European film funding poised for a reboot

Is Europe headed for a collective rethink of its public film-funding philosophy?

For a while, it looked like a seismic subsidy shift was indeed imminent.

Rumors at the Berlin Film Festival that the plug might be pulled on the Media program, which supports development and distribution across the European Union to the tune of €755 million ($1.06 billion) allocated between 2007-13, prompted a call to arms by a battalion of European auteurs, including Pedro Almodovar, Ken Loach, Nanni Moretti, Michael Haneke, Bernardo Bertolucci, Theo Angelopuolos and Constantin Costa-Gavras.

Unwelcome plans to merge Media with other EU cultural support programs were confirmed on March 18; however, the powers in Brussels, most notably European Commission president Jose Manuel Barroso, have pledged not to cut the Media budget and to work closely on making the change in tandem with European filmmakers.

But while one threat seems to have been averted, local budget cuts are causing turmoil and forcing fundamental changes in public film funding policies in several European countries, most notably the U.K. and Italy.

Neither are things serene within the vast landscape of Europe’s soft money schemes, where a proliferation of regional funds and national tax rebates is causing simmering tensions among EU countries increasingly looking to lure shoots.

“Although everybody is very friendly within Europe — the French love the Belgians, love the Spanish, work with the Germans and so forth — ultimately it’s really about trying to have the biggest part of the spend in your country and not in your neighbor’s country,” laments Patrick Lamassoure, managing director of Film France, the government-financed agency that promotes filmmaking in Gaul.

Meanwhile, in Blighty, the film industry is in transition, as deep slashes on March 31 shuttered the U.K. Film Council, whose film-funding arm will continue to exist within the British Film Institute.

British producers are still trying to gauge the impact of the changes, but there is little doubt that they are feeling forced to shift “from being creative, to (being) business, business, business,” as producer Paul Webster, whose credits include “Atonement” and “Eastern Promises,” complains. (For more on the U.K. cuts, see related story).

In Italy, the entertainment community was mobilized to strike over a proposed cut to almost half the country’s comprehensive arts fund, the Fondo Unico Dello Spettacolo (FUS). But on March 23, the eve of the strike, the Silvio Berlusconi government suddenly backpedaled and proposed a plan to reopen the country’s funding faucet.

The film industry breathed a collective sigh of relief, but the country as a whole is fuming. That’s because to refinance the FUS, which funds theater, opera, dance and film, the Italian government slapped a tax on gas just as the price at the pump was already skyrocketing due to the conflict in Libya.

In fact, a portion of the tax will be used to finance Italy’s participation in the Libyan military intervention, and another slice will provide the country’s police force a pay raise — but it is still being dubbed “fuel for film” by angry Italian consumer advocacy groups, even though only 5% of the tax will go to the country’s culture ministry.

Riccardo Tozzi, prexy of Italy’s producers and head of Cattleya, the prominent Rome shingle that is Universal’s Italo outpost, hails the tax as “a very interesting solution, because it’s permanent.”

This type of tax in Italy gets written in stone, Tozzi notes. That means Italy’s industry will no longer be dependent for funding on the government’s yearly budget, freeing the film sector from political volatility, he claims.

Others in the Italo industry are not so sure.

“For years, we have been asking for a modern law centered on a tax that draws on all platforms that use film product,” says Italy’s National Film Auteurs’ Assn. “That is the only way for us to have the necessary resources for our sector with no uncertainty, and to free cinema from a dependency on politics.”

But a system based on the French model, which draws levies from all film-related platforms, seems unlikely ever to be adopted by Italy.

In France and Germany, government-regulated film-funding systems are still solid.

That said, the French parliament recently snatched roughly €30 million ($42 million) from tax coin levied directly from the industry (a percentage of admissions, money from broadcasters, homevid, Internet providers and VOD services) and earmarked for the Centre National du Cinema et de l’Image Animee (CNC), the state film agency — and redirected it for other spending. Still, the CNC has a massive €700 million ($1 billion)-plus budget this year.

“The (French) system is very strong and very clever because it keeps growing,” says Lamassoure. “But for the first time in 60 years, we have a sign that in a crisis, suddenly there are ways for parliament to put their hands on part of the money,” he cautions.

Interestingly, rather than cuts, Lamassoure is more worried about the fact that, despite Gallic rebates, the biggest-budget French features are being shot abroad, where incentives are more attractive.

Lamassoure cites the latest installment of the quintessential Gallic franchise, “Asterix and Obelix: God Save Britannia,” from Fidelite Films, which has a €50 million ($70 million) budget and will start a 3D shoot in April in Malta.

Medium-budget French movies are also fleeing France, mostly to Belgium, which offers a non-capped tax shelter.

Film France, however, has lured lots of foreign shoots itself, with numbers skyrocketing nearly 69% to $428.6 million in 2010, thanks to, among others, W.S. Anderson’s “The Three Musketeers,” produced by German giant Constantin Film.

In the past decade, soft money in Europe has basically gone from handouts based on cultural concerns to regional funds and national tax rebates driven by economic motives.

“There has been a huge change in the way that public money reaches film production,” says Lamassoure, noting that in the early days of the support funds, the people holding the pursestrings would ask, “What kinds of films will you make?”

Now, he notes, a large portion of the money is from government coffers — and the big question is “Where are you going to shoot?” This shift, says Lamassoure, is probably why the European Commission wants to take a closer look at all public support of the film industry.

Martin Moszkowicz, film and television topper at Constantin, says that European incentives are designed to improve the cultural agenda of EU countries.

“Any of these tax rebates always has to have a cultural component, otherwise it’s just an economic aid, and that would not be allowed under EU regulations,” he says.

Italy’s much-maligned gas tax solved that problem by dipping directly into consumers’ wallets.

And now, with a mix of straight subsidies and strong tax credits solidly in place, Tozzi says that Italy’s system is starting to stabilize, even though it still needs tweaking.

Tozzi also notes that all the mayhem hit the Italo industry at a time when the national market share, which hit an all-time of 65% high in January, has been steadily soaring — a trend not exclusive to Italy.

“Basically, everywhere throughout Europe we are on a constant upward trajectory in terms of local market shares,” Moszkowicz says. That’s due in part to systems in place in various European countries that foster films that play better with local auds, he maintains.

“Is there a better way to do things?” wonders the Constantin topper. “We can have that discussion; but certainly we are in a better place today than we were 10 years ago.”

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