year; €50 million in 2012; €100 million in 2013; €150 million in 2014. That €200 million figure is just above 21% of the current culture budget. Total state funding is being cut by 13%, which means culture is disproportionately hard hit. Local government in cities and provinces will also receive less money, and, as they subsidise cultural institutions too, the blow will be much bigger.

Eye, the new umbrella Dutch film agency which launched in January, will have its budget increased next year to €12 million. It is also due to move into an eye-poppingly modernist building in Amsterdam next year. Like the soon-to-be-defunct UK Film Council, Eye has brought together a number of film organisations: Filmbank, promotional agency Holland Film, the Netherlands Institute for Film Education and the Filmmuseum.

The Netherlands Film Fund, which is likely to move into the Eye building, has an annual budget of €35.5 million until end-2011. It is likely that the Film Fund will lose its annual €12 million “matching” fund though. This matching fund was introduced in 2008 to replace the Dutch tax break. It matches investment from either private or public investors. Because the money comes from the Finance Ministry, it’s likely this kind of fund will be an easy target. “The fear is that the supplementary fund will be one of the first to be knocked off,” says Dutch director and producer Ate De Jong. “The film sector won’t be affected too much until 2012, so we have some time to regroup – although nobody knows how.”

Both the Eye and the Netherlands Film Fund receive local funding. How much each will lose of that is being worked out at the moment. On top of direct cuts, state broadcaster NPO is having its budget cut by up to €200 million a year by 2015. The government is talking about closing down one channel if NPO can’t meet the cuts itself.

The budget for state film agency the Instituto de la Cinematografia y de las Artes Audiovisuales has been cut by 19.3% to €86 million ($119 million) in 2011. This year’s budget is €107 million. And the scenario for 2012 and 2013 seems even worse, Fabia Buenaventura, director general of producers’ association FAPAE, tells me — although there’s nothing official yet. Last month ICAA director Ignasi Guardans was sacked to be replaced by Carlos Cuatros, director of Spain’s film academy. In May the agency halved the amount filmmakers can claim through the automatic subsidy system, pegged to box office performance, to €400,000 ($500,000). The ceiling producers can claim through selective funding was cut by 25% to €1.5 million. Spain launched a new €85m film fund at the beginning of this year. US movies that have accessed the fund — which caused unrest with small, indie producers who felt frozen out by the focus on bigger, more commercial films — include Juan Antonio Bayona’s The Impossible, starring Ewan McGregor, and Juan Carlos Fresnadillo’s Intruders, starring Clive Owen.

It was midnight in Los Angeles on July 24 when UK arts minister Ed Vaizey telephoned Tim Bevan, chairman of the UK Film Council, to tell him that his organisation was being abolished. The news came out of the blue. “I was surprised not to have had a conversation beforehand,” Bevan said later. The Working Title boss telephoned Film Council CEO John Woodward to tell him what had happened the next day. Woodward compared the decision to close down his organisation to being run over by a bus. Closing down the UKFC is expected to save £2.5 million a year. The government has assured the worried British film industry that the £26 million it currently gets through National Lottery funding will not only continue, but will increase to £43 million a year post 2014 (once the 2012 London Olympics are out of the way). And the UK tax credit, designed to attract Hollywood inward investment, which costs around £100 million annually, is safe.

It’s not just the UK Film Council that has been swiped by the government’s spending cuts. The Culture Ministry’s budget will be reduced from £1.4 billion to £1.1 billion by 2014/2015. The British Film Institute has had its budget cut by 15% from £16 million to £14.6 million. The British Council, which promotes UK film culture abroad, has had its total budget, provided by the Foreign Office, cut from £181 million to £149 million by 2014. The Film Industry Training Board is set to be privatised. Its chairman Iain Smith told me that, again, the government’s decision came out of the blue.

Worse, film funding outside of the BFI and the lottery, has been slashed by over 50%. The budget for all other film activity from now on will be £4.7 million – down from £9.4 million this year, says the Department for Culture, Media and Sport. The £4.7 million has to cover all the work of the regional film commissions, certifying whether films are British to qualify for the film tax credit, and a host of other activities. Regional screen agencies, which encourage local film production, are braced to have their budgets cut by 15% too.

This article was printed from https://deadline.com/2010/11/hard-times-how-europes-financial-crisis-is-affecting-each-countrys-film-industry-82752/