German exhibs fight for decrease in levy

Germany’s generous state and federal funding apparatus appeared to be one source of financing that would remain unaffected by the global financial crisis.

Until recently.

From the $80 million-a-year German Federal Film Fund (DFFF) to nearly $410 million in annual federal and regional subsidies for the country’s film industry, Germany has been regarded as a dreamland for domestic and international filmmakers, and the envy of neighbors like Austria, which is setting up similar incentives of its own.

All of Germany’s biggest box office hits of the past year received subsidy funding, including Til Schweiger’s hit romantic comedy “Keinohrhasen,” which went on to cume $54 million; “The Wave” ($20 million); “The Wild Soccer Bunch 5″ ($11.2 million); and “The Baader Meinhof Complex,” which had cumed $23 million before it was announced as one of Oscar’s five foreign-language nominees.

Upcoming international productions like Stephen Daldry’s Berlinale screener “The Reader,” Tom Tykwer’s “The International” (which opens this year’s fest) and Bryan Singer’s “Valkyrie” also landed coin.

Yet as the film industry’s spotlight focuses on Berlin, cracks are appearing on what has been one of the most stable sources of film financing in Europe.

At the root of the problem is a levy German theaters must pay to the country’s main film funding body, the German Federal Film Board (FFA). Charged between 1.8% and 2.3% of their annual box office revenue, exhibitors pay some $22.4 million a year to the FFA. Home entertainment distribs and the country’s public and commercial TV companies also contribute to the FFA’s annual budget of $92.5 million.

Yet exhibs have long objected to the levies and have even taken legal action against the tax, which has remained unchanged despite sinking box office revenues.

The exhib association HDF is demanding that the levy be decreased and, more important, that the government agree to assistance in the conversion from analog to digital projection, a daunting prospect that far exceeds the budget of the FFA. As elsewhere, the German industry is grappling with the question of who should pay for the high-priced technical upgrades.

A number of cinema chains, including leading multiplex operators Cinestar, Cinemaxx and UCI, have already filed a joint complaint with the European Union to look into the matter.

The HDF came close to advising all of its members, about 75% of German exhibs, to continue paying the levy but with a caveat — a legal notice stipulating the theaters’ objection to the levy and blocking the FFA from spending the millions it receives until the matter is settled.

The government has already signaled assistance for exhibs, which might stave off a total rebellion. UCI, Cinestar and a number of smaller theaters initially entered a separate caveat, but in late January, in a sign of good will, lifted their separate boycott in the hopes of reaching a speedy solution with the FFA.

The ongoing battle has the German film industry on edge.

“We’re very concerned,” says Martin Moszkowicz, production director of Germany’s Constantin Film. “It was getting out of control. We are all professionals in our industry. We should find solutions. The FFA is the most important part of film financing in Germany, it’s the leading subsidy board, so it’s a huge problem. It affects all other subsidies … now is the time to find a solution.”

The row has no direct fiscal impact on Germany’s nine regional subsidies, which still have a combined volume of some $306 million, but the FFA is the leading federal org that sets the tone for the rest of the film boards, and if it’s crippled, it could well trigger reverberations across the country.

The $80 million-a-year DFFF fund, which is overseen by the FFA, remains unaffected. Unlike the FFA, the DFFF is financed entirely by taxpayer money.

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