Industry Report: Financing
Producers’ Economic Models in the New Media
by Cartoon, the European Association of Animation Film
- Christian Davin is founder of the production company Alphanim and President of the French Syndicate of Animation Producers (SPFA).
What is the role of an organization such as the SPFA?
In France we have a system of aid for independent production, which has existed for some twenty years. Market trends and evolution in the cinematographic industry raise the requirement for an organization such as ours. It is necessary to mobilize to ensure that the law correctly assimilates new technologies and that legislation and regulations do not act to the detriment of independent producers.
What are the pillars of the aid system for French production?
The first pillar is the support fund managed by the National Center of Cinematography (CNC), which collects sums from two sources: a tax levied on cinema tickets and a tax levied on the net turnover of the TV networks. The global sum is around 500 million €.
Essentially, this money is disbursed to producers and distributors for reinvestment in new works.
In what way should the support fund evolve?
If we consider that advertising revenues are migrating to other media, which are not necessarily television networks, it is important to foresee that the law adapts the application of the tax to all actors in this sector. The approach seems simple, but it is complicated to impose a new tax on new distributors. On the one hand, we meet with operators who do not share the same culture, and on the other hand new economic models are coming into being. The fundamental principle, which must be defended in all European countries, is however that any company that distributes television (PPV, VOD, telcos, aggregators) must contribute to the tax.
What is the purpose of the law voted in France in March 2007 on the taxation of receipts of the new operators?
The goal was precisely to extend the CNC tax to all the operators who broadcast images. The law envisages even that all revenues coming from phone calls or SMS, which incite the client to see cinematographic works should be taxed. The new tax should augment the revenue of the CNC by 10% in the next two years.
To counterbalance this tax, the government has adopted a rule reducing VAT on all operators broadcasting images (therefore also on the access providers and telecommunications companies), a rule which has applied for years to French television networks.
Did you meet with resistance on the part of the new operators?
The negotiation was difficult because the new operators do not have a culture of content and of the industry which generates content: 500,000 people are involved in the production of audiovisual works, with a sales turnover exceeding 2 billion €. To convince them, we brought to the table all the actors and ministries involved: industry, culture, communication and finance.
What was the role of your organization?
We have always put forward the producers’ point of view. We want to ensure that any television image, be it animation, fiction or documentary, shown on any support whatsoever, shall fall under the same regulation as classic television.
We took into account two types of television which seem to be developing very rapidly: high-definition TV and personal mobile TV. These are two sectors in which the economic model made it possible for a slightly higher tax to be envisaged. It was necessary to anticipate the market trends, the economic model of these media, and adapt the amount of the tax.
We obtained agreement that a part of the funds shall be put at the disposal of producers and authors for creative development on new formats.
We also brought the large VOD operators and the cinema producers to the table, to sign a protocol defining the manner of exploitation of cinema films in VOD; to ensure their protection from piracy, and that there would be no free offers of cinema films. The charter set at 15 the maximum number of works offered within a package. This protocol has even defined the percentage of French and European works that must be present in the offers. We obtained from the telcos that at least 5% of European works would be broadcast on the VOD platforms; to rise to 10% from the moment their turnover exceeded 10 million €.
These actions show that a market in everyone’s best interest can always be organized. This requires political and industrial goodwill.
What are your strengths when negotiating with the government?
What has enabled us to be heard over the years is our capacity to produce employment; in particular for young people. The tax credit which was founded in France two years ago could be «sold» to the government by stating that the producers would spend more money in France and would produce employment. With more employees at work, one pays more social contributions to the government, which uses them to finance the country’s social security. When companies are given work, they pay Vat which also goes to the state. We elaborated a business plan to the government’s profit, showing them that by investing 100 million € of tax credit in television and cinema, the companies involved would increase their expenditure in France by 47%.
We are of the advice that all European states should establish a tax credit scheme.
What was the role of your organization in the negotiation of the directive on Television Without Frontiers (now Directive «Audiovisual Media Services»)?
The new directive is more ambitious than the old one. Negotiators in all countries must seize this tool to remind their government of the principles established in Brussels.
There are several important changes. A change of title, first of all, and highly significant: the directive «audiovisual Media services» will be applied soon, still concerning TV networks, but also now the Internet and mobile telephony (whatever the technical platform). The text distinguishes between linear services (received passively by the client) and non-linear services (ordered «by request» by a voluntary action of the viewer).
These latter, non-linear services, are for the moment only subject to a simple general code of good conduct. There is no «content quota», no minimum level of broadcast of European works. The Commission preferred to invite the Member states to select appropriate methods, based on their local conditions, in order to promote «as far as possible» the best access of European works to all the services of «video on demand».
As for the linear services, they are aligned on the regulations governing the «classic» networks. The quota principle is maintained. The current norm is a minimum of 50%, of which at least 10% must be productions of independents. The Member states are engaged «as far as possible» to favour the production and distribution of European works, notably with the aid of financial contributions.
One can obviously hear subsidy, or a minimum commitment of televisions and new operators in independent production. This is a positive element, as for the Commission; in principle all aid must be reimbursable. The regulations on publicity are softened. The old directive envisaged a minimum of 20 minutes of programme between two publicity breaks. In the new case, each distributor can select the moments the most appropriate (for him). The new directive accepts new forms of publicity (split screen, virtual advertising, and interactive advertising).
It also introduces, by regulating it, the concept of «product placement» for both linear and non-linear services (with the exclusion of programmes for children).
The Directive should be applied without reserve by the Member states, before the end of 2009.
Cartoon Master Freising, Germany, June 2007