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Connecting you to the future Study on the economic and cultural impact, notably on co-productions of territorialisation clauses of state aid schemes for.

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Presentation on theme: "Connecting you to the future Study on the economic and cultural impact, notably on co-productions of territorialisation clauses of state aid schemes for."— Presentation transcript:

1 connecting you to the future Study on the economic and cultural impact, notably on co-productions of territorialisation clauses of state aid schemes for films and audiovisual productions A Public Presentation File summarising the Final Report for The European Commission (DG Information Society and Media) Cambridge Econometrics in association with David Graham & Associates, Rambøll Management and Germann Avocats 16 May 2008 Slide 1 (Corrigendum of 6 June 2008)

2 connecting you to the future Introduction What is the purpose of the study? –To provide the Commission with clear and reliable data on the consequences of 'territorialisation' requirements imposed by certain State aid schemes supporting the cinema sector. What is territorialisation? –Territorialisation clauses in some Member States oblige producers to spend a certain proportion of the film budget or of the aid received in the Member State that grants the aid. Slide 2

3 connecting you to the future Introduction (continued) Why is territorialisation allowed? –the European Commission considers that territorialisation clauses are justified to ensure the continued presence of human skills and technical expertise required for cultural creation. How much of a requirement does territorialisation impose on film makers? –the European Commission allows Member States to impose such clauses on up to 80% of the total film budget. In other words, producers must be free to spend at least 20% of the film budget outside this State without suffering any reduction in aid. Slide 3

4 connecting you to the future Part A: Legal Aspects Objective –Stock taking and analysis of the territorialisation requirements from the legal perspective in force during the reference period from 2001 to 2005 in 25 Member States (EU25, not including Bulgaria and Romania). Findings –The territorialisation requirements present a great variety in terms of form and content. –A large majority of the 140 reported funding schemes, i.e. 68% of the schemes (representing 59% of the budgets of the schemes), contain territorialisation requirements that are not quantified or not fully quantified in the applicable regulations. –There is almost no judicial or administrative case law reported, and therefore no evidence for implicit or implied territorialisation requirements. –The considerable number and complexity of the territorialisation requirements can cause conflicts of rules and legal uncertainty. Slide 4

5 connecting you to the future Part B: Analysis of Public Subsidies Objective –to discover and analyse the budgets available and money actually spent on supporting films and other audiovisual works in the EU25 during 2001-05 Findings –around 20% of budgets of analysed funding bodies is subject to explicit territorialisation requirements –more than 2/3 of the film aid is awarded on a selective basis, with the remainder awarded automatically –tax incentive schemes are found in an increasing number of countries –total state aid from funding bodies (with budgets exceeding 1m) and from tax-incentive schemes is equivalent to an average of 5 per capita, of which about 40% comes in the form of tax incentives Slide 5

6 connecting you to the future Selecting a Sample of Countries for Further Analysis The analysis in Parts A and B of the study suggested certain Member States would form a useful representative sample for further study The sample was constructed to be representative of geography, size of audiovisual industry and intensity of territorialisation A production cost based measure of territorialisation was constructed, and categorised the Member States selected for analysis into the four levels of High, Moderate, Low and No significant territorialisation The sample of Member States consisted of France (high territorialisation), Germany and Spain (moderate territorialisation), Hungary (low territorialisation) and the Czech Republic, Denmark, Finland and Sweden (no significant territorialisation) Slide 6

7 connecting you to the future Part C: Description of Economic Structure Objective –describe the economic structure of the audiovisual sector in the representative sample of eight countries Findings –macro data audiovisual employment constitutes approximately 0.2 – 0.3% of total employment in all the selected countries except the Czech Republic with 0.1% the annual turnover per capita of the audiovisual industry ranges from 70 in the Czech Republic to about 350 in France. It ranges from 0.7% to 1.4% of GNP in all eight countries the number of feature films per million inhabitants ranges between one and seven per year, of which less than 50% are co-productions the percentage of national films is highest in the Czech Republic, Hungary and Germany –micro data six typical services (casting services, gaffer services, focus pulling, rental of camera equipment, editing of films and development of films ) were selected data were gathered in order to estimate price levels, capacities and rates of capacity utilisation Slide 7

8 connecting you to the future Part D: Comparison of Economic Indicators and Film Budgets Objective –analyse and compare the economic structures of the film industry in the context of varying levels of territorialisation and see if territorialisation affects costs of the several components of film budgets Findings –only a weak, positive correlation between the per capita audiovisual turnover of the country and its intensity of territorialisation was identified –analysis of economic characteristics at the micro level suggested that there is also a certain positive correlation between prices and the intensity of territorialisation –a sample of 25 films provided evidence of a weak, positive correlation between the percentage of the budgets spent on production and pre- production and the intensity of territorialisation in the relevant countries –analysis of specific cost items of the 25 film budgets shows that, for films produced in countries applying territorialisation conditions, a slightly higher proportion of budgets is spent on costs related to travel, transport, accommodation and allowances These conclusions should be treated as mere indications of possible correlations Slide 8

9 connecting you to the future Part E: Synopsis of Co-Production Agreements Objective –provide a summary of co-production agreements and of the number of co-productions between Member States during the reference period. Findings –36 bilateral agreements available in the MERLIN database were focus of this part. In general they require a minimum financial contribution of 20-30% and usually require technical and artistic contributions as well. –1,009 bilateral co-productions between EU25 Member States during the reference period: 816 co-productions were made between two EU25 members that apply territorialisation 104 were between two Member States, of which one applies territorialisation and one does not 89 co-productions were made between two Member States neither of which applies territorialisation –France, Germany, Italy, Spain and the UK, all of which apply territorialisation, were involved in 84.5% of the 1,009 co-productions. –43.3% of total productions of Member States that do not apply territorialisation were co- productions. In Member States that apply territorialisation they accounted for 43% of total productions. There is no evidence that the size and stability of an industry have a direct relationship with a Member States propensity to co-produce. –however, there is a tendency for neighbouring countries to co-produce. Slide 9

10 connecting you to the future Part F: Qualitative Assessment of the Impact of Territorialisation Requirements on Co-productions Objective –using quantitative data from the Study and qualitative data from interviews, assess the impact of territorialisation requirements on co-productions –based on interviews with 40 stakeholders ( a mix of producers, representatives from national and regional film funds, and academics). Findings –the main motive for making co-productions is access to additional funding, risk sharing, and access to distribution channels –most stakeholders find it hard to imagine state aid continuing without territorialisation clauses –the qualitative assessment made it clear that there is a great deal of implicit territorialisation in Europe (i.e. territorialisation not explicitly stated in laws and statutes). –in general, there was a widely held view that the co-production and territorialisation clauses are in fact complementary. Co-productions are undertaken in order to get access to funds available in other Member States, but these funds would not be available without some degree of territorialisation –however, territorialisation can cause some inefficiencies and increase the costs of production –most producers would like to see more automatic than selective funding. In general, flexible but clear and transparent territorialisation rules are seen as the most effective environment for co-productions. Slide 10

11 connecting you to the future Part G: Cultural Implications of Possible Territorialisation Removal Objective –assessing the cultural impact on European film of potentially removing territorialisation, based on the same set of interviewees in Part F Findings –cultural characteristics considered by respondents to be protected by territorialisation included national identity, national language, festivals and new talent –most respondents argued that territorialisation, explicit and implicit, stimulates cultural diversity –cultural diversity, here considered to include both the ability for different cultures to make films and their ability to share these films, was considered by most respondents to also be stimulated by co-productions –however, critics of current national funding schemes argue that they result in too many poor-quality films, made on low budgets, which are unable to circulate. Also there was a concern from these critics that current rules favour national production over co- production –territorialisation was considered to protect local industry, and a thriving local industry was believed by respondents to be necessary to make films representing diverse cultures. Some respondents believed that if territorialisation were removed, Member States without well-established industries would feel a particularly negative cultural impact, as they would lose much of their ability to make their own films Slide 11

12 connecting you to the future Conclusions From the legal standpoint there is a great variety of territorialisation requirements. The variety and complexity can create difficulties for film producers and for those granting aid. A large majority of the funding schemes analysed contain explicit requirements for territorialisation, but without quantifying fully what amount of money is to be spent in a specified place. Even when schemes do not explicitly require spending to be in a specified place, the criteria for granting such aid can be interpreted in such a way as to favour applications that will lead to such spending. The economic analysis showed that the greater the degree of territorialisation in a Member State the higher the turnover of that states audiovisual industry. The data also suggest that the costs of services for film production are higher in countries that apply territorialisation requirements than in those that do not. Territorialisation requirements do not hinder co-productions; rather they facilitate funding for all kinds of productions (including co-productions) that might not otherwise have been available, although they can make co-productions less efficient. It seems that the removal of territorialisation rules might lead to an increase in implicit territorialisation. One consequence of this could be that funding would be more likely be directed towards national productions and, as a result, circulation of films between different countries and cultures might be made more difficult. Slide 12

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