Difference between revisions of "Draft 2012 Cinema Communication" English (en) français (fr)

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= Draft Communication from the Commission on State aid for films and other audiovisual works  =
 
= Draft Communication from the Commission on State aid for films and other audiovisual works  =
  
== 1. Introduction  ==
+
= Introduction  =
 
<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">1.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Audiovisual works, particularly films, play an important role in shaping European identities. They reflect the cultural diversity of the different traditions and histories of the EU Member States and regions. Audiovisual works are both economic goods, offering important opportunities for the creation of wealth and employment, and cultural goods which mirror and shape our societies. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">2.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Amongst audiovisual works, films still have a particular prominence, because of their cost of production and cultural importance. Film production budgets are substantially higher than for other audiovisual content, they are more frequently the subject of international coproduction, and the duration of their exploitation life is longer. Films in particular face strong competition from outside Europe. On the other hand, there is little circulation of European audiovisual works outside their country of origin.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">3.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>This limited circulation results from the fragmentation of the European audiovisual sector into national or even regional markets. While this is related to Europe's linguistic and cultural diversity, proximity is also built into the public support for European audiovisual works, with which national, regional and local funding schemes subsidise many small production companies. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">4.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>It is generally accepted that aid is important to sustain European audiovisual production. It is difficult for film producers to obtain a sufficient level of upfront commercial backing to put together a financial package so that production projects can proceed. The high risk associated with their businesses and projects, together with the perceived lack of profitability of the sector, make it dependent on State aid. In these circumstances, the fostering of audiovisual production by the Commission and the Member States have a role to ensure that their culture and creative capacity can be expressed and the diversity and richness of European culture reflected.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">5.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>MEDIA, the&nbsp;European Union's support programme for the film, television and new media industries, offers many different funding schemes, each targeting different areas of the audiovisual sector, including schemes for producers, distributors, sales agents, organisers of training courses, operators in new digital technologies, operators of video-on-demand (VoD) platforms, exhibitors and organisers of festivals, markets and promotional events. It encourages the circulation and promotion of European films with particular emphasis on non-national European films.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">6.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Member States implemented a wide range of support measures for the production of films, TV programmes and other audiovisual works. The rationale behind these measures is based on both cultural and industrial considerations. They have the primary cultural aim of ensuring that the national and regional cultures and creative potential are expressed in the audiovisual media of film and television. On the other hand, they aim to generate the critical mass of activity that is required to create the dynamic for the development and consolidation of the industry through the creation of soundly based production undertakings and the development of a permanent pool of human skills and experience. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">7.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Grants, tax incentives and other types of audiovisual support generally involve State resources. Since film producers are acting on an international level and audiovisual works are traded internationally, such support is liable to affect trade between Member States. Those producers and audiovisual works which receive such support are likely to have a financial and hence competitive advantage over those which do not. Consequently, such support may distort competition and is regarded as State aid.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">8.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The Treaty recognises the utmost importance of promoting culture for the European Union and its Member States by incorporating culture among the Union's policies specifically referred to in the Treaty on the Functioning of the European Union (TFEU). Article 167 (2) TFEU provides that:</div><div style="margin: 0cm 0cm 6pt 1cm">''Action by the Union shall be aimed at encouraging cooperation between Member States and, if necessary, supporting and supplementing their action in the following areas:''</div><div style="margin: 0cm 0cm 6pt">''&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; […]''</div><div style="margin: 0cm 0cm 12pt">''&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - artistic and literary creation, including in the audiovisual sector.''</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">9.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Article 167 (4) TFEU provides that: ''The Union shall take cultural aspects into account in its action under other provisions of the Treaties, in particular in order to respect and to promote the diversity of its cultures.''</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">10.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Article 107 (1) TFEU prohibits aid granted by the State or through State resources, which distorts or threatens to distort competition and trade between Member States. However, the Commission may exempt certain State aid from this prohibition. One of these exemptions is Article 107 (3) (d) TFEU for aid to promote culture, where such aid does not affect competition and trading conditions to an extent contrary to the common interest.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">11.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>In line with the subsidiarity principle enshrined in Article 5 TEU, the definition of cultural activities is primarily a responsibility of the Member States. In assessing an audiovisual support scheme, the task of the Commission is limited to verifying whether a Member State has a relevant, effective verification mechanism in place able to avoid manifest error.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">12.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>As explained further in Section 3, this would be achieved through the existence of either a cultural selection process to determine which audiovisual works should benefit from aid or a cultural profile to be fulfilled by all audiovisual works as a condition of the aid. The Commission notes that the fact that a film is commercial does not prevent it from being cultural. This is in line with the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions of 2005[[#_ftn1|<span><span><span><span style="font-size: 12pt">[1]</span></span></span></span>]].</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">13.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The assessment criteria for State aid for the production of films and other audiovisual works were originally set out in the 2001 Cinema Communication[[#_ftn2|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[2]</span></span></span></span>]]. The validity of these criteria was extended in 2004[[#_ftn3|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[3]</span></span></span></span>]], 2007[[#_ftn4|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[4]</span></span></span></span>]] and 2009[[#_ftn5|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[5]</span></span></span></span>]] and expired further to the publication of the present Communication.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">14.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>In view of a number of different trends which have emerged since 2001, this Communication aims to ensure that European audiences are offered a more culturally diverse choice of audiovisual works by:</div>
 
<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">1.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Audiovisual works, particularly films, play an important role in shaping European identities. They reflect the cultural diversity of the different traditions and histories of the EU Member States and regions. Audiovisual works are both economic goods, offering important opportunities for the creation of wealth and employment, and cultural goods which mirror and shape our societies. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">2.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Amongst audiovisual works, films still have a particular prominence, because of their cost of production and cultural importance. Film production budgets are substantially higher than for other audiovisual content, they are more frequently the subject of international coproduction, and the duration of their exploitation life is longer. Films in particular face strong competition from outside Europe. On the other hand, there is little circulation of European audiovisual works outside their country of origin.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">3.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>This limited circulation results from the fragmentation of the European audiovisual sector into national or even regional markets. While this is related to Europe's linguistic and cultural diversity, proximity is also built into the public support for European audiovisual works, with which national, regional and local funding schemes subsidise many small production companies. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">4.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>It is generally accepted that aid is important to sustain European audiovisual production. It is difficult for film producers to obtain a sufficient level of upfront commercial backing to put together a financial package so that production projects can proceed. The high risk associated with their businesses and projects, together with the perceived lack of profitability of the sector, make it dependent on State aid. In these circumstances, the fostering of audiovisual production by the Commission and the Member States have a role to ensure that their culture and creative capacity can be expressed and the diversity and richness of European culture reflected.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">5.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>MEDIA, the&nbsp;European Union's support programme for the film, television and new media industries, offers many different funding schemes, each targeting different areas of the audiovisual sector, including schemes for producers, distributors, sales agents, organisers of training courses, operators in new digital technologies, operators of video-on-demand (VoD) platforms, exhibitors and organisers of festivals, markets and promotional events. It encourages the circulation and promotion of European films with particular emphasis on non-national European films.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">6.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Member States implemented a wide range of support measures for the production of films, TV programmes and other audiovisual works. The rationale behind these measures is based on both cultural and industrial considerations. They have the primary cultural aim of ensuring that the national and regional cultures and creative potential are expressed in the audiovisual media of film and television. On the other hand, they aim to generate the critical mass of activity that is required to create the dynamic for the development and consolidation of the industry through the creation of soundly based production undertakings and the development of a permanent pool of human skills and experience. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">7.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Grants, tax incentives and other types of audiovisual support generally involve State resources. Since film producers are acting on an international level and audiovisual works are traded internationally, such support is liable to affect trade between Member States. Those producers and audiovisual works which receive such support are likely to have a financial and hence competitive advantage over those which do not. Consequently, such support may distort competition and is regarded as State aid.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">8.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The Treaty recognises the utmost importance of promoting culture for the European Union and its Member States by incorporating culture among the Union's policies specifically referred to in the Treaty on the Functioning of the European Union (TFEU). Article 167 (2) TFEU provides that:</div><div style="margin: 0cm 0cm 6pt 1cm">''Action by the Union shall be aimed at encouraging cooperation between Member States and, if necessary, supporting and supplementing their action in the following areas:''</div><div style="margin: 0cm 0cm 6pt">''&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; […]''</div><div style="margin: 0cm 0cm 12pt">''&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - artistic and literary creation, including in the audiovisual sector.''</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">9.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Article 167 (4) TFEU provides that: ''The Union shall take cultural aspects into account in its action under other provisions of the Treaties, in particular in order to respect and to promote the diversity of its cultures.''</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">10.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Article 107 (1) TFEU prohibits aid granted by the State or through State resources, which distorts or threatens to distort competition and trade between Member States. However, the Commission may exempt certain State aid from this prohibition. One of these exemptions is Article 107 (3) (d) TFEU for aid to promote culture, where such aid does not affect competition and trading conditions to an extent contrary to the common interest.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">11.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>In line with the subsidiarity principle enshrined in Article 5 TEU, the definition of cultural activities is primarily a responsibility of the Member States. In assessing an audiovisual support scheme, the task of the Commission is limited to verifying whether a Member State has a relevant, effective verification mechanism in place able to avoid manifest error.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">12.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>As explained further in Section 3, this would be achieved through the existence of either a cultural selection process to determine which audiovisual works should benefit from aid or a cultural profile to be fulfilled by all audiovisual works as a condition of the aid. The Commission notes that the fact that a film is commercial does not prevent it from being cultural. This is in line with the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions of 2005[[#_ftn1|<span><span><span><span style="font-size: 12pt">[1]</span></span></span></span>]].</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">13.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The assessment criteria for State aid for the production of films and other audiovisual works were originally set out in the 2001 Cinema Communication[[#_ftn2|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[2]</span></span></span></span>]]. The validity of these criteria was extended in 2004[[#_ftn3|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[3]</span></span></span></span>]], 2007[[#_ftn4|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[4]</span></span></span></span>]] and 2009[[#_ftn5|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[5]</span></span></span></span>]] and expired further to the publication of the present Communication.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">14.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>In view of a number of different trends which have emerged since 2001, this Communication aims to ensure that European audiences are offered a more culturally diverse choice of audiovisual works by:</div>
 
*extending the scope of activities covered by the Communication to include all aspects from story concept to delivery to the audience;  
 
*extending the scope of activities covered by the Communication to include all aspects from story concept to delivery to the audience;  
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<br>
 
<br>
  
== 2. Scope of activities  ==
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= Scope of activities  =
 
<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">15.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Regarding the scope of activities to which this Communication applies, the State aid criteria of the 2001 Cinema Communication focused on the production of films. Some Member States however offer also support for other related activities which fell outside the scope of the 2001 Cinema Communication criteria, such as script-writing, development, film distribution, or film promotion (e.g. on film festivals). In these cases, the Commission applied the criteria of the Cinema Communication as a reference to assess the necessity, proportionality and adequacy of the aid, whenever such aid was notified to it. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">16.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The objective of protecting and promoting Europe's cultural diversity through audiovisual works can only be achieved if these works are seen by audiences. Aid to production alone risks stimulating the supply of audiovisual content without ensuring that the resulting audiovisual work is properly distributed and promoted. It is therefore necessary and appropriate that aid may cover all aspects of film creation, from story concept to delivery to the audience. The support for such activities and its intensity should be linked to audiovisual works which are eligible for aid to promote culture.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">17.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Apart from aid specifically granted for script writing, development, distribution or promotion, any aid granted to a specific audiovisual work should contribute to its overall budget. The producer should be free to choose the items of the budget that will be spent in other Member States. The earmarking of aid to specific components of the film budget could turn such aid into a national preference to the sectors providing the specific aided items, which would be incompatible with the Treaty.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">18.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Some Member States also offer aid to cinemas, for example to support rural cinemas or arthouse cinemas in general or to cover their transition to digital film projection. However, the amounts involved are usually small, so that rural and arthouse cinemas should be sufficiently served by the levels of aid which fall under the ''de minimis'' Regulation[[#_ftn1|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[6]</span></span></span></span>]]. Aid for renovation investment of small and medium-sized enterprises (SME) may also meet the conditions of the General Block Exemption Regulation (GBER)[[#_ftn2|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[7]</span></span></span></span>]]. If special circumstances would justify more support, this should be assessed on a case-by-case basis. Therefore the Commission does not consider it necessary to establish specific rules for operating or investment aid to cinemas.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">19.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Some Member States support audiovisual projects which go beyond the traditional concept of film and TV productions, in particular interactive products like transmedia or games. Transmedia storytelling (also known as multi-platform storytelling or cross-media storytelling) is the technique of <span style="color: black">telling stories across multiple platforms and formats using digital technologies, like films and games. Importantly, these pieces of content are linked together[[#_ftn3|<span><span><span style="color: black; font-size: 12pt">[8]</span></span></span>]]. </span>Since transmedia projects are inevitably linked to the production of a film, the film production component is considered to be an audiovisual work within the scope of this Communication.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">20.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Games represent a significant opportunity for Europe in the coming years. They have other characteristics regarding production, distribution, marketing, and consumption than films. Not all games necessarily qualify as audiovisual works or cultural products. Therefore, the rules designed for film production cannot apply automatically to games. Furthermore, contrary to the film and television sector, the Commission does not have a critical mass of decisions on State aid to games. It would therefore be premature to integrate this sector in the present communication. Consequently, this Communication does not cover aid granted to games. Any aid measures in support of games not meeting the conditions of the GBER or the ''de minimis'' Regulation will continue to be addressed on a case-by-case basis. To the extent that the necessity of an aid scheme targeted at cultural and educative games can be demonstrated, the Commission will apply the aid intensity criteria of this Communication by analogy.</div>
 
<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">15.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Regarding the scope of activities to which this Communication applies, the State aid criteria of the 2001 Cinema Communication focused on the production of films. Some Member States however offer also support for other related activities which fell outside the scope of the 2001 Cinema Communication criteria, such as script-writing, development, film distribution, or film promotion (e.g. on film festivals). In these cases, the Commission applied the criteria of the Cinema Communication as a reference to assess the necessity, proportionality and adequacy of the aid, whenever such aid was notified to it. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">16.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The objective of protecting and promoting Europe's cultural diversity through audiovisual works can only be achieved if these works are seen by audiences. Aid to production alone risks stimulating the supply of audiovisual content without ensuring that the resulting audiovisual work is properly distributed and promoted. It is therefore necessary and appropriate that aid may cover all aspects of film creation, from story concept to delivery to the audience. The support for such activities and its intensity should be linked to audiovisual works which are eligible for aid to promote culture.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">17.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Apart from aid specifically granted for script writing, development, distribution or promotion, any aid granted to a specific audiovisual work should contribute to its overall budget. The producer should be free to choose the items of the budget that will be spent in other Member States. The earmarking of aid to specific components of the film budget could turn such aid into a national preference to the sectors providing the specific aided items, which would be incompatible with the Treaty.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">18.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Some Member States also offer aid to cinemas, for example to support rural cinemas or arthouse cinemas in general or to cover their transition to digital film projection. However, the amounts involved are usually small, so that rural and arthouse cinemas should be sufficiently served by the levels of aid which fall under the ''de minimis'' Regulation[[#_ftn1|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[6]</span></span></span></span>]]. Aid for renovation investment of small and medium-sized enterprises (SME) may also meet the conditions of the General Block Exemption Regulation (GBER)[[#_ftn2|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[7]</span></span></span></span>]]. If special circumstances would justify more support, this should be assessed on a case-by-case basis. Therefore the Commission does not consider it necessary to establish specific rules for operating or investment aid to cinemas.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">19.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Some Member States support audiovisual projects which go beyond the traditional concept of film and TV productions, in particular interactive products like transmedia or games. Transmedia storytelling (also known as multi-platform storytelling or cross-media storytelling) is the technique of <span style="color: black">telling stories across multiple platforms and formats using digital technologies, like films and games. Importantly, these pieces of content are linked together[[#_ftn3|<span><span><span style="color: black; font-size: 12pt">[8]</span></span></span>]]. </span>Since transmedia projects are inevitably linked to the production of a film, the film production component is considered to be an audiovisual work within the scope of this Communication.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">20.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Games represent a significant opportunity for Europe in the coming years. They have other characteristics regarding production, distribution, marketing, and consumption than films. Not all games necessarily qualify as audiovisual works or cultural products. Therefore, the rules designed for film production cannot apply automatically to games. Furthermore, contrary to the film and television sector, the Commission does not have a critical mass of decisions on State aid to games. It would therefore be premature to integrate this sector in the present communication. Consequently, this Communication does not cover aid granted to games. Any aid measures in support of games not meeting the conditions of the GBER or the ''de minimis'' Regulation will continue to be addressed on a case-by-case basis. To the extent that the necessity of an aid scheme targeted at cultural and educative games can be demonstrated, the Commission will apply the aid intensity criteria of this Communication by analogy.</div>
== Territorial spending obligations ==
+
= Territorial spending obligations =
 
+
<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">21.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Territorial spending obligations on film producers to spend a certain part of the film production budget in a particular territory have been controversial since the Commission started looking into film support schemes. The 2001 Cinema Communication allowed Member States to impose that up to 80% of the entire film budget needed to be spent on their territory.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">22.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Territorial requirements fragment the Internal Market for audiovisual production. However, when assessing State aid schemes, the Commission must ensure that the Treaty principles are respected[[#_ftn1|<span style="color: black"><span><span><span style="color: black; font-size: 12pt">[9]</span></span></span></span>]]. The territorial criterion of the 2001 Cinema Communication derogated from these principles to ensure the continued presence of the human skills and technical expertise required for cultural creation within the Member State offering the aid.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">23.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The Commission acknowledges that the specific characteristics of the film industry have to be taken into consideration, in particular its extreme mobility. To a certain extent, these conditions are therefore necessary to maintain a critical mass of infrastructure for film production in the Member State or region granting the aid. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">24.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>A study into the economic and cultural impact of territorial conditions in film support schemes was carried out for the Commission and completed in 2008[[#_ftn2|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[10]</span></span></span></span>]]. As stated in the 2009 extension of the Cinema Communication, overall, the study was inconclusive. It could not confirm either positive or negative effects of territorial conditions. It did not demonstrate that high territorial conditions lead to sufficient positive effects to justify maintaining the levels of restrictions applicable at the time. Moreover, since most post-production of films and audiovisual works is now done digitally (which was not the case in 2001), it is possible to shoot and edit films in different countries without harming their technical or cultural quality.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">25.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Therefore the amount of expenditure which is tied by territorial conditions should have at least a proportional relation with the amount of the actual financial commitment of a Member State and not with the overall production budget. It is not proportionate for Member States to require film producers to spend 80% of the production budget in their territories, regardless of the aid amount available[[#_ftn3|<span><span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[11]</span></span></span></span></span>]]. Accordingly, it seems more appropriate to base the maximum territorial spending obligations on the amount of the aid than on the production budget.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">26.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The Commission considers that Member States may require that up to 100% of the aid awarded to the production of a given audiovisual work is spent in the territory offering the aid[[#_ftn4|<span><span><span style="font-size: 12pt">[12]</span></span></span>]]. Furthermore, the Commission considers that, for audiovisual support schemes in which the aid intensity is based on the production expenditure in a given territory, such as film tax incentives, any production expenditure within the EEA must be eligible[[#_ftn5|<span><span><span style="font-size: 12pt">[13]</span></span></span>]].</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm"><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">27.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>When the 2001 Cinema Communication was adopted, the phenomenon that Member States try to use film aid to attract major foreign film projects to be produced in their territory had not emerged. Since then, several Member States have introduced schemes with the declared objective of capturing a higher share of mobile film projects. All of these schemes easily met the 2001 State aid assessment criteria since the aid was directed towards a cultural product, had territorial expenditure requirements of up to 80% of the production budget, had aid intensities well below 50% and eligible expenditure covered all forms of production expenditure in the Member State.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">28.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Comments received during the public consultation preceding the present Communication suggest that the principal objective of this type of aid is to attract high profile productions to Europe, in global competition with the locations and facilities in the United States, Canada, New Zealand, or Australia. Contributors to the consultation agreed that these productions were necessary to maintain a high quality audiovisual infrastructure, to contribute to the employment of high class studio facilities, equipment and staff, and to contribute to transfer of technology, know how and expertise. The partial employment of facilities by foreign productions would also help to have the capacities to realise high quality and high profile European productions.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">29.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Regarding the possible effect on the European audiovisual sector, foreign production may have a lasting impact as it usually makes wide use of this local infrastructure and of local cast. Overall, this may thus have a positive effect on the national audiovisual sector. It should also be noted that many of the films which are considered to be major third country projects are in fact co-productions involving also European producers. Thereby these subsidies would contribute also to the promotion of European audiovisual works and to sustaining facilities for national productions. However, the Commission is concerned that Member States are increasingly using public funding to compete with each other and not only with third countries to attract film productions to their territory. Although this aid for foreign productions is also likely to serve the objective of promoting culture, the question is not usually whether these audiovisual works will be produced at all but rather where this will be done.&nbsp;</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">30.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>For the application of Article 107 TFEU, it is sufficient that there is a threat of distortion of competition, which clearly exists in this context and which would be considerably reduced if any production expenditure at least within the EEA would be eligible as a reference for the aid intensity in audiovisual support schemes.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">31.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>If the Commission is nevertheless of the view that such aid may in principle be compatible with Article 107(3)d TFEU as aid to promote culture, certain limits have to be set. The amounts of aid can be very high, in view of the huge budgets of major third country productions. Setting a cap will ensure that other parameters for the location decision making, such as the quality of local crew, stages, and technology remain decisive and that competition takes place primarily on the basis of quality and price, rather than on the basis of State aid.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm"><span>32.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Therefore the Commission considers it appropriate to develop different standards for European and other films. If a scheme is open to films and TV productions which do not meet the definition of a European work, as described in the annex, the maximum aid intensity should be reduced for higher budget films, on the basis of a regressive scale.</span> </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">33.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>This will limit the possible distortive effect on competition while still leaving the possibility to strengthen the local audiovisual sector in the interest of promoting indirectly European film productions. It will avoid further increase of budgets used for a subsidy contest.</div>
 
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= '''<font size="6"><font size="3">Improving circulation of european films and audience choice &nbsp;</font></font>''' =
<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">21.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Territorial spending obligations on film producers to spend a certain part of the film production budget in a particular territory have been controversial since the Commission started looking into film support schemes. The 2001 Cinema Communication allowed Member States to impose that up to 80% of the entire film budget needed to be spent on their territory.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">22.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Territorial requirements fragment the Internal Market for audiovisual production. However, when assessing State aid schemes, the Commission must ensure that the Treaty principles are respected[[#_ftn1|<span style="color: black"><span><span><span style="color: black; font-size: 12pt">[9]</span></span></span></span>]]. The territorial criterion of the 2001 Cinema Communication derogated from these principles to ensure the continued presence of the human skills and technical expertise required for cultural creation within the Member State offering the aid.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">23.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The Commission acknowledges that the specific characteristics of the film industry have to be taken into consideration, in particular its extreme mobility. To a certain extent, these conditions are therefore necessary to maintain a critical mass of infrastructure for film production in the Member State or region granting the aid. </div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">24.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>A study into the economic and cultural impact of territorial conditions in film support schemes was carried out for the Commission and completed in 2008[[#_ftn2|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[10]</span></span></span></span>]]. As stated in the 2009 extension of the Cinema Communication, overall, the study was inconclusive. It could not confirm either positive or negative effects of territorial conditions. It did not demonstrate that high territorial conditions lead to sufficient positive effects to justify maintaining the levels of restrictions applicable at the time. Moreover, since most post-production of films and audiovisual works is now done digitally (which was not the case in 2001), it is possible to shoot and edit films in different countries without harming their technical or cultural quality.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">25.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Therefore the amount of expenditure which is tied by territorial conditions should have at least a proportional relation with the amount of the actual financial commitment of a Member State and not with the overall production budget. It is not proportionate for Member States to require film producers to spend 80% of the production budget in their territories, regardless of the aid amount available[[#_ftn3|<span><span style="font-size: 10pt"><span><span><span style="font-size: 10pt">[11]</span></span></span></span></span>]]. Accordingly, it seems more appropriate to base the maximum territorial spending obligations on the amount of the aid than on the production budget.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">26.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The Commission considers that Member States may require that up to 100% of the aid awarded to the production of a given audiovisual work is spent in the territory offering the aid[[#_ftn4|<span><span><span style="font-size: 12pt">[12]</span></span></span>]]. Furthermore, the Commission considers that, for audiovisual support schemes in which the aid intensity is based on the production expenditure in a given territory, such as film tax incentives, any production expenditure within the EEA must be eligible[[#_ftn5|<span><span><span style="font-size: 12pt">[13]</span></span></span>]].</div><div><br>
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<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">34<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The digital revolution offers potential opportunities as it offers increasing possibilities of access for the public to audiovisual productions and enables European films to increase their audience. The Green Paper on the online distribution of audiovisual works[[#_ftn1|<span><span><span><span style="font-size: 12pt"><font color="#000080">[1]</font></span></span></span></span>]] launches a debate as to whether changes need to be made, including to the regulatory framework, in order to enable rights holders, users and citizens to profit from the potential of the digital single market.</div>
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== '''<font size="4"><font size="3">'''<span style="font-style: normal">Sequencing of release windows</span>'''</font></font>''' ==
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<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">35.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>A number of contributors to the first public consultation noted that certain Member States impose conditions on the timing and/or territory in which the aided audiovisual work is released (known as 'release windows'[[#_ftn2|<span><span><span style="font-size: 12pt"><font color="#000080">[2]</font></span></span></span>]]) as a condition for granting aid. According to the case law of the European Court of Justice, such restrictions comply with the Treaty if their aim is to encourage cinematographic production as such and do not exceed that which is necessary in order to ensure the attainment of the objective in view[[#_ftn3|<span><span><span><span style="font-size: 12pt"><font color="#000080">[3]</font></span></span></span></span>However, the commercial aspects of the distribution and marketing strategy may differ depending on the audiovisual work in question. Mandatory release windows as a condition of the aid may have an impact on the visibility and circulation of audiovisual works. Member States are recommended not to impose unnecessary limitations on the distribution and marketing of an audiovisual work as a condition for supporting it.]]. </div>
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== '''<font size="4"><font size="3">'''<span style="font-style: normal">Promoting the international availability of films online</span>'''</font></font>''' ==
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<div style="text-indent: -1cm; margin: 0cm 0cm 12pt 1cm">36.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>As was also revealed by the first public consultation, film distributors may bundle rights for the exploitation of films on a national basis. Usually, they buy the exploitation rights in the pre-production phase and therefore play a crucial role in the financing of the film. Producers are often dependent on the pre-sale of their rights and therefore attempt to maximise their short-term revenues by selling all rights for different territories on an exclusive basis (theatrical rights, broadcasting rights, digital rights, etc.). Broadcasters often demand the exclusive digital rights in addition to the broadcasting rights.</div><div style="text-indent: -1cm; margin: 0cm 0cm 12pt 1cm">37.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Few European films are distributed outside their production territories. Member States are recommended to promote the cross-border availability of European films and&nbsp;could for example, as a condition of the aid, encourage rights holders to release to third parties the online rights for those exploitations (including those territories) that they are otherwise unable to exploit. This would also encourage innovative online business models, foster competition and promote the international availability of films online.</div><div style="text-indent: -1cm; margin: 0cm 0cm 12pt 1cm">38.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>More broadly, the Commission will examine as a follow up to the Audiovisual Green Paper whether, consistent with a high degree of protection for rights holders, the regulatory framework should be adapted in order to promote the online distribution of audiovisual works. The proposal for a Council recommendation on the European film in the digital era examines how to promote appropriate practices notably by increasing the transparency of reporting and payments. Such transparency would serve to promote trust among the actors and assist in the development of digital distribution.</div>
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== '''<font size="4"><font size="3">'''<span style="font-style: normal">Film </span>''''''<span style="font-style: normal">heritage</span>'''</font></font>''' ==
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<div style="text-indent: -1cm; margin: 0cm 0cm 12pt 1cm">39.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Films should be collected, preserved and accessible for future generations for cultural and educational purposes. Therefore, as a condition of the aid, it is recommended that Member States require and support producers to deposit a copy of the aided film suitable for long-term preservation in the film heritage institution designated by the funding body[[#_ftn4|<span><span><span style="font-size: 12pt"><font color="#000080">[4]</font></span></span></span>]].</div>
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= '''<font size="6"><font size="3">Assessing the compatibility of the aid</font></font>''' =
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<div style="text-indent: -26.95pt; margin: 0cm 0cm 6pt 1cm">40.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>When it assesses aid schemes to cinema and TV production, the Commission verifies on the basis of the above considerations </div><div style="margin: 0cm 0cm 6pt 26.95pt">&nbsp;&nbsp; - First, whether the aid scheme respects the "general legality" principle, i. e. the Commission must verify that the scheme does not contain clauses that would be contrary to provisions of the TFEU in fields other than State aid;</div><div style="margin: 0cm 0cm 12pt 26.95pt">&nbsp;&nbsp; - Secondly, whether the scheme fulfils the specific compatibility criteria for aid, set out below. </div>
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== '''<font size="5"><font size="3">General legality</font></font>''' ==
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<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">41.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The Commission must first verify that the aid respects the “general legality” principle and that the eligibility conditions and award criteria do not contain clauses contrary to the TFEU in fields other than State aid. This includes ensuring that the TFEU principles prohibiting discrimination on the grounds of nationality, free movement of goods, free movement of workers, freedom of establishment, freedom to provide services and freedom of movement of capital have been respected (Articles 18, 34, 36, 45, 49, 54, 56 and 63 TFEU). The Commission enforces these principles in conjunction with the application of competition rules when the provisions in breach of these principles are inseparable from the operation of the scheme.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 6pt 1cm">42.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>In compliance with the above principles, aid schemes must not, for example:</div><div style="text-indent: -14.2pt; margin: 0cm 0cm 6pt 56.75pt"><span>·<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span></span>reserve the aid exclusively for nationals;</div><div style="text-indent: -14.2pt; margin: 0cm 0cm 6pt 56.75pt"><span>·<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span></span>require beneficiaries to have the status of national undertaking established under national commercial law (undertakings established in one Member State and operating in another by means of a permanent branch or agency must be eligible for aid; furthermore the agency requirement should only be enforceable upon payment of the aid and should&nbsp;never lead to an obligation to set up more than one establishment on the territory of a given Member State);</div><div style="text-indent: -14.2pt; margin: 0cm 0cm 6pt 56.75pt"><span>·<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span></span>require workers of foreign companies providing filmmaking services to comply with national labour standards;</div><div style="text-indent: -14.2pt; margin: 0cm 0cm 6pt 56.75pt"><span>·<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span></span>unduly limit the freedom of aid beneficiaries to acquire goods and services anywhere in the internal market. However, an <span>aid scheme </span>for film production may impose an eligibility condition that a proportion of the aid amount of up to a maximum of 100% of the aid amount is spent in a given territory of the granting Member State, provided that this is no more than 50% of the production budget.</div>
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== '''<font size="5"><font size="3">Specific assessment criteria under Article 107(3)(d) TFEU</font></font>''' ==
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<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">43.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The objective for supporting the production of European audiovisual works and ensuring the existence of the infrastructure necessary for their production and exhibition is the shaping of European cultural identities and the enhancement of cultural diversity. Therefore, the purpose of the aid is the promotion of culture. Such aid may be compatible with the Treaty in accordance with Article 107(3)(d) TFEU. Undertakings in the film and TV programme production sector may also benefit from other aid types granted under Article 107(3)(a) and (c) TFEU (e.g. regional aid, aid for SME, Research and Development, training, or employment), within the maximum aid intensities in the case of cumulation of aid.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">[[|18.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>In the case of schemes designed to support the script-writing, development, production, distribution and promotion of audiovisual works covered by this Communication, the Commission will examine the following criteria to assess whether the scheme is compatible with the Treaty under Article 107(3)(d) TFEU:]]</div><div style="text-indent: -28.8pt; margin: 0cm 0cm 12pt 55.75pt">(1)<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The aid is directed to a cultural product. Each Member State ensures that the content of the aided production is cultural according to its own national criteria, through an effective verification process to avoid a manifest error: either through the selection of film proposals by a panel, or, in the absence of such a selection process, by establishing a list of cultural criteria against which each audiovisual work will be verified.</div><div style="text-indent: -28.8pt; margin: 0cm 0cm 12pt 55.75pt">(2)<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>If the audiovisual work to be supported is a European work[[#_ftn5|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt"><font color="#000080">[5]</font></span></span></span></span>]], the aid intensity must in principle be limited to 50% of the production budget, with a view to stimulating normal commercial initiatives. Where several aid schemes are applied to the same cost, it is the cumulated aid intensity that must be limited to 50%. In view of the importance of co-operation of producers of different Member States for the production of European works which are seen across several Member States, and in line with Article 167 (2) TFEU, the aid intensity for cross-border productions funded by more than one Member State and involving producers from more than one Member State may be up to 60%. Difficult audiovisual works[[#_ftn6|<span><span><span style="font-size: 12pt"><font color="#000080">[6]</font></span></span></span>]] and co-productions involving countries from the DAC List of the OECD[[#_ftn7|<span><span><span style="font-size: 12pt"><font color="#000080">[7]</font></span></span></span>]] are excluded from these limits. Films whose sole original version is in the national language of Member States with a limited territory, population and language area may be regarded as difficult audiovisual works in this context.</div><div style="text-indent: -28.8pt; margin: 0cm 0cm 12pt 55.75pt">(3)<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>In principle, there is no limit for aid to script writing or development. However, if the resulting script or project is ultimately made into a film, the costs of script-writing and development are subsequently included in the production budget and taken into account for calculating the maximum aid intensity for the audiovisual work as set out in paragraph (2) above.</div><div style="text-indent: -28.8pt; margin: 0cm 0cm 12pt 55.75pt">(4)<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The costs of distributing and promoting European audiovisual works which are eligible for production support may be supported with the same aid intensity as they were or could have been for their production.</div><div style="text-indent: -28.8pt; margin: 0cm 0cm 12pt 55.75pt">[[|(5)<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>However, if the audiovisual work to be supported is not a European work]][[#_ftn8|<sup><span style="font-size: 10pt"><span><sup><span style="font-size: 10pt"><font color="#000080">[8]</font></span></sup></span></span></sup>]], the aid should be limited to the following regressive maximum aid intensities, related to the production budget:</div>
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{| style="margin: auto auto auto 64.9pt; border-collapse: collapse" class="FCK__ShowTableBorders" border="0" cellspacing="0" cellpadding="0" width="492"
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|-
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| style="border-bottom: black 1pt solid; border-left: black 1pt solid; padding-bottom: 2.75pt; background-color: transparent; padding-left: 2.75pt; width: 200.75pt; padding-right: 2.75pt; border-top: black 1pt solid; border-right: #f0f0f0; padding-top: 2.75pt" valign="top" width="268" | <div style="text-align: center; margin: 0cm 0cm 12pt" align="center">'''Part of the production budget'''</div>
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| style="border-bottom: black 1pt solid; border-left: black 1pt solid; padding-bottom: 2.75pt; background-color: transparent; padding-left: 2.75pt; width: 168.1pt; padding-right: 2.75pt; border-top: black 1pt solid; border-right: black 1pt solid; padding-top: 2.75pt" valign="top" width="224" | <div style="text-align: center; margin: 0cm 0cm 12pt" align="center">'''Maximum aid intensity'''</div>
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|-
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| style="border-bottom: black 1pt solid; border-left: black 1pt solid; padding-bottom: 2.75pt; background-color: transparent; padding-left: 2.75pt; width: 200.75pt; padding-right: 2.75pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 2.75pt" valign="top" width="268" | <div style="text-align: center; margin: 0cm 0cm 12pt" align="center">Less than €10m</div>
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| style="border-bottom: black 1pt solid; border-left: black 1pt solid; padding-bottom: 2.75pt; background-color: transparent; padding-left: 2.75pt; width: 168.1pt; padding-right: 2.75pt; border-top: #f0f0f0; border-right: black 1pt solid; padding-top: 2.75pt" valign="top" width="224" | <div style="text-align: center; margin: 0cm 0cm 12pt" align="center">50.00%</div>
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|-
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| style="border-bottom: black 1pt solid; border-left: black 1pt solid; padding-bottom: 2.75pt; background-color: transparent; padding-left: 2.75pt; width: 200.75pt; padding-right: 2.75pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 2.75pt" valign="top" width="268" | <div style="text-align: center; margin: 0cm 0cm 12pt" align="center">€10m - €20m</div>
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| style="border-bottom: black 1pt solid; border-left: black 1pt solid; padding-bottom: 2.75pt; background-color: transparent; padding-left: 2.75pt; width: 168.1pt; padding-right: 2.75pt; border-top: #f0f0f0; border-right: black 1pt solid; padding-top: 2.75pt" valign="top" width="224" | <div style="text-align: center; margin: 0cm 0cm 12pt" align="center">30.00%</div>
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|-
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| style="border-bottom: black 1pt solid; border-left: black 1pt solid; padding-bottom: 2.75pt; background-color: transparent; padding-left: 2.75pt; width: 200.75pt; padding-right: 2.75pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 2.75pt" valign="top" width="268" | <div style="text-align: center; margin: 0cm 0cm 12pt" align="center">Over €20m</div>
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| style="border-bottom: black 1pt solid; border-left: black 1pt solid; padding-bottom: 2.75pt; background-color: transparent; padding-left: 2.75pt; width: 168.1pt; padding-right: 2.75pt; border-top: #f0f0f0; border-right: black 1pt solid; padding-top: 2.75pt" valign="top" width="224" | <div style="text-align: center; margin: 0cm 0cm 12pt" align="center">10.00%</div>
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|}
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<div style="margin: 0cm 0cm 12pt 26.95pt">&nbsp;</div><div style="text-indent: -28.8pt; margin: 0cm 0cm 12pt 55.75pt">(6)<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Apart from aid to script writing and development, aid granted for specific production activities (such as post-production or principal photography) is not allowed in order to ensure that the aid has a neutral incentive effect and consequently that the protection/attraction of those specific activities in/to the Member State granting the aid is avoided.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm"><span>45.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span></span>In determining whether the maximum aid intensity is respected, the total amount of public support measures of Member States for the aided activity or project shall be taken into account, regardless of whether that support is financed from local, regional, national or Union sources. However, funds awarded directly by EU programmes like MEDIA, without the involvement of Member States in the award decision, are not State resources. Therefore, their assistance does not count for the purposes of respecting the aid ceilings. </div>
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= '''<font size="6"><font size="3">Appropriate Measures</font></font>''' =
 +
<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">46.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The Commission proposes as appropriate measures for the purposes of Article 108(1) TFEU that Member States bring their existing schemes regarding film funding in line with this Communication, within 12 months following its publication in the Official Journal. Member States should confirm to the Commission within one month of publication of the Communication in the Official Journal that they agree to the appropriate measures proposed. In the absence of any reply, the Commission will take it that the Member State concerned does not agree.</div>
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= '''<font size="6"><font size="3">Application</font></font>''' =
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<div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">47.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>This Communication will be applied from the first day following its publication in the Official Journal of the European Union. It will replace the State aid provisions of the 2001 Cinema Communication.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">48.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>The Commission will apply this Communication to all notified aid measures in respect of which it is called upon to take a decision after the Communication is published in the Official Journal, even where the aid measures were notified prior to that date.</div><div style="text-indent: -26.95pt; margin: 0cm 0cm 12pt 1cm">49.<span style="font: 7pt 'times new roman'">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>In accordance with the Commission notice on the determination of the applicable rules for the assessment of unlawful State aid[[#_ftn9|<span style="font-size: 10pt"><span><span><span style="font-size: 10pt"><font color="#000080">[9]</font></span></span></span></span>]], in the case of non-notified aid the Commission will apply:</div><div style="margin: 0cm 0cm 12pt 26.95pt">&nbsp;&nbsp; (a) this Communication, if the aid was granted after its publication in the Official Journal of the EU;</div><div style="margin: 0cm 0cm 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b) the 2001 Cinema Communication in all other cases.</div><div style="text-align: left; margin: 6pt 0cm 6pt 42.5pt" align="left">&nbsp;</div><span style="font-size: 12pt">
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</span><div style="text-align: center; margin: 6pt 0cm" align="center">'''Annex'''</div><div style="margin: 6pt 0cm">A European audiovisual work is any work complying with the following conditions: </div><div style="margin: 6pt 0cm">- the work has been majority produced by a producer or producers established in the European Union/EEA. To be considered as the actual producers, the production companies must be credited as such. Other elements such as creative control, ownership of exploitation rights and share of profits may also be taken into account to determine who the actual producer is; </div><div style="margin: 6pt 0cm"><u>and</u> </div><div style="margin: 6pt 0cm">- the work must be produced with the significant participation of professionals who are nationals/residents of Member States of the European Union/EEA ‘Significant participation’ is defined as having more than 50% of the points on the basis of the table below, (e.g. having 10 or more points in the case of a work of fiction or the biggest share of points if the total is less than 19 as is normally the case for documentaries or animation films where all of the categories are not usually included in the credits): </div><div>&nbsp;</div>
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{| style="margin: auto auto auto 47.4pt; border-collapse: collapse" class="FCK__ShowTableBorders" border="0" cellspacing="0" cellpadding="0"
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|- style="height: 7.85pt"
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">'''European Elements'''</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">'''Points'''</div>
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|- style="height: 7.85pt"
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Director</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">3</div>
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|- style="height: 7.85pt"
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Scriptwriter</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">3</div>
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|- style="height: 7.85pt"
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Composer</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">1</div>
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|- style="height: 7.85pt"
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Actor 1</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">2</div>
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|- style="height: 7.85pt"
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Actor 2</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">2</div>
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|- style="height: 7.85pt"
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Actor 3</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">2</div>
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|- style="height: 7.85pt"
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Artistic director /Production design</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">1</div>
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|- style="height: 7.85pt"
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Director of Photography</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">1</div>
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|- style="height: 7.85pt"
 +
| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Editor</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">1</div>
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|- style="height: 7.85pt"
 +
| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Sound</div>
 +
| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">1</div>
 +
|- style="height: 7.85pt"
 +
| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Shooting location</div>
 +
| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">1</div>
 +
|- style="height: 7.85pt"
 +
| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">Laboratory</div>
 +
| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.85pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">1</div>
 +
|- style="height: 7.95pt"
 +
| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.95pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">'''Total'''</div>
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| style="border-bottom: #f0f0f0; border-left: #f0f0f0; padding-bottom: 0cm; background-color: transparent; padding-left: 5.4pt; width: 114.65pt; padding-right: 5.4pt; height: 7.95pt; border-top: #f0f0f0; border-right: #f0f0f0; padding-top: 0cm" valign="top" width="153" | <div style="layout-grid-mode: char">'''19'''</div>
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|}
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<div><br>
 +
----
 +
<div id="ftn1"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref1|<span><span><span style="font-size: 10pt"><font color="#000080">[1]</font></span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; COM(2011) 427 final.</font></div></div><div id="ftn2"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref2|<span><span><span style="font-size: 10pt"><font color="#000080">[2]</font></span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In particular on the sequence of releasing films via cinemas, pay-TV, home video sale, home video rental, free TV, and video-on-demand.</font></div></div><div id="ftn3"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref3|<span><span><span style="font-size: 10pt"><font color="#000080">[3]</font></span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Case 60-61/84 ''Cinetheque SA'', Judgment of 11 July 1985, [1985] ECR-2605.</font></div></div><div id="ftn4"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref4|<span><span><span style="font-size: 10pt"><font color="#000080">[4]</font></span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Film Heritage Institutions are designated by Member States in order to collect, preserve and make available film heritage for cultural and educational purposes. In application of the 2005 European Parliament and Council Recommendation on film heritage, Member States have listed their Film Heritage Institutions. The current list is available at:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>[http://ec.europa.eu/avpolicy/docs/reg/cinema/institutions.pdf <font color="#000080" size="2">http://ec.europa.eu/avpolicy/docs/reg/cinema/institutions.pdf</font>]<font size="2">.</font></div></div><div id="ftn5"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref5|<span><span><span style="font-size: 10pt"><font color="#000080">[5]</font></span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As defined in the Annex of this Communication.</font></div></div><div id="ftn6"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref6|<span><span><span style="font-size: 10pt"><font color="#000080">[6]</font></span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Such as short films, films by first-time and second-time directors, documentaries, or low budget or otherwise commercially difficult works.</font></div></div><div id="ftn7"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref7|<span><span><span style="font-size: 10pt"><font color="#000080">[7]</font></span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The DAC list shows all countries and territories eligible to receive official development assistance.&nbsp;These consist of all low and middle income countries based on gross national income (GNI) per capita as published by the&nbsp;World Bank, with the exception of&nbsp;G8 members, EU members, and countries with a firm date for entry into the EU.&nbsp;The list also includes all of the Least Developed Countries (LDCs) as defined by the&nbsp;United Nations. See&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>[http://www.oecd.org/document/45/0,3746,en_2649_34447_2093101_1_1_1_1,00.html <font color="#000080" size="2">http://www.oecd.org/document/45/0,3746,en_2649_34447_2093101_1_1_1_1,00.html</font>]<font size="2">.</font></div></div><div id="ftn8"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref8|<span><span><span style="font-size: 10pt"><font color="#000080">[8]</font></span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As defined in the Annex of this Communication.</font></div></div><div id="ftn9"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref9|<span><span><span style="font-size: 10pt"><font color="#000080">[9]</font></span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; OJ C 119, 22.05.2002, p. 22.</font></div></div></div></div><div><br>
 
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----
 
<div id="ftn1"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref1|<span><span><span style="font-size: 10pt">[9]</span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Treaty principles do not prevent Member States from requiring that even up to 100% of the production budget is spent within the EEA. This would not fragment the Internal Market since it would not tie the aid to any specific part of the EEA.</font></div></div><div id="ftn2"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref2|<span><span><span style="font-size: 10pt">[10]</span></span></span>]]<font size="2"><span>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2008 Study on the Economic and Cultural Impact, notably on Co-productions, of Territorialisation Clauses of State aid Schemes for Films and Audiovisual Productions</span>, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;http://ec.europa.eu/avpolicy/info_centre/library/studies/index_en.htm#finalised.</font></div></div><div id="ftn3"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref3|<span><span><span style="font-size: 10pt">[11]</span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; For example: a producer is making a film with a budget of €10 million and applies for aid to a scheme offering at most €1 million per film. It is disproportionate to exclude the film from the scheme on the grounds that the producer does not expect to spend at least €8 million of the production budget in the territory offering the aid.</font></div></div><div id="ftn4"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref4|<span><span><span style="font-size: 10pt">[12]</span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This means that a scheme must not exclude a film from the aid on the grounds that it will not spend more than 100% of the aid amount locally (eligibility criterion). This does not prevent a selection committee from awarding the aid to the films it considers to be the most deserving among the project proposals received. In practice, overall, film productions supported under a film scheme often spend more production expenditure in the territory than the aid amount. In any case, Member States are under no obligation to impose territorial spending requirements on film producers.</font></div></div><div id="ftn5"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref5|<span><span><span style="font-size: 10pt">[13]</span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The</font><font size="2">Member State may nonetheless require that up to 100% of production aid is spent in its territory.</font></div></div></div><div><br>
 
<div id="ftn1"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref1|<span><span><span style="font-size: 10pt">[9]</span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Treaty principles do not prevent Member States from requiring that even up to 100% of the production budget is spent within the EEA. This would not fragment the Internal Market since it would not tie the aid to any specific part of the EEA.</font></div></div><div id="ftn2"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref2|<span><span><span style="font-size: 10pt">[10]</span></span></span>]]<font size="2"><span>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2008 Study on the Economic and Cultural Impact, notably on Co-productions, of Territorialisation Clauses of State aid Schemes for Films and Audiovisual Productions</span>, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;http://ec.europa.eu/avpolicy/info_centre/library/studies/index_en.htm#finalised.</font></div></div><div id="ftn3"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref3|<span><span><span style="font-size: 10pt">[11]</span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; For example: a producer is making a film with a budget of €10 million and applies for aid to a scheme offering at most €1 million per film. It is disproportionate to exclude the film from the scheme on the grounds that the producer does not expect to spend at least €8 million of the production budget in the territory offering the aid.</font></div></div><div id="ftn4"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref4|<span><span><span style="font-size: 10pt">[12]</span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This means that a scheme must not exclude a film from the aid on the grounds that it will not spend more than 100% of the aid amount locally (eligibility criterion). This does not prevent a selection committee from awarding the aid to the films it considers to be the most deserving among the project proposals received. In practice, overall, film productions supported under a film scheme often spend more production expenditure in the territory than the aid amount. In any case, Member States are under no obligation to impose territorial spending requirements on film producers.</font></div></div><div id="ftn5"><div style="margin: 0cm 0cm 0pt 36pt">[[#_ftnref5|<span><span><span style="font-size: 10pt">[13]</span></span></span>]]<font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The</font><font size="2">Member State may nonetheless require that up to 100% of production aid is spent in its territory.</font></div></div></div><div><br>

Revision as of 19:38, 19 March 2012

Draft Communication from the Commission on State aid for films and other audiovisual works

Introduction

1.            Audiovisual works, particularly films, play an important role in shaping European identities. They reflect the cultural diversity of the different traditions and histories of the EU Member States and regions. Audiovisual works are both economic goods, offering important opportunities for the creation of wealth and employment, and cultural goods which mirror and shape our societies.
2.            Amongst audiovisual works, films still have a particular prominence, because of their cost of production and cultural importance. Film production budgets are substantially higher than for other audiovisual content, they are more frequently the subject of international coproduction, and the duration of their exploitation life is longer. Films in particular face strong competition from outside Europe. On the other hand, there is little circulation of European audiovisual works outside their country of origin.
3.            This limited circulation results from the fragmentation of the European audiovisual sector into national or even regional markets. While this is related to Europe's linguistic and cultural diversity, proximity is also built into the public support for European audiovisual works, with which national, regional and local funding schemes subsidise many small production companies.
4.            It is generally accepted that aid is important to sustain European audiovisual production. It is difficult for film producers to obtain a sufficient level of upfront commercial backing to put together a financial package so that production projects can proceed. The high risk associated with their businesses and projects, together with the perceived lack of profitability of the sector, make it dependent on State aid. In these circumstances, the fostering of audiovisual production by the Commission and the Member States have a role to ensure that their culture and creative capacity can be expressed and the diversity and richness of European culture reflected.
5.            MEDIA, the European Union's support programme for the film, television and new media industries, offers many different funding schemes, each targeting different areas of the audiovisual sector, including schemes for producers, distributors, sales agents, organisers of training courses, operators in new digital technologies, operators of video-on-demand (VoD) platforms, exhibitors and organisers of festivals, markets and promotional events. It encourages the circulation and promotion of European films with particular emphasis on non-national European films.
6.            Member States implemented a wide range of support measures for the production of films, TV programmes and other audiovisual works. The rationale behind these measures is based on both cultural and industrial considerations. They have the primary cultural aim of ensuring that the national and regional cultures and creative potential are expressed in the audiovisual media of film and television. On the other hand, they aim to generate the critical mass of activity that is required to create the dynamic for the development and consolidation of the industry through the creation of soundly based production undertakings and the development of a permanent pool of human skills and experience.
7.            Grants, tax incentives and other types of audiovisual support generally involve State resources. Since film producers are acting on an international level and audiovisual works are traded internationally, such support is liable to affect trade between Member States. Those producers and audiovisual works which receive such support are likely to have a financial and hence competitive advantage over those which do not. Consequently, such support may distort competition and is regarded as State aid.
8.            The Treaty recognises the utmost importance of promoting culture for the European Union and its Member States by incorporating culture among the Union's policies specifically referred to in the Treaty on the Functioning of the European Union (TFEU). Article 167 (2) TFEU provides that:
Action by the Union shall be aimed at encouraging cooperation between Member States and, if necessary, supporting and supplementing their action in the following areas:
            […]
            - artistic and literary creation, including in the audiovisual sector.
9.            Article 167 (4) TFEU provides that: The Union shall take cultural aspects into account in its action under other provisions of the Treaties, in particular in order to respect and to promote the diversity of its cultures.
10.        Article 107 (1) TFEU prohibits aid granted by the State or through State resources, which distorts or threatens to distort competition and trade between Member States. However, the Commission may exempt certain State aid from this prohibition. One of these exemptions is Article 107 (3) (d) TFEU for aid to promote culture, where such aid does not affect competition and trading conditions to an extent contrary to the common interest.
11.        In line with the subsidiarity principle enshrined in Article 5 TEU, the definition of cultural activities is primarily a responsibility of the Member States. In assessing an audiovisual support scheme, the task of the Commission is limited to verifying whether a Member State has a relevant, effective verification mechanism in place able to avoid manifest error.
12.        As explained further in Section 3, this would be achieved through the existence of either a cultural selection process to determine which audiovisual works should benefit from aid or a cultural profile to be fulfilled by all audiovisual works as a condition of the aid. The Commission notes that the fact that a film is commercial does not prevent it from being cultural. This is in line with the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions of 2005[1].
13.        The assessment criteria for State aid for the production of films and other audiovisual works were originally set out in the 2001 Cinema Communication[2]. The validity of these criteria was extended in 2004[3], 2007[4] and 2009[5] and expired further to the publication of the present Communication.
14.        In view of a number of different trends which have emerged since 2001, this Communication aims to ensure that European audiences are offered a more culturally diverse choice of audiovisual works by:
  • extending the scope of activities covered by the Communication to include all aspects from story concept to delivery to the audience;
  • limiting the possibility to impose territorial obligations on production expenditure;
  • controlling the competition between Member States to use State aid to attract inward investment from major productions; and
  • referring to Commission initiatives aimed at improving the circulation and increasing the audience of European films for the benefit of both the European audiovisual industry and the citizens.


Scope of activities

15.            Regarding the scope of activities to which this Communication applies, the State aid criteria of the 2001 Cinema Communication focused on the production of films. Some Member States however offer also support for other related activities which fell outside the scope of the 2001 Cinema Communication criteria, such as script-writing, development, film distribution, or film promotion (e.g. on film festivals). In these cases, the Commission applied the criteria of the Cinema Communication as a reference to assess the necessity, proportionality and adequacy of the aid, whenever such aid was notified to it.
16.            The objective of protecting and promoting Europe's cultural diversity through audiovisual works can only be achieved if these works are seen by audiences. Aid to production alone risks stimulating the supply of audiovisual content without ensuring that the resulting audiovisual work is properly distributed and promoted. It is therefore necessary and appropriate that aid may cover all aspects of film creation, from story concept to delivery to the audience. The support for such activities and its intensity should be linked to audiovisual works which are eligible for aid to promote culture.
17.            Apart from aid specifically granted for script writing, development, distribution or promotion, any aid granted to a specific audiovisual work should contribute to its overall budget. The producer should be free to choose the items of the budget that will be spent in other Member States. The earmarking of aid to specific components of the film budget could turn such aid into a national preference to the sectors providing the specific aided items, which would be incompatible with the Treaty.
18.            Some Member States also offer aid to cinemas, for example to support rural cinemas or arthouse cinemas in general or to cover their transition to digital film projection. However, the amounts involved are usually small, so that rural and arthouse cinemas should be sufficiently served by the levels of aid which fall under the de minimis Regulation[6]. Aid for renovation investment of small and medium-sized enterprises (SME) may also meet the conditions of the General Block Exemption Regulation (GBER)[7]. If special circumstances would justify more support, this should be assessed on a case-by-case basis. Therefore the Commission does not consider it necessary to establish specific rules for operating or investment aid to cinemas.
19.            Some Member States support audiovisual projects which go beyond the traditional concept of film and TV productions, in particular interactive products like transmedia or games. Transmedia storytelling (also known as multi-platform storytelling or cross-media storytelling) is the technique of telling stories across multiple platforms and formats using digital technologies, like films and games. Importantly, these pieces of content are linked together[8]. Since transmedia projects are inevitably linked to the production of a film, the film production component is considered to be an audiovisual work within the scope of this Communication.
20.            Games represent a significant opportunity for Europe in the coming years. They have other characteristics regarding production, distribution, marketing, and consumption than films. Not all games necessarily qualify as audiovisual works or cultural products. Therefore, the rules designed for film production cannot apply automatically to games. Furthermore, contrary to the film and television sector, the Commission does not have a critical mass of decisions on State aid to games. It would therefore be premature to integrate this sector in the present communication. Consequently, this Communication does not cover aid granted to games. Any aid measures in support of games not meeting the conditions of the GBER or the de minimis Regulation will continue to be addressed on a case-by-case basis. To the extent that the necessity of an aid scheme targeted at cultural and educative games can be demonstrated, the Commission will apply the aid intensity criteria of this Communication by analogy.

Territorial spending obligations

21.            Territorial spending obligations on film producers to spend a certain part of the film production budget in a particular territory have been controversial since the Commission started looking into film support schemes. The 2001 Cinema Communication allowed Member States to impose that up to 80% of the entire film budget needed to be spent on their territory.
22.            Territorial requirements fragment the Internal Market for audiovisual production. However, when assessing State aid schemes, the Commission must ensure that the Treaty principles are respected[9]. The territorial criterion of the 2001 Cinema Communication derogated from these principles to ensure the continued presence of the human skills and technical expertise required for cultural creation within the Member State offering the aid.
23.            The Commission acknowledges that the specific characteristics of the film industry have to be taken into consideration, in particular its extreme mobility. To a certain extent, these conditions are therefore necessary to maintain a critical mass of infrastructure for film production in the Member State or region granting the aid.
24.            A study into the economic and cultural impact of territorial conditions in film support schemes was carried out for the Commission and completed in 2008[10]. As stated in the 2009 extension of the Cinema Communication, overall, the study was inconclusive. It could not confirm either positive or negative effects of territorial conditions. It did not demonstrate that high territorial conditions lead to sufficient positive effects to justify maintaining the levels of restrictions applicable at the time. Moreover, since most post-production of films and audiovisual works is now done digitally (which was not the case in 2001), it is possible to shoot and edit films in different countries without harming their technical or cultural quality.
25.            Therefore the amount of expenditure which is tied by territorial conditions should have at least a proportional relation with the amount of the actual financial commitment of a Member State and not with the overall production budget. It is not proportionate for Member States to require film producers to spend 80% of the production budget in their territories, regardless of the aid amount available[11]. Accordingly, it seems more appropriate to base the maximum territorial spending obligations on the amount of the aid than on the production budget.
26.            The Commission considers that Member States may require that up to 100% of the aid awarded to the production of a given audiovisual work is spent in the territory offering the aid[12]. Furthermore, the Commission considers that, for audiovisual support schemes in which the aid intensity is based on the production expenditure in a given territory, such as film tax incentives, any production expenditure within the EEA must be eligible[13].
27.            When the 2001 Cinema Communication was adopted, the phenomenon that Member States try to use film aid to attract major foreign film projects to be produced in their territory had not emerged. Since then, several Member States have introduced schemes with the declared objective of capturing a higher share of mobile film projects. All of these schemes easily met the 2001 State aid assessment criteria since the aid was directed towards a cultural product, had territorial expenditure requirements of up to 80% of the production budget, had aid intensities well below 50% and eligible expenditure covered all forms of production expenditure in the Member State.
28.         Comments received during the public consultation preceding the present Communication suggest that the principal objective of this type of aid is to attract high profile productions to Europe, in global competition with the locations and facilities in the United States, Canada, New Zealand, or Australia. Contributors to the consultation agreed that these productions were necessary to maintain a high quality audiovisual infrastructure, to contribute to the employment of high class studio facilities, equipment and staff, and to contribute to transfer of technology, know how and expertise. The partial employment of facilities by foreign productions would also help to have the capacities to realise high quality and high profile European productions.
29.         Regarding the possible effect on the European audiovisual sector, foreign production may have a lasting impact as it usually makes wide use of this local infrastructure and of local cast. Overall, this may thus have a positive effect on the national audiovisual sector. It should also be noted that many of the films which are considered to be major third country projects are in fact co-productions involving also European producers. Thereby these subsidies would contribute also to the promotion of European audiovisual works and to sustaining facilities for national productions. However, the Commission is concerned that Member States are increasingly using public funding to compete with each other and not only with third countries to attract film productions to their territory. Although this aid for foreign productions is also likely to serve the objective of promoting culture, the question is not usually whether these audiovisual works will be produced at all but rather where this will be done. 
30.         For the application of Article 107 TFEU, it is sufficient that there is a threat of distortion of competition, which clearly exists in this context and which would be considerably reduced if any production expenditure at least within the EEA would be eligible as a reference for the aid intensity in audiovisual support schemes.
31.         If the Commission is nevertheless of the view that such aid may in principle be compatible with Article 107(3)d TFEU as aid to promote culture, certain limits have to be set. The amounts of aid can be very high, in view of the huge budgets of major third country productions. Setting a cap will ensure that other parameters for the location decision making, such as the quality of local crew, stages, and technology remain decisive and that competition takes place primarily on the basis of quality and price, rather than on the basis of State aid.
32.         Therefore the Commission considers it appropriate to develop different standards for European and other films. If a scheme is open to films and TV productions which do not meet the definition of a European work, as described in the annex, the maximum aid intensity should be reduced for higher budget films, on the basis of a regressive scale.
33.          This will limit the possible distortive effect on competition while still leaving the possibility to strengthen the local audiovisual sector in the interest of promoting indirectly European film productions. It will avoid further increase of budgets used for a subsidy contest.

Improving circulation of european films and audience choice  

34          The digital revolution offers potential opportunities as it offers increasing possibilities of access for the public to audiovisual productions and enables European films to increase their audience. The Green Paper on the online distribution of audiovisual works[1] launches a debate as to whether changes need to be made, including to the regulatory framework, in order to enable rights holders, users and citizens to profit from the potential of the digital single market.

Sequencing of release windows

35.            A number of contributors to the first public consultation noted that certain Member States impose conditions on the timing and/or territory in which the aided audiovisual work is released (known as 'release windows'[2]) as a condition for granting aid. According to the case law of the European Court of Justice, such restrictions comply with the Treaty if their aim is to encourage cinematographic production as such and do not exceed that which is necessary in order to ensure the attainment of the objective in view[3]However, the commercial aspects of the distribution and marketing strategy may differ depending on the audiovisual work in question. Mandatory release windows as a condition of the aid may have an impact on the visibility and circulation of audiovisual works. Member States are recommended not to impose unnecessary limitations on the distribution and marketing of an audiovisual work as a condition for supporting it..

Promoting the international availability of films online

36.         As was also revealed by the first public consultation, film distributors may bundle rights for the exploitation of films on a national basis. Usually, they buy the exploitation rights in the pre-production phase and therefore play a crucial role in the financing of the film. Producers are often dependent on the pre-sale of their rights and therefore attempt to maximise their short-term revenues by selling all rights for different territories on an exclusive basis (theatrical rights, broadcasting rights, digital rights, etc.). Broadcasters often demand the exclusive digital rights in addition to the broadcasting rights.
37.         Few European films are distributed outside their production territories. Member States are recommended to promote the cross-border availability of European films and could for example, as a condition of the aid, encourage rights holders to release to third parties the online rights for those exploitations (including those territories) that they are otherwise unable to exploit. This would also encourage innovative online business models, foster competition and promote the international availability of films online.
38.         More broadly, the Commission will examine as a follow up to the Audiovisual Green Paper whether, consistent with a high degree of protection for rights holders, the regulatory framework should be adapted in order to promote the online distribution of audiovisual works. The proposal for a Council recommendation on the European film in the digital era examines how to promote appropriate practices notably by increasing the transparency of reporting and payments. Such transparency would serve to promote trust among the actors and assist in the development of digital distribution.

'Film 'heritage

39.         Films should be collected, preserved and accessible for future generations for cultural and educational purposes. Therefore, as a condition of the aid, it is recommended that Member States require and support producers to deposit a copy of the aided film suitable for long-term preservation in the film heritage institution designated by the funding body[4].

Assessing the compatibility of the aid

40.        When it assesses aid schemes to cinema and TV production, the Commission verifies on the basis of the above considerations
   - First, whether the aid scheme respects the "general legality" principle, i. e. the Commission must verify that the scheme does not contain clauses that would be contrary to provisions of the TFEU in fields other than State aid;
   - Secondly, whether the scheme fulfils the specific compatibility criteria for aid, set out below.

General legality

41.        The Commission must first verify that the aid respects the “general legality” principle and that the eligibility conditions and award criteria do not contain clauses contrary to the TFEU in fields other than State aid. This includes ensuring that the TFEU principles prohibiting discrimination on the grounds of nationality, free movement of goods, free movement of workers, freedom of establishment, freedom to provide services and freedom of movement of capital have been respected (Articles 18, 34, 36, 45, 49, 54, 56 and 63 TFEU). The Commission enforces these principles in conjunction with the application of competition rules when the provisions in breach of these principles are inseparable from the operation of the scheme.
42.        In compliance with the above principles, aid schemes must not, for example:
·      reserve the aid exclusively for nationals;
·      require beneficiaries to have the status of national undertaking established under national commercial law (undertakings established in one Member State and operating in another by means of a permanent branch or agency must be eligible for aid; furthermore the agency requirement should only be enforceable upon payment of the aid and should never lead to an obligation to set up more than one establishment on the territory of a given Member State);
·      require workers of foreign companies providing filmmaking services to comply with national labour standards;
·      unduly limit the freedom of aid beneficiaries to acquire goods and services anywhere in the internal market. However, an aid scheme for film production may impose an eligibility condition that a proportion of the aid amount of up to a maximum of 100% of the aid amount is spent in a given territory of the granting Member State, provided that this is no more than 50% of the production budget.

Specific assessment criteria under Article 107(3)(d) TFEU

43.        The objective for supporting the production of European audiovisual works and ensuring the existence of the infrastructure necessary for their production and exhibition is the shaping of European cultural identities and the enhancement of cultural diversity. Therefore, the purpose of the aid is the promotion of culture. Such aid may be compatible with the Treaty in accordance with Article 107(3)(d) TFEU. Undertakings in the film and TV programme production sector may also benefit from other aid types granted under Article 107(3)(a) and (c) TFEU (e.g. regional aid, aid for SME, Research and Development, training, or employment), within the maximum aid intensities in the case of cumulation of aid.
[[|18.        In the case of schemes designed to support the script-writing, development, production, distribution and promotion of audiovisual works covered by this Communication, the Commission will examine the following criteria to assess whether the scheme is compatible with the Treaty under Article 107(3)(d) TFEU:]]
(1)          The aid is directed to a cultural product. Each Member State ensures that the content of the aided production is cultural according to its own national criteria, through an effective verification process to avoid a manifest error: either through the selection of film proposals by a panel, or, in the absence of such a selection process, by establishing a list of cultural criteria against which each audiovisual work will be verified.
(2)          If the audiovisual work to be supported is a European work[5], the aid intensity must in principle be limited to 50% of the production budget, with a view to stimulating normal commercial initiatives. Where several aid schemes are applied to the same cost, it is the cumulated aid intensity that must be limited to 50%. In view of the importance of co-operation of producers of different Member States for the production of European works which are seen across several Member States, and in line with Article 167 (2) TFEU, the aid intensity for cross-border productions funded by more than one Member State and involving producers from more than one Member State may be up to 60%. Difficult audiovisual works[6] and co-productions involving countries from the DAC List of the OECD[7] are excluded from these limits. Films whose sole original version is in the national language of Member States with a limited territory, population and language area may be regarded as difficult audiovisual works in this context.
(3)          In principle, there is no limit for aid to script writing or development. However, if the resulting script or project is ultimately made into a film, the costs of script-writing and development are subsequently included in the production budget and taken into account for calculating the maximum aid intensity for the audiovisual work as set out in paragraph (2) above.
(4)          The costs of distributing and promoting European audiovisual works which are eligible for production support may be supported with the same aid intensity as they were or could have been for their production.
[[|(5)          However, if the audiovisual work to be supported is not a European work]][8], the aid should be limited to the following regressive maximum aid intensities, related to the production budget:
Part of the production budget
Maximum aid intensity
Less than €10m
50.00%
€10m - €20m
30.00%
Over €20m
10.00%
 
(6)          Apart from aid to script writing and development, aid granted for specific production activities (such as post-production or principal photography) is not allowed in order to ensure that the aid has a neutral incentive effect and consequently that the protection/attraction of those specific activities in/to the Member State granting the aid is avoided.
45.        In determining whether the maximum aid intensity is respected, the total amount of public support measures of Member States for the aided activity or project shall be taken into account, regardless of whether that support is financed from local, regional, national or Union sources. However, funds awarded directly by EU programmes like MEDIA, without the involvement of Member States in the award decision, are not State resources. Therefore, their assistance does not count for the purposes of respecting the aid ceilings.

Appropriate Measures

46.        The Commission proposes as appropriate measures for the purposes of Article 108(1) TFEU that Member States bring their existing schemes regarding film funding in line with this Communication, within 12 months following its publication in the Official Journal. Member States should confirm to the Commission within one month of publication of the Communication in the Official Journal that they agree to the appropriate measures proposed. In the absence of any reply, the Commission will take it that the Member State concerned does not agree.

Application

47.        This Communication will be applied from the first day following its publication in the Official Journal of the European Union. It will replace the State aid provisions of the 2001 Cinema Communication.
48.        The Commission will apply this Communication to all notified aid measures in respect of which it is called upon to take a decision after the Communication is published in the Official Journal, even where the aid measures were notified prior to that date.
49.        In accordance with the Commission notice on the determination of the applicable rules for the assessment of unlawful State aid[9], in the case of non-notified aid the Commission will apply:
   (a) this Communication, if the aid was granted after its publication in the Official Journal of the EU;
            (b) the 2001 Cinema Communication in all other cases.
 
Annex
A European audiovisual work is any work complying with the following conditions:
- the work has been majority produced by a producer or producers established in the European Union/EEA. To be considered as the actual producers, the production companies must be credited as such. Other elements such as creative control, ownership of exploitation rights and share of profits may also be taken into account to determine who the actual producer is;
and
- the work must be produced with the significant participation of professionals who are nationals/residents of Member States of the European Union/EEA ‘Significant participation’ is defined as having more than 50% of the points on the basis of the table below, (e.g. having 10 or more points in the case of a work of fiction or the biggest share of points if the total is less than 19 as is normally the case for documentaries or animation films where all of the categories are not usually included in the credits):
 
European Elements
Points
Director
3
Scriptwriter
3
Composer
1
Actor 1
2
Actor 2
2
Actor 3
2
Artistic director /Production design
1
Director of Photography
1
Editor
1
Sound
1
Shooting location
1
Laboratory
1
Total
19


[1]              COM(2011) 427 final.
[2]               In particular on the sequence of releasing films via cinemas, pay-TV, home video sale, home video rental, free TV, and video-on-demand.
[3]              Case 60-61/84 Cinetheque SA, Judgment of 11 July 1985, [1985] ECR-2605.
[4]              Film Heritage Institutions are designated by Member States in order to collect, preserve and make available film heritage for cultural and educational purposes. In application of the 2005 European Parliament and Council Recommendation on film heritage, Member States have listed their Film Heritage Institutions. The current list is available at:                http://ec.europa.eu/avpolicy/docs/reg/cinema/institutions.pdf.
[5]               As defined in the Annex of this Communication.
[6]               Such as short films, films by first-time and second-time directors, documentaries, or low budget or otherwise commercially difficult works.
[7]               The DAC list shows all countries and territories eligible to receive official development assistance. These consist of all low and middle income countries based on gross national income (GNI) per capita as published by the World Bank, with the exception of G8 members, EU members, and countries with a firm date for entry into the EU. The list also includes all of the Least Developed Countries (LDCs) as defined by the United Nations. See        http://www.oecd.org/document/45/0,3746,en_2649_34447_2093101_1_1_1_1,00.html.
[8]               As defined in the Annex of this Communication.
[9]               OJ C 119, 22.05.2002, p. 22.


[9]               The Treaty principles do not prevent Member States from requiring that even up to 100% of the production budget is spent within the EEA. This would not fragment the Internal Market since it would not tie the aid to any specific part of the EEA.
[10]               2008 Study on the Economic and Cultural Impact, notably on Co-productions, of Territorialisation Clauses of State aid Schemes for Films and Audiovisual Productions,           http://ec.europa.eu/avpolicy/info_centre/library/studies/index_en.htm#finalised.
[11]               For example: a producer is making a film with a budget of €10 million and applies for aid to a scheme offering at most €1 million per film. It is disproportionate to exclude the film from the scheme on the grounds that the producer does not expect to spend at least €8 million of the production budget in the territory offering the aid.
[12]               This means that a scheme must not exclude a film from the aid on the grounds that it will not spend more than 100% of the aid amount locally (eligibility criterion). This does not prevent a selection committee from awarding the aid to the films it considers to be the most deserving among the project proposals received. In practice, overall, film productions supported under a film scheme often spend more production expenditure in the territory than the aid amount. In any case, Member States are under no obligation to impose territorial spending requirements on film producers.
[13]              TheMember State may nonetheless require that up to 100% of production aid is spent in its territory.


[6]               Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 88 of the Treaty to de minimis aid, OJ L 379, 28.12.2006, p. 5.
[7]               Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation), OJ L 214, 9.8.2008, p. 3.
[8]               Not to be confused with traditional cross-platform media franchises, sequels or adaptations.


[1]               The Convention states in Article 4(4): “Cultural activities, goods and services refers to those activities, goods and services, which … embody or convey cultural expressions, irrespective of the commercial value they may have. Cultural activities may be an end in themselves, or they may contribute to the production of cultural goods and services."
[2]               Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on certain legal aspects relating to cinematographic and other audiovisual works, OJ C 43, 16.2.2002, p. 6.
[3]               OJ C 123, 30.4.2004, p. 1.
[4]               OJ C 134, 16.6.2007, p. 5.
[5]               OJ C 31, 7.2.2009, p. 1.
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