The European Commission’s Approach to Film Funding: Striking a Difficult Balance

Abstract

Audiovisual works, in particular films, play an important role in shaping European identities and reflecting the EU’s cultural diversity. This chapter looks at the European Commission’s activities in relation to public film funding. It begins with a historic overview of the objectives of the European Commission in its approach to the audiovisual sector. It then turns to the concrete realizations of the Commission via its own funding programmes (the MEDIA programme) as well as through its State aid control of Member States’ financing schemes.

The chapter continues with a discussion of the digital transition, emphasizing the possibilities this may bring with it for the Commission to realize a more ambitious programme for the European film sector. However, various and sometimes opposing digital trends are added to an existing set of challenges. Therefore, the chapter concludes with a reality check in terms of what the Commission’s role in shaping the digital European film sector can amount to. The stated objective of realizing a digital single market for films does not seem to be achievable without giving up the carefully struck balance between the different (industrial and cultural, national and European) interests around the table. For the time being, the European film market looks to remain complex and fragmented.

The views expressed in this chapter are purely those of the authors and may not under any circumstances be regarded as stating an official position of the European Commission and/or its DG Competition.

1 Introduction: The European Commission’s Film Policy

The European Commission [the European Union (EU)’s executive body, hereinafter referred to as the Commission] has become a prominent player in public film funding on the European level. In this chapter, we aim at evaluating its activities in the film funding domain. On the one hand, the European audiovisual sector is an important source of creativity and cultural diversity. On the other hand, cinema is an industry with a cross-border, European dimension. Aiming to foster the sector’s cultural and economic value, the Commission has established its own financial support scheme for audiovisual content (including film, TV and video games), the MEDIA programmes (now integrated under the Creative Europe banner). At the same time, a common framework for State aid was set up to ensure that Member States’ own support mechanisms are in the common interest and a level playing field is preserved. These State aid control activities have led to the establishment of a set of rules the Member States have to comply with when setting up their film funding measures.

In this chapter, we aim at evaluating the activities of the Commission in the film funding domain; the Commission’s ultimate objective is to foster the cultural and economic value of the European film sector, and it aims in particular to contribute to overcoming the audiovisual sector’s ingrained market fragmentation .

In this chapter, we will argue that neither of its two main policy instruments mentioned above has achieved clear-cut results. MEDIA funding has created European collaborative networks of film professionals, but we argue that it has not transformed Europe’s film market structures in a more substantial way. Likewise, the Commission’s State aid control of (national, regional or local) film support schemes has not had major consequences for the freedom of the Member States when they set up film funding schemes. Despite recurrent claims by national policy-makers and film professionals, the Commission’s State aid control activities are adapted to the cultural specificities of the audiovisual sector and do not pose a veritable threat to the European film sector.

Overall, we believe that the Commission has so far struck a careful balance between the various interests of the many stakeholders involved and the sometimes contradictory objectives with regard to the sector’s future. However, we criticize that this balancing act curbs the Commission’s policy power when taking initiatives in this domain. The resulting activities sometimes seem to lack a clear policy direction. In fact, we claim that the Commission is “stuck in the middle” of two seemingly opposing policy paradigms: the economic-industrial and the cultural policy paradigms. Even worse so, reconciling the interests of the various sector stakeholders and different Member States involved is difficult, if not insolvable. Little surprise that despite the Commission’s ambitious objective of market integration, the European film marketplace remains a patchwork of complex policy and funding regimes, mainly regionally active film professionals and—for the most part—small and fragmented audiences.

In terms of film support in the digital era, the Commission has rekindled its old dream of realizing a more integrated European film market without borders. This has led to updating the MEDIA programmes but also to new challenges in terms of State aid control. As the film sector continues to undergo change, European-level solutions are crucial in addressing the current challenges faced by European players. However, the reality of the European film marketplace remains too often at odds with what could theoretically lead to a more integrated European digital film market. Because of this apparent contradiction, all signs so far point towards the continuation of the status quo and a division of the European film marketplace along geographical and/or language borders.

The chapter is organized as follows: first, we look into the policy objectives underlying the Commission in its approach to the audiovisual sector. We see that from the outset, the Commission has to juggle different elements, trying to balance economic competitiveness with cultural diversity protection, and national prerogatives with cross-border ambitions. This shapes the Commission’s concrete realizations with regard to film funding and their impact. In the second and third section, we discuss the main film funding related activities of the Commission in more detail: the MEDIA support programmes on the one hand and the State aid control activities on the other. Next, we turn to the challenges accompanying the digital transition and the European answers that have been developed in response.

Methodologically, we rely on desk research, in particular a review of the relevant academic literature, policy documents, available statistical data (notably of the European Audiovisual Observatory) and specialized press articles. Interviews with stakeholders (sector professionals, policy-makers, academics) have informed our views as well.

2 The Policy Objectives

The audiovisual sector is not an area in which the European institutions were very active, initially. Only in the 1980s, film, as part of the audiovisual industries, became more prominent on the European-level policy agenda. The context was one of privatization and liberalization, exemplified by the abolishment of public service broadcasting monopolies throughout Europe. Competition in television markets had become fiercer, leading to increased demand for content, but the European audiovisual industries were not able to compete with cheaper, more successful American fare. In cinemas, audience shares for European films, especially non-national European titles, were plummeting (Herold, 2010; Pauwels, 1995). In this context, policy-makers became interested in the potential role European-level institutions could play in overcoming the sector’s weaknesses. Some cultural arguments were put forward that centred on the idea of a shared cultural heritage and therefore a common European audiovisual identity. More frequently, however, such cultural concerns were integrated into an economic-industrial argument based on a common defensive strategy against the US audiovisual companies (De Vinck, 2011; Theiler, 1999). This economic-industrial argument was moreover often coupled with a technologically driven discourse on the potential of then-new technologies such as cable and satellite. In the 1990s, the European-level policy role in audiovisual matters was further confirmed. The Treaty of Maastricht (1993) affirmed an EU mandate for cultural action and stipulated that the EU has to take cultural aspects into account in all its activities.¹ Yet it also introduced the principle of subsidiarity,² limiting the EU’s role to merely a complementary one (Barbato, 2008; De Vinck, 2011; Littoz-Monnet, 2007).

This historical overview shows how two sets of tensions, “vertical” and “horizontal” ones, shape European-level policies in the area of film funding. A first set of vertical tensions can be linked to the division of competencies between the Member States and the European institutions. The second set of horizontal tensions relates to the dual economic and cultural character of the audiovisual industries. The economic impact of culture has, for instance, been prominent in policy discourse, which typically includes references to the contribution of the cultural and creative sectors to EU GDP (4.5%) and employment (around 4%) (e.g. Dossi, 2016). It is often difficult to strike a balance between these two facets of the audiovisual sector and aligning cultural diversity preservation with policy objectives related to industrial competitiveness (Dossi, 2016, p. 25).

In the second half of the 1980s, a number of concrete regulatory and other measures were put in place by the Commission. The MEDIA audiovisual support programme was set up as its main financial support mechanism, organized cyclically and focused on supporting “everything but production”: training, development, distribution and promotion. After a pilot project in 1986, the first of these programmes started in 1991 (Barbato, 2008; Harcourt, 2005).

Alongside the set-up of MEDIA, it is also in the 1980s that the Commission started to scrutinize national support measures for the audiovisual industries from a competition law angle. Indeed, because of the inherent economic dimension of the film industries, EU competition rules are in theory applicable as to any other economic activity. As such, national and local aid measures for film are subject to a review by the Commission before they are implemented³ (Competition Directorate-General of the European Commission, 2014; De Vinck, 2011). At first, the Commission’s intervention remained fragmented and generally limited to infractions of the non-discrimination principle .⁴ Only the Greek system was censured in 1989, because the award of aid was subject to conditions of nationality that were considered incompatible with the common market. Nevertheless, the actions of the Commission were controversial with Member States from the start and would lead to the consolidation of a State aid approach in the film sector in the 1990s (De Vinck, 2011).

3 From MEDIA to Creative Europe

Since 1991, several MEDIA programmes (see Table 1 for a historic overview of the different periods) have tried to strengthen the audiovisual sector, increase its competitiveness and improve the circulation and consumption of European audiovisual works across borders. They aim to encourage the use of new technologies, the development of skills and networking (De Vinck, 2011).

Table 1 Successive MEDIA programmes

The latest MEDIA programme period started in 2014 under the banner of the Creative Europe programme and will run until 2020, with a total budget of EUR 1.46 billion (Dossi, 2016). Creative Europe brings together existing cultural and MEDIA support schemes, with the addition of a cross-sectoral strand. The latter includes a “Guarantee Facility” (as of 2016), transnational policy cooperation and a network of Creative Europe Desks ⁵ (Dossi, 2016; European Commission, 2016a). Of the total budget, 56% (EUR 818 million) is earmarked for the MEDIA programme and 13% for the cross-sectoral activities. In 2016, the annual budget for MEDIA was EUR 100.7 million (Dossi, 2016; Media Consulting Group, 2016).

At first sight, the audiovisual marketplace today is roughly similar to that which prompted the set-up of these European-level film support mechanisms more than 25 years ago. European film sector players are often small and fragmented, a situation that is mirrored at audience level. This hampers the competitiveness of European players on a global scale, where Hollywood players remain dominant. US films, for instance, rake in most of the theatrical admissions: in 2015, they had a market share of 64% in the EU market (European Audiovisual Observatory, 2016). There is still a large part of European creative output that does not travel at all. A 2016 study by the European Audiovisual Observatory (EAO) found that most European films are only released in a limited number of countries, whether this is in cinemas or in video on demand (VoD) catalogues. On average, the EU films studied were available on VoD in 2.8 countries (compared to 6.8 countries for US films). Theatrically, EU films produced and released between 2005 and 2014 were made available in 2.6 countries (compared to 9.7 countries for US films) (Grece, 2016).

At the same time, the audiences for the Scandinavian crime series The Bridge, the European box office numbers for the French film Intouchables or the Oscar nominations for The Artist clearly show Europe’s large creative potential and individual success stories.⁶ Even if the picture is more nuanced than the overall statistics show, it is clear that the successive MEDIA support periods have not been able to make national, language, cultural or other borders in the film sector evaporate.

With the general picture not drastically changed, what has been the impact of European-level film support? It is true that a large number of initiatives have been funded by MEDIA. The MEDIA Plus and MEDIA Training programmes saw a total of 9000 projects funded. The first 3 years of MEDIA 2007 delivered similar results, with more than 5000 projects receiving support between 2007 and 2009 inclusive (Euréval and MEDIA Consulting Group, 2007, 2010; European Commission, 2011).⁷ Latest data on the first 2 years of the Creative Europe programmes again show that 4134 actions were supported under the MEDIA strand of the programmes in the years 2014–2015 or approximately 43% of all applications (Dossi, 2016).

The projects that receive MEDIA funding typically are collaborations between players from several Member States. However, such pan-European cooperation remains project-based, with little or no permanent pan-European structures being established. Networks, such as Europa Cinemas’ grouping of European arthouse screens, have been built on the basis of European-level support, but individual players continue to work on a territorially limited basis. While the seeds of a pan-European awareness may have been sown, MEDIA support has not led to the realization of a European single audiovisual or film market (see De Vinck, 2011).

Looking at the means at its disposal, this outcome is somewhat predictable. Even if MEDIA’s budgets have increased over the years, they are not aligned to the high number of participating countries and the numerous support initiatives set up under its banner. The average MEDIA funding per support contract in the period 2007–2009 amounted to only EUR 53925 (European Commission, 2011). A recent survey of Creative Europe Desks concluded that the lack of funding leads to the rejection of many quality projects and high-profile activities (Media Consulting Group, 2016). Comparing MEDIA’s figures with the total audiovisual funding available to the sector, the latest data estimate that national and subnational funds account for more than 90% of public financing expenditure for film and television content in Europe (Talavara Milla, Fontaine, & Kanzler, 2016).

These national or regional support schemes, on which the sector is very dependent, typically have a national or regional agenda. Attracting film euros (or dollars for that matter) to the territory and/or promoting their “own” creative talent remains their first concern. Through State aid control activities, the Commission has also entered this area of film support, however, with a more “European” agenda.

4 European State Aid Control of Film Support Measures

From the start, the application of EU State aid rules to film funds was controversial with Member States, who felt that their cultural prerogatives were being attacked. After the first steps in the 1980s, the Commission’s activities in this domain really only took shape in 1998, when it dealt with a complaint about the French film production support system and its so-called territorial spending obligations . Such provisions oblige the beneficiary of the aid to spend a certain amount of the film’s budget in the country that donates the aid. Following the investigation, the French authorities had to modify several provisions of their scheme. In turn, the French insisted that equal treatment would be given to the other EU Member States, which resulted in a general review exercise by the Commission (Barbato, 2008; Craufurd Smith, 2008; Pauwels, Biltereyst, & De Vinck, 2007).

Today, the Commission applies sector-specific State aid compatibility criteria that have been set out in the 2001 Cinema Communication and its 2013 successor (European Commission, 2001, 2013a). These Commission communications have clarified the do’s and don’ts that granting authorities should take into account in order for their support measures to be declared compatible with the internal market. State aid to promote culture is allowed by the Treaty on the Functioning of the European Union (TFEU) through a specific derogation (Article 107(3)(d)), but the cultural characteristics of film do not automatically make public support compatible with the EU’s State aid rules (Held, 2016; Herold, 2008). For instance, the Commission does not permit discriminations against non-domestic companies or individuals and has set limits to the territorialization requirements that can be established in return for funding. Nevertheless, this type of provisions can still tie up to 80% of a film’s budget to the territory (European Commission, 2013a).

All in all, the Member States continue to have a lot of leeway when setting up their support mechanisms. The fact that the Commission allows territorialization clauses (as a means to ensure the presence of human skills and technical expertise in the granting Member State) is in itself testimony of the specific approach to films. The 2013 Cinema Communication also clarified that it is up to the Member States to establish a definition of “culture” or “difficult films”, in line with the subsidiarity principle. Aid intensities for the latter can go up to 100%. The 2013 Cinema Communication does not have an end date, which should ensure more stability (De Vinck, 2011; European Commission, 2013a; Held, 2016).

Since 2014, moreover, aid for audiovisual works has been included in the General Block Exemption Regulation. Audiovisual schemes of EUR 50 million or less per year no longer need to be notified to the European Commission, as long as a number of criteria (similar to the Cinema Communication’s requirements) are fulfilled (European Commission, 2014c).

Despite this generous approach towards the audiovisual sector, there is a clear, albeit indirect, impact of the Commission’s State aid scrutiny. Indeed, what remains hidden from view are the formal and informal exchanges that take place between the Commission and the Member State in question before the Commission adopts a decision approving a certain film support measure. The extent to which the nature of Europe’s film funding has been shaped by State aid rules is impossible to assess, but that Member States adapt their planned measures before or during the notification process with the Commission is a certainty (Craufurd Smith, 2008; Held 2016; Herold, 2010). As such, the compatibility criteria and how they are interpreted contribute to shaping the support policies on which the sector is so dependent and thus also how they respond to economic, cultural and technological change in the sector.

5 European Answers to Digital Challenges: Play, Stop, Rewind, Repeat

Digitization has been a key trend for the audiovisual sector worldwide for at least a decade. It impacts existing film sector players and gives rise to new stakeholders, such as telecom operators or VoD service providers. There are many opportunities based on flexibility and cost-efficiencies but also a lot of challenges in terms of who will control the global digital marketplace, what the transforming value chain will look like and, ultimately, how industry players will connect to audiences.

These evolutions are not “new” anymore, but the impact of these changes is nevertheless ongoing. The Commission has generally embraced these developments. In the context of European-level film support policies, digitization gave a new impetus to the existing idea of a common marketplace without borders: “a new single market to deliver the benefits of the digital era” (European Commission, 2010, p. 6).

At first sight, the digital era indeed offers a number of tools and opportunities for breaking down barriers for circulation, thus making it possible for smaller, non-national European films to reach a larger audience. This typically links to the idea that the larger “shelf space” for films in online Video on Demand catalogues increases the potential success of smaller films for audiences, content creators and aggregators alike (a phenomenon that was dubbed the “long tail” effect by Anderson in 2006). But also the costs for traditional distribution, including the theatrical release, decrease. As a result, distributors may be more willing to take risks on releases that belong to a market niche. It is also easier to reach these communities by making use of social networks, recommendation tools, etc. Ultimately, pan-European communities could emerge, aggregating fans of a certain European film across traditional language and culture borders (Eliashberg, Elberse, & Leenders, 2006; Gubbins, 2012; Ulin, 2010).

Digital distribution opportunities come with a number of disadvantages, however. Firstly, digital cost savings also benefit the existing major (Hollywood) players, to the extent that we may simply see a reinforcement of their (blockbuster) power. Secondly, in a context of abundance, the importance of marketing and branding may actually be reinforced, again benefiting the bigger film players. For European films, creating audience interest across borders remains a challenge given the costs that arise from dealing with the cultural and linguistic specificities of the various European film markets. As competition for a place in the spotlight becomes more intense, the market may become even more pressured, resulting in less attention for non-national European films alongside national and Hollywood successes (De Vinck, 2011). Moreover, the emergence of new non-European (in particular US-based) power players such as Google, Facebook or Netflix is identified as a further threat for European players going digital (see, EU MEDIA Futures Forum, 2012).

These two sides of the digitization story render the job for European-level policy-makers hoping to create a borderless audiovisual market even more complex. Not only are they faced with the need to update and adapt their existing policy instruments to a new film era, but they have to take into account the persisting nature of existing (vertical and horizontal) tensions when doing so. The development of a holistic approach to the film sector’s digital future is hampered by the continuous need to get different policy-making levels and entities on the same wavelength, as well as old and new industry stakeholders—without neglecting the interests of the audience.

Looking at the European Commission’s approach, it is clear that the audiovisual digital future has been the topic of debate and various soft law initiatives, going back to the European Charter for the Development and the Take-up of Film Online (2006) up to, more recently, the Communication on European Film in the Digital Era (2014). The latter announced the launch of a European Film Forum in 2015, which involves a wide range of stakeholders in a dialogue on digital challenges and opportunities. It looks among other things at issues of public support and financing (European Commission, 2006, 2014a, 2016b).

Specifically in terms of support-related activities, changes to both the MEDIA programme and the State aid control framework have been made relatively late and cannot be described as very ambitious.

While technological considerations were at the base of the MEDIA programme from the start, the specific impact of digitization was first addressed during MEDIA Plus (2001–2006) and has increasingly come to the foreground in the MEDIA 2007 period (2007–2013). The challenges of a shift towards digitization are at the core of the latest MEDIA cycle under the Creative Europe programme, alongside the more traditional obstacles of market fragmentation, global competition and access to financing (Dossi, 2016).

In the impact assessment accompanying the set-up of Creative Europe, it was pointed out that the impact of globalization and the digital shift were “not sufficiently taken into account by EU action in favor of the sector and should be tackled in a broader and more structured way” (European Commission, 2011, p. 72). Even if digital concerns had been clearly present in MEDIA discourse for quite some time, the focus of the support schemes themselves remained on traditional audiovisual activities such as theatrical exhibition (see Euréval and MCG, 2007).

The pilot project scheme, launched under MEDIA Plus, was an exception to this and provided funding for audiovisual partnerships putting forwards innovative projects with a European dimension (APRIL and Euréval-C3E, 2006). The pilot projects scheme served as a laboratory of ideas with a relatively high risk factor. MEDIA support of this type accounted for roughly 50% of the projects’ budgets (see, e.g. MEDIA, 2011) and thus had a substantial effect on the beneficiaries, few of whom would have been able to go through with these projects without this funding (APRIL and Euréval-C3E, 2006).

In 2007, Euréval et al. had noted that the value of the pilot project scheme depended on whether a number of the ideas tested would result in specific MEDIA support schemes and/or the identification of new business models (Euréval and MCG, 2007). At least in terms of the former, the scheme can be said to have been successful as the VoD and digital cinema on demand (DCD) strand was explicitly taken out of the pilot projects and established as a distinct support line under MEDIA 2007, to fund the creation and exploitation of digital catalogues and advanced cinema theatre distribution services. Currently, support for VoD is granted under the “online distribution” support strand (EACEA, 2016).

Unfortunately, the budget and support capacity of the VoD/DCD scheme were out of touch with the large pool of potential beneficiaries in the market. In 2010, Euréval et al. estimated that MEDIA 2007 had supported about 4% of the total number of active services in Europe (Euréval and MCG, 2010, p. 160). Moreover, they noticed that, despite some ties between France, Germany, the UK and Belgium, most actors were “… having a difficult time in making European consumers aware of their offers”. As a result “the question of a real European dimension of projects still remains” (Euréval and MCG, 2010, p. 163).

Licencing and general market fragmentation may also play a role here and show the limits of MEDIA’s role in the face of market realities. Instead, the scheme was once again more successful in terms of increasing pan-European networking and awareness. The set-up of a EuroVoD ⁸ network (in 2010) by a number of VoD services, for instance, included several of the MEDIA-supported VoD services and has also received EU funding itself (e.g. under the “online distribution” scheme; see EACEA, 2014).

Another digital area in which MEDIA has been active is that of release windows. ⁹ With audiences looking for content “anytime, anywhere, anyhow” and piracy booming, the traditional release structure—starting with a theatrical release, followed by a sequential release in other windows (television, VoD)—has been increasingly under pressure. In 2011, the European Parliament launched a preparatory action on the circulation of European films in the digital era, with a budget of 2€ million. Implemented by the European Commission, MEDIA selected projects for funding that experimented with (quasi-)simultaneous releases across different platforms and in several countries. A particular aim was to identify the conditions that could lead to an increased transnational circulation and a global audience for European films in the EU (European Commission, 2013b, 2016e; Paris, 2014). Today support for innovative multi-platform releases continues to be possible, under MEDIA’s “online distribution” scheme (EACEA, 2016).

However, many sector players, in particular cinemas, oppose such experiments, as it breaks with the established position of the cinema at the centre of the distribution model for films (Heidsiek, 2014). The European exhibitors association UNIC urged the Commission to “trust the industry where and when to release films” and stated that “(…) there is no real market for non-domestic European films in the way the Commission would like that to be” (Heidsiek, 2014). This shows how the Commission has to balance the sometimes contradictory views of sector players, their diverging interests and objectives. So far, the majority of MEDIA funding continues to go towards traditional releases in cinemas, with approximately 5% of the funds specifically invested in online distribution (European Commission, 2016f).

We can conclude that MEDIA, rather than shifting towards digital markets, has adapted the particularities of various existing schemes in a more incremental way. MEDIA started adapting the guidelines of its various schemes to the digital context from the beginning of the 2007 cycle onwards. For instance, development support was made available to projects intended for commercial exploitation on non-traditional platforms (e.g. mobile and online) (see European Commission, 2007).

The current set-up of the support programme reflects the fact that digital technology has become part of the everyday reality for Europe’s film sector. The pilot project scheme is no longer part of the latest 2014–2020 Creative Europe programme (Creative Europe, 2014), but digital technology is integrated in the different support measures instead. Nevertheless, MEDIA’s role remains limited to an encouraging one as it lacks the financial and political strength to be a real driving force for the (digital) development of the sector.

At the same time, financial support incentives form an alternative strategy when more radical policy proposals made in related areas such as copyright fail to take root. Indeed, when it comes to taking concrete digital policy actions, the Commission has been confronted (once again) with passionate negative reactions from the audiovisual sector and Member States. This occurred in particular when changes to copyright legislation and so-called geo-blocking ¹⁰ practices were initially proposed in the beginning of 2015 (Blaney, 2015b, c). Toning down its ambitions already in the Communication on a Digital Single Market Strategy (European Commission, 2015), the Commission by the end of 2016 had only proposed a regulation on the cross-border portability of online content, allowing EU residents to access the digital content they purchased at home while travelling to other EU countries (European Commission, 2016d). Audiovisual content was meanwhile explicitly excluded from the scope of the proposed regulation on geo-blocking (European Commission, 2016c).

Instead, Creative Europe/MEDIA will be involved in the development of digital tools to promote the distribution of films that are only available in a few Member States. Two subtitling projects have also been launched in view of increasing cross-border circulation (Blaney, 2015a; European Commission, 2016g).

Alongside its own financial support measures, the Commission’s State aid control activities could also promote certain responses to the digital challenges and opportunities facing the sector. In reality, here as well, the impact of the Commission has been mitigated. The 2013 update of the Cinema Communication notably broadened its scope to include all steps in the film value chain (European Commission, 2013a; Held, 2016). By doing this, the Commission took account of digital evolutions and increased legal certainty for Member States and the sector. However, the new rules where adopted when digital change was already well under way: State aid controllers adapted to the market evolutions after their completion.

Only when it came to the transition to digital cinema, the Commission’s State aid controllers were more proactive. The installation of digital projection equipment as of the early 2000s had been slow due to the high conversion costs. Therefore cinemas increasingly called for public support (De Vinck, 2011). In 2009, the Commission opened a formal investigation procedure into the Italian digital cinema tax credit, because it had doubts “that the measure may mainly benefit large multiplexes which should need less support” (European Commission, 2009). Only at the end of 2014, the investigation was concluded with a positive closing decision (European Commission, 2014b), but by then, more than 90% of European screens had already been digitized (MEDIA Salles, 2015). Possibly, this situation led Member States to adopt their support measures under so-called de minimis rules ¹¹ (whereby small support amounts are exempted from the notification obligation), or not at all.

The more recent outcome of the investigation¹² into the German film fund also clearly impacts the financing of Member States’ support schemes. The Commission’s decision confirmed the possibility for Member States to tax (Video on Demand) companies that are active in their country but established elsewhere in the EU.¹³ This will affect the market relations between different sector players: old and new, locally based or not.

However precisely because of the contrast between the Commission’s potential role in shaping the digital European film marketplace and the different tensions, obstacles and contradictions slowing down the action it takes, we conclude with a reality check for the stated ambitions of achieving a more integrated European film market.

6 Conclusion: A Long Way to Go

Looking back at more than 25 years of Commission actions in the area of film funding, we can conclude that neither MEDIA nor State aid control activities have achieved the expected results.

In the 1980s, an ambitious discourse about the future competitiveness of a culturally diverse European film sector was at the origins of MEDIA’s set-up. Yet in the absence of matching budgets, permanent pan-European market structures never materialized. Instead, MEDIA fostered looser European networks and successes of individual films, with the latter being more the exception than the rule. In other words, the stated ambitions were not achieved.

The Commission’s investigations into how the Member States support their film industries have not had the expected outcome either. Sector players and local policy-makers had feared the impact of economic liberalization on a sector that they considered to fall under their exclusive cultural policy competencies. In reality, a sector-specific approach was developed for the audiovisual support schemes, with Member States retaining a lot of leeway. Moreover, competition law is also used to validate certain support approaches, including territorialization clauses or, more recently, the notion that also non-national VoD services may be obliged to contribute to national film funds. In other words, the stated fears never materialized.

The complex market realities of the film sector in Europe may help explain the mitigated impact of the Commission on the film sector. Indeed, we saw that several tensions play a role in shaping European policy discourse. It is very difficult to reconcile industrial with cultural concerns, the idea of a “Europe without borders” with the realities of local cultural communities. To foster a single market for films with a positive outcome for the manifold and sometimes opposing sector and policy interests is perhaps simply impossible.

In a digital context, new tensions are piled upon the old ones and make it at once an opportunity and a challenge to reinvent the Commission’s approach to film funding. With digital technology , a number of traditional weaknesses of the European film sector become less of a burden. At the same time, we see that the old dominant US-based players are joined by new US-based powerhouses. European-level solutions seem particularly well suited to fully exploit the potential benefits of a borderless digital market for films. The Commission has gradually adapted MEDIA to integrate digital technology in its day-to-day activities. European funding schemes are also often used as sweeteners where more radical (copyright inspired) approaches fail. In light of the past results, it is nevertheless doubtful that these funding efforts will eradicate the persisting borders of the European film marketplace. The potential to shape the sector through State aid control has not been taken up either.

As a result, the European film market looks to remain complex and shaped by many borders for at least the foreseeable future. A radical overhaul of the Commission’s approach to film funding would upset the carefully crafted balance between the different players and tensions in the sector. A perpetuation of the status quo may seem like a disappointment in the face of European discourses from the past to the present. In order to increase its impact, the Commission would have to become more active (instead of reactive) and clear in its approach (instead of watered down by compromise). However, this risks alienating at least part of the sector players and national policy-makers, who ultimately have a different agenda: one of retaining their position in the film value chain (for the sector players) and of protecting national industries and cultures (for national policy-makers). In this light, unless the European Commission is prepared to take a gamble on who would be the winners and losers of a more drastic overhaul of its film funding approach, a reality check of its ambitious discourse is in order.