Public Film and TV Funds in Europe Face Crisis as Streamers, Other Forces Upend Traditional Business Models

As Europes multitude of film agencies prepare to plant their flags atop Cannes pavilions, a host of public servants are mindful that they face an existential crisis in the bruising battle for cinemas hearts, minds and future political support.

Under attack from Ministers of Culture (Germany), losing top box office status in their home markets (France) and most recently an acknowledgment of institutional racism at the British Film Institute (U.K.), the guardians of the European filmmaking ecosystem valued at more than $3 billion is facing a reckoning like never before.

The timing is acute. A powerful array of streaming platform and studio-driven streaming commissioners have been muscling into Europe for a long time. The scale of commissioning engulfing larger European territories was illustrated by Netflixs recent revelation that it will have spent $6 billion in just four years in the U.K. by the end of 2023. And in a recent talk that will have jangled the nerves of European funders, Netflix chair Reed Hastings claimed that the streamer is the biggest builder of cross-European culture as European subscribers overtook North American ones with 76.7 million next to 74.3 million revealed in the streamers last quarter results.

Streamer stats and statements like Netflixs attract gushing praise from European politicians, but all too often are followed by a simple question: Is there a need for public funding for film in this day and age? The conundrum facing Europes film sector is that it has long been dependent on a complex mix of art and cultural funding mechanisms and interventions in an attempt to sustain national cinemas, first and foremost, under the onslaught of Hollywoods powerful export machine. Now those systems are under pressure to coexist and potentially combine with the global streamers and avoid obsolescence.

Weaponizing the term subsidy has long plagued the debate. One MEDIA Eurocrat back in the 1990s when a round of cultural trade talks between the EU and the MPAA had reached boiling point claimed that European film was sick and needed to get off the drugs and addiction of subsidy. Milos Forman, the Czech director, went further, explaining at the time that in former Eastern Europe you were in a zoo with a cage and roof over your head and someone fed you everyday; in the U.S. its the jungle youre free to go where you like but everyone is trying to kill you.

Yet the issues at stake are far from binary. A deep dive under the roof of the European funding systems reveals a highly complex set of relationships between a range of artistic and cultural stakeholders, navigating myriad rules and regulations. And Europe is not some homogenous super-state, rather a complex continent of different races, histories, languages, proud traditions and cultural specificity. Nowhere is that diversity more potently on display than in stories captured for the big screen.

The birthplace of none other than Swedish director Ingmar Bergman has given rise to the most detailed study on European public funding for decades. Tomas Eskilsson, author of the Film i-Vast in-depth report into Public Film and AV Policies and Funding at a Crossroads (first edition launched at Cannes 2022, the second is due at Venice and the third at Cannes in 2024), is an advocate for change. After more than 725 interviews with industry practitioners for the first report (including 250 producers), along with key pan-European and industrywide organizations across the value chain for the second, Eskilsson has an informed view of the challenges at stake.

The study is based on the fact that the digitization and globalization of the sector have reshaped the ecosystem and supporting business and operational ideas throughout the value chain. The second study is about the future purpose of such funding, he explains.

Part of the issues are, inevitably, political. What the research shows is that many agencies see themselves at the direction of politicians, which has added a further level of reactive rather than proactive decision making and scant informed direction of travel.

Public funds need to define where they can be important, but that is easier to identify in smaller territories than larger, where political tensions are higher, says Eskilsson.

In 2022, for the first time in French cinemas history, no national film reached the top 10 box office, triggering alarms despite the overall percentage of domestic market share remained steady at 40%.

A nine-strong French focus group assembled for the second report tried (and failed) to reach agreement on key protocols, demonstrating internal divisions and disagreements over even simple industry definitions. However, the one factor the French agree on is that the rest of Europe should stand in solidarity with them despite its industry suffering from overproduction and a disappearing audience.

Experienced industry observers disagree. The levy and inflated producer income levels resulting from regulatory investment obligations are scandalous. The system supports a 250-films-a- year output half of which are completely non-performing and is run by a French industry tribe that is incredibly entitled, explains a French analyst and widely published industry expert who asked not to be named. Producers are able to leverage the existence of statutory windows to achieve deals that bear no relation to the success or otherwise of their content. The model is under intense pressure.

France is not the only major state under attack. Germanys $640 million-per-year film-funding system has come under the spotlight of Claudia Roth, the German culture commissioner. Speaking at Berlin festival in February, Roth hammered into the countrys complex web of federal and regional programs, arguing that they are too slow, unpredictable and inadequate. One larger uber-agency might be on the cards, but streamers will be expected to make a greater contribution to the overall success of the funding system.

According to Film i-Vasts upcoming second reports draft executive summary, shared exclusively with Variety, there are clear signs of a subsidy race/incentive war across Western and Southern European countries. The report suggests that the motives are either aggressive or defensive, driven by the desire to become a leading European production hub of local and international audio visual works, and/or the desire to counteract the risk of losing production to other countries.

The intense discussion about the future of European incentives revolves around seven core issues, including:

1. The need for both Europe in general and specific territories to work with a more complex purpose that is more clearly linked to film and AV policy.

2. Basic rules need to be applied to who can benefit from incentives as per traditional film and AV funding.

3. The need to link incentives more clearly to the fact that they also deliver cultural values.

4. The need for the EU to regulate incentives by maximizing the percentage and total amount an individual project can receive.

5. How best to prove economic effects when virtually all countries in Northern Western and Southern Europe have major capacity problems and associated inflationary cost issues;

6. The real power over film and AV policy is shifting from the cultural sphere to the economic (finance/tax) in countries where incentive funding works with greater funds than the traditional public system (e.g., the U.K., Ireland, Spain, Belgium and Italy and a range of countries in Eastern Europe.

7. Should Europe be reset?

A critical tension lies between automatic and selective funding mechanisms. Automatic funding comprises a network of regional, state and national incentives, including tax shelters, fiscal incentives and production rebates. Automatic inward investment systems tend to be viewed as neutral rather than at risk from the tyranny of subjectivity, gatekeeping and to an extent, bottlenecking.

Hence it is the second intervention that is much more emotive what the EU calls direct public funding. That kind of direct subsidy support, totalling more than $800 million across Europe for production grants and loans is applied across the value chain, from development, packaging, production financing, through to festival, marketing and distribution backing.

Talking to all and any filmmakers about direct funding is a loaded gun. Those writers, directors and producers that are regularly supported are happy to extoll the virtues of whatever system and public servants that they work with, while those that dont get selected feel shut out and are frustrated at what they see as a biased and unfair lottery. And the increased emphasis on access, diversity and fairness has lifted the bar higher.

A recent high-profile case in point is the British Film Institutes brush with a complainant, filmmaker Faisal Qureshi. Details around the racial discrimination case whichis ongoing makes for unedifying reading. Materials accessed by Freedom of Information requests display a deep mishandling across the complaints procedure, which was slow, defensive and opaque. Qureshi points to the evidence, which demonstrates a lack of sincerity and inconsistent messaging at best.

BFI CEO Ben Roberts explains that the complaint coincides withinternal anti-racism trainingwithin the BFI,which includes acknowledgement of systemic racism within the organization. BFI Roberts admits he was upset by the tone of press coverage,feeling that the institute had been at the forefront of early diversity and inclusion work.

Speaking to Variety, Roberts confirms that theBFIs complaints system is being reviewed and with new funds being introduced, application processes are also being updated. Inclusion targets for who we employ and who we fund have been ramped up/increased [they were first set in 2017] which is one approach. But its clear that there are micro moments along the way in a big public funding environment where, despite our best intentions, the processes are throwing people outand we are working to improve that.

Roberts has also introduced fixed contractsfor some posts, in a nod to widespread criticism of entrenched and powerful senior decision-makers, some who the BFI even inherited after long stints at its predecessor, the U.K. Film Council. He sees the BFIs role needing to be about finding and embracing talent, something that those concerned about the German direction agree upon.

Im a big fan of selective funding because it allows us to make bolder creative decisions and have greater creative control, says Maximilian Leo, a Cologne-based German producer withAugenschein Filmproduktion. We forget that public funding helps producers find, support and create writers and directors. Studios and streamers do not do that directly soft money and mitigating risk might be crucial for a director to grow through their first two or three projects so they hit a more ambitious level.

Taking a wider analysis of the issues, a look at the total European production financing volumes by market size is instructive. Typically, those films budgeted at around $3 million or below are significantly more dependent on a combination of public support systems, but what is astonishing is how dependent feature films intended for theatrical release are on the entire pubic regulatory system in play.

Put bluntly, more than 60% of most low-budget film finance plans in Europe are reliant on the public purse in one form or another. Figures from 2020 published by the European Audiovisual Observatory showed that 26% of all European filmed content was supported with direct public funding (e.g., selective), while 17% attracted automatic incentives, although that rose to 19% in larger countries and down to just 6% in small ones. Broadcaster involvement was at an average of 20%, and pre-sales were at 15% in larger and less than 10% in smaller nations financing mix.

European films dependency on the range of interventions support Eskilssons focus on the issues at hand. The key point of undertaking such studies and consultation is to find and hear new arguments, imaginative approaches and foster fresh collaboration. Yet across Europe there are considerable differences in response to such a call to arms. Its a scattered picture. The classic problems include a slowness in operating and response times, and the curse of bureaucracy. But what is really perplexing is the sense of falling behind the times an out of date sticker around their priorities which are under existential threat.

The fears are shared. Simon Perry, an experienced European public fund manager and coordinator of ACE Producers Best Practice Exchange (BPX) a decade-old body that brings public funders around the world together in a bid to share knowledge and discuss strategy has focused on the more granular challenges facing funders. We need to be addressing the more profound aspects of funders work in the digital age, given the complex and greatly increased responsibilities now placed on funders to ensure originality of content (including support for new talent), independence of production and the future of cinema all potential casualties of the new major companies data-driven commissioning techniques, IP acquisition practices and online distribution priorities.

The BPX workshop in Cannes last year, and the recent workshop during this years Berlinale, deliberately highlighted the new demands placed on public funders and examined the ways in which they are rising, or not, to the challenges in the market. BPX is planning a roundtable meeting of members in September to respond to the latest white paper on public funding from Film I Vast.

Key challenges presented by the streamers are in part defined by what the public fund report calls the Grey Zone, the contentious area where film agencies and/or public service broadcasters co-finance local content with a streaming giant. This drives at the heart of concerns both within the public sector and across the global independent production market that the streamers typically take all IP and leave nothing on the table. What funders are trying to enshrine is the principle that production companies must be able to own the underlying rights to their projects to safeguard a healthy independent sectors future.

The Grey Zone offers a tangible process: Normally, the production company owns the film project. The works country of origin can exploit the content for a defined period of time (normally eight months), the global SVOD rights have the streaming service for a longer time (up to 10 years) after which the SVOD rights return to the production company.

The report points out that there are several benefits, including a larger global spread, and a potentially much wider audience; a shortened funding process; and fewer partners, which in turn enable wider artistic and creative freedom. Just over 40% of Europes film agencies have financed at least one drama or film that has also been financed by a global streamer, but where the rights have been retained by the production company. But few funds, the report warns, have a concrete strategy linked to the transformed ecosystem and the opportunities that the Grey Zone offers.

Even smaller bordering territories demonstrate the great gulf between policies. In Switzerland the selective system has worked for an established group of producers at a low-budget arthouse level, but it needs a much higher risk appetite to embrace fresher, younger talent, explains Viviana Vizzani a producer at Zurich Avenue and former senior programmer of the Zurich Film Festival. Compared to the dynamic Austrian system, which has undergone an overhaul and offers both dynamic direct and automatic support, the Swiss are clearly out of sync.

Part of the challenge is around data, and the lack of sharing from streamers. Koen Van Bockstal, CEO of the Flemish fund VAF, has built a knowledge center. Its not sexy but you cannot implement change while remaining blind. We insist that when working with streamers that theywill have to share their data with us when co-financing, Van Bockstal says.On the production funding front, with the funds 11 million euros available, we decided to fund less projects going forwards, otherwise we are just organizing poverty across too many films with not enough impact.Public funderscan get lazy if they have too much to work with, argues Van Bockstal,

Other nimble smaller funds are not fully convinced that the public funding reports emphasis on streaming reflects their specific issues. Chris Marcich, CEO of the Croatian Audiovisual Centre (HAVC), explains that the streamers make a very small contribution thanks to a tiny obligation but it makes little difference. We are told explicitly by the streamers that they are not interested in producing Eastern European or Croatian original content. According to Marcich, the report says a lot about countries finding themselves in same situation as Scandinavia, where they are swimming in money. We dont have their luxury. Size does matter.

Talking of size, the elephant in the already crowded room is the European Commission. The EUs Creative Europe program armed with a 2021-27 current budget of some 2.4 billion euros states that it is there to promote, strengthen and protect European culture and linguistic diversity, cultural heritage and creativity, as well as the competitiveness of Europes cultural and creative sectors. So one might expect that the bureaucrats are leading the debate and sharpening their tools to achieve impact? Not exactly.

According to the Film i Vast research, the vast majority of respondents pointed to the lack of real leadership from the commission and Creative Europe. While theres a lot of talk in closed rooms, the commission has tended to lean towards art and culture but has gradually swung to a more industrial and economic focus but like so much at a commission level, many bureaucrats lack a deep insight into what really happens on the ground. Part of the issue noted by practitioners Europe-wide is that programs on an EU level get set for long periods, but the industry is moving so fast that within six months everything has changed again.