Content-Type: text/html Support of the Film Industries in France and Italy in the Late 1990s Support of the Film Industries in France and Italy in the Late 1990s Joseph D. Denny Master's Student School of Journalism, Indiana University Ernie Pyle Hall Bloomington, IN 47405 [log in to unmask] (812) 332-3360 Submitted to the 2000 Convention of the Association for Education in Journalism and Mass Communication Support of the Film Industries in France and Italy in the Late 1990s ABSTRACT France and Italy each possess a proud film history. Both have made significant efforts to bolster their film industries for most of the 20th century. The results have been mixed. This paper examines and compares the efforts of France and Italy to maintain their film industries in the second half of the 1990s. It also offers policy recommendations for the future. Support of the Film Industries in France and Italy Introduction In 1993, near the end of the Uruguay Round of GATT negotiations, the European Union, led by France, and the United States waged a major battle over the status of audiovisual products, such as films and television programs. The United States wanted to include these products in the treaty and eliminate the protective system of subsidies and quotas that many European countries had created. The European Union argued that these products deserved to be protected because of their cultural significance. After heated negotiations, the United States finally relented. Without an international trading agreement to stop them, the countries of Europe were free to pursue any methods to support their audiovisual products. This paper specifically examines and compares the efforts of France and Italy to maintain their film industries in the second half of the 1990s. France and Italy are worth investigating and comparing for several reasons. First, each possesses a proud film history. Next, each has attempted a variety of strategies to aid its film industry. Finally, each is a member of the European Union. History World War II World War II had a drastic, negative impact on the European film and cinema industry. The war wrecked the infrastructures and economies of Europe. In France, for example, "studios and cinemas had been destroyed; there was no heating, no film stock" (Jeancolas, 1998, p. 47). In contrast, the war had not harmed the United States' infrastructure and economy, and during the war it continued to produce films (Puttnam, 1997, p. 160). Following the war, the American film industry looked to "regain its dominance in the rest of the world" (Puttnam, 1997, p. 157). In 1946, France and the United States signed the Blum-Byrnes Agreement. This agreement erased France's war debt to the United States and gave France $650 million in aid. It also made it easier for American films to make it to French screens (Puttnam, 1997, p. 160). In Italy, the postwar government removed much of the country's protectionist legislation (Puttnam, 1997, p. 162). These political maneuvers plus the huge European demand for such films as Gone with the Wind and Citizen Kane helped to flood Europe with American films (Jeancolas, 1998, p. 48). In response to this deluge-and the accompanying protest from the European film industry-European governments soon adopted systems of aid and support designed to thwart American film dominance. Protection and support of cinema had existed in European countries before the war (Nowell-Smith, 1998, p. 3), but this fresh wave of American films spurred more. Italy created a credit system that favored producers, distributors, and exhibitors (Thomas, 1996, p. 496). France established an administrative agency in charge of regulating cinema, Le Centre National de la Cin‚matographie, or CNC, which devised a set of aids for the film industry (Thomas, 1996, p. 497). Protection of, and aid to the French and Italian film industries have remained in place to the present day. Television Expansion Other than war, the biggest effect on the European film industry has been the emergence of television. It has both harmed and helped the European film industry. In the 1960s, television was changing people's behavior in Europe. They preferred staying at home rather than going to the theaters, "which were increasingly decrepit and in need of renovation" (Thomas, 1996, p. 497). Geoffrey Nowell-Smith wrote: "Television grew inexorably and-with an equal inevitability, though the effect was slow to make itself felt-cinema shrank" (1998, p. 9). In France and most other countries the decline in cinema attendance from the 1960s through the 1970s was gradual and constant. But in Italy the fall was more dramatic. In 1976, the Italian Constitutional Court ruled that private television broadcasting could not be restricted. As a result, about 400 local TV stations appeared. They broadcast 1,500 feature films every day. Between 1975 and 1983, cinema attendance declined by almost 70 percent (513 million to 161 million). According to Robin Buss: "[The ruling] virtually destroyed the cinema market" (1989, p. 15). But at the same time, governments were using revenues from television, which was state-owned, to help film industries across Europe. As television prospered, the revenue from license fees on televisions grew, and governments used a portion of the revenue to support the cinema industry (Thomas, 1996, p. 497). Privatization Following Italy, France introduced private television stations in 1985 (Browne, 1999, p. 102). Through the 1980s, the number of television stations in Europe mushroomed. Advertising revenue for these new stations was not guaranteed, so they tended to buy the cheapest programming available-programs from Hollywood. To limit the amount of American programming, some European countries, led by France, pushed for a quota system. This effort led to the passage of a European Union (EU) directive called "Television Without Frontiers" (Puttnam, 1997, p. 271). Television Without Frontiers Television Without Frontiers was introduced in 1989. It required that within each European country at least 50 percent of television programs (excluding news and certain other types of nonfiction shows) be of European origin, "where practicable" (Puttnam, 1997, p. 271). The United States opposed the measure, as did the United Kingdom, Italy, Spain, West Germany, Denmark, and Belgium (Noam, 1991, p. 293, as cited in Chao, 1996, p. 1134). The "where practicable" phrase meant that each member state could decide whether to mandate the programming requirement. The directive passed, but the dispute over quotas between the EU and the United States and within the EU continued. Uruguay Round of GATT The issue of quotas surfaced again during the Uruguay round of the General Agreement on Tariffs and Trade (GATT), which lasted from 1986 until 1994. GATT is a set of multilateral trade agreements aimed at, among other things, the abolition of quotas among the contracting nations. The United States wanted GATT to include audiovisual products (including film and television), which would eliminate the quotas instituted with the Television Without Frontiers directive. The European Union, most vocally France, wanted to exclude the audiovisual products under a "cultural exception" (Puttnam, 1997, pp. 273-274). The rhetoric during the negotiations was sharp. Jack Valenti, head of the Motion Picture Association of America, said of the European cultural identity argument: "If you equate Europe's game shows and talk shows with MoliŠre and Racine, then that's about culture. But the culture issue is a transparent cloak, and I want to disrobe Europe on this" (qtd. in Dodwell, 1993, p. 6). Wim Wenders, a German director and then chairman (and now president) of the European Film Academy said: "People increasingly believe in what they see, and they buy what they believe in. If we ever give up the European film industry, then all the other European industries will suffer in the future. People use, drive, wear, eat and buy what they see in the movies. We need to regard our films in the same way as we do our literature. Books would never be included in international trade industry deals" (qtd. in Robinson, 1993). Fearing that the issue would derail the entire talks, the U.S. relented and the issue was "left open for future discussion" (Puttnam, 1997, p. 274). One hundred seventeen nations agreed to GATT on December 15, 1993. The Europeans, especially the French, were elated. French Communications Minister Alain Carignon said: "This is a great and beautiful victory for Europe and for French culture" (qtd. in Riding, 1993, p. D19). And the Americans were furious. Valenti said of the negotiations: "[T]hey put their final offer on the table and it was a joke. It was so porous, so full of holes, of words with no meaning" (qtd. in Fuller, 1993). Aid and Support Mechanisms in the Late 1990s Without an international treaty to stop them, the governments of both France and Italy continued to aid their film industries. This section highlights the latest actions on several fronts. France France has provided aid and support to its film industry for decades. In the second half of the 1990s these efforts have continued and, in most areas, increased. Quotas Although the quota system does not apply to films, one of its intentions is to increase the demand for French and European produced films. Another goal of the quotas is to keep American audiovisual products out of Europe. In 1995, France proposed to make the quota system more strict by eliminating the "where practicable" phrase of the Television Without Frontiers directive (Tucker, 1995). Other EU countries, including Britain and Italy, argued for phasing out quotas altogether, saying they violated free trade principles (Perry, 1995, as cited in Chao, 1996, p. 1136). By 1996, however, Italy had a new center-left government that was more favorable toward quotas, and it switched its support to the French side. Its support of the compromise was significant (Buerkle, 1996). In June 1996, The European Council of Culture Ministers voted to maintain the existing Directive. The agreement "reflected political exhaustion." Neither side won a clear-cut victory. (Buerkle, 1996). Subsidies In its 1999 budget, the CNC increased its subsidies to the film and audiovisual industry by 2.5 percent to $475 million. The subsidies aid French film producers, distributors, and exhibitors, as well as TV producers and the video industry (Bortin, 1998). The money comes from an 11 percent tax on cinema tickets ($108 million), a 5.5 percent tax on television stations' revenue ($311 million), and a 2 percent tax on video distributors' revenue ($56 million) (Moore, 1994, p. 295). This system was begun in the 1960s (Thomas, 1996, p. 497). Perhaps in response to small theater owners' complaints of influx of multiplexes (Tartaglione, 1999), the 1999 budget gives the biggest rise in funds to exhibitors (Bortin, 1998). The funds help small theater owners to upgrade their facilities and better compete with the new multiplexes. In 1990, 10.6 percent of French screens were in multiplexes; by 1996, the percentage had grown to 18.4 percent ("European Multiplex Cinemas," 1996, p. 107). As of early 1999, France had 41 existing multiplexes and 32 under construction (Tartaglione, 1999). Speaking about the overall effect of subsidies, Marc Tessier, the head of the CNC said: "I think the policies we are pursuing are bearing fruit. They are responsible in part for the very strong surge in movie attendance in France" (qtd. in Bortin, 1998). Co-productions Co-productions allow the producers of the film to receive subsidies from multiple countries. France produces more films-183 in 1998-and participates in more co-productions-81 in 1998-than any other country in Europe ("Film Production/Distribution," 1999, p. 130). In 1997, France signed a co-production agreement with Italy. Under the agreement producers needed a ten percent minority partner from either France or Italy to receive government funds from that country (Vivarelli, 1997, August 29). Investment The Societes de Financement du Cinema et de l'Audiovisuel (SOFICA) is a French government-approved tax-sheltering program designed to attract investment for film and television production. The shareholders who invest in SOFICA get a tax break, and SOFICA uses the funds to finance films that meet its production criteria (Moore, 1994, p. 295). In 1999, $46.1 million was invested into the plan. The contribution of SOFICA to film and television production is about seven percent ("French tax breaks," 1999). Italy Quotas Italian broadcasters are required to abide by the Television Without Frontiers directive, but only "where applicable." In 1998, new legislation set additional investment quotas. The legislation required that the public broadcaster, Radiotelevisione Italiana (RAI), must invest at least 20 percent of its license fee revenue into the production and acquisition of European or Italian works. Also, the two top private broadcasters, Mediaset and Telemontecarlo, must invest at least 10 percent of their advertising revenue into European TV programming. These requirements would total approximately $378 million (Vivarelli, 1999, September 27). The Culture Minister at the time, Walter Veltroni, said: "During the 1980s, RAI was just a big jukebox for foreign fare, now it must become the driving force of our audiovisual industry" (qtd. in Vivarelli, 1998, September 11). Subsidies In 1998, Italy altered its film fund. It created the Intervention Fund, which allows producers with approved projects to receive low- and no-interest loans through any bank. This fund replaced a system in which producers were required to obtain loans from through the government's Banca Nazionale del Lavoro. A related fund, the Guaranteed Production Fund, which was created in 1994, continues in its current form. It awards seed money to films considered to be of "national cultural interest." Both funds are available exclusively to Italian films or co-productions with a majority-Italian stake (Rooney, 1999, May 17, p.44). Last year the state invested $94 million in 70 films. Recently, the maximum budget eligible for financing was raised from $2.3 million to $4.6 million, which is "a boon to medium-budget productions" (Young, 1998, February 23, p. 38). Co-productions Italy has recently signed three co-production agreements with other countries in addition to the pact signed with France in 1997, discussed earlier. In September 1999, the culture ministers of Italy and Germany announced a film co-production agreement and pledged to further boost industry cooperation by implementing joint distribution and marketing subsidies (Vivarelli, 1999, September 28). The agreement provides state aid from both countries to film projects that have at least 20 percent of the financing from one of the countries and the remaining 80 percent of the financing from the other country. The agreement replaces a 1966 treaty that generated 16 movies in about 30 years (Vivarelli, 1999, September 28). In May 1998, Italy and Great Britain signed a co-production agreement ("Tom Clark Signs," 1998). In 1996, Italy became an official participant in the European Council's convention for film co-productions (Rooney, 1996, March 10, p. 30). Multiplexes Italy lags behind the rest of Europe multiplex development. In 1990, 0.9 percent of the screens were in multiplexes; in 1996, 1.0 percent of the screens were in multiplexes. This is the lowest percentage in Europe-for instance, in 1996, France had 18.4 percent and the UK had 57.5 percent ("European Multiplex Cinemas," 1996, p. 107). However, since 1996, the government has attempted to catch up. In 1997, 518 new screens opened, seven times the normal number, because of the Culture Ministry cut out "mounds of red tape" (Young, 1999, February 23, p. 38). By 1999, the percentage of screens in multiplexes had risen to five percent, (Rooney, 1999, January 11, p. 39). The development, however, is not without its limits. In December 1998, the government began restricting the development of large cinemas (more than 1,300 seats) to "underscreened" areas. Also, these large cinemas must regularly show 15 percent European product on at least three of their screens (Vivarelli, 1998, December 15). Also, one feature of multiplex development is that foreign investors seem more eager than local investors to build multiplexes. The locals choose instead to renovate existing or abandoned single-screen cinemas into two- or three- screen cinemas (Christian, 1999, p. 60). Fearful that foreign interests will dominate a majority of the new screens, the government has sought to pass antitrust legislation. Antitrust legislation In September 1999, the government approved a law designed to prevent monopoly ownership of Italy's cinema screens. The law would stop any one person or company from owning more than 20 percent of Italy's movie theaters. It would limit the screening of a film to 20 percent of Italy's theaters. And, it would limit the daily program at a theater to 25 percent of films from the same distributor, unless the distributor were European, and then the limit would be 40 percent ("Italy Approves Draft Law," 1999, September 17). The parliament still must approve the law, and it is likely to face difficulty. MP Giuseppe Rossetto of the opposition Freedom Alliance said: "If radical changes aren't made to this deeply anti-market-oriented proposal, it will never become law" (qtd. in Vivarelli, 1999, September 21). Giovanna Melandri, the Culture Minister since the end of 1998, said: "The antitrust discipline will allow European, Italian and independent product to reach audiences_We believe the market is there, but we need to give everyone a chance. The anti-trust law will regulate the American presence on the Italian market. That's obvious" (qtd. in Young, 1999, August 30, p. 18). According to Melandri, the proposed law would be Italy's first antitrust measure in the cinema industry ("Italy Approves Draft Law," 1999, September 17). Exporting Italy has also made an effort to get more of its films screened in other countries. In October 1999, the Italian government doubled the budget to promote Italian audiovisual products in other countries (Zecchinelli, 1999, October 25, p. 19). In July 1999, representatives from Italy and the United States signed the Declaration of Taormina, which focused on how more European movies can make their way to American screens. The Italians hope to benefit from the American experience in distribution via satellite, cable, Internet, DVD, and theme-based TV networks. One recent Italian film that successfully made it to American theaters was "Life is Beautiful," which was produced in Italy and released by Miramax in the U.S. (Young, 1999, August 16, p. 19). Miscellaneous The Italian government has implemented a number of other strategies to boost the film industry. In September 1998, it launched a new promotional agency, Agenzia Per La Promozione del Cinema Italiano (Vivarelli, 1998, September 8). Since 1997, it has encouraged exhibitors to lower their prices to spark attendance-attendance is up and so is revenue (Young, 1998, February 23, p. 38). Also, aided by the air-conditioned comfort of the multiplexes, the government has encouraged cinemas to stay open in the summers, a time they are traditionally closed (Vivarelli, 1998, May 20). Government Interest The flurry of activity to aid the Italian film industry seems in some part due to genuine government interest in the film industry. From World War II until 1996, when the center-left government of Massimo D'Alema gained control, this interest rarely existed (Rooney, 1996, June 17, page 11). Many give the credit for the government's initiatives to Walter Veltroni, Italy's Deputy Prime Minister from April 1996 to October 1998. Veltroni, a noted cinephile, "took a concrete interest in changing not only laws, but industry habits" (Young, 1998, February 23, p. 38). After Veltroni left the post in 1998, Gillo Pontecorvo, head of Italy's state film group, Ente Cinema, said of his efforts: "Veltroni did an extraordinary job; something unprecedented in the film industry" (qtd. in Rooney, 1999, November 2, p. 11). In October 1998, Veltroni left his post to head the Democrats Left party and Giovanna Melandri was appointed the minister of culture. The Italian entertainment industry sees her appointment as an extension of the climate fostered by Veltroni (Rooney, 1999, November 2, p. 11). European Union In addition to efforts by the national governments of France and Italy, the European Union has instituted programs intended to strengthen the film industries of its member states. The first European Union effort directed toward the audiovisual sector was the Television Without Frontiers directive, discussed previously. Another European Union initiative is the MEDIA (Measures to Encourage the Development of the Audiovisual Industry) program. The MEDIA program, begun in 1990, provides support for the European film and television program industry "with the aim of making this industry more competitive and more capable of meeting the needs of an ever increasing number of television stations" ("Audiovisual Policy," 1999). The original MEDIA program ran from 1990 through 1995 and spent about $203 million, and its successor, MEDIA II, will run from 1996 through 2000 and will spend about $315 million ("Audiovisual Policy," 1999). In 1999, European Union ministers responsible for culture and audiovisual policy agreed that the MEDIA II program should be strengthened ("Culture/Audiovisual Council," 1999). In 1998, members of the European Union met at the European Audiovisual Conference in Birmingham, England. Delegates agreed that to create "more dynamic and competitive conditions for the European audiovisual content industries," the MEDIA II program should be strengthened; cultural diversity should be maintained; skills development should be emphasized; and exports should be boosted ("Proceedings," 1998). Results of the Initiatives Both France and Italy have made significant efforts to bolster their film industries. The results of these efforts have been mixed. Film Production First, the quota systems, subsidies, and co-productions seem to have had a positive effect on film production (see Figure 1). France increased its output by nearly 21 percent from 1996 to 1997 (131 to 158) and nearly 16 percent from 1997 to 1998 (158 to 183). Italy has not recorded that level of improvement, but it has managed to relatively stabilize production after significant decline between 1992 and 1995 (127 to 75). Figure 1. Feature films produced in France and Italy, 1992-1998. [--- WMF Graphic Goes Here ---] Sources: European Audiovisual Observatory, 1999, p. 80; Screen Digest, 1999, June, p. 130. Cinema Attendance Next, the introduction and expansion of multiplexes, made possible in part by relaxed building laws, seems to have sparked an increase in cinema attendance (see Figure 2). In France, attendance increased 37 percent between 1994 and 1998 (124 million to 170 million). In Italy, attendance increased 30 percent between 1995 and 1998 (91 million to 118 million). In 1997, attendance surpassed 100 million for the first time in the 1990s. Figure 2. Cinema attendance in France and Italy (in millions), 1991-1998. [--- WMF Graphic Goes Here ---] Sources: European Audiovisual Observatory, 1999, p. 89; Screen Digest, 1999, September, p. 231. Domestic Market Share In contrast, the performance of domestic films in domestic markets has not improved. American films continue to dominate European screens. France's share of its domestic market hasn't cracked 40 percent in this decade, and America's share has not fallen below 50 percent (see Figure 3). Figure 3. Market share in France by origin of film, 1990-1997. [--- WMF Graphic Goes Here ---] Source: European Audiovisual Observatory, 1999, p. 96. Italy's share of its domestic market has not hit 30 percent in this decade, and the American share has not dipped below 55 percent (see Figure 4). Figure 4. Market share in Italy by origin of film, 1990-1997. [--- WMF Graphic Goes Here ---] Source: European Audiovisual Observatory, 1999, p. 97; Screen Digest, 1998, June, p. 131. Influence of Television Another result of these government efforts has been the increased influence of television. The quota requirement of the Television Without Frontiers directive has provided a steady, legislated demand for films. Also, television has become a major source of funding-either directly, through television's investment in film, or indirectly, through taxes on television broadcasters that are later distributed to film in the form of subsidies. The film industry has become dependent upon television-for demand and for money. Geoffrey Nowell-Smith wrote: "For a while [the cinema] maintained its rivalry with [television]. Then with some reluctance, it entered into co-operation. And it has now entered into a state of effective subordination." (1998, p. 9). Recommendations Overall, the film industries of France and Italy have performed well in the latter half of the 1990s. Much of their success is due to the policies of their national governments and the European Union. However, this success masks some dangers to the film industries. First, the government policies could change. Politicians control government, and politicians can change. At the national level, although a drastic change in government policy is possible in any country, it is more likely in Italy than in France. The pro-cinema policies of the Italian government since 1996, it could be argued, are largely the result of one man's work. Indeed, since World War II there have been few Italian governments that have supported film in the way the current government has. Italy's political landscape is traditionally unstable. A government not as sympathetic to the film industry could sweep into power and strip away many of the policies. At the European level, the attitude toward film is not harmonious. For example, in 1996, France could not pass a stricter version of the Television Without Frontiers directive. In 1999, France struggled more than ever against other EU countries to keep audiovisual products out of the world trade negotiations ("Culture/Audiovisual Council," 1999). Eventually, audiovisual products could find their way into world trade negotiations. If that were to happen, the quotas and subsidies in Europe would be in grave jeopardy. Second, the policies have made the film industry dependent on the television industry. It is risky to depend on another media to survive. One risk is that the source of the funding affects the product. Terry Ilott wrote: "[Television tends] to support intimate, parochial projects, thereby contributing to the reduced commercial and creative ambitions of European cinema" (1996, pp. 30-31). The more influence television has, the more the films produced are geared toward the small screen of television rather than the big screen of the cinema. Another risk of films relying on television is that advancing technology makes the future uncertain. It is possible that the Internet could become the broadcasting medium of choice. Quotas would be difficult to enforce. The revenue from traditional broadcast networks could diminish. For these reasons-the vicissitudes of government policy and the effect and uncertain future of television-the aid and support of the film industry must be gradually dismantled. The money must not come from television broadcasters; it must come from investors who believe the film will make money on the big screen. The demand must not come from quotas; it must come from audiences. Also, government and industry leaders must encourage domestic ownership of multiplexes. Domestic owners would likely screen more domestic films. France has done well in this area and Italy should do the same. To summarize, government and industry leaders must realize that they must make changes to ensure the long-term survival of the film industry in France and Italy. They must: ù Begin to dismantle government subsidies and quotas. ù Rely less on television. ù Encourage domestic ownership of multiplexes. Works Cited Audiovisual Policy: Current situation and prospects. (1999, October 13). Europa web site. 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