16/03/2005

Italian film, an ‘experimental’ market

The Italian film industry is currently going through a sea-change : it has to adapt to the new rules of the game set by a law implemented over a year ago but at the same time, it must deal with the scarcity of its financial resources. This is, in a way, an ‘experimental’ time : old-fashioned views must be replaced by new market strategies.

A glimpse at the figures reported by the Anica (the Italian producers’ and distributors’ society) shows that production is going rather well. What is more striking is the decreasing investments. Thus, in 2004, 96 of the films produced were entirely Italian —there were only two more in 2003. Co-productions have been increasing, climbing from 19 to 38, and 15 of them were majority productions. On the other hand, the average investment per film has receded by 17,7%, from €2.5M in 2003 to hardly €2.1M a year after. In terms of absolute value, this means that the total amount of investments in film production has gone down by 17M euros —that is, 5,73%—, as a consequence of the substantial cuts (13%) in public support funds. For that matter, State-funded films were 57 in 2003 and only 46 in 2004.

After a meagre year 2004 in terms of public funding, it is necessary to go forward. The Cultural Affairs Secretary after whom the reform of public funding was named, Giuliano Urbani, eventually raised his voice : as a result, nearly €74M were allocated to film production. This money comes from the Fus (United Fund for the Visual Arts) ; added to the other (non-Fus) funds, a total budget of €91.6M is available for film production in 2005.
The Urbani Law —which aims at redefining the relation between cinema and the market— establishes that in terms of public funding, a film of national cultural interest can only receive up to 50% of its budget (whereas the old law hardly limited support to 90%). The law also organises a reference system, that is, a series of parameters and characteristics the production companies must comply with to be eligible. Amongst these conditions, there is the quality of the producer’s previous films, the continued commitment to cinema, and the health of the company. The ‘reference system’ entails three things : first, that the selection committees are made of very high profile personalities —with very good references— of the film industry ; secondly, that these committees examine the candidates’ references and privilege healthy reliable companies where the emphasis is really put on production ; thirdly, that the projects themselves must have good artistic references, that is, a good list of credits including as many excellent professionals (director, script-writer, actors...) as possible. This means that the committees will not only decide on the script, as it is usually done, but they will also take into account the resumes of the whole team, producer, and cast.
Last March, the titles of the first films funded under the new law were published. 9 films (out of 20 applicants) of acknowledged cultural interest were chosen to benefit from this public money (cf. doc. attached).
The requirements designed to "restrict" the access to the Fund surely imply that the production company is involved in the application, and therefore that less projects will be applied for and have access to financial guarantees. Does this mean there will be less films ? An evaluation showed that all films put together —State-supported films and private productions financed by the market— would only amount to 50 to 60 productions a year. The compulsory 50% of private investments will weaken many projects in front of what is known as the ‘productive monopoly’, that is, the strict alternative between Medusa and Rai Cinema. However, in the past few years, big majors like the Warner and other companies like Mikado Film and Filmauro have been gaining some control on the market ; their presence fortunately widens perspectives. Still, the reference system is criticised. The Independent Authors and Producers’ Society (the API) claim the artistic criteria could generate a ‘head-hunt’ for the most popular award-winning artists.
At the moment, the main weakness of new law is the tax shelter , that is, the tax-relief which applies to the funds a company spent to produce Italian films. National Secretary Urbani promised he would implement it before the end of the year (as he said as few days ago, before leaving Rocco Buttiglione his position), which is a good thing, for as such, the current system of fiscal privileges is not likely to attract any private money into the Italian film business.
The reform is an improvement but it is still ‘experimental’. The law requires further regulation, which will make it possible to adjust it. For instance, granting funding on a film’s prizes appeared to be too strict a condition : soon, any film which has, if not received a prize, at least been nominated, will be eligible.

One of the greatest novelties brought by the Urbani reform is the produce placement, that is, the possibility to show famous brands’ names in the film, in exchange for money to pay for this publicity. Despite the lack of a price-list, practice showed that this type of investment usually provides for 10% of the budget. To make things clearer, the law specifies that the agreement should be made explicit in the list of credits by mentioning the name of the companies advertised for. It is still too soon to see if producers are interested in this financial device and if companies seize the good opportunity. Yet, according to what the promotion and advertising agency Camelot (Milan) revealed in a report on nearly 60 companies, produce placement can already cover 5 to 10% of a film’s budget. The sectors more likely to be interested are the phone-industry, the fashion business, and products of mass-consumption. The computer and the snack&drinks industries only choose films with a world-wide distribution. Amongst the productions which have already benefited from the new scheme, we find Quo vadis, baby? by Oscar-winner Gabriele Salvatores.

Films can also receive financial help from CineFund, introduced at the end of last year by the Cinecittà Holding as an ‘innovative experiment’. This investment fund consists in public and private money ; its budget goes up to €50/70M. It aims at financing 30 to 40 national and international (co)productions (provided Italy is the majority producer) a year by granting each of them up to €1M or €2M. Part of the CineFund, exactly €15M, will be kept for sponsors, such as Cinecittà Holding itself, to start with, the Istituto Luce, and the public company Arcus. The investors are mostly institutional : foundations, credit institutions, and regional authorities.
At the end of 2004, CineFund had already gathered €25M, thanks to the subscription of Istituto Credito sportivo which joined the other companies/members.

International co-productions are the future of European cinema —for the costs have become very high— but so far, there are no structures likely to really incite partnerships, although there are bilateral co-production agreements which have evolved in time and have really been improving.
Clearly, there have been a few changes compared to the past. Nowadays, ‘financial’ co-productions are a good means for companies or countries to share the risks —and benefits. Agreements usually cover the whole range of productions (TV, shorts, documentaries) ; recently the level of the minimum participation was lowered to encourage Italian producers to combine several resources —public funds and co-production.

So far, Italy has signed co-production agreements with 26 countries : Algeria, Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Czech Republic, China, France, Germany, England-Ireland, Israel, ex-Yugoslavia, Marocco, Mexico, Rumania, Russia, Spain, Sweden, Switzerland, South-Africa, Tunisia, Hungary, Venezuela. Negotiations with India are in process. In these agreements, the participation quota goes from 20% min. to 80% max., except for France (5-10%), Marocco (30%), and Switzerland (30%). An exception to the quota can be granted by special governmental approval.
Cooperations with countries which do not have agreements with Italy are covered by the 1992 European Convention on Co-production or supervised by the Istituto di Compartecipazione internazionale.

Each agreement establishes a series of criteria, describes the cooperation and its benefits (one of which is, for instance, that the film can take the nationalities of all of the co-producers) ; thus, all the agreements are different, more or less constrictive. Currently, Italian co-productions involve mostly France, the UK, Spain, and Germany, but new relations are developing between Italy and Eastern European countries, Africa, and Asia.

Some of the most crucial steps which have been taken to favour co-productions are the agreements initiating the ‘Regional network between European capitals’ ("Rete delle Regioni capitali") which the Lazio region has recently signed with three major French, Spanish, and German partners (cf. art. on the Lazio Film Commission).

What is still missing in Italy is a coherent system of regional funds, of the kind which helped French cinema so much. In 2003, the first Italian regional fund was created, the Friuli Venezia Giulia Film Commission, which dedicates €300,000 a year to films and TV productions shot in Friuli Venezia Giulia (cf. art). After three years, this pioneering regional fund has become an example to follow to multiply the number of films and TV productions made in Italy and control their economic ramifications in each area. Things are changing slowly but they are changing. As a matter of fact, recently, in Puglia, a new fund was created, the Salento Film Fund. And last March, the announcement was made that the region Lazio would create another regional film fund. The renewal of the local authorities following the regional elections has obviously slowed down the process.