Author:  Phillipe Kern General Secretary, European Film Companies Alliance

Cinema in Europe

In Europe, cinema is considered an important cultural form rather than simply entertainment. The focus is on the craftsmanship involved in making the films, rather than the industry that is responsible for creating them. On the whole, European cinema is driven by passion, including the passion of Governments who support their film sectors for artistic reasons and regulate their industries to protect them, rather than focusing on commercial considerations. The challenge for European cinema is simply to exist in an international market that is dominated by the incredibly powerful oligopoly of film distributors operating out of Hollywood.

British film producers should see the whole of Europe as an important and a welcoming market. Traditionally, British films tend to perform better in Europe than they do in the US. British films are the 'European' films that travel best across Europe and tend to be the most successful.

The European Union's Role in Film

Culture became a core priority area for the EU in 1993, following the ratification of the Maastricht Treaty. Despite the EU's general de-regulatory approach to industry, they recognise that cinema needs some support in order to survive in the face of global competition and that its survival is both necessary and desirable because of the role it plays in the cultural life of Europe.

Eighty per cent of the regulatory environment for film is now run from Brussels - for example, in respect of copyright law , antitrust , and also related areas such as the Television Without Frontiers conditions requiring television channels to show a minimum amount of European product. The major question relating to individual state's support for their domestic industries is how the EU can create a framework for these state aids to operate within the generally liberal economic environment of Europe, and without establishing precedents that might be pursued by other industries. The current approach of the EU is to try to synchronise the state aids more effectively so that conditions are more similar in each country, for example by insisting that only cultural films are supported and that state aids should never account for more than 50% of a film's budget. In many European countries state aid to production is well above the 50% threshold and the distinction between commercial and cultural films is totally artificial. Moreover why should the European Commission rule on state aid for cinema whilst the market is dominated by the Hollywood majors (75 % market share)?

This may become an issue in the forthcoming world trade talks, although the Motion Picture Association has pulled back from its earlier stance of aggressively lobbying against any state aids. They are more interested now in gaining access to these support mechanisms to encourage their member countries to distribute more European films in Europe. The MPA strategy is also aimed at preventing the evolution of state support by freezing existing regimes - the challenge is to liberalise new services (interactive / internet distribution). The EU and MPA could also find themselves in disagreement over the use of output deals with pay television channels which, the EU might argue, create barriers to entry for other TV distributors and take too much money out of this important market which could otherwise help to support domestic European production.

Direct EU Support for Film

The audiovisual sector is the only creative industry that receives direct subsidy from the EU. The MEDIA + programme will distribute €410 million over five years in support for development, distribution and training programmes. (To set this in context, this works out at €82 million a year compared to the aggregate of €1.5 billion spent by individual member states on support for the audiovisual sector each year.) Around 20% of the available development funding goes to UK companies, but there is less take up by UK distributors of the distribution support scheme as the UK is not good at distributing non-national European films. There is no production support under the MEDIA + programme, but there is now a mechanism through which the European Investment Bank can support banks which, in turn, support production. This is a significant departure from normal practice by the EIB which usually only supports major infrastructure projects. Production support is available through the Council of Europe's Eurimages programme (of which, unfortunately, the UK is no longer a member) and more importantly through the accumulation of national tax incentives accessible via co-productions.

Other Issues

Television Without Frontiers: this legal instrument was introduced in the nineties to ensure that European television channels showed minimum levels of European product and original programming. In practice, different countries have interpreted the regulations differently - for example, the UK has tended to be more relaxed about it than France. There is a widespread view within Europe that this directive has not worked as was originally intended and, as it comes up for renewal, broadcasters across Europe are arguing that the restrictions should be relaxed. Surveys show that broadcasters can comply with the quota regime set by the directive without showing any national or European films. Potentially the directive is an important piece of market regulation to promote European films' market access on TV platforms.

Piracy: the European Parliament is currently considering legislation to harmonise anti-piracy legislation and regulation throughout Europe to make it easier for rights holders to pursue actions against pirates across national boundaries within Europe.

Cable and Satellite Directive: given that cable and satellite signals are widely available across territorial boundaries, there is a growing call for cable and satellite film deals (and other programming arrangements) to be negotiated across Europe as a whole rather than for individual territories.

• The European Union recognises that it is a struggle for European cinema to survive in a global market that is dominated by the Hollywood studios.
• The EU supports film because of its cultural importance in Europe and because of the adverse market conditions in which European film companies have to operate.
• The EU provides some direct financial support for development, distribution and training through the MEDIA + programme, but this is a relatively small amount compared to the national support mechanisms operated by each member state.
• British film makers should regard Europe as an important market for their films. Traditionally, British films have performed much better in Europe than in the US.