APPENDIX 6: COMMITTEE VISIT TO BERLIN,
2 NOVEMBER 2009|
As part of its inquiry into the film and television
industries, the Select Committee undertook a visit to Berlin,
1-3 November 2009.
This document provides a minute of the meetings held.
Meeting with Kirsten Niehuus, Managing Director Film
Funding, Medienboard Berlin-Brandenburg
1. Medienboard Berlin-Brandenburg (MBB) is one of
the three largest of the seven regional organisations providing
film financing, spending around 30m a year. The financing
is provided in the form of soft loans (repayment rate around 5
per cent). About three quarters of the funding comes from the
regional budget and the remaining quarter from voluntary payments
by television companies.
2. The Medienboard provides funding for script development,
project development, production and distribution. Only producers
and distributors are eligible to apply for support and they must
normally have an operation in Berlin-Brandenburg. 100 per cent
of the funding provided by the MBB must be spent in the region.
They will support films shot abroad if the post-production is
carried out in Berlin-Brandenburg.
3. Ms Niehuus emphasised the importance of co-productions,
particularly with France, where they had support at the political
level. UK/German co-productions had been active until the previous
UK film support system (sale and leaseback) came to an end. Under
the current tax credit scheme, co-productions were very difficult.
Ms Niehuus thought this was a real loss, creative and commercial,
and thought UK producers felt the same.
4. Ms Niehuus said that the MBB sought to achieve
a balance between support for films likely to be economically
successful, those likely to be critically successful and those
which nurtured new talent. She noted that enticing foreign filmmakers
to make their films in Germany gave benefits to German actors
(improving their international recognition) and technicians (improving
their skill level). Overall, she thought the benefits of supporting
filmmaking in Berlin-Brandenburg were the strengthening of the
film industry itself in the region (skill levels, reputation)
and secondary benefits to the local economy (catering, hotels,
cars, etc). She thought additional direct employment was not a
strong argument and was not convinced that it helped tourism.
5. In general, Ms Niehuus thought the German film
industry had made great strides over the last ten years, increasing
it local market share from around 15 per cent to 20-30 per cent.
This was partly due to attracting an older cinema-going public
through the development of "arthouse lite" films which
appealed to this segment: films which were more complex but not
Meeting with Dr Carl Woebcken, CEO Babelsberg
6. Films have been made at Babelsberg since 1912.
The current owners took over the studio in 2004, without incurring
debt, and doubled the studio space available. Dr Woebcken
said that activity at Babelsberg had exploded in 2007, with 11
films being made there and up to 2,500 people being employed on
site (n.b. this was partly due to productions being put on hold
until the DFFF was introducedsee below).
7. Dr Woebcken noted that the balance of filmmaking
was different as between Germany and the United Kingdom. The UK
was more successful in attracting Hollywood productions to be
filmed or part-filmed locally than was Germany. But the number
of German domestic productions was much higher than those of the
UK. German producers found it easier to raise the public subsidy
up to the maximum of 50 per cent. With pre-sale and equity, this
was normally enough to see the film made
8. Dr Woebcken said that there were a number
of reasons for foreign filmmakers to choose Germany to make their
films. Firstly, the German Federal Film Fund (DFFFsee below)
was internationally competitive. Foreign films could receive up
to 20 per cent support (Speed Racer received 19.6 per cent).
Germany offered good studio facilities, but also both city and
country shooting locations. It had a talent pool, including experienced
crews used to Hollywood methods, but also actors (43 of the 60
actors in Inglourious Basterds were German). It had a track
record of films made in Germany. Finally, it had excellent, but
9. He said that, at 60m a year, the DFFF was
not large enough. Germany needed to put more money into bigger
films which could be exploited outside the country. He saw finance
as a major problem for the industry and said he was looking to
develop European finance partners.
10. He mentioned the arrangement which Babelsberg
Studios has with producer Joel Silver to take an equity stake
in his forthcoming productions made at the studio. He saw this
as a way to ensure a continuous flow of work for the studio, but
acknowledged that the equity investment constituted a risk.
11. On employment, Dr Woebcken said that he
had reduced the number of permanent staff at the studio from 250
to about 85 in order to "stay lean". The company employed
about 30 tradesmen (carpenters, plasterers, painters, etc), but
could increase this to 300-400 as necessary. He saw this flexibility
as essential. He said that Babelsberg employed a number of apprentices
in the trades. The government paid for their courses and the studio
paid their salaries, which increased over the three year training
Meeting with Ulrike Schauz, Head of Division for
Film Affairs, Federal Government Commission for Culture and Media
12. The Commission for Culture and Media Affairs
is the federal authority responsible for promotion of cultural
issues and the development of the general framework for art and
culture at the national level. (Under the German Constitution,
education and culture policy is the responsibility of the Laender.)
In the area of film, the Commission is responsible for developing
the policy framework and for the three main federal film funding
streams: BKM funding (mostly culturally directed), the Federal
Film Board (FFA) funds and the Federal Film Fund (DFFF), on which
13. Ms Schauz said that the main objectives of the
BKM's Film Affairs Division were to create the right legal environment
for film support, to improve the economic performance of German
film, to improve the artistic standing of German film, to strengthen
the position of German films abroad and to promote the attractiveness
of film production in Germany.
14. She said that the BKM had undertaken a policy
review of film support in 2005-06. They abolished their previous
tax credit system, which had not been achieving its objectives,
and in 2007 established the DFFF. The Fund was allocated 180m
from the federal budget for the three year period 2007-09 for
supporting film production through grants. The decision to move
to grants was influenced by the need to put a system in place
quickly to meet a political promise without having to bring in
new legislation. Hungary, the Czech Republic and Austria had followed
the DFFF model of providing direct grants.
15. The initial evidence from the scheme was encouraging.
The BKM estimated that, for every Euro given in grants, about
six euros were invested in the German economy, which was more
than they had expected. Bigger projects had produced better results
in terms of the positive effect on ancillary industries. There
was evidence of increasing know-how transfer, leading to more
postproduction work staying in Germany. Babelsberg Studios had
been the main beneficiary of the Fund.
16. The DFFF is to be extended for a further three
years, 2010-12, at the same rate of 60m a year. There were
a few changes to the scheme, but the Cultural Test was unchanged,
so they did not expect any problems obtaining agreement from Brussels.
There had been discussion of extending the limit on funding per
film (4m) and extending the overall funding to 100m
per year. Both were proposed by Babelsberg Studios but rejected.
Ms Schauz explained that the limit per film can be extended up
to 10m, but only on a decision of the board (viz Speed Racer).
Asked how Speed Racer, which is based on an American graphic
novel, passed the Cultural Test, she mentioned the scene at the
Brandenburg Gate and the contribution to employment, but admitted
that she was surprised by its score.
17. Ms Schauz mentioned the current legal challenge
to the Federal Film Board (FAA)'s levy funding (discussed in detail
below). She commented that the challenge to the constitutionality
of the levy had been made by the owners of the multiplex cinema
chains. This reflected dissatisfaction within the exhibition sector
that small cinemas were exempt from the levy but still benefited
from the FFA's funding.
18. She said that the impact of the court case had
been to delay payments to producers, meaning that some productions
had been postponed or abandoned. She hoped the situation would
improve in 2010, but the German film industry would continue to
be affected by global problems related to the recession. No German
banks were currently providing film funding, but the federal government
had agreed to facilitate access to finance through the state-owned
19. Ms Schauz said that the shortage of funding increased
the importance of co-productions: larger budgets generally meant
higher quality films. It was difficult to do co-productions with
the UK because the support systems did not match.
Meeting with Peter Dinges, Chief Executive, German
Federal Film Board and Constanze Hellmich, Funding Consultant,
German Federal Film Fund
20. The Federal Film Board (FAA) was established
in 1968 in response to the decline of the Germany film industry
in that decade, and following the example of France and Italy,
which had introduced film support systems. The role of the FFA
is to promote the film industry and the quality of German films
to help them achieve success domestically and internationally.
The FFA is responsible for administering the FFA fund and the
BKM film funds. In addition, the German Federal Film Fund (DFFF)
functions as a subsidiary of the FFA.
21. The FFA has a budget of nearly 70m a year.
This is raised by a levy on cinema operators, video/DVD retailers
and public and private broadcasters. The first two are levied
at fixed rates according to turnover, while the broadcasters negotiate
individual agreements with the FFA.
22. Mr Dinges said that the benefits of this
system were that it was, in effect, a solidarity fund, raising
money and distributing it within the industry. It made the funding
independent of government, in the sense of not requiring budgetary
subventions. It was also self-administering, with members of the
industry sitting on the Board.
23. However, the exhibitors had broken this solidarity
by challenging the legality of the levy, on the grounds that the
different treatment of broadcasters violates the principle of
equal treatment in the German Constitution. On 25 February 2009,
the highest Administrative court referred the case to the constitutional
Court, which is expected to pronounce on the case by mid 2010.
In the meantime, the exhibitors have stopped levy payments.
24. Mr Dinges said that the principle of the
levy had been accepted by the parties 40 years ago. A deal had
been done, whereby the exhibitors accepted the levy and in return
had their VAT liability reduced to 7 per cent. They now say that
the levy is too high, having apparently forgotten the deal. It
has been suggested that, if the exhibitors refuse to pay the levy,
they should pay VAT at the full rate of 19 per cent. The exhibitors
say that the government would never dare to impose this. So far,
they have been proved correct.
25. The FFA's main expenditure is on funding film
production in the form of grants and conditionally repayable loans.
About half of this is automatic, in the sense that any producer
who meets the criteria is entitled. The other half is a rebate
to producers, which rewards success. Based on audience figures
and awards, money is held on account for producers and can be
drawn on to fund their next films. Under the new law, this selective
fund will fall from 15m to 10m a year.
26. The FFA also gives financial support for distribution,
promotion and marketing, the building and refurbishment of cinemas
and film appreciation education for children. The FFA is keen
to launch support for digital conversion of cinemas (along the
lines of the UKFC's Digital Screen Fund but as a PPP project),
but this is difficult at present because the FFA's relationship
with the exhibitors is not good.
27. The DFFF is the largest provider of film production
support, with an annual budget of 60m. It was introduced
in 2007, to replace the tax credit system which had ended up financing
films made in Hollywood (the so-called "Silly German money)
It was initially set to run for three years and is being extended
for a further three years.
28. The DFFF supports production of full-length films
intended for cinematic release. It provides up to 20 per cent
of (accepted) German production expenditure up to a maximum of
80 per cent of the total budget in the form of a grant. There
is a cap of 4m per film, though this can be extended to
10m on the decision of the Advisory Board, who consider
issues such as skills transfer. Grants are approved on a first
come first served basis up to the 60m limit, though this
has not yet been tested in fact. Applicants must be German residents
or have a place of business and their project must pass a Cultural
Test (similar to the UK tax relief test).
29. Producers may apply for financial support from
both the FFA fund and the DFFF (and the Lander) up to a total
of 50 per cent of the budget permitted under EU rules. (There
is even the possibility of up to 80 per cent funding for projects
that are "small and difficult"not further defined
by Brussels.) Average funding intensity of German films is 48-49
30. Mr Dinges said that the German Government
had made a calculation that, by establishing a fund of 60m
and offering grants of 20 per cent, they would attract annual
film production expenditure in Germany of around 300m. Of
this, they expected 200m to be German films and 100m
international films. This had turned out to be a largely accurate
calculation, since they had given out 118.5m in the first
two years. There had been calls for an increase in the budget
for the next three years, but there was no justification for this.
If anything, they expect film production expenditure to fall due
to wider budgetary constraints brought about by the difficult
31. Overall, he acknowledged that the German film
production support system was not the most attractive for big
foreign productions. It was simple, transparent and predictable,
but it was a compromise. Domestic productions and co-productions
were also important. This was particularly so for the FFA funding,
which had no requirements about the territory of spend. Last year,
57 of the 180 films supported by the FFA were co-productions.
32. He reiterated the difficulty of doing co-productions
with the UK and the loss this represented. He added that co-productions
had a psychological effect and said that the cancellation of the
UK/Germany Co-production Agreement in 2004 had been a bad sign.
33. Mr Dinges said that there were good film
schools in all regions of Germany, covering all areas including
special effects. The film industry was involved with the schools
and offered positions to their graduates. He said that the main
complaint of German companies was that they took graduates of
these schools, trained them up (through apprenticeship and other
schemes) and then one year later they left Germany to earn more
money abroad. Canada was the destination of choice. This trend
was not harming Germany's skills base at present, but the next
generation of qualified film technicians were in Canada.
34. Mr Dinges commented that this was another
outcome of the international competition in subsidies. The UK
and Germany had to abide by EU rules on support for their film
industries. Canada had no such constraints. He suggested that
there was a process underway by which the DFFF grants attracted
foreign filmmakers to Germany, leading to a transfer of know how
to German technicians, which in turn led them to leave Germany.
The Committee adjourned.