27/03/2003

The French film industry finds that life at the top is not easy, but a number of strategies for its future survival and continued prosperity are being examined and will be implemented shortly

End of an era?

In 2001, the world of French cinema was on a high, due to the success of Amélie [+see also:
trailer
film profile] and the apparent strength of a flourishing industry, protected by a support system that was the envy of all its European neighbours. Since 2002, the influence of television on funding for French cinematographic productions has started to become a worry, a major shake up has affected the pay TV company Canal+, damaging the whole chain of film production.

One thing is certain: the French model has reached its peak and it must contemplate the end of the golden age where television contributions to cinema was continually on the rise. The solution: to find new investment funds to maintain the high level and diversified nature of films. Contributions from European partners, a higher level of tax contributions from the video sector, a readjustment of television obligations, a search for private subsidy…..basically there’s a need to look at all the possibilities.

Staying at the top has its problems: the room for manoeuvre is limited and the operators in the French cinema sector have to be brave and resolute to maintain a production that achieves a balance between profitability and creativity.

In the shadow of a high quality production

Stagnation or the first signs of decay? The statistics for French cinematographic production in 2002, published on March 11 by the National Film Centre (CNC) have confirmed the rumours going round the industry for the last few months, that the triumphant machine of French cinema has run out of steam.

After a record 2001 seeing the production of 204 films (172 of which were French born and bred), there were 200 feature length films made in the year 2002 (out of which 163 were initiated France). This step backwards could be compared with a simple air pocket at the high altitude reached in 2001. The considerable drop in investments in 2002 (down 4.9% out of a total of Euro 860,72 million) leaves no doubt about the reality of a certain turbulence that is shaking the foundations of French cinema. On the other hand, if you count the months of work from the beginning of a film production to its cinema release (from 18 to 24), the signs of a drop in production increase; since 2002 many producers have not been able to finance feature length films due out in 2005.
And it’s also true that French cinema has known particularly fortunate times, given that b>there were 115 films produced in 1994, as opposed to the 204 in 2001 and at the same time, funding went from Euro 501m to Euro 904m. It was an important growth that favoured all the operators in the sector, guaranteeing a diversity in production and the renovation of talent.
In 2002, the 67 first works produced, which represent 41% of the feature length films made through French initiatives, confirm this dynamism.

Nevertheless, this creativity hides the the chasm that has opened up between the big productions and the medium to low budget films . Actually, if the average cost of a French feature length film was Euro 4.44m in 2002, the 26 films that cost more than 7m, (which represent 16% of production) use up half of all investments. In addition, the Leclerc report on funding, delivered on February 3 to the Minister for Culture, shows that the number of small budget films (there were 41 that cost less than Euro 1m) has dropped by 20% from 1999 onwards, representing only 2.6% of financing. The average budget for a feature length film (between Euro 1-7m) is also in decline, with a 10% reduction in costs over the last three years.
This structure of a two-speed cinema also has an influence on attendances: in 2001, 100 of the French initiatives out of a total of 170, didn’t get an audience of more than 100,000.

One of the main causes for this tendency appears to be a strategy to minimise commercial risks on the part of producers, distributors and the operators in the sector. The films are made according to the following formula "action + star = almost guaranteed profitability", a genre of production that monopolises the major part of private funding. Using the same logic, the distribution of a film in as many screens as possible at the same time, has led to a drop in the exposure time for productions (2 weeks for a flop and 2 months for a hit) and has sparked off an inflation in promotional costs (around Euro 500,000 for an average French film). This is why the French independents can’t compete on equal terms with the American majors.

The weakness of TV networks’ film financing

“The upward trend in financing has run its course.” That statement was made by David Kessler, the managing director of the CNC during a press conference to present the Institution’s end-of-year report for 2002. In his speech, Kessler was eager to emphasise the anxiety felt by French operators and the absolute need to find alternative solutions.

Up until now, the film industry’s support system was driven by its engine: French pay-TV Canal+. Right from its inception in 1984, Canal+ was obliged to spend at least 20 per cent of its annual resources in the purchase of the broadcast rights to films (at least 12 per cent of this sum was earmarked for European titles and 9 per cent for domestic ones). The amount was calculated according to the number of subscribers. In 2002, Canal+ invested a total of Euros 302m, Euros123m of which went to 109 French films. All the same, and for the very first time ever, the drop off in subscribers resulted in a proportional decrease in the network’s financial obligations to the film industry. In the Spring of 2002, the temporary suspension of presales to Canal+ generated panic in the French film industry. Canal+ was swimming in troubled waters because of the problems caused by competition from cable and satellite channels and the uncertainty surrounding the future strategies of Canal+’s parent company, Vivendi Universal. As a result, Canal+ was forced to renegotiate its obligations to the French film industry until 2004. In addition since May 2000, the network has had to respect the diversity clause meaning the it had to give preferential treatment to medium-to-low budget films (45 per cent of those investments goes to productions with a budget of Euros5.34m or less) and the effects this clause had were bizarre, to say the least: an increase in films whose budget was very close to this amount (24 films in 2002 compared to 11 in 2001).
Lastly, the following theory was put forward: the network had failed to maintain its obligations. Canal+ dismissed these charges and pointed out the disparity that exists between the reality of its presales situation and the CNC’s involvement in these titles. The Superior Audiovisual Council is scheduled shortly to bring an end to this controversy which, however, was a clear indicator of the climate of distrust that exists between French cinema and its principle source of finance.

The situation regarding finance forthcoming from terrestrial TV channels is much better: Euros108m were invested in 2002, an 8 per cent increase. The breakdown of where this money went is as follows: 68 per cent was spent in presales and 32 per cent in co-production. However it must be pointed out that this increase is relative in that it is the result of an extension of legal obligations. Privately owned broadcaster TF1, who guarantee 31 per cent of these investments, reduced their level of contribution in 2002 by Euros12m in 2002 and invested Euros 33 compared to Euros45 in 2001. At the same time the contribution from France’s two state-owned broadcasters (France 2 and France 3) went up by Euros14m from Euros36m in 2001 to Euros50m in 2002. Another fundamental problem that will be dealt with shortly regards the pre-financing of unencrypted terrestrial channels since it no longer corresponds to the real impact of cinema: in 1993, 20 French films out of a total of 49 made it into the year’s Top 100 in terms of attendance. In 2002 that number had dropped to just 9 out of a total of 23.

TV networks have, for the longest time, been the driving engines of French cinema. That is the reason for the current symbiotic relationship, which has however generated a whole series of problems like the pressure that TV networks bring to bear on the casting of a given film that they have scheduled for a prime time slot; the limited space TVs dedicate to animated features and films for adolescents (who are cinema’s prime customers); vertical integration with video production and distribution companies that limit the independents’ activities considerably. French film industry operators hope that these problems can soon be solved by means of new sources of funding.

Strengths and solutions for the future

Although the financial heart of French cinema may be missing the odd beat or two, there is no doubt that the industry will get over its present difficulties.
The first positive sign of this is the increase in the number of international - and mainly European co-productions.

In 2002 foreign investment in the French film industry stood at Euros182.47m (up 34 per cent). The best news, however, was the 30 per cent increase – or Euros79.84m - in foreign investment in French-born-and-bred films. 94 co-productions with foreign partners were made in 2002, compared to 78 in 2001. This is a two-sided phenomenon in that French investment in international co-productions also rose: more than Euros265m were invested in 2002 compared with Euros197 in 2001, with Europe, and especially Belgium, contributing the lion’s share. Belgium is France’s production partner of choice and was behind 15 French-born films. Co-productions with the UK (10 features) and Germany (9 features) were also on the increase: and this trend validates the policy of strengthening joint ventures between Europe’s various state-owned film industry institutions and the support systems these countries have implemented. Italy and Switzerland continue to enjoy strong links to France with, respectively 9 and 6 co-productions, while Spanish joint ventures with France fell off between 1998 and 2002 from 16 to just 3.

Industry operators welcomed this international venture although the de-localisation of film sets is still giving French professionals some cause for concern. In 2002 French studios managed to hold their own even though films shot in foreign (non-French) locations rose by 18 per cent. Low labour costs and the high quality of Eastern and Central European studios (Hungary, the Czech Republic) are becoming more and more attractive, as are the fiscal sweeteners on offer in the German Landers, the UK’s sale and lease-back clauses, Irish tax breaks and Luxembourg’s tax shelters that Belgium is on the verge of adopting. A day’s work in France costs 20 per cent more that it would in the UK.
The second potential source of energy for the French film industry is based on an increase on taxes levied on the home video publishing sector which is on the rise following the advent of the DVD. The support fund managed by the CNC, who distribute the revenue from this sector to guarantee that French films are funded, would thus have an extra Euros30m to Euros40m at its disposal: a very welcome source of oxygen especially at a time when private investment in cinema via the Soficas (an important source of money for French cinema) is falling, banks are reluctant about issuing loans and regional contributions are marginal.

A third potential resource for the Industry’s future may come from funding from France’s 11 cable and satellite channels. They are come under the TPS Cinéma and Ciné Cinéma networks which are scheduled to spend around Euros40m annually in film pre-buys – and this amount is likely to increase in proportion to the number of their subscribers.
Jean-Jacques Aillagon is scheduled to announce the measures to be implemented to safeguard the balance of financing. The results of these measures will become visible further down the line in a few years’ time.