European Film Industry Focuses on Twin Threats: Netflix and Digital Single Market

Ted Sarandos, chief content officer at Netflix, was challenged at Cannes about the company's policies in Europe.

Is Netflix the enemy for European film industry folk? You could be forgiven for thinking so after attending a debate on production staged by the Sarajevo Film Festival’s industry program, CineLink, earlier this month.

The discussion, which attracted a range of movie biz professionals from across South-East Europe, as well as others from further afield, set out to look at the production sector in the region, but seemed magnetically drawn back to the challenges posed by the expansion in Europe of U.S. digital giants, principally Netflix, Amazon and iTunes, rather than the opportunities offered by digital distribution.

This sense of threat has been made more urgent by the proposals tabled by the European Union’s executive branch, the European Commission, to sweep away territorial copyright barriers in the movie and TV business in order to create a single European market. This would prevent producers selling the rights to their films territory by territory across Europe and – so the argument goes – would destroy the existing model of independent film financing as few companies would be willing to license an independent film for the whole continent and big players would undermine small players, lessening competition.

Faced with this danger, the European film and TV industries are circling their wagons and speaking with one voice. The approach follows the lines expressed in a statement issued in May by a coalition of international TV and film business organizations. This said that “mandating any form of cross-border access by EU law in the audiovisual sector would not create or increase value, but more likely lead to its transfer to the benefit of a few big global internet platforms, which will ultimately reduce consumer choice and cultural diversity.”

Put another way: The enemy is at the gate and some damn fool is about to let them in.

“We are facing a cultural and business holocaust,” said Hrvoje Hribar of the Croatian Audiovisual Center in the debate on European co-productions, referring to the European Commission’s Digital Single Market proposals. Hribar said that the European Commission’s proposals lacked logic, especially claims that it would benefit the film industry. “We are bewildered, and looking at this with a chill in our hearts,” he said, adding that the Digital Single Market plan was a “crazy project.”

The perceived threat could also be seen as coming from older media congloms, including U.S. cable companies. Marten Rabarts of the Netherlands’ Eye Institute mentioned the case of a Dutch film director who had crossed over to the dark side by accepting a commission to direct a miniseries for HBO. “Is he a collaborator?” Rabarts asked mischievously, yet again evoking the language of the era of Nazi rule in continental Europe. Admittedly, Rabarts added that he liked to play devil’s advocate, but his question did not seem out of place in the debate.

Part of the fear that Netflix engenders is the fact that they do not contribute to the industry levy that helps fund the production subsidies in many European countries, including two of the main sources of co-production funds, France and Germany, but also other major producing nations like Poland and Spain.

Andre Lange, an independent expert and former staffer at the European Audiovisual Observatory, referred to comments he had made during a talk at Cannes by Ted Sarandos, chief content officer at Netflix. Lange had said: “In five, 10, 15 years, you will destroy the current ecosystem of film production in Europe.”

Lange pointed out that most of the U.S. digital giants have their European bases in countries that do not oblige them to contribute to production funds, and broadcasters and telcos in countries like France where they operate are asking why they have to pay when Netflix and other digital companies don’t.

Lange said that within 10 years all the TV companies and telcos would refuse to pay the levy if the multinational digital giants did not contribute, and this could lead to the collapse of the whole European film funding system.

Robert Balinski of the Polish Film Institute added: “There is a lack of awareness about how important the issue is.”

The twin threat that the Digital Single Market and digital players like Netflix posed to the burgeoning co-production scene in Europe, speakers claimed. Rabarts said that Europe was trying to export the European co-production model to countries outside the continent at a time when it was under threat. “We are trying to expand this model at the same time as being threatened from within,” he said.

Lange said that around a quarter of all European films were co-productions, and that the co-productions tended to get wider distribution in foreign markets and bigger box office on average than films that were not co-productions – around a third of the admissions for European films were generated by co-productions. The countries that were involved in the most co-productions tended to be the smaller countries, like Ireland and Belgium, because their home markets wouldn’t support the films on their own, and they were most at risk from the Digital Single Market and increased competition to local players from the multinational digital giants if the copyright borders are removed.

Another complaint directed at digital companies like Netflix is that they don’t share their data. This lack of transparency infuriates European film industry players.

The debate in Sarajevo questioned whether the underlying difficulty with the U.S. companies lay in a difference of philosophy or ideology.

Rabarts commented: “We don’t work in the same industry.” He argued that in the U.S. filmmaking was seen mostly as a business activity, while in Europe it was mainly seen as a cultural activity.

More and more countries were stepping up their involvement in European co-productions. Tamara Tatishvili of the Georgian National Film Center described their determination to join Eurimages, the organization that funds European co-productions, despite difficulties in making this happen due to a World Trade Organization agreement that Georgia had signed without negotiating an exemption for culture, and the barrier that posed.

In a separate debate on exhibition, Jan Runge, CEO of UNIC, which represents movies theaters owners in Europe, bemoaned the fact that the importance of theatrical is often overlooked compared with digital. “If you open the newspapers and look at the media section you might think that the only dynamic development is in video on demand,” he said. “Everybody talks about Netflix but if you look at the figures movie theaters are a very dynamic part of the film industry.”

Like the speakers on the production panel, Runge warned against moves by European politicians to change the legislative landscape to favor the digital sector. “The development of VOD cannot be at the expense of the theatrical business,” he said. The approach to digital of the exhibition debate panellists was far more nuanced than their colleagues in the production discussion, and it was pointed out that there were many ways that the digital and telco businesses and the theatrical businesses could work together, citing the partnerships with Orange.

Runge saw cinema as being capable as both contributing to a country’s cultural and commercial life. “Cinema is an essential part of a country’s culture. It also creates jobs,” he said.

He cited admissions figures for the first six months of this year that showed growth in most European markets. He added that in South East Europe there was scope for further growth as many countries in the region were under-screened.

Christof Papousek of Austria-based exhibition chain Cineplexx said that the company was expanding rapidly in South East Europe. Papousek said that to differentiate his multiplexes from rivals they were showing more art-house and European movies. “European film culture can work in a multiplex,” he said. Papousek added that it was time to break down the barriers between the so-called “good” art-house world and the “bad” multiplex world, and overcome prejudice. “I would like to see an end to this black-and-white picture,” he said.

However, each local market had to be treated differently. “You have to be very general with your brand, but very local with your activities,” he said.

The session on co-productions was moderated by Jovan Marjanovic of Sarajevo Film Festival, and the session on exhibition was moderated by Tina Hajon, an independent expert.

Other participants included Dag Asbjornsen of the European Commission, Claudia Droc of Europa Cinemas, Hrvoje Laurenta of Kino Europa in Zagreb, Croatia, Mina Djukic of Kino Zvezda in Belgrade, Serbia, Giovanni Dolci of IMAX and Ellis Driessen of the Netherlands Film Fund.

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