Brussels plans tax on film distributors

http://www.digitalcinemainfo.com/european-commission_10_20_09.php

 

Published: Monday 19 October 2009   

The European Commission is considering imposing a fee on movie distributors to help fund the shift to digital cinema, which is expected to increase the EU's share of the global film market but is deemed to be too expensive for small cinema operators.

Background:

The EU helps to fund the European film industry via its Media Mundus programme. The current Media 2007 phase provides EU filmmakers with €755m for the period 2007-2013, and has helped fund award-winning films like Slumdog Millionaire (UK), Gomorra (Italy) and La Vie en Rose (France). 

In summer 2008, the European Commission made clear it was exploring ways of increasing the share of European films in extra-EU markets to counter the dominance of Hollywood (EurActiv 11/06/08), primarily through the 'Media International' initiative approved by MEPs in December. 

In September, the Commission announced that the European cinema industry will get €5m this year to enhance filmmakers' cooperation with their counterparts in third countries (EurActiv 21/09/09).

A March study published by the EAO had found that American fiction still "overwhelmingly dominates" European television screens, but European productions are increasing their market share (EurActiv 26/03/09). 

In a document published on Friday (16 October), Brussels underlined that the ongoing conversion to digital equipment to produce, distribute and project movies carries the potential for enormous savings.

However it produces a problematic "paradox" since "[big] investment for digital equipment has to be borne by exhibitors, but the savings will be made by distributors," reads the document.

Indeed, the market for film distribution in Europe is very concentrated, with the top 10 companies (among which Metropolitan Filmexport or Entertainment Film Distributors) controlling over 80% of the market share in many EU countries.

In contrast, the exhibitors' market is highly fragmented. Just 10% of Europen cinemas are multiplexes and 31% are single-screen, according to figures provided by the Commission.

The numerous small single-screen cinemas are the most likely to show independent works, but are at risk of disappearing due to the cost of the migration to digital equipment. Only big multiplexes may survive after the shift to digital and the unavoidable concentration trend. 

To protect the cultural patrimony of small cinemas, the Commission is ready to authorise state aid funding, but it is also considering the development of a different business model in which distributors pay for the infrastructure investment of exhibitors.

Brussels is openly looking at the US model, called Virtual Print Fee (VPF), which envisages that part of the money that is saved by distributors in shipping digital content rather than traditional 35mm print is paid to a third party which invests it in financing the conversion to digital cinema.

"The question is why existing investors and European distributors have so far not been able to sign such agreements," reads the document, with which the Commission started a public consultation to listen to different opinions from relevant stakeholders on the matter.

The procedure is scheduled for closure in December. After that, the Commission will propose a way forward for the digital conversion from 2010. 

The EU executive believes that European cinema could develop better and could expand more into extra-EU markets if cinema costs are slashed.