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CANNES — Local producers have to take responsibility for the future health of the Gallic film industry, according to Marc Tessier, CEO of France’s Centre National de la Cinematographie (CNC), the state-financed body that oversees and funds much of French film production.

“The structure exists in France for a healthy industry,” Tessier tells Variety, “but producers have to accept the reality that the audience goes to see what it wants to see, and that needs to be a factor when producers sit down with directors to discuss projects.”

Tessier’s remarks, made on the eve of the release of the CNC’s annual report on French film and television, come against a background of expanding cinema attendance but stagnating market share for local pics. The CNC handles an annual budget of around $450 million funneled into film and television.

In 1998, box office attendance in France hit a decade-high 170 million people, with grosses totaling $1 billion.

The downside was that French films grabbed a theatrical market share of 27%, 5 million entries down on 1997. In addition, CNC stats show that of the top 40 box office pics of last year, a whopping 31 came from the U.S., with “Titanic” setting an all-time box office record with a gross slightly in excess of $123 million.

Tessier argues that the growth in multiplexes and the renewal of more traditional cinemas has been a positive development. France currently has 4,762 screens and some 50 multiplexes, with the number of plexes set to double in the near future.

“The heavy investment in cinemas has meant that French films have never had better access to the public,” says Tessier.

One cause for concern, however, is how the more traditional center-city hardtops, smaller than the plexes, will hold on to business.

“We are aware that we need to help the non-multiplexes to stay in business. They carry films that don’t necessarily fit into multiplexes, and those films have a right to exist,” says the CNC boss.

With this in mind, the CNC has earmarked $16 million to help exhibs renovate screens. A further $20 million is destined to help indie distributors market their pics and turn out more prints.

Tessier also believes that if an ongoing spat between pay television company Canal Plus — France’s biggest film financier — and digital platform TPS can be resolved, French pics will have more financing than ever available to them.

The squabble, centering mainly on each side’s efforts to defend broadcast windows, has split the French production community in two, with some producers supporting Canal Plus while others are leaning toward TPS.

“There is certainly an air of uncertainty in the production community, with people wondering what is going to happen,” says Tessier.

Producers find themselves in a tricky position. Canal Plus coin goes into around 80% of French pics, and the Canal Plus group invests some $166 million per year in French films. Producers don’t want to anger this source of funding but would like to be able to make additional pay television sales to TPS.

“I think that the two television sides and the film producers will come to a general agreement over the summer and that will be good for the film industry,” opines Tessier.

The CNC topper has also called on film producers to pay more attention to the video sector. Video revenue last year hit $616 million.

“The problem has been that while the video market is an important source of revenue, many producers really don’t pay enough attention to marketing their video releases,” says Tessier. “This needs to change.”