Making movies: all about the colour of money …

Date: 13/05/04

A successful European audiovisual sector is the only way to guarantee cultural diversity on film, writes Roy Perry

FOR those following the progress of the European audiovisual industry, the statistics released annually by the European Audiovisual Observatory provide the latest diagnosis of how the patient is doing. Year on year an all-too-familiar trend in the European audiovisual market is revealed; for example, in 2002, although a total of 630 feature films were produced in the EU, compared to 450 produced in the US, the American films gained more than 70% of the market share.

With an estimated @95 billion turnover for 2001 and with more than one million jobs directly depending on the audiovisual sector in Europe, its importance should not be overlooked. Despite these figures, the trade deficit with the US in the audiovisual sector continues to grow - in 2002 it was estimated at @8.2bn.

Decreasing the deficit and increasing the market share of European films are, of course, vital goals for a healthy and dynamic European audiovisual sector, and are key (but by no means the only) aims of the support given by such programmes as MEDIA Plus. Cinema is a significant wealth generator as well as an important outlet of cultural and artistic expression. If Europe is not to be overcome by the dominance of American culture and European citizens are to find their own culture and societies portrayed on the big screen, then a successful European audiovisual sector can be the only solution for guaranteeing cultural diversity in film.

It is this cultural value of cinema that explains why the EU and national governments pay the sector special attention. The question facing Europe is whether there should be any state aid given to the cinema industry and, if so, how much and in what form?

Subsidizing the European film industry, as with any other industry, raises two problems. The first is to create a dependence on the subsidy when we would really like to see the sector grow strong enough so as not to need support. The second problem is determining just which aspects of the industry and which films should receive subsidies. To have a subsidy policy based on the perception that EU audiences should be viewing a certain kind of film is doomed to failure. Market forces must be respected.

In recent years there have been some excellent European films in receipt of state aid in one form or another. The fabulous destiny of Amélie Poulain and Billy Elliot are two examples which even did well in the US. If the European audiovisual market is really going to compete with the US, then above all we need to remove the obstacles preventing free movement in Europe. We need to recognize the specific problems of linguistic barriers, but new technologies will be increasingly helpful here.

Rather than having subsidies, much more consideration should be given to 'soft loans', so that when a film is successful the public purse will be reimbursed. Producers will be encouraged all the more to make commercially successful films. In the US, the film industry receives tax breaks in various formats and Eurpean governments and the EU should be more ready to mirror these systems rather than give grants. There is still much improvement to be done with the way the MEDIA Plus programme supports training and film distribution to achieve a single market in the film industry as in other industries.

If European cinema is to compete with the US, then the EU's role is to facilitate a vibrant market, rather than fund failing films. A successful industry will meet the wishes of the market. That must be the guiding principle.

• Roy Perry is a UK Conservative MEP and vice-chairman of Parliament's committee on culture, youth, education, the media and sport.

Lower VAT-rates and other tax breaks are the way forward to ensure European movie success, argues Ruth Hieronymi

EUROPE can be proud of its audiovisual heritage, which bears witness to its great cultural diversity. While European films were rather successful in the 1950s and 1960s, since the beginning of the 1980s the trade deficit with the US has increased dramatically, rising from some l4 billion dollars to l6.9bn in 1995-2002. In 2002 US-produced films accounted for 70% of admissions in cinemas of the EU-15.

The structural reasons for this bad performance are clear: a diversity of languages, 25 national distribution networks and a chronic lack of risk capital. To face these structural problems the EU set up the MEDIA programme in 1991, followed by the MEDIA Plus programme in 2001.

Leaving the funding of film production to the member states, MEDIA Plus concentrates on supporting distribution, development and promotion while backingEuropean film festivals. Last year, 90% of European films distributed outside their national territory received help from MEDIA Plus.

Support for the European cinema network was granted to 700 cinemas showing an average of 38% non-national European films, thus offering diversity to Europe's audience. With the extension of the MEDIA Plus programme until 2006 now being decided by the European Parliament and Council of Ministers, the broader future of this instrument must, however, be seen in the context of the revision of the Television Without Frontiers Directive and the discussion on quotas.

The lack of risk capital is a general problem of the European economy. Parliament therefore demanded that the European Commission should encourage member states to support the creation of financial institutions specializing in the audiovisual sector.

A decisive first step has been taken with the i2i-initiative, which aims to facilitate lending and to strengthen small- and medium-sized enterprises (SMEs) in the EU by offering interest rates below market prices, thus complementing the MEDIA Plus programme. In addition, the European Investment Fund offered more than l400 million of venture capital in 2002 alone.

Parliament proposes the following priorities for i2i: financing of transnational distribution structures for European films; infrastructure requirements of smaller, independent cinemas which show many European films; structural needs of European SMEs which produce independent films and are lacking capital, plus; the structural needs of cinema festivals.

The main responsibility for supporting EU films lies, of course, with member states. One tool is reduced tax rates within a wide range of systems used across Europe. Some member states (such as Belgium, Ireland and Luxembourg) offer their own tax concessions for producing films - which support local facilities but not necessarily production of domestic films. In addition to reduced sales taxes, the German government offers tax releases for risk investment in the production of films. This is non-discriminatory, favouring investment in locally produced films as well as Hollywood-productions.

Thus substantial resources of up to l2bn from Germany alone are lost each year. The harmonization of tax rates being strictly rejected by all sides, member states should, however, find a way to coordinate their approach.

Parliament has called for the exchange of best practice and urged governments to generally impose lower VAT-rates.

• Ruth Hieronymi is a German Christian Democrat MEP and a member of the committee on culture, youth, education, the media and sport.

The European Union set up the MEDIA programme in 1991, upgrading it with MEDIA Plus a decade later. In this article, two MEPs give their views on the best way to take EU funding of European film from 2004 onwards.