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

1. 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.

2. 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[1]. Aid for renovation investment of small and medium-sized enterprises (SME) may also meet the conditions of the General Block Exemption Regulation (GBER)[2]. 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[3]. 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.

[1]               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.
[2]               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.
[3]               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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