Industry Report: Financing
Minutes of the "World Forum on Strategy and Finance for Cinema" seminar (Rome, October 2006)
by Alain Modot, VP Media Consulting Group for the Rome Film Festival
- In the prestigious framework of Cinema.Festa Internazionale di Roma, the “Davos” of cinema has been organized on October 17 by Media Consulting Group, in partnership with Cinecittà Holding and Rome Film Fest. About 200 European professionals came to listen to international experts and guest speakers intervening in the five panels of the Forum and to exchange analyses, questions and expertise.
The digital revolution and shifting economic models
Introducing the discussions, Gaetano Blandini (IT – General Direction of Cinema) focused on the peculiarities of the cinematographic industry in Europe, by underlining, on the one hand, its wealth linked to its cultural diversity and on the other hand, the deep both financial and technological changes to cope with.
In panel 1 two academics, Chris Brady (UK – Film Business Academy) and Alessandro Usai (IT – Bocconi University) confronted their analyses on the validity of the Long Tail theory for the cinema. And to conclude that the digital revolution was first changing the consumer’s behaviour and that a growing number of “niche” markets could exist and offer at very low cost programs which until now had problems to find their economic balance on the traditional markets.
In panel 2, two producers Antonio Saura (ES – Zebra Producciones) and Riccardo Tozzi (IT - Cattleya) agreed to consider that if the digital technologies contributed to the added value in the release of the artworks they did not create this added value. According to them, cinema did not turn into a spiral of "low cost" production and the films made for theatrical release will be always increasingly expensive without counting the increase of marketing expenses for distribution. Production companies are now in an intermediate business model where traditional sources of film financing are increasingly insufficient to produce films (less money of the mainstream channels and distribution) not balanced yet by revenues coming from the new medias (VOD and DSL).
These new business models as analysed by Robert Pisano (USA - MPAA) are now evolving because of shifts in the consumer’s choices. Since 5 years “consumers have the possibility to decide how and when they want to watch a film” and there is a need for a more flexible media chronology and DRM. Theses changes are forcing majors and independents to try to seek different economic strategies like the simultaneous release on various supports. But all the experts of the panel agreed to say that films would always be made for theatres. According to Olivier Zegna Rata (FR – Canal Plus), the Pay TV channels will always need films and additional services (VOD and S.VOD) set up by companies are going up in power and should contribute in a more consequent way to the balance of the system while making it possible for two new complementary economic models to coexist: the television and the individual ways of consumption.
Solutions for the future of cinema
The crisis of the traditional economic model of film production could be partly solved as analysed by the experts from panel 4 with the incoming of investment funds and of new categories of investors in the film industry. According to Vincent Grimond (FR –Exception Wild Bunch) the need for financing the production could be filled by contributions in equity and investments in specialized financial vehicles (slates) if the market could obtain the necessary tools to help the financial decision (financial databases, modelling capacity, benchmarking). These tools proved their effectiveness as showed by Roy Salter (USA – The Salter Group) but certain traditional investors (Marino Cucca, IT - Banca Nazionale del Lavoro) still doubt their adaptability to the European economic framework which does not reach the critical mass. In these conditions, a European guarantee mechanism (Laurent Vallet, FR - IFCIC) guaranteed by national and Community resources could be useful for the sector.
Finally the representatives of the European public funds insisted during panel 5 on the dynamic role of the public intervention. At the regional level, as showed by Giulia Rodano (IT – Lazio District), the action of the Region develops in a broad register supporting both the companies and the activities. At the national level Henning Camre (DK – Danish Film Institute) analysed the needs of the public policy without which a great part of the European cinema would not exist any more. Anyway, this analysis did not forget the limits and the risks of a massive public intervention. Aviva Silver (Head of Unit of the MEDIA Program) finally exposed the logics of professional, cultural and political synergies, which are the basis of the Community action complementary with the actions undertaken by the Member States.
In panel 3 the two guest speakers have been discussing for collaboration existing between American and European professionals. Richard Fox (USA – Warner Bros) showed how a Hollywood studio could support co-development of European creation by respecting the language, the talents, and production facilities of the different countries for films which can benefit from the expertise and the means of the studios. According to Fox, “if films fail locally, nobody wins”. The speakers of this conference showed a great confidence in the future of cinema as a specific expression of the culture (Michel Reilhac, FR - ARTE). If cinema is not in crisis, its mode of production in full change must be the object of a specific attention not only at a political or legislative level but in any case innovating in order to preserve its future.
The complete recording of these debates in mp3 format is available on line on www.mediacg.tv
Author: Alain Modot, VP Media Consulting Group for Cinema.Festa Internazionale di Roma, Cinecittà Holding and Media Consulting Group