Appendix H: International Production Support Program

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1 Appendix H: International Production Support Program Fear of U.S. as content Hub Leads to Protectionism in Content Imports Arguments for Content Protectionism National culture Employment Projection of country

2 Critics: Americanization threatens national culture The free flow of information is the channel through which life styles and value systems can be imposed on poor and vulnerable societies. (Herbert Schiller) Arguments against Content Protectionism Free flow of information Free trade Audience choice Four Major Protective Film Policies Subsidies Import quotas Screen quotas Television quotas Lee, Hyangsun, An economic analysis of protective film policies: A case study of the Korean screen quota system, Intercultural and Department Division, the 2005 Communication Association Conference, May Screen Quota Film Policy Most economically viable One condition: Quotas need to be set at a rate which can assure the audience the right of choice so that domestic film markets can be placed in context of sufficient competition with imported films. Lee, Hyangsun, An economic analysis of protective film policies: A case study of the Korean screen quota system, Intercultural and Department Division, the 2005 Communication Association Conference, May

3 Effectiveness of Screen Quota Korean Film decrease in level of uncertainty involving domestic film distribution and exhibition Encouragement of private investing for film production Lee, Hyangsun, An economic analysis of protective film policies: A case study of the Korean screen quota system, Intercultural and Department Division, the 2005 Communication Association Conference, May Effectiveness of Screen Quota Enhancement of film quality and diversity Rapid augmentation of film market; expansion of domestic market for foreign films Increase in export of domestic films Lee, Hyangsun, An economic analysis of protective film policies: A case study of the Korean screen quota system, Intercultural and Department Division, the 2005 Communication Association Conference, May Canada Content Protectionism Canadian government subsidizes film production directly Canada requires that 60% of TV schedule be Canadian content. Mexico Content Protection Foreign films could be shown with subtitles in Spanish, but dubbing was not permitted because that would increase the mass appeal 640 The New York Times, July 14,

4 France Content Protection France requires theaters to reserve 20 weeks of screen time a year for French (now European) films. 642 France: Film Industry Subsidies CNC (Centre Nationale de la Cinematographie) : $500 Million Tax Shelters - Sofica (Societes de Financement du cinema et de l audiovisual) - company investors can write off 50% of the investment against tax - individuals can write off 100% 643 Canal Plus, exclusive licensed pay television channel, in return for conditions: must invest 20 percent of its revenue in film acquisition, at least half of it for French films France Film industry promotion regulated by Décret no (Decree No ) in Nikoltchev, Susanne, National Film Production Aid; Legislative Characteristics and Trends, European Audiovisual Observatory: IRIS Plus Legal Observations, Issue 4, p

5 The CNC can ask the Commission du soutien financier sélectif à la production (Committee for selective production aid) grants funding UK Lottery-funded film financing (~15 films/yr) Nikoltchev, Susanne, National Film Production Aid; Legislative Characteristics and Trends, European Audiovisual Observatory: IRIS Plus Legal Observations, Issue 4, p UK All industry Fund voluntary contribution of 0.5% of revenues from all companies whose business is exploitation of British films exhibitors, distributors, video companies and broadcasters. i.e., also from Hollywood distributors 648 UK Skills Investment Fund, 0.5% of production costs up to $16.3m and 0.25% for those above this level. Contributions will be voluntary but receipt of other public sector funding is conditional on contributing

6 UK Tax breaks expanded, allowing 100% tax write-off of film production investment and acquisition costs in first year for films budgeted to $24.5m Supported by Channel Four TV Channel 650 United Kingdom National Lottery Act is the system basis for film aid. Film Council allocates funds according to Act that being films that follow criteria for British films. Nikoltchev, Susanne, National Film Production Aid; Legislative Characteristics and Trends, European Audiovisual Observatory: IRIS Plus Legal Observations, Issue 4, p Germany In 1999 the Filmförderungsgesetz (the Federal Support Act- FFG) enacted, offering government funding for reference, project and short films. Germany Films may not be released in recorded form either in Germany or abroad in the German language version until six months after they are first shown in (German) cinemas Nikoltchev, Susanne, National Film Production Aid; Legislative Characteristics and Trends, European Audiovisual Observatory: IRIS Plus Legal Observations, Issue 4, p Nikoltchev, Susanne, National Film Production Aid; Legislative Characteristics and Trends, European Audiovisual Observatory: IRIS Plus Legal Observations, Issue 4, p

7 Italy The Dipartimento dello Spettacolo (Department of Entertainment) of the Ministero per i Beni e le Attività Culturale (Ministry for Culture) is responsible for aiding the film industry. Nikoltchev, Susanne, National Film Production Eli M. Noam, Aid; Production Legislative Characteristics and Trends, European Audiovisual Observatory: IRIS Plus Legal Observations, Issue 4, Italy Subsidized films may not be shown on television until one year after their first cinema release or, if the film is not shown in cinemas, one year after being assigned Nikoltchev, Susanne, National Film Production Eli M. Noam, Aid; Production Legislative Characteristics and Trends, European Audiovisual Observatory: IRIS Plus Legal Observations, Issue 4, Intra-European Subsidy Conflicts Subsidies attracting filmmakers to the German region of NordRhein Westfalen may be subject to investigation i i by European Commission (EC) if a complaint lodged by Dutch film companies captures EC s much vied-for attention 656 European Film Support EU: Brussels subsidies $850 million for films that generated box office revenues of around $400 million. In addition, in some European countries the subsidies are over 50% of a film budget 657 7

8 Australia Australia Government support is quite high Government money makes up around 37 per cent of overall investment. Government support is quite high Government money makes up around 37 per cent of overall investment. Hancock, David, Global Film Production : tax law to attract private capital Film Licensed Investment Company (FLIC) in parallel to existing tax concessions. 100% tax deduction, plus direct grants US Subsidies Hancock, David, Global Film Production

9 California 2005 Legislation provides a 12% tax credit or refund on a project s spending in California, up to $3 mil. Credits would be refundable (producer with no tax liability would receive the full amount of the credit in cash from the state.) News, sports, talk and game shows, sitcoms, awards shows, telethons, reality shows, animation, student industrial films, and pornography would be ineligible because they are unlikely to go elsewhere for financial reasons. 664 But the bill would include incentives for increased production of television commercials, in a nod to a less flashy but major source of Hollywood jobs

10 To avoid subsidizing star salaries, the bill would allow only the first $25,000 of salaries for stars, directors, and other above-the- line talent t to count toward instate spending. Overhead and distribution costs would be excluded. 666 California has given the film industry tax breaks before: when post-production houses were converting to costly digital equipment, the state offered an investment tax credit. 667 An initiative known as Film California First, which lasted less than three years, reimbursed film companies up to $300,000 for payments to police and fire departments or other public agencies for their services or the use of public property. In a year when California state budget cut $3 billion out of public education, is this the best use of scarce public resources?

11 In the U.S., 14 states have passed or expanded incentives for production this year alone. But Louisiana remained leader in enticements to film % television industry. Louisiana offers a tax credit of 15% of a production s total costs, even it is only partly shot in Louisiana, and an additional 20 percent of a film s in-state payroll A revised credit, which takes effect in January, will apply only to spending in Louisiana but will rise to 25% of spending, plus 10% of payroll. Louisiana Up to 15% transferable tax credit on production expenses. (Credits can be sold.) Up to 20% additional tax credit on wages paid to Louisiana residents

12 New York A 10% tax credit or refund on a project s spending in New York. Additional 5% tax credit if produced in New York City. New Mexico A tax credit of 15-20% on production spending or a waver of state & local sales and use taxes. Interest-free loans available up to $15 million South Carolina A 15% rebate on labor and project s spending in South Carolina. Illinois: Prison Break A 25% tax credit on wages paid to residents up to $25,000. Credit rises to 35% for employees from disadvantaged areas. Tax credits became transferable in

13 Louisiana paid out $65 million in credits last year. State Senate Appropriations Committee would provide a 12% tax credit on a project s spending in California up to a cap of $4 million/ production. Canada provides a 18% refundable tax credit on labor costs, with no cap, the provinces of Ontario and British Columbia add 18% more, while Manitoba offers a whopping 45% credit for labor costs, according to California Film Commission Quota today for broadcast TV EU directive "TV Without frontiers" The 2 most creative aspects in the film business were the accounting systems of Hollywood, and the European excuses why their film industries are so weak

14 N National Film Production Films produces per million inhabitants ( ) Market Hong Kong Iceland Switzerland Ireland Israel Sweden Norway Average Denmark France United States EU (average) Source: Screen Digest 682 Alien Territory In 2003, eight countries- Japan, Britain, Germany, France, Spain, Mexico, Italy, and Australia- provided most of the foreign revenues for the major studios (Table 4). Epstein, Edward Jay, The Big Picture, The New Logic of Money and Power in Hollywood, New York: E.J.E. Eli M. Noam, Publications, Production Ltd., Inc.,

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