Tuesday, June 07, 2016

Why EU law and Brexit could kill UK Indies SUMMARY

Realised I'd blogged a few on the same theme, so I'm gathering them together in this revised post, looking at how influential EU law is - and the possible impact of the UK's surprise Brexit vote. In a nutshell, the EU as an increasingly neo-liberal, free market institution is pushing for reforms that in theory boost competition - but in reality will severely undermine Indies and slash film production while boosting the conglomerates. Brexit poses similar threats, with production, funding and distribution all facing huge cuts at the Indie level, co-productions made difficult and access to EU cinema markets cut, while the huge studio production industry will face issues too.

Rebecca O'Brien is quoted in this nofilmschool feature, a detailed analysis of how the industry works - and will struggle post-Brexit. It argues there are 3 key areas of concern:

  1. Fewer European co-productions
  2. Decline in British cinema—both in quality and quantity
  3. UK may no longer be a top international filming destination
1: Fewer European co-productions
Co-productions are the lifeblood of European cinema. In 1994, Treaty No. 147, or the European Convention on Cinematographic Co-Production, was ratified in order to "safeguard creation and freedom of expression and defend the cultural diversity of the various European countries." It was not only the portal to creative synergy in a continent rich with varied cultures, but it also created the framework for film financing across international borders.
Co-productions significantly reduce risk; where one production company might be unwilling to assume debt on a single film, three companies can share the risk and bring different financial resources to the project, such as country-specific tax incentives and investors. In an industry built upon the assumption of risk, a co-production can mean the difference between development purgatory and getting a film made.
Furthermore, co-productions can receive aid of up to 60% of the production budget.
Rebecca O'Brien, a producer on I, Daniel Blake, said that the success of co-productions is exactly the international cooperation for which Europe at large should strive. 
2: Decline in British cinema—both in quality and quantity

Creative Europe Media, the EU-supported film and TV financing program responsible for 26 films that played at Cannes this year, contributes a significant amount of money to British filmmakers. Between 2007 and 2015, it contributed €130 million to the film industry [including e100k in I, Daniel Blake (Ken Loach)], contributing to production budgets, distributors, and festivals alike. Without this financial support, British movies will inevitably see a decline in production. 
As it stands, only a small fraction of British films are profitable; just 7% of UK films made from 2003 to 2010 saw returns for investors. The loss of public money from CEM will likely result in production companies and investors prioritizing box office yield over creative risk-taking. 
After Brexit, the UK will be forced to re-negotiate quotas and taxes for exports to the EU. In 2015, the UK exported 41% of its movies to the EU, surpassing its American exports. Imminent financial pressures will likely diminish UK film exports, thereby disincentivizing production.

3: UK may no longer be a top international filming destination
A recent study by FilmLA found that the UK's total production budget spending exceeded that of California by 150%. And according to the British Film Institute, the UK was the second largest film market in the world in 2014. But with a likely economic downturn in the country, these numbers could fall dramatically—and that's not just bad news for the UK.
Last year, 37 Hollywood films, including Star Wars: The Force Awakens, Jupiter Ascending, and Avengers: Age Of Ultron, were shot in the UK. These films accounted for the majority of UK production spend and saved American productions millions of dollars due to attractive tax incentives. Much of Game of Thrones, including last week's epic "Battle of the Bastards," is filmed in Northern Ireland due to the support of the European Regional Development Fund. A cocktail of less valuable tax incentives and a recession in the UK resulting in fewer production facilities could limit the feasibility (and desirability) of American productions set on UK soil.
Michael Ryan, the chairman of the Independent Film and Television Alliancetold Variety that "this decision has just blown up our foundation."
"As of today, we no longer know how our relationships with co-producers, financiers, and distributors will work," Ryan continued, "whether new taxes will be dropped on our activities in the rest of Europe, or how production financing is going to be raised without any input from European funding agencies.... This is likely to be devastating for us."

StudioCanal UK are already seeing costs up by 15% as sterling (the UK currency) has nosedived in value since the referendum. Their CEO, Danny Perkins, explains that the UK will need a specific treaty (as Switzerland has negotiated) to gain continued open access to EU cinema markets - which could take years, if it ever happens. Euro-financing has also been made more difficult to access. If US studios fill that void, they are MUCH less likely to support ideas which reflect British culture instead of taking a more generic, commercial approach.

Consider the practicalities too of StudioCanal personnel trying to visit other Euro branches, or even just pre-production visits and research if UK citizens require visas to do so.

This is a great overall look at the operations of StudioCanal, a key player for both Warp and Working Title, and also a producer itself now (notably Paddington and a forthcoming sequel)
Perkins [Danny, StudioCanalUK CEO] is well positioned to assess what the unravelling of the UK’s position in the EU will mean in practical terms. StudioCanal UK is quietly celebrating its 10-year anniversary – dating from the 2006 acquisition of independent distributor Optimum Releasing by the French film giants StudioCanal, Canal Plus’ production arm – and in that time have become the leading non-Hollywood studio in the UK. Their move into production with 2010’s Brighton Rock has seen them steadily accrue success, culminating in Paddington’s stellar performance in 2014, and the subsequent green-lighting of a sequel, Paddington 2. 
“Anything you are looking to acquire has become 10-15% more expensive. Anything we are looking to invest in, our contribution is suddenly 10-15% less.” The UK’s post-Brexit vote currency crash, affecting both dollars and euros, has seen to that. The European qualification, says Perkins, is vital to penetrate markets where Hollywood, with its all-consuming output deals, has consistently dominated. “For any of us in the business of exporting British content, it’s going to be harder because I don’t think anyone is warming to us right now. Culturally, we have just given two fingers to the rest of Europe.
Perkins’ concerns are part of the mosaic of Brexit-related crises engulfing the British film world which – just like other cosmopolitan trade sectors – is still grappling with the changes that lie ahead once Article 50 is invoked. Not only will funding from EU agencies dry up (meaning European films will struggle to find berths in UK cinemas, and British producers will find it more difficult to place their films abroad), but the system of European co-production treaties that enable British producers to find backing for their films will have to be scrapped and renegotiated. US-based producers appear chipper about stepping into fill the gap – but their priorities are likely to be very different from the Europeans, and less interested in helping British film-makers concerned with the UK’s cultural identity. 
However, to some extent, Perkins can keep StudioCanal UK’s head above the fray, insulated as they are by their parent organisation. “We are fortunate,” he says, “that we are part of a big international company, so we can manage our operations around the legislation that lies ahead. If we were still an independent outfit, it would be a lot tougher.” Restrictions on freedom of movement will hamper the exchange of staff between the company’s various national outposts, and red tape will vastly increase (“It’s a huge opportunity if your’e in the bureaucracy business,” says Perkins. “Whoever prints passports is going to do really well”).
Disaster looms if British film disconnects from Europe, says studio head.

Rebecca O'Brien (producer of Ken Loach films through Sixteen Films) argues that an EU proposal to make film distribution on a country-by-country basis illegal in the EU will cut film production by 50% and utterly devastate the Indie sector. An example I've frequently used, she points out that Loach can't get enough UK funding, and relies on pre-sales to French, German and other NATIONAL distributors, skilled and established in their territory. The EU proposal would surely kill off such small-scale operations, and boost the likes of Universal with their enormous scale and resources?

As attention is fixed on the EU referendum in the UK, we mustn’t lose sight of what is on the horizon. The Digital Single Market strategy (DSM), outlined in a document released at the end of last year, threatens to make it impossible for distribution companies to secure rights to films on a territory-by-territory basis. Ultimately, all films made available on any online platform would have to be made available across the whole of the EU at once. By ignoring the complexities of the European model for film financing and distribution, this prescriptive vision in fact threatens to make Europe’s fragile film industry unsustainable, and ultimately to short-change the very European consumers it purports to empower. 
Our company, Sixteen Films, only makes projects by European film-makers with original voices. The majority of these films could not be made if they were to rely purely on commercial funding from the UK. Over time, we have developed a sound business model to share the financial burden of producing such films through long-term partnerships with film distributors in many other EU countries. The linchpin of this delicate system is our freedom to choose to sell rights to these projects, on an exclusive basis, to national distributors for their own market. 
The European commission is simply wrong to assume that this model prevents European audiences from having access to European films. It does precisely the opposite: the sustained popularity of Ken’s films in countries such as France and Italy attests to the skills of local distributors who understand their national culture and are uniquely placed to develop their audiences’ loyalty to his body of work. These distributors are not large multinationals; they are SMEs (small or medium enterprises) with limited cash in the bank and they would not be able to stay in business if no longer able to secure exclusivity for the rights they acquire to independent films.
A recent study by Oxera and O&O bears out these concerns: if EU producers should no longer be free to sell film rights on a territorial basis, there will be a steep decline in EU audiovisual output overall. The study forecasts as much as a 48% reduction of new local TV content production, and 37% fewer local films.
Why the EU's plans for a single market in film need to be opposed.

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