1. Film Financing and the Digital Single Market: its Future, the Role of Territoriality and New Models of Financing
Prof. P. Bernt Hugenholtz
Institute for Information Law (IViR)
University of Amsterdam
Other authors: Joost Poort, Peter Lindhout, Gijs van Til
22/1/2019
Presentation for the Committee on Culture and Education (CULT)

2. Structure of Presentation
Research Questions
Film Financing: market problem analysis
Film Support policies in Europe
Legal Challenges
Market Challenges
Stakeholder Positions
Recommendations
22/1/2019
Presentation for the Committee on Culture and Education (CULT)

3. 1. Research Questions
Role of territoriality in film financing in the EU?
Main challenges to territoriality as key model for film financing?
Consequences for film financing if EU policies were to (further) reduce scope of territorial exclusivity?
Member States’ and EU models of film financing and support?
Challenges from digital developments and evolving consumer behaviour?
Alternatives to traditional financing models and policies?
22/1/2019
Presentation for the Committee on Culture and Education (CULT)

4. 2. Film Financing: market problem analysis
High upfront investments and demand uncertainty require presale agreements with exclusive distribution rights for financing films
European films are (on average) much less successful in attracting larger audiences than US films:
In 2017: 1676 EU feature films vs. 821 US films
Market share of EU films in EU 20~30% vs. 60~70% for US films
Language barriers and cultural differences in Europe are a likely explanation
Many EU films lack economies of scale, more dependent on country-by-country exploitation, after good reviews and festival performances
22/1/2019
Presentation for the Committee on Culture and Education (CULT)

5. 3. Film Support policies in Europe
Variety of film support policies at EU and MS level
In 2014 direct support was € 2.15 billion in the EU Member States
Direct support is provided through grants and soft loans
For different projects and phases of the creation trajectory, but mostly for production
Share of direct public funding decreases with increasing market size
Diseconomies of scale: number of films per capita in MS decreases with population
Only small percentage (~5%) of total funds are repaid
Indirect public support through incentive schemes (e.g. tax benefits) and risk reduction for private investors
Broadcasters, AV media service providers often obliged to invest in film production or contribute to film funds
22/1/2019
Presentation for the Committee on Culture and Education (CULT)

6. 4. Legal Challenges
Role of territoriality in copyright gradually diminished by EU law aimed at removing barriers to the Single Market:
Satellite and Cable Directive
Portability Regulation
proposed Online Broadcasting Regulation/Directive
EU competition law sets limits to grants of territorial exclusivity, prohibits clauses that restrict ‘passive’ sales to viewers in non-licensed territories
Territorial exclusivity in contracts increasingly vulnerable to EU competition law, as territorial grants are no longer supported by underlying territorial rights
22/1/2019
Presentation for the Committee on Culture and Education (CULT)

7. 5. Market Challenges
VOD platforms challenge traditional release strategies and separation of windows for each type of exploitation
Audiences do not understand why a film that is available elsewhere in Europe, is not available in their country
Arthouse cinemas have trouble connecting to younger audiences
Rise of transnational cultures is essential for Europe’s cultural diversity, but at odds with territorial distribution
Despite disruptive developments, presales remain essential for film financing
New financing models such as crowdfunding and product placement are of limited significance
22/1/2019
Presentation for the Committee on Culture and Education (CULT)

8. 6. Stakeholder Positions
Industry stakeholders show large degree of consensus
They insist on essential role of territorial exclusivity for presale agreements, and on ‘freedom of contract’
Territorial exclusivity claimed to stimulate cultural diversity in European film
Can be countered by argument that it harms transnational and pan-European cultural diversity by preventing access by European audiences to same films
22/1/2019
Presentation for the Committee on Culture and Education (CULT)

9. 7. Recommendations
Where territorial exclusivity remains indispensable, the European Commission may create specific competition law rules in the form of ‘block exemptions’
Language exclusivity could provide a practical, and legally more robust alternative to territorial licensing, albeit not without technical challenges and contractual consequences
Support schemes might be directed more actively towards connecting with younger age groups and transnational cultures
Reconsider regulation from funding bodies, broadcasters and in national laws that reinforces the traditional windowing system
Make national and EU support policies more selective by awarding higher budgets for fewer films and for distribution and promotion
22/1/2019
Presentation for the Committee on Culture and Education (CULT)