The British Film and Television Industries - Communications Committee Contents


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 disturbing.

Meeting with Dr Carl Woebcken, CEO Babelsberg Film Studios

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 introduced—see 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 (DFFF—see 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 affordable, infrastructure.

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 period.

Meeting with Ulrike Schauz, Head of Division for Film Affairs, Federal Government Commission for Culture and Media Affairs (BKM)

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 see below.

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 KfW bank.

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.

FFA funds

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.

DFFF

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 per cent.

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 economic conditions.

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.

Training

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.


 
previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2010