Hollywood freeze out in EU?

Proposed regs set to cut coin for non-EU productions

The European Union has drafted film funding rules which, if approved, will cut coin for Hollywood productions shooting in Europe and create potential impediments for all co-productions in its member states.

The changes — written in the EU’s Cinema Communcations law — involve a major modification of film subsidies that provide some €3 billion ($3.8 billion) per year.

The news emerged on Saturday at the European Audiovisual Observatory’s annual Cannes event, a packed confab this year titled “Leveling the Playing Field? Towards New European Rules for Film Funding.”

For Hollywood, the most important change is the reduction in “aid intensity” to non-EU productions, due to what bureaucrats in Brussels are calling a subsidy race. This refers to the competition among some European countries that use state aid to attract investments from large-scale, mainly U.S., film companies.

Under the rules being drafted, a $50 million European movie would get up to $25 million in subsidies while a non-Euro pic would only be eligible for up to $11 million. This differentiation does not currently exist.

The U.K.’s film tax credit, for example, delivered a record $320 million to producers in 2011, with the vast majority going to Hollywood movies shot in Blighty, such as Disney’s “John Carter.” France and Germany have also become Hollywood hotspots.

There have been concerns in EU echelons that a race to attract major U.S. productions could undermine funding for smaller European movies.

But Austrian producer Werner Muller, a prominent member of the Intl. Federation of Film Producers’ Assns., dismissed them.

“The only one who sees a competition constraint is the European Commission; not our industry. Where is the problem for the U.K., the German or the French industries in having non-European productions? If these movies don’t shoot in Europe, they will just shoot elsewhere,” he said.

The regs being drafted also envision European countries forcing producers to spend 100% of the aid they get within the country offering the incentives, rather than the current 80%. Producers fear this would kill off several types of co-productions, both European and international, that require greater multi-territory flexibility.

“The Commission seems very concerned about discontinuing the 80% criteria and this is cause for alarm,” said Charlotte Appelgren, head of Cine Regio, which represents 37 European regional film funds.

“What we are looking at are changes in tax schemes and funds that are based on current territorial percentages, and also a regressive scheme for international productions,” lamented Frederic Delcor from the European Film Agency of Directors.

“We have made serious investments relying on the system we have now,” Delcor added, warning that Europe may not be able to maintain its current production levels under the proposed new rules.

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