ASSESSING STATE AID FOR FILMS AND OTHER AUDIOVISUAL WORKS – UNIC POSITION

UNIC Position State Aid Review 2012 Complementary Comment to Initial Position of September 30th 2011 European Commission State Aid Unit stateaidgreffe@ec.europa.eu 14.06.2012 / Ref. UNIC_2012_05 ASSESSING STATE AID FOR FILMS AND OTHER AUDIOVISUAL WORKS – UNIC POSITION The Union Internationale des Cinémas (UNIC) is pleased to participate in the EC Consultation regarding the current review of rules on state aid to films and other audiovisual works. This position paper is a complementary comment in addition to UNIC’s previous response submitted on September 30th 2011. The scope of the Cinema Communication should not cover aid to cinemas. UNIC believes that it would be more beneficial to continue to examine aid to cinemas on a case-by-case or country by country basis for the following reasons:  There is a limited amount of evidence as regards past EC decisions pertaining to state aid for theatrical exhibition. It would therefore be too difficult and too arbitrary to develop criteria that would allow the inclusion of aid for a diverse range of cinemas across all EU Member States in the Cinema Communication.  A major share of EU cinemas will have digitally converted their theatres by the time the new Cinema Communication would apply, making rules concerning digital roll-out obsolete.  Finally, most state support to the digital transition only complements ‘virtual-print-fee’ arrangements – the market-based financing mechanism adopted by distribution colleagues across much of Europe as a way to help cinemas purchase digital equipment.  There is so far little evidence that aid to cinemas in general distorts or threatens to distort the internal market. Because of the above reasons we believe that the Cinema Communication should not include criteria that determine on which basis aid to cinemas should be granted. Union Internationale des Cinémas | International Union of Cinemas | UNIC Av. des Arts 10-11 boîte 17 | 1210 Brussels (Saint-Josse-ten-Noode) | Belgium T +32 2 8809939 | www.unic-cinemas.org UNIC Position State Aid Review 2012 Complementary Comment to Initial Position of September 30th 2011 Raising the de minimis threshold should allow cinemas to finance the digital transition. The new EC draft Cinema Communication states that cinemas would be sufficiently served by the de minimis regulation (and the GBER) because of the usually small amounts involved in supporting film theatres. We would like to further examine this topic based on the fact that we propose a case-by-case or country by country examination of aid given to cinemas in the future. Unfortunately, the current de minimis threshold is too low to enable cinemas to receive adequate support to fully benefit from the digital shift. This is of particular relevance for cinemas that receive state aid for screening a certain level of local and/or European films: When these cinemas accumulate the aids received the current de minimis threshold is not enough. For these reasons, UNIC suggest to the Commission to consider raising the de minimis threshold to € 500.000. In addition, we suggest that the rule is applied to the actual cinema establishment that received bespoke aids as opposed to the legal entity of the cinema group. Cinema exhibition remains an economic and a cultural activity and the two should not be separated. The current draft of the Cinema Communication makes a distinction between arthouse and other cinemas that is no longer relevant in the digital age. It also lacks recognition of the cultural contributions of all cinemas. This should be rectified. In particular, the current draft notes that aids given to arthouse cinemas can be notified under the de minimis rule and that aid for renovation investments of SMEs may also meet the conditions of the General Block Exemption Regulation. In this context, UNIC would like to stress two points: First, the distinctions between arthouse cinemas and other cinemas get increasingly blurred. Therefore, funding agencies and governments should be able to notify aids to any type of cinema under any potentially applicable state aid rule, should this indeed be required. While the share of European national and European non-national films might be higher in smaller cinemas, their overall exploitation is significantly higher in other cinemas. UNIC’s data shows that commercial cinemas contribute 80% of the EU box office for European films. Furthermore, by the time European cinemas are fully digitised, crossover programming will have increased considerably, further blurring programming distinctions between film theatres. The EC’s argument that a film’s commercial nature does not prevent it from being cultural (in line with the 2005 UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions) applies to cinemas as well. Union Internationale des Cinémas | International Union of Cinemas | UNIC Av. des Arts 10-11 boîte 17 | 1210 Brussels (Saint-Josse-ten-Noode) | Belgium T +32 2 8809939 | www.unic-cinemas.org UNIC Position State Aid Review 2012 Complementary Comment to Initial Position of September 30th 2011 Second, while UNIC prefers that aid to cinemas should be notified under a revised de-minimis rule, it is vital that those public agencies and governments that wish to do so can also notify their schemes under Art. 107 (3) (d) TFEU, which exempts “aid to promote culture, where such aid does not affect competition and trading conditions to an extent contrary to the common interest”. Regardless of their programming policy, all cinemas are cultural establishments that are indispensable to the promotion and distribution of cinematographic works and contribute to the forging of our national and European identities. UNIC has explained how cinemas contribute to cultural diversity and social cohesion at length in its initial consultation response and thus will not repeat these arguments at this point. There is no reason why DG Competition should get involved in a debate on how films are to be released in Europe. UNIC would like to stress that the release schedule of a film is above all the direct result from commercial negotiations between different players in the film industry. The “media chronology” is an essential tool that enables the financing of film projects and thereby safeguards cultural diversity and creation in Europe. Article 5.1 (36) of the draft Cinema Communication nevertheless rightly indicates that Member States may get involved in how films are released if their aim is to encourage cinematographic production, should they decide to do so. However, the new draft Cinema Communication also recommends that Member States do not “impose unnecessary limitations on the distribution and marketing of an audiovisual work as a condition for supporting it”. Given the above acknowledgement that Member States have the remit to decide whether to get involved or not, UNIC strongly feels that this rather unclear comment should not be part of the new Cinema Communication. EU regulators should above all trust the market and their colleagues at national level to understand what is best for the sector. It is vital that the European Commission acknowledges the benefits of a sustainable and exclusive theatrical release window for the entire European film industry: Regardless of whether a film’s release schedule is influenced by regulation or not the media chronology allows the industry to maximise returns at each step of the value chain, which is particularly important in a high-risk industry like cinema. In this context, a distinct and exclusive theatrical release window benefits the entire film industry, as the success of a film in home entertainment often depends on its success in theatrical exhibition and the related marketing efforts made by distributors and exhibitors. Release strategies, whether the result of market dynamics or partly influenced by government intervention, are always the result of national specificities of the film industry. Cultural factors (i.e. language, taste), economic factors (i.e. value of a Union Internationale des Cinémas | International Union of Cinemas | UNIC Av. des Arts 10-11 boîte 17 | 1210 Brussels (Saint-Josse-ten-Noode) | Belgium T +32 2 8809939 | www.unic-cinemas.org UNIC Position State Aid Review 2012 Complementary Comment to Initial Position of September 30th 2011 specific version market) and technical factors (i.e. the proliferation of screens or broadband) shape these local conditions. Given the fragmented nature of Europe’s creative content markets and the fact that cultural policy-making rests within the remit of EU member states, UNIC believes that there is no justifiable reason for Brussels to get involved in debates about release windows. Practices of linking release windows or theatrical releases to film support equally vary from one country to another, and sometimes within one country, from one fund to another. Film support may be linked to a specific release strategy as agreed upon by industry stakeholders; it may be linked to a theatrical release, independent of the window; and in some cases voting mechanisms within the fund may decide upon changes on a case by case basis. In each case, the schemes are the result of national specificities, which industry stakeholders and Member States are best positioned to assess. UNIC would also like to add that one main reason for linking film support to release strategies, is the financial contribution of the film industry in general, and the exhibition sector in particular. In France for instance, the Centre National des Cinémas (CNC) levies a 10,72% tax on each cinema ticket. In 2011, this earned the CNC € 128 million. In the same year, the British Film Institute (BFI) made £ 5 million on cinema tickets. In 2010, German cinemas paid € 25,1 million to the Filmförderungsanstalt (FFA). UNIC therefore believes it makes perfect sense for some film support to be linked to theatrical release windows, as it reflects how certain version markets contribute to the financing of European productions. We therefore suggests that the EC deletes its recommendation to Member States, ie. the last sentence of paragraph 5.1 (35). General remarks in relation to the entire film industry and the Cinema Communication. UNIC fully supports its film industry partners in relation to multiple other important aspects that the draft Cinema Communication addresses: Art. 26 of the EC’s draft Communication states that “Member States may require that up to 100% of the aid awarded to the production of a given audiovisual work is spent in the territory offering the aid”, rather than 80% of the production budget as was the case so far. UNIC is very concerned that this could have the undesirable result of Member States reducing the funds available to support film creation. This would have severely detrimental effects on the European cinematographic and audiovisual industry, not only in terms of cultural creation and diversity, but also in terms of employment and economic growth. The 2008 study commissioned by the EC on the economic and cultural impact of territorialisation clauses did not indicate any resulting distortion of the internal market. For these reasons, UNIC supports maintaining the current rules on territorialisation. A healthy level of European film production is the fundamental basis for high cinema attendance across the European Union. Union Internationale des Cinémas | International Union of Cinemas | UNIC Av. des Arts 10-11 boîte 17 | 1210 Brussels (Saint-Josse-ten-Noode) | Belgium T +32 2 8809939 | www.unic-cinemas.org UNIC Position State Aid Review 2012 Complementary Comment to Initial Position of September 30th 2011 UNIC also supports maintaining the current aid standards to incoming foreign film productions. Differentiating between these could threaten the sustainability of local and national production hubs and film industry infrastructures, and ultimately weaken Europe’s film competitiveness. We look forward to working further with the Commission on the current state aid review and would be happy to discuss any of the raised issues in person should you wish to do so. With kind regards, Jan Runge Chief Executive Union Internationale des Cinémas (UNIC) Union Internationale des Cinémas | International Union of Cinemas | UNIC Av. des Arts 10-11 boîte 17 | 1210 Brussels (Saint-Josse-ten-Noode) | Belgium T +32 2 8809939 | www.unic-cinemas.org ... - tailieumienphi.vn