Building sustainable film businesses: the challenges for industry

Section 5.0  

l

  Public support for film

5.3

European competition policy  

(State Aid)

As of the date of this report (May 2012) the 

European film industry is uncertain about how 

current European Commission proposals concerning 

State Aid might be enacted and how they might 

affect the way in which screen agencies support the 

film sector.

The draft proposals for change have been issued by 

the EC in pursuit of one of its core responsibilities 

under the Treaty on the Functioning of the 

European Union (TFEU), namely the policing of EU 

competition law. In the draft Communication the 

EC refers to Article 107 of the TFEU (the general rule 

against competition-distorting state aid) and Article 

107(3)(d), the so-called ‘cultural exception‘. 

The draft proposals set out to make a number of 

changes to the rules governing state aid to film.  

The most important changes are:

l

  A proposed cap on state aid to high budget 

‘non-European’ films

l

  A reduction in the proportion of the budget a 

Member State can require to be spent within its 

territory (territorialisation)

l

  A new definition of expenditure anywhere within 

the European Economic Area (EU members plus 

Iceland, Liechtenstein and Norway) as ‘national’ 

expenditure where the aid is pro rata  

to national expenditure

l

  A proposed rule against allowing state aid to 

support particular budget lines.

One of the Commission’s roles is to be the guardian 

of competition within the single market. It accepts 

that film, as a cultural good, is an exception but 

seeks to prevent the ‘cultural exception’ being used 

inappropriately as a form of industrial protection.  

As expressed in the draft Communication, it has 

three particular concerns:

l

  That the definition of  ‘qualifying spend’ causes 

particular activities in the film budget to receive  

a national preference

l

  That Member States may have local spend 

requirements of up to 80% of the film budget, 

which the Commission regards as excessive

l

  That Member States are using public funding 

to compete with each other to attract mobile 

international productions to shoot in their 

territories.

The Commission believes that these aspects 

of Member States’ film support systems distort 

competition to an extent that is not justified in the 

pursuit of legitimate cultural purposes.

SPI believes there is considerable opposition within 

many European governments to most of these 

changes but until the issues are clarified there is 

a cloud in Europe over the flexibility enjoyed by 

nations and regions in their support strategies for 

the sector. 

Building sustainable film businesses:

the challenges for industry and government

21

---

Having identified what film companies can do 

to help themselves achieve sustainability and 

longevity there remains a question about what 

public agencies wishing to support film as both a 

cultural and economic activity can do that is aimed 

specifically at strategic company development. 

It is not inappropriate to put public funds into 

helping film businesses become sustainable. 

Business support for SMEs in all sectors is a well-

established and highly effective strategy used by 

governments around the world to help enterprises 

to grow. Independent film companies will inevitably 

fall under the definition of a small to medium 

sized enterprise (if not a micro enterprise) and are 

therefore eligible for this support. 

However, the complexities inherent in the film 

industry (in particular the challenges to growth 

described elsewhere) mean that business support 

is not always applicable, and could be more 

specifically targeted and designed to help film 

companies overcome those particular obstacles. 

SPI has built on its knowledge of and research into 

public support schemes for film around the world, 

and the efficacy of those schemes, to identify a 

number of success factors for public agencies 

wishing to support film businesses. These factors 

have done the most to support growing film 

businesses in the independent sector, even though 

they support growth in an indirect way, with the 

focus still largely on individual projects.

In summary, these success factors are identified as:

l

  A holistic range of initiatives with consistent 

levels of support

l

  Project based support that motivates by 

rewarding success

l

  Where broadcasters are mandated to invest

l

  Levies and quotas

l

  Systems that combine well with those in 

other countries.

6.1

A holistic range of initiatives with 

consistent levels of support

In many of the most established, mature film 

economies around the world there is a public 

support body, usually at national level but often  

also at regional level, providing an integrated set  

of support initiatives aimed at different points along  

the value chain. 

A holistic range of support mechanisms across 

the value chain might include some or all of the 

following commercially based interventions:

l

  Development funding for new projects

l

  Production funding

l

  Support for distributors and, where relevant, sales 

companies, for example with marketing costs

l

  Support for independent exhibitors and 

national broadcasters

l

  Initial training for new entrants as well as 

advanced training and networking opportunities 

for established film professionals.

A holistic approach usually exists in countries 

where government has a full understanding of the 

range of benefits of a healthy screen sector, both 

economic (as described in Section 4) and cultural. 

Most important is an understanding that screen 

production is a major driver of activity in the creative 

economy, which is a core element of the knowledge 

economy that many developed countries are 

increasingly turning to for growth.

Crucially these policy programmes have 

permanence, or at least real longevity – one 

example would be in Sweden where the Film 

Agreement guarantees support for periods 

of at least four years, providing domestic and 

international stakeholders along the value chain  

a measure of security in their business decisions.

Success factors for  

Public Support Systems

Section 6.0

Building sustainable film businesses:

the challenges for industry and government

22

---