3.4 Relationships between the exhibitors and the public authorities
 
Subsidies (Table 21)

 

The issue of the intervention of public authorities in the cinema exhibition industry is particularly complex. There are three distinct types of subsidy to the exhibition industry:

·         Subsidies to investment
 
The importance of these subsidies, dedicated to renovation or, more rarely, to the construction of new cinemas, is highly variable according to country: it is vital in France, where more than 40 million ECU are donated annually to the cinemas. It is important to emphasize here that these sums are essentially achieved by forced savings on admissions, and therefore should be distinguished from the financial aid granted by the State from public funds. Subsidies everywhere else do not exceed 7 million ECU; the level is very low in countries like Germany, but higher in Denmark, and, to a lesser extent, in Italy and Spain.
 
With the exception of France, Denmark and Germany, where a proportion of the subsidy is allocated automatically, subsidies are always allocated selectively.
 
Local governments increasingly plays a role in maintain the public financing of the exhibition sector. The full amount of their participation, particularly that of the town councils, is very difficult to quantify. Nevertheless, the contribution of local government is known to be substantial in Germany, Denmark, the Netherlands and Italy.

 
·         Subsidies to exhibition
 
In all the countries, subsidies destined for cinema operation (primarily for programming and for enlivening the cinemas etc.) are limited: they are less than 2 million ECU in both the large and small countries of the Community. They seek, on the whole, to maintain exhibition in less favourable geographical areas, particularly rural cinemas (Denmark, France); Art and Experimental cinemas providing so-called "quality" programming. Italy has, relatively, the most significant amount of this sort of subsidy (with its emphasis on the quality of programming).
 
·         Subsidies to the release of copies
 
Here again, France stands out on account of the funds which are guaranteed to the release of copies: this resulted, in 1992, in a release of nearly 3,000 copies of 100 French and foreign films (including some American films). Two other countries, Denmark and Germany, maintain the release of copies, particularly in rural areas, but both do this at a much more modest level.
 
 Table 21a Support for Exhibition
   
Belgium
Denmark
France
Germany
Ireland
Investment Subsidies Type of Subsidy  
(Automatic or Selective)		 Selective Automatic: 521,000 DK  
Selective: 100,000 DK  
Local Councils: 88,000 DK		 Auto: 146.9M FF and Select: 54.2M FF Auto: 3.4M DM 
Select: 0.5M DM		  
Grand Total (1992) about 12M FB  
0.288M ECU		 Total 709,000 DK  
0.094M ECU		 201.1M FF  
29.4M ECU		 3.9M DM  
1.93M ECU		  
Number of establishments benefiting (1992) 1   A: 886  
S: 1,500		 2,722 1
Agency responsible for subsidy Ministère de la Communauté française FSI (Federation financed by public authorities and professional bodies) A: CNC  
S: ADRC		 FFA Irish Film Centre
Exhibition Subsidies Type of Subsidy  
(Automatic or Selective)		 Some selective subsidies Selective: 9,000 DK Selective Selective None
Grand Total (1992) < 5M FB    
0.1M ECU		 9,000 DK + a proportion of the contributions made by local councils 34.4M FF 
5.0M ECU		 Federal: 1.2M DM  
Länder: 5.4M DM  
Total:   6.6M DM  
           3.27M ECU		  
Number of establishments benefiting (1992) 2   1,549 screens 100  
Agency responsible for subsidy Walloon and Flemish communities   ADRC BMI + Länder  
Print Subsidies Type of Subsidy  
(Automatic or Selective)		 None Selective Automatic and Selective Selective None
Grand Total (1992) 0 ECU 1M DK  
0.12M ECU		 38M FF  
5.55M ECU		 2.3M DM  
1.0M ECU		  
Number of establishments benefiting (1992)   8 films  
17 copies		 100 films  
2,990 copies		 650  
Agency responsible for subsidy   FSI ADRC FFA  
   Note: There are no public subsidies for exhibition in Greece
 
 
 Table 21b Support for Exhibition
   
Italy
Netherlands
Portugal
Spain
UK
Investment Subsidies Type of Subsidy  
(Automatic or Selective)		 Selective Only for Municipal cinemas Selective Selective Selective
Grand Total (1992) 40 Bn Lire (1991)  
2.5M ECU		 1.3M ECU 371,000 ECU over 6 years; Annual average 0.062 ECU 210M Pesetas 0.7M £sterling (1)  
1.0M ECU+
Number of establishments benefiting (1992) Renovation and refurbishment 27 76 (between 1985 and 1992) 20 38  
(49 screens)
Agency responsible for subsidy Ministry of Tourism and Entertainment (2) Municipal councils   ICAA (3) 
BEX (4)		 BFI
Exhibition Subsidies Type of Subsidy  

(Automatic or Selective)

 Selective subsidies made available for "quality programming" Subsidies for communal cinemas Municipal cinemas only Automatic for rural areas Selective
Grand Total (1992) 2 Bn lire (1991)  
1.25M ECU		     80M Pesetas  
0.6M ECU		  
Number of establishments benefiting (1992) -        
Agency responsible for subsidy Ministry of Tourism and Entertainment (2)     Autonomous regions + ICAA  
Print Subsidies Type of Subsidy  
(Automatic or Selective)		 None None None For films which benefit from distribution subsidies None
Grand Total (1992)       Budgeted: 80M 
Disbursed: 0		  
Number of establishments benefiting (1992)          
Agency responsible for subsidy       ICAA  
(1) Subsidies from town councils need to be added to this 
(2) Since 1993: Presidency of Councils of Ministries 
(3) Ministry of Culture 
(4) Banco Exteriore
 
 
·         The balance of public subsidies
 
Without question, the French public authorities play the most active role in the exhibition industry, through a subsidy regime essentially based on transfer mechanisms within the circuit: subsidies in this country represent about 5% of the turnover of exhibitors. Everywhere else, public subsidies are limited to 1% of the revenues of the sector.
 
If one uses as an indicator the average total subsidies per cinema, then France and Denmark pull away from the rest of the countries studied. We must emphasize the considerable effort Denmark makes (subsidies there are not a systematic transfer, as in France), and the importance on France of the subsidy to the release of copies, a proportion of which is automatically given to the middle-sized towns and rural areas. This practice, although opposed by several exhibitors in France (because the money is paid to distributors), seems to respond to a need which was expressed in all the studies, particularly in areas where the subsidies offered were few, like in Ireland.
 

 
 
 

 Table 22: Public Subsidies to Exhibition by Country : Summary
 
Total Subsidies to Exhibition
ECU M (1)
Total Subsidies per Screen
ECU
Total Print Subsidies
ECU M
Total
 
ECU M
Belgium
0.4
928
0.0
0.4
Denmark
4.3
13,650
0.12
4.42
France
34.4
7,814
5.55
39.95
Germany
5.2
1,432
1.0
6.2
Greece
0.0
0
0.0
0.0
Ireland
0.0
0
0.0
0.0
Italy
3.75
1,242
-
3.75
Netherlands
1.3
3,125
0.0
1.3
Portugal
0.173
746
0.0
0.17
Spain
2.18
1,206
-
2.18
UK
1.0
569
0.0
1.0
Total 11 countries
52.7
3,174
6.67
59.37
(1) These figures do not include the increase in subsidies from regional bodies to cinemas. 
 
Source: MEDIA Salles/BIPE Conseil 
 

 
Overall, it seems that public subsidies contribute effectively to the maintenance of an industry with numerous sites; when they are split up by country it seems that these subsidies have little impact on the average national level of admissions. But a definite correlation can be discerned between the level of public subsidy - both in the exhibition sector, and in the cinema industry as a whole - and the variety of programme choice, as much in the level of national films as in the number of different films distributed by country by year (for example, in the UK, 267 films were distributed to the first-run cinemas in 1991, compared with 438 in France, and that is for a number of admissions which is only 10% lower in Great Britain).
 
 Other interventions by public authorities in the exhibition sector
 
The three other types of intervention by the public authorities in the exhibition sector are:

 · Direct management of cinema operation by the public authorities
 
In almost all the countries in Europe, town councils and regional authorities are increasingly intervening in the direct management of cinemas, in order to avoid their disappearance, particularly in the rural areas and small towns. This phenomenon is particularly acute in France, where the town councils intervene directly in about 1,000 cinemas, either in terms of upkeep, or in terms of their operation. Spain and the UK are also involved in this kind of intervention: over a hundred cinemas in Spain are managed by government bodies and town councils; about 50 cinemas in the UK are managed by town councils.
 
In the "small" countries, emphasis should be placed on Portugal (26 cinemas) and the Netherlands (27 cinemas). Other operating systems also exist, like the cine-clubs, which are either maintained by town councils or by regional organisations (Ireland).
 
In certain countries (like France and Italy), the practice of town councils managing cinemas has developed in order to counteract the economic difficulties facing the commercial cinemas. In France, this practice has generated a real economy of its own, parallel to the exhibition industry, based on cinemas which no longer face the same financial constraints as commercial establishments, because of the intervention of the councils.
 
·    Fiscal tapping of resources
 
Discussion here is limited to showing the differences in indirect taxation. We must first emphasize the enormous variety of rates of taxation in different countries. They vary from 5.3% in France to 25% in Denmark. When we look at local taxes, the rates are even different within the same country (Belgium, Greece). In France, which appears to have the highest levels, this taxation is accompanied by a special cinema tax, which is redistributed automatically and selectively to the whole sector (TSA). This tax in France played an important part in the modernisation of cinemas during the 1970s and 1980s, a movement started by the circuits and certain independent operators. Certain countries apply a preferential rate of VAT to the cinema exhibition sector; others impose on them a maximum rate. The amount of public subsidy granted to the sector is sometimes correlated to the rate of taxation (eg. Denmark).
 
 
 Table 23a: Other Kinds of Intervention by Public Authorities in the Exhibition Sector
Indicator
Belgium
Denmark
France
Germany
Greece
Ireland
Management or Operation of Cinemas by Public Authorities Number of Screens 1 7 ± 1,000 20 (e) None Irish Film Centre  
(2 screens)
Market Share N.S.   22% < 1%   0.5%
Competent Authorities Film Museum Local Authorities Local Authorities Local Authorities   Irish Film Centre
Taxes VAT (Rate) 6% 25% 5.3% 7% 8% 12.5%
Other Taxes (Rate) Local Taxes (av. 9.6%)  
Music Rights: approx 1%		 Music Rights (0.90%) Music Rights (1.5%) Music Rights (0.49%) 8% -
Transfer Mechanism No No TSA: 11% Film Fund: 1.5-2.5% of takings No -
Regulatory Intervention Release Windows No Regulation No Regulation Regulation by the CNC:  
Video 1 year's sales  
TV: 2-3 years  
C+: 1 year		 No regulation:  
In practice:  
Video 16 months  
Rental 6 months/transaction		 No standard practice No. Practice is: Video 6 months,  
TV: 3 years
Cinema Programming Quotas     Yes: 5 weeks of EU films per quarter (1953 law, but not applied)   None No
Other Regulation     Various CNC regulations   None Censorship Act
Source: MEDIA Salles/BIPE Conseil
 
 
 Table 23b: Other Kinds of Intervention by Public Authorities in the Exhibition Sector
Indicator
Italy
Netherlands
Portugal
Spain
UK
Management or Operation of Cinemas by Public Authorities Number of Screens 10  27 26 100 49  
(38 cinemas)
Market Share - 4.8% - - 1%
Competent Authorities Ente Cinema: 10  

 

 Local Authorities Town Councils, National Audiovisual Secretariat Autonomous regions, local authorities, Madrid Film Institute BFI
Taxes VAT (Rate) 9% 17.5% 5% 6% 17.5%
Other Taxes (Rate) 9% - Entertainment tax  
2.1% - Music rights		 Music rights:  
Exhibitors' share = 0.37%		 Levies:  
2.2 ECU each showing.  
Right to exhibit: 27.7 ECU/screen		 Authors rights 2% Business Rates: 2.5%  
Music Rights: 1%
Transfer Mechanism No No Only up to 1991. Currently being negotiated No Voluntary until 1991; currently in negotiation
Regulatory Intervention Release Windows Actual:  
TV:        24 months  
Pay-TV:  12 months  
Video:     8 months		 Fixed by professional associations:  
Video:    6 months  
TV:       2 years  
Pay-TV: 18 months		 Yes.  
TV 2 years from importation  
Video: 2 years from importation		 Fixed by law (May 1992) for films with subsidies. Others:  
Video 6 months  
TV 1 year		 No  
Actual:  
Video: 6 months
Cinema Programming Quotas No No Yes, but not applied Yes, 1-3 EU films per cinema (1) No
Other Regulation   Regulation of the professionals' organizations (NFC) 1973 law not applied. New law being negotiated. ICAA regulation (2) Film Order 1989
1. Distribution quotas for Spanish films to obtain a licence for dubbing.  
2. 1 day of EU film for each 2 days of foreign film, or 1 day EU for each day of foreign if the EU film has been on release in Spain more than 2 years.  
  
Source: MEDIA Salles/BIPE Conseil
 
 
· Legal and regulatory intervention
 
Exhibition outlets
 
France and Portugal are the only countries where outlets are regulated according to the different mediums of exhibition. In Spain and Germany, outlets are only regulated for films which have been publicly subsidized. In the other countries, the hierarchy of cinema showings, video and television are regulated by the sector's own practices. It is worth noting that the practices fixed by the interprofessional associations can have a quasi-regulatory authority: this is the case in the Netherlands and Germany. Where it is not regulated, video distribution follows six to nine months after cinema showings.
 
Cinema programming quotas
 
There are very few regulations in this area. The Spanish example described in the following chapter (programming) is worthy of mention: the important quota for European works which is imposed on exhibitors there constrains their programming freedom - for every two days of American films screening, there must be one with EU films. This system receives considerable criticism from the Spanish exhibitors, as they object to its effects on their profitability; European films have a substantially lower ability to fill cinema seats than films originating in America.
 
Release windows
 
In four member states, release windows are fixed by statute; in one country (the Netherlands), they are the result of agreements between the professional associations. In other countries either there are no arrangements or only de facto ones. In practice, even where windows are governed by state regulation, they are frequently subject to exemptions ("dérogations"), notably in relation to films financed wholly or in part by TV broadcasters. The current debate features arguments, on the one side, for the need for harmonised regulation, across the European Union, to make easier cross-border releases by regularising release patterns. This is deemed all the more necessary because of the proliferation of separate outlets (pay-TV, pay-per-view, etc.). On the other side, the view expressed is that release patterns must be based on commercial judgements and free negotiations between the parties. Exhibition, which current arrangements serve to protect, may be threatened by encroachment by other media. The same could be said for the video rental window, which is narrowing in favour of sell-through, and of the video window as a whole, which is being eroded by pay TV. But those in favour of liberalisation argue that the value of exhibition as a showcase means that constricting the theatrical window, by potentially reducing the value of subsequent windows, would not be in anybody's interest.
 
Conclusions about public intervention  
By contrast, the positive impact of subsidies on numbers of visits at global level is imperceptible. It is possible to say that subsidies have a positive impact on the cultural function of the exhibition industry, by encouraging the maintenance of cinemas for its citizens, and by guaranteeing a certain breadth of programming choice. On the other hand, they do not seem to markedly improve the commercial results of the sector.
 
 
Table 24 Breakdown of cinemas by direct and indirect public subsidies
Exhibition subsidies
Investment subsidies
No subsidies
9.1%
9.8%
76.2%
Source: MEDIA Salles/BIPE Conseil