EUROMED AUDIOVISUAL III PROGRAMME Regional Capacity Development Support Unit IDENTIFICATION OF...

EUROMED AUDIOVISUAL III PROGRAMME Regional Capacity Development Support Unit

IDENTIFICATION OF FINANCING TOOLS FOR FILM AND

AUDIOVISUAL PRODUCTION AND THEIR PRACTICAL USE IN THE

SOUTH MEDITERRANEAN REGION

LINDA BEATH Senior short-term expert

May 2012

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Table of Contents SECTION I: Business Models for Film and Audiovisual Projects 4 SECTION II: Economics of the Business Models for the Film and Audiovisual Project 8 SECTION III: Future Economic Trends Affecting Film and Audiovisual Projects 12 SECTION IV: Types of Financing for Film and Audiovisual Projects 15

A: Subsidy Funding • National Funds 15 • Regional and Local Funds 17 • Pan-national Funds 19 • Specialised Territorial Funds 22

B: Tax Incentives 25

• Tax Exemption 25 • Tax Rebate 26 • Tax Credit 27 • Tax Shelter 29

C: Co-production 32 D: Television Funding for Independent Production 36

E: Presales 39

• Distribution 39 • International Sales 42 • Online Platforms 45

F: Advertising 47

• Sponsorship 47 • Product Placement 49 • Barter 52

G. Investment 55

• Equity Investment 55 • Deferrals 56 • Goods, Services and Facilities Support 58

H. Crowdsourcing 60

I. Awards, Grants and Prizes 63

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SECTION V: Recommendations for the South Mediterranean Film and Audiovisual Production Sector 66 APPENDIX: Glossary of Film and Audiovisual Financing Terms 71

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SECTION I

Business Models for the Film and Audiovisual Projects

A healthy business model for a company or product looks like this:

Research Marketing and + Manufacturing + and < Revenues

Development Costs Distribution Costs Costs

For the international film and audiovisual projects made by the Hollywood Studios and major commercial television networks, the business model is: the cost of making and showing a project to its audience is less than that project’s revenues. Although not every project makes profits, these companies survive because on an annual basis, the costs of projects’ and company overheads are exceed by their earnings. This economically driven model is also achieved by the largest international production companies and by exceptional projects that generate big box office or high market share audiences made by smaller companies This market driven model is only realised by a minority of the world’s annual production; the majority of the world’s film and audiovisual productions have a different business model:

Research Marketing

and + Production + and > Revenues

Development Costs Distribution Costs Costs

The amount it costs to make these projects is not earned back by all of the revenue sources for each project. These feature films, documentaries, animation, short films, and public broadcast programmess are subsidised either through various kinds of government initiatives or advertising or different types of equity investment, including filmmakers who work for little or no pay. This is the international business model which is prevalent in Europe and in the South Mediterranean countries.

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The Four Stages of a Film or Audiovisual Project Business Model

Research and Development Costs There are three main types of production:

• drama – features, shorts, TV fiction • documentary and reality programmes • animation

Research and development follows different processes for the three categories. Drama is developed by writing scene by scene treatments or scripts. In the AngloSaxon countries and in Northern Europe, scripting feature films takes multiple drafts with up to 25 or 30 required in the most arduous countries (UK and USA). In the northern and southern Mediterranean, and most other non-English language countries, films are often made from the first, second or third draft with lower budgets projects sometimes shooting from treatments rather than full scripts. Documentaries are not developed by such a rigid and predictable process. After a period of research and a short treatment, part of the film is shot and edited, after which there is a rewrite period. This may repeat itself several times before completion. Animation dialogue scripts are written and recorded after a storyline has been agreed upon. Sketches, animated characters and backgrounds are done at the same time. Animation then starts and lasts for a much longer period of time than live action shooting and post production. Development budgets are high; at least two times the amount for other films and audiovisual project of the same length. Costs of research and development reflect the arduousness of the process: approximately 10% of the cost of a Hollywood movie is spent on development while in Europe it is closer to 3 or 4% of the total production costs. It is even lower in the rest of the world. Development is restricted by the amount of money available to filmmakers, but, in Europe particularly, there is concern that it is a false economy. There are significant and ongoing efforts by both MEDIA and local governments are working to increase the amount of money available for this part of the production process. Production Costs It is an understatement to say that the costs of making films and audiovisual projects varies widely. The costs vary with genre; animation is more expensive than live action drama which is more expensive than documentaries. The costs also vary by country and region. These costs include preproduction, production and post production as well as the costs associated with delivery.

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The feature sector is the only film and audiovisual project where credible information or estimates about costs is available. Average worldwide budgets are analysed by the European Audiovisual Observatory (see their annual publication http://www.obs.coe.int/oea_publ/market/focus.html ). The lowest costs are in the EU are Greece and Eastern Europe which are in the range of € 350,000 to € 1,200,000. The highest budgets are in France and the United Kingdom with a range of € 6,000,000 to € 11,000,000. In the Southern Mediterranean, there is currently little information available about production costs. Based on informal information, their feature costs range from € 50,000 to € 900,000. International average feature film costs mostly reflect the EU and Southern Mediterranean ranges except for the USA. There independently made films cost about the same, but the Hollywood Studios produce movies that costs tens of millions of dollars with that ceiling now raised to $ 300,000,000. (See: http://www.the-numbers.com/movies/records/budgets.php for a comparison of budgets and earnings for both Studio and independently made films.) The cost of production has fallen in the last decade because of the cost of digital filmmaking tools. That reduction has probably bottomed out; the costs of raw materials and of personnel is unlikely to fall without sacrificing the number of films made, the quality of the films, and the audiovisual production sector as a viable industry or sustainable art form. Marketing and Distribution Costs Marketing consists of promotion and advertising to the audience. Distribution refers to the delivering of a film or audiovisual project to a viewer. The costs of marketing consist of the creation of marketing tools, usually a producer expense itemised on the Delivery List for the project. These tools may include artwork, photographs, sound and video trailers, etc. and rarely cost beyond € 100,000 for a non-Hollywood feature destined to a national and international releases. The cost of advertising, which is usually paid for by the distributor or broadcaster or internet platform, now ranges from ads in newspapers, to airtime on radio and television, conventional and internet trailers and teasers, to marketing specialists like press attachees and, on the internet, who called ‘Audience Designers’. Each country has different costs to release a feature; in Europe those costs are usually in the low hundreds of thousands of € while in the Southern Mediterranean they are probably lower. The marketing, advertising and hard costs associated with a release, paid for by a distributor, are referred to as ‘P&A costs’; that used to represent the costs of Prints and Ads but in the digital era it has become a catchall phrase. Distribution requires some form of infrastructure; in the case of feature films that infrastructure is cumbersome: cinemas, not all of which are digital; plus DVD

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manufacturers, wholesellers and retailers; plus broadcasters and internet downloading or streaming sites. Television is more of an all-in-one marketing and distribution system that is cost effective, if limited in its reach. The internet is not limited in its territorial reach, it is a global distribution system, but it depends on audience ownership of comparatively expensive hardware and software as well as access to a server. Revenues Until the last decade there was a predictable, orderly marketplace in which to earn revenues with films and audiovisual projects. Unidirectional content distribution was clear with a distinct series of exclusive windows: For movies

• release in cinemas only for 3 to 6 months • DVD rentals and sales the following 6 months • a subsequent one year Pay TV window • a 2 to 5 year to 7 year free television window followed • specialised television channel window and second windows on free television

For other audiovisual projects, the windows were based on a television model

• several showings by the first broadcaster which commissioned the project • DVD rentals and sales after the first or second showing • broadcast by a second, smaller channel or network

While the US Studios and larger international media companies are still actively trying to retain this series of windows, the internet has upset their orderly marketplace. Legal operators and pirates alike are putting films on sites that allow downloading or streaming soon after production is complete. Companies handling smaller films and audiovisual projects are experimenting with simultaneous releases in cinemas, on television and on the internet. In 2011, bigger profit driven companies finally started challenging this convention, too, when Netflix announced it had bought the Pay TV rights to Dreamworks Animated films. This is the first time a Studio choose release on the internet over a traditional TV channel window but it is unlikely to be the last. The only certainty about revenue streams in the future is that there is no predictable model; confusion is increasing, and experimentation is evolving more slowly than most experts expected and in ways those experts did not predict.

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SECTION II

Economics of the Business Models for the Film and Audiovisual Projects Introduction The South Mediterranean, like Europe, is dominated by American movies and TV programmes. Box office results and TV guides both confirm that economically, the US production companies, successfully operate on a market driven economic business model. This domination is reflected on the internet, with the USA leading statistics for computer use, broadband penetration and ownership of the major websites for audiovisual content on the web. The bottom line for a market driven business model in this industry means the bigger the audience, the more money for the project. The rest of the world’s producers are competing for the remainder of the marketplace. Often they are highly successful with their national audiences but international audiences are hard to win. With a concerted industry effort, nternet marketing and distribution may help grow these audiences. The market driven model infrequently works for international projects, so non-American films and audiovisual projects are made using different business models. Most involve combining subsidies, tax relief, broadcaster dependency and other smaller amounts from a variety of sources.

The USA’s Two Tier Film System Big Business The Hollywood Studios make films for the marketplace. They are large companies that exist to create profits for their shareholders so each film they greenlight is expected to earn back its costs from its revenues: domestic and international theatrical releases, DVD rentals and sales, television sales, internet earnings and a variety of ancillary rights. Not all of their films are profitable, so the Studios have found different ways to reduce production costs. They have been aggressively using tax credits around the world, lowering cast and crew fees by shooting outside their unions’ jurisdictions, hedging risk throught international presales, raising equity investment with or without tax shelter benefits and raising advertising monies early in the production process. The big American television networks and pay and cable organisations do the same, particularly with primetime drama. The US television sector is highly market driven, from networks through to local station syndication. Advertising time – commercials – are their main revenue source. Channel owners insure what they pay for content and operating overheads versus what they earn selling ads generates profits. The single exception is the PBS network which is also viewer supported via corporate funding raising and individual donations.

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The Studios and the biggest American TV companies have been reluctant to embrace internet delivery of programmes to US computer users despite Amercia’s extensive broadband access. In their protectionist efforts, they also lead the international fight against piracy. As internet delivery numbers increase and as revenues become more significant, they are starting to follow companies like Netflix and Hulu into that marketplace. Even more reluctantly, they are beginning to create original content for it, too. The American Indies Independent filmmakers in the United States (in other words, those not affiliated to the Hollywood Studios and biggest television production companies) do not have access to subsidies beyond tax credits which approximately 35 states currently use to encourage shooting in their region. (That number has decreased recently with 9 states rescinding or not renewing the tax relief legislation in the past couple of years.) Independent US movies, shorts and documentaries are made on low budgets, including an increasing percentage of them made on micro budgets of under $ 250,000 per feature film, some as low as thousands or tens of thousands of dollars. Their go-to financing sources are a combination of credit, equity investment, deferrals or non-payment of cast and crew and some sponsorship, product placement and goods, services and facilities support. The America indies pioneered crowdfunding and now access over € 32,000,000 per year from just one of the bigger websites. Grants and financial prizes are highly competitive with thousands of applications for support at the National Endowment for the Arts, ITVS, etc. American independent filmmakers have assumed a more experimental approach to reaching their audience, they are now innovators. Marketing on the internet has become specialised with ‘audience designers’ and ‘producers of marketing and distribution’ being credited for building the brand of a film. They start the promotional effort before it is completed to attract audiences; releases are regional, local and self promoted; there is DIY and DIWO advice on the internet, at seminars and conferences and specialists that did not exist 5 years ago helping shape a new distribution sector. Streaming and downloading are being done on platforms like iTunes all the way to single websites for a film. The American independent filmmakers generally aim to earn money with their projects, but they rarely recover costs let alone make profits for their makers and financiers. Although the USA is the largest user of internet content, downloading and streaming, the independent producers of internet content including film and audiovisual projects cannot pay for their creations without advertisers – who are still only experimenting with their marketing budgets. Internet exploitation of features, television programmes, documentaries and shorts is growing in the United States, but the top numbers are still low; IndieWire recently sited $20,000 as the 2011 record high earnings for an independently produced feature.

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International Film and Audiovisual Production Sectors: The Screen Industries While the American business models and financing are a study in extremes, the international industry is much more homogeneous, with the quantity of money involved being the sole variable. Until the end of the last century, international film and audiovisual production was subsidized. There was a simple trio of funders: a government subsidy plus a national – usually public – broadcaster plus a distributor. While the broadcasters accessed audiences and varying levels of market share, only the distributors and sales agents expected to earn revenues and make profits. The government subsidies usually gave soft loans – contracts that only required producers to share any revenues with them rather than guarantee repayment. In practice organisations from Telefilm Canada or the New Zealand Film Commission through to the world’s biggest, the CNC in France, had small, single digit percentage returns on their investments. The most successful recoupment of subsidy funds probably occurred at British Screen, which, during the 1980s, earned the unparalleled 25 to 50% of its expenditures back from the exploitation of its features. Co-production treaties started to be signed in the early 1970s and by the 1980s and 1990s, Europe was co-producing more than 20% of its feature films. Co-production now accounts for 100% of Belgian and Luxembourg features and almost as high a percentage in the Nordic countries. During the same period costs for prints, advertising and running exhibition chains climbed while, simultaneously, audiences numbers dropped. Distribution became economically less viable. With weaker distributors, investments in production, presales and sales numbers fell, too. Many single cinemas closed; most new cinema screens were constructed as part of a multiplex. During the same period, television audience numbers eroded with more viewing choices and changes in viewers’ tastes being blamed for dropping market share numbers. Advertisers responded with lower prices per commerical so the prices broadcasters paid per hour of programming fell, too. Starting in the 1980s, international producers were faced with a gap between the money they could raise from classic financing sources and the cost of their production. One response was under their control: they maintained or lowered their costs per production. Cheaper digital filmmaking tools and a lack of financial resources has kept the average cost of films fairly constant for over a decade. Even so, new sources of money had to be found. Europe and the AngloSaxon world responded to this crisis with different funding instruments: first national tax shelters which gave way to the less corruptible tax credits. France created a highly monitored tax relief system hybred with its credits and SOFICAs. Regional funding appeared and then expanded both in the number of funders and the amount of funding available. Previously banned product placement, sponsorship and advertising became viable

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sources of money for producers. As well, some unique solutions were put into place like the more recent innovations: Italy’s tax shelter mechanism to encourage corporate investment and MEDIA subsidies for setting up and marketing VoD platforms so revenues to producers could increase. Even in the recent economic crisis, most countries which had them maintained or increased national support organisations for film and audiovisual production. Only now that is starting to unravel in the worst affected economies. The Irish Film Board has been cut for 2012 and it is expecting more reductions next year. Film Commissions and regional funds have blossomed almost everywhere in the EU and the AngloSaxon world and they are expanding into other regions including a few in the South Mediterranean and more in the Middle East. Politicians have caught on and now support the idea that inbound production provides many benefits including increased employment, particularly of younger people. The competition to bring foreigners in to shoot their movies locally is tough so economic incentives have had to become an essential to enticing them. In the South Mediterranean, very few of these newer funding sources – from tax incentives to regional funds – been adopted. In most countries, production has slowed or declined significantly. Digital, non-professional films are being made by unpaid filmmakers who have something to say; over all genres, budgets are very low. Shorts and documentaries as well as full length features are finding their way onto the internet but are not finding their way into more commercial outlets like cinemas and television. China has a fully subsidised and highly controlled industry with a market place that is so large that more native entrepreneurial investors are putting money into features. Private equity is also used in the Far East, India and Russia and. to a smaller extent, in Europe. Feature films, animated films, documentaries and shorts are subsidised in most South Mediterranean countries. There are government funds made available to promote production for cultural, artistic and/or economic reasons. Co-productions are important, particularly with the European Union. Funding sources usually include subsidies, various types of tax relief including tax-free production zones and private investment including deferrals. State funded production units still operate while state owned television provides some, albeit reluctant support to filmmakers. Distribution, while experiencing trouble to the north, is almost non-existent in most South Mediterranean countries outside Egypt and Israel. The home video market is saturated by pirated DVDs. The region’s television networks are still heavily into inhouse production plus foreign acquisitions. As a result of this combinations, there is not a significant revenue stream in domestic markets. While international festivals are celebrating more South Mediterranean features, documentaries and shorts, they are not yet selling to distributors; some specialist international sales companies are now hoping to change that. With so little access to market funds, to new forms of non-grant funding and with earnings hampered by its domestic market, the subsidisation of South Mediterranean production is fundamental to its existence.

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SECTION III

Future Economic Trends Affecting Film and Audiovisual Projects Production costs have been kept low, and even lowered, for everything from short films to high end, multiple episode TV drama since digital filmmaking tools started appearing. Amateurs can access and use the same equipment as professionals. Viewer generated content made mostly by non-professional filmmakers fuels sites like YouTube, which in 2011, added 600 + videos per minute (or, to put it another way, 25 + hours were added to YouTube every 60 seconds, with some web analysts estimating it at twice that number). This low cost approach to filmmaking does not allow for an industry sector to function economically; production costs – particularly for personnel – will have to rise. That will only happen when the market place is less turbulent, when healthy business models are more prevalent, particularly when the internet generates fair prices for content and investment support for its creation. And none of that is likely to be accomplished in the short run. Feature film production and distribution is currently dependent on ‘old’ media companies and a ‘old’ media economics and methodology. The US studios are moving increasingly to making and releasing only blockbusters and franchises, with less room for the smaller and more intimate dramas they supported in the past. They are experimenting with new technological advances, like stereoscopic 3D but audiences seem to be first intrigued then quickly become tired of “gimmicks”. The independents in the States are developing a new way to get to their audiences using hybrid methods combining older but smaller marketing and distribution companies and increasingly heavy use of the internet. International governments are subsidising production which is paid for by a larger and larger number of financiers – some governmental, some market forces, talent deferrals and gradually increasing sponsorship and advertising. The national governments ability to continue investing significant amounts into film and audiovisual production sector is likely to come under review, particularly in the countries where the GNP is stalled or falling. As a global total national funding is likely to decrease in scope and size but regional funds will take up much of the loss. European distribution and marketing is being subsidised for its own feature productions. Most countries with a state subsidy also support international sales and marketing. There is some support for experimentation in internet social networking and audience building as well as training and investment in the cross pollinisation of the film production sector with the technology sector.

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Television has undergone five major radical transformations since the early 1950s: from 1 to 3 major broadcasters per country, the number of channels more or less doubled when commercial broadcasters entered national markets in the 1970s. In the 1980s pay television and niche speacialty channels profilerated. In the 1990s boutiques of channels were delivered by cable and satellite. The number of channels on offer to each viewer increased, so that by the early 21st century, market share per programme – and therefore the price paid to purchase a programme – fell. From an international universe of a few channels to 10,000s of channels now targeted at national or territorial audiences, television is again poised to multiple itself. According to a long article in a recent New Yorker, internet television is likely to produce 100,000s of channels which are very highly specialised and which are aimed at global audiences, not local ones. A new internet channel (IPTV) can be set up for little money. They can be highly specialised with viable channels catering to knitters or white water rafters. These channels will use a limited number of hours of programming per day and will attract big enough numbers of international viewers that specialised advertisers – for knitting yarn, needles, patterns or for raft, paddle, and locations – which will support the channel profitably. In the first six months of 2012, YouTube is launching its first 100 internet television channels. The increase of potential buyers, albeit at lower prices per buyer, will open up possibilities for short, documentary and TV programme providers. Penetrating the new marketplace is going to demand that producers either acquire or hire a skillset, information and contacts which they do not now possess. The home video market is becoming less and less profitable. Time Magazine’s recent article on the 2011 entertainment industry numbers included this assessment: “But the DVD cash cow is nearly milked dry, as audiences go for cheaper downloading and streaming formats. Most signs point south, and some industry analysts predict catastrophe. “The business will never be the same again,” Harold Vogel, head of Vogel Capital Management and author of Entertainment Industry Economics: A Guide for Financial Analysis, told The Wrap late last year. “It’s not cyclical. This is a technological shift on a generational scale, and the long-term technology is distribution on the web — and that’s not ten years, that’s forever.” Currently, the cinema going audience is diminishing, the television universe is fragmenting with niche channels multiplying rapidly and DVDs are being phased out. All of the good, if confusing, news seems to begin and end with the wired marketplace. Active global internet users now exceed 2.1 billion people – more than 30% of the world’s population – according to to web traffic monitory company Pingdom. 710 computers are bought around the world every minute. Broadband penetration is no longer just a consumer concern but has become an essential service. YouTube is adding 600+ new videos per minute; that is 25+ hours of film and audi visual content every 60 seconds. Internet content is in search of a business model with positive – if still unique – examples starting to appear more regularly.

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Predictions by the digital trade publication, PaidContent, estimate that a large percentage of revenues will be generated exclusively online by 2013 with internet portals contributing significant amounts of money for production of content by 2015. YouTube is already experimenting with investing in production with its first funds being put in the hands of the filmmakers who have generated hundreds of thousands, if not millions, of YouTube viewings. Development, production, marketing and distribution of film and audiovisual projects on the internet are heavily subsidised by advertisers and sponsors who are largely experimenting with a new medium. Or by the makers of the content, infrequently with the support of specialised and as yet experimental “digital funds” from their governments. Leading proponents of content for the internet and digital experts do not agree on what business models are, can be or will be. To paraphrase Wendy Bernfeld of Rights Stuff, “today’s business models can be summed up in one word: “confusion”. There are a number of possible models currently being discussed, used or tested by innovators:

• customers paying per view (or for each hit or click) • customers paying to own • customers paying subscriptions for services that provide access to a library of content • advertiser pays per customer view • advertiser pays for exposure • subsidised per view, per download or to own

The iTunes model (customer pays per unit to own content) has been duplicated worldwide by various types of platforms. Subscription based services are expanding and appear to be doing so profitably, with Netflix currently opening internationally. Advertising on the internet is increasing more rapidly than in any other medium. According to PaidContent, the amount of money spent on advertising in 2011 is $ 464 billion, of which 15.9 percent is spent on the internet. Online ad growth is outpacing other forms of advertising; it is 12% higher than the 2010 spend. Part of the credit for this growth is the improvement of more accurate methods to measure and then analyse the value of internet advertising for a brand. Advertising agencies still regard the internet as the “wild, wild west” – yes, a play on the ‘www.’ prefix for a website – but they are no longer as skeptical as they were 3 to 5 years ago. Customers, content viewers or users have made gaming on the internet – and across other platforms – highly profitable. Reuters forecasts that global revenues in 2011 would reach US $65 billion. However, customers, viewers and users are not yet supporting film and audiovisual projects in large enough numbers to represent a substantial revenue source let alone a potential source of financing. Most industry experts are counting on substantial, if not rapid, growth in this one area.

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SECTION IV

Types of Financing for Film and Audiovisual Projects

A: Subsidy Funding

National Funds

What:

A public or semi-public body or government agency whose specific duties include providing funding to the film and audiovisual sector of a single country, for a range of activities.

Typical names: National Film Institute

National Film Fund

National Centre of Cinematography (and Image)

Ministry of Culture - AV or Cinema Department

How it works: Guidelines for eligible projects, production companies are made available to the film and audiovisual sector. Applications are required, usually by a set deadline, with proposed contents, proposed budgets and sometimes plans for reaching the audience. Producers generally are the only eligible applicant although some national funders will support writers or filmmakers directly in the early stages of development. All eligible applications are assessed, often by experts. Successful applicants sign contracts which include the amount of support, a schedule of payments and items or events to be met during and after production.

Funds available: Development and Research

Production Sometimes including auto-matic support based on prior performance

Post Production Sales & marketing, international promotion, festivals

Amounts: The annual budgets of National Funding bodies varies widely; in Europe in 2011 from as little as € 235,000 to as much as € 705,900,000.

Source of funds: The government allocates an amount per year from its Ministry of Finance or the national Treasury or from designated sources such as a specific tax, a percentage of state lottery sales, etc. There is usually an annual budget approval process as well as an annual performance review and financial

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audit.

Where: Eligibility: Recoupment:

Generally available: South Mediterranean; all of the European Union countries (although this may change due to the global economic crisis); Latin America; East Asia; Anglophone countries, except the USA; some African countries south of the Sahara (which also include training initiatives). The agency establishes clear guidelines for eligibility including nationality of the production company, producer, writer and director, key cast and crew as well as projects including issues like genre, budget, content, length, etc. There are generally some exclusions: projects that are pornographic, graphically violent, xenophobic and/or those which exploit women or minorities. Co-productions are supported, usually because the countries involved grant formal approval under the terms of a treaty. Any financial investment by National Funds may be, but are not always, considered loans against a pro rata and pari passu proportion of all revenues earned by the film or audiovisual work. Some agencies also get a pro rata and pari passu share of the profits not earned by the creative team. There is no recoupment required in some countries (in Finland and Switzerland, for example).

Advantages: Direct aid for the film or audiovisual project, usually in the form of cash, of between 25% and 100% of the budget of film and audiovisual projects; support in the form of expertise for all stages from early development through to national and international sales

Disadvantages: The choice of projects is not based on automatic support but on the evaluation of perceived quality; national funding bodies are usually encumbered by rules, deadlines and limitations leading to frequent complaints of ‘too much bureaucracy’; governmental support can be withdrawn or reduced without notice

Examples: Centre Cinematographic Morocain; Egyptian National Film Centre; Swedish Film Institute; Ministero per i Beni e le Attività Culturali (MiBAC), Italia.

For more information:

There is a large article explaning public funding in detail at: http://www.obs.coe.int/oea_publ/funding/00002095.html

Links: Most funds have websites. The Korda Database of the European Audiovisual Observatory has gathered all of the links to European National Funding bodies: http://korda.obs.coe.int/ The CNC in France has an extensive website which is highly informative and which includes a large archive of past years’ activities: www.cnc.fr

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Regional and Local Funds

What:

A public or semi-public body or agency whose specific duties include providing funding to the film and audiovisual sector in a geographically limited area (states, provinces, cities), for a range of activities.

Typical names: Regional Film Fund

Regional Film Commission

Regional Film Board

Regional Audiovisual Fund

How it works:

Note: All film commissions promote and support shooting films and audiovisual projects in their region; one of their key goals is attracting large budget foreign movie shoots. However, not all film commissions have funds (or local tax credits) to subsidise production costs. Some funds support other and more diverse activites, such as internet video gaming. Guidelines for eligible projects and production companies are made available to the film and audiovisual sector. Applications are required, usually by a set deadline, always in advance of first day of Principal Photography, with proposed contents, proposed budgets and sometimes plans for reaching the audience. The budget has to be divided to show the amount to be spent in the region. Producers in the region are generally, but not always, the only eligible applicants. Successful applicants sign contracts which include the amount of support, a schedule of payments and items or events to be met during and after production.

Funds available: Development and Research, including Location Scouting

Production

Post Production Promotion

Amounts: The annual budgets of regional film and audiovisual funding bodies varies widely; in Europe 2011 funds ranged from € 235,000 to as much as € 36,000,000.

Source of funds: The regional or local government allocates an amount per year from its financial resources; there is usually an annual administration review and approval process as well as a financial audit. The agencies are expected to show that the funds they invested resulted in economic expenditures in the area that are at least 1.5 times higher than the cash spent. (This is

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referred to as the ‘multiplier effect’.)


Although film commissions are widely spread, those which give out funding for production are limited to: Europe; Anglophone countries except the USA. Israel has 2 in Jerusalem and Haifa (the latter is about to be launched). The agency establishes clear guidelines for eligibililty – which may include having a local co-producer – but which are based extensively on economic criteria, especially the amount to be spent in the region on goods, services and employment. Some funds have cultural requirements as well, like regional locations appearing on screen or regional facilities being used. Some but not all funders require recoupment; if recoupment is essential, it is usually on a pari passu pro rata basis.

Advantages: Regional and local agencies can provide production financing of up to 50% (in some cases, there is a maximum amount) based largely on an economic evaluation rather than a quality or cultural assessment. There are other benefits including reducing financial risks, securing greater distribution and exploitation, providing better access to talent from other regions and opening production opportunities. Some regional funds offer goods, services and facilites in addition or in place of direct financial investment in the production. Regional funding does not require adherence to co-production treaty regulations.

Disadvantages: Regional and local support are susceptible to being cut or abandoned after elections; budgets are frequently revised annually with some regions experiencing sudden decreases or increases close to a financial year end. There is little consultation between most regional funds when they are set up and therefore no harmonisation of rules. As a result, the requirements of regional and local funding make it difficult to fulfill the terms, conditions and guidelines of other regions and of other sources of funding. Some countries (France and Germany especially) and the CineRegio organisation are working to make it easier for a project to be produced in multiple regions. There may also difficulties like clashes between crews of mixed nationalities and differing cultural and industrial backgrounds, language problems and technical difficulties when the same elements have to be shared (eg: post production).

Examples: Jerusalem Film Fund; Filmfond Wien, Film London, Wallimage; Nova Scotia Film Development Corporation; Screen Queensland.

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Note: See Pan-National Funds for more information about the Doha Film Institute as well as the Dubai, Abu Dhabi and Screen Institute Beirut funds.


There is a large article explaning public funding with references to regional funds at: http://www.obs.coe.int/oea_publ/funding/00002095.html

Links: In Europe, 37 regional funds are members of Cine Regio: http://www.cine-regio.org/

Pan-National Funds

What:

A public or semi-public body or agency whose specific duties include providing funding to the film and audiovisual sector of several countries, for a range of activities, all aimed at increasing production, co-production and distribution in the region.

Names: Abu Dhabi Eurimages Nordisk Film & TV Fond

AFAC – Crossroads & Arab Documentary Film Fund Le Fonds francophone de production audiovisuelle du Sud Screen Insitute Beirut

Doha Film Institute IberMedia

Dubai International Film Festival Enjaaz Fund MEDIA

Note: The Abu Dhabi, Beirut, Doha and Dubai fund MENA productions; The Arab Fund for Arts and Culture (AFAC) funds all Arabic productions. All finance Arab cinema from the Middle East and Northern African countries. Eurimages funds production from European countries plus others (eg Russia). The Fonds francophone de production audiovisuelle du Sud is open to industry professionals working in film and television (fiction and documentary) in southern French speaking countries. IberMedia finances Latin American, Portuguese and Spanish films. The Nordisk Film & TV Fond gives financial support to films from the Nordic countries.

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How it works:

Note: MEDIA supports development of film and audiovisual projects, distribution (including digital distribution), promotion, festivals, training, and support for access to financing; it does not fund production. Neither does the new MEDIA Mundus programme. Funding for Development, Production and Post-Production: Guidelines for eligible projects and production companies are available to the film and audiovisual sector on the internet. Applications are required, usually by a set deadline, with proposed contents, proposed budgets and sometimes plans for reaching national and international audiences. Producers are generally the only eligible applicant on behalf of themselves and their co-producers. All eligible applications are assessed, often by experts. Successful applicants sign contracts which include the amount of support, a schedule of payments and items or events to be met during and after production.

Amounts: Abu Dhabi Sanaad Fund US $ 50,000 Eurimages € 20,994,241 (in 2010)

Nordisk Film & TV Fond € 9,500,000 (approx. 2011)

AFAC Crossroads – US $ 1,300,000 Documentary – US $ 500,000 Le Fonds francophone de production audiovisuelle du Sud € 1,300,000 Screen Institute Beirut (SIB)

Doha Film Institute IberMedia US$ 7,788,667 (in 2009)

Dubai Film Festival Enjaaz Fund MEDIA for 2007 – 2013 € 755,000,000

Funds available:

Development and Research

Production (some: co-production only)

Post Production

Sales & marketing, distribution, international promotion, festivals

Source of funds: The organisations and governments involved allocate an annual amount from their annual budgets, from the Ministry of Finance or the national Treasuries. There is an annual budget approval process as well as an annual performance review and audit. MEDIA receives its funds from the European Commission’s budget every 7

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years. The Nordisk Film & Television Fond receives 1/3 of its annual budget from the 5 Nordic Council countries, 1/3 from national film funders and 1/3 from Nordic broadcasters. Eurimages is funded by its 35 member countries as is Ibermedia by its 18 countries. The


Not available beyond the funds listed above. Note: In May 2010 at the Cannes Film Festival the International Organisation of La Francophonie (IOF) and the Federation of African Filmmakers (FEPACI) announed plans to start work on a Pan African Cinema Fund. A feasibility study was tabled at the Carthage Film Festival in 2010, including a name change to CineA. The African southern Mediterranean countries are instrumental in the effort to build this agency. There are two other pan national bodies being initiated: one for Africa under discussion by the OUA (Union Africaine), one for the Middle East with the Royal Film Commission of Jordan actively coordinating discussions and one from the Arab League. For Abu Dhabi, the AFAC, Doha, Dubai and the SIB the funds are restricted to Arab producers, some are geographically restricted to the Middle East and South Mediterranean. Co-production and distribution of films between the member countries of the agency are the essential requirements for all four European funds. The agency establishes clear guidelines for eligibililty including nationality of the production companies, co-producers, writer and director, key cast and crew as well as projects including issues like genre, budget, content, length, etc. MEDIA accepts applications from its member states’ film and audiovisual organisations with relevant experience for the activities requesting financial support. Financial investments in production by Pan-National Funds are loans against a pro rata and pari passu proportion of all revenues earned by the film or audiovisual work. These agencies also get a pro rata and pari passu share of the profits not earned by the creative team. Some of the funds give grants, for example, MEDIA does not require repayment.

Advantages: Direct aid for the film or audiovisual project, in the form of cash installments, of between 10% and 70% of the budget of film and audiovisual projects (with published maximum amounts which are low compared to average budgets); or financial support for development, distribution, promotion, festivals, film education and training, etc. Eligibility rules, guidelines and benefits are transparent, and applied the same way for all applicants; all contracts are the same for all recipients.

Disadvantages: The choice of projects is not based on automatic support but on the evaluation of perceived quality; Pan National funding bodies are have extensive rules and guidelines, and limitations leading to frequent complaints of ‘too much bureaucracy’; deadlines are infrequent; high proportion of signed financing required before applications can be

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submitted; recoupment required for production funding. Links:

Abu Dhabi Sanad Fund: http://www.abudhabifilmfestival.ae/en/sanad/about-sanad AFAC: http://www.arabculturefund.org/ Doha Film Institute: http://www.dohafilminstitute.com/financing/guidelines Dubai International Film Festival Enjaaz Fund: http://www.dubaifilmfest.com/index.php/en/dubai_film_market/enjaaz/ Eurimages: http://www.coe.int/t/dg4/eurimages/default_en.asp Fonds francophone de production audiovisuelle du Sud (not available in English): http://www.francophonie.org/Fonds-francophone-de-production,28896.html IberMedia: www.programaibermedia.com/ MEDIA: http://ec.europa.eu/culture/media/index_en.htm One of its programmes that is relevant to the South Mediterranean, MEDIA Mundus, is a € 15,000,000 aimed at boosting international cooperation in the audiovisual industry. There is a brochure about its activities at: http://ec.europa.eu/culture/media/mundus/index_en.htm Nordisk Film & TV Fond: http://www.nordiskfilmogtvfond.com/ Screen Institute Beirut: http://www.screeninstitutebeirut.org

Territorial Support Funds

What:

A body or agency whose specific duties include providing funding to the film and audiovisual sector of its country, dedicates a portion of its budget to support productions between its national producers and co-producers from territories outside its own. Note: Unlike these funds for multiple countries, France has also pioneered the concept of “mini-treaties” which give up to 20% more than normal subsidy amounts to encourage more co-production with a single targetted country. There are three signed with Canada (for features, animation, television) and one with Germany.

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Names: Aide aux cinemas du monde € 6,000,000

International Film Fund

SØRFOND € 500,000

Funds available: Development Production Post Production

Amounts: The annual budgets of the funds, if known, are listed above. The International Film Fund in Singapore limits per film investments to € 610,000.

Source of funds: These funds are a small, defined portion of the larger annual budget for production support or they are a fund (administered through, respectively, the CNC France, the Singapore Media Development Agency and the Norwegian Film Institute) that is allocated by one or more non-associated ministries of the government (Foreign Affairs, for example).


Limited availablity worldwide; these funds are valuable while they last, but are, often, also transient. These specialised funds establish clear guidelines for eligibililty tailored to the programme and its goals, including nationality of the production companies, producers, writers and directors, key cast and crew, facilities as well as projects including issues like genre, budget, content, length, etc. Co-production is a requirement; all the financing must go to a local producer, although applications may be able to be submitted by the non-national producer / rights owner. Singapore’s fund is eligible only to films with wide international marketability while the other funds are more interested in artistic quality and cultural importance. Any financial investment by these funds are considered either grants or loans against a pro rata and pari passu proportion of all revenues earned by the film or audiovisual work. The agency, if it takes a revenue share, also may get a pro rata and pari passu share of the profits not earned by the creative team.

Advantages: Disadvantages:

Direct aid for the film or audiovisual project, usually in the form of cash, of between up to a set amount or a % of the budget of film and audiovisual projects; support in the form of expertise for all stages from early development through to national and international sales. The requirement that the production is a treaty co-production means that the lead producer (non-nationals, usually), is obligated to work with a co-producer whose costs may be more expensive for all aspects of production than the producers’ costs; the lead producer is obligated to do certain of its work under the law, rules, conditions and industry practices of the co-producer.

Links:

Aide aux cinéma du monde:

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http://www.cnc.fr/web/fr/international The 2012 call for applications is not yet up, but the 2011 information for the International Film Fund, Singapore, can be found at: http://www.smf.sg/BusinessCentre/Pages/IFF.aspx The Norwegian Film Institute’s SØRFOND: http://www.filmfrasor.no/en/news/2011/08/SORFUND-INTERWIEV-WITH-LASSE-SKAGEN

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B: Tax Incentives

Tax Exemption

What: National, regional and local governments allow an exemption from

paying VAT - value added tax (also called sales tax or goods and services (GST) tax) from goods, raw materials and some services used directly in the production of other goods. In this industry, goods and services used in the making of films and audiovisual projects.

Typical names: VAT Exemption Sales Tax Exemption

Tax Free Zone Goods and services tax exemption

How it works: The Tax authority of the area declares that the goods used in the production of audiovisual works is exempt from paying any form of sales or value added tax. Production companies apply for tax exemption numbers or certificates which, when given to a supplier, allow the total invoice to be reduced by the applicable tax rate. In some countries special centres of production are granted a “tax free” status. In both cases, tax is not paid by the producer.

VAT Tax Rates: South Mediterranean: 10 to 20% Rest of World: 0 – 25.5 %

Europe: 15 – 25%

Anglophone countries: 0 – 15%

Gulf States: 0%

Recoupment:

Not applicable. However, VAT tax does affect a producer’s revenues: most countries that have VAT tax do impose the tax on the sale of theatre tickets, DVDs, subscriptions to Pay TV and some internet transactions.

Advantages: Direct reduction in costs for the goods and some services used for production of films and audiovisual projects. Simple to administer, account for and immediate cashflow benefit.

Disadvantages: The cost of production is reduced by the combined tax rates of the nation, state and city so the benefits for producers in low tax areas are less than those in higher tax areas.

Examples: Tax free zones in Egypt (10%), Jordan (16%); HST (harmonised sales tax) exemptions in Canadian provinces, Ontario and Newfoundland (both 13%)

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There is a large article explaning VAT and sales tax in detail at: http://en.wikipedia.org/wiki/Value_added_tax

Tax Rebate (aka Tax Refund)

What:

National, regional or local governments grant a company a rebate (a refund) for all or a portion of VAT - value added tax – paid on goods, services and faciliites used directly in the production of other goods; in this industry, in the production of films and audiovisual projects. Note: In some countries and regions, the term ‘tax rebate’ also refers to a Tax Credit.

Typical names: VAT Rebate VAT Refund

Sales Tax Rebate or Refund

Goods and Services Tax Rebate or Refund

How it works: The tax authority of a country or a region decrees that the goods, services and facilities used in the production of an audiovisual work will be collected but later returned to the producer. The supplier will invoice the producer for the cost plus the tax. All or a portion of the total VAT tax paid during production will be given back – refunded – to the production company by the tax authority. Production companies provide the tax authority accounts showing the total VAT tax paid. The tax authority then issues a cash refund or a credit note to the producer to use as payment of any monies due to the tax authority now or in the future. The credit note can be used to pay any forms of taxation, not just VAT including employee withholdings, or social charges (government health, unemployment or pension, for example).

VAT Tax Rates: The Southern Mediterranean: 10 to 20% Rest of World: 0 – 25.5 %

Europe: 15 – 25% (Hungary’s will be 27% in 2012)

Anglophone countries: 0 – 15%

Gulf States: 0%

Recoupment:

No.

Advantages: Direct reduction in costs for the goods, services and facilities used for production of films and audiovisual projects. Simple to administer and

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to do the required accounting.

Disadvantages: When there is no cash return of the VAT tax collected, that amount has to be cashflowed from the time it is collected until the rebate is credited to the production company; some tax authorities require long audit periods before approving the amount of the rebate. A Tax Exemption is easier and the cash is available more quickly than a Tax Rebate.

Examples: Iceland Film Centre administers the Tax Rebate programme for its film and audiovisual industry: www.filminiceland.com/incentives/


There is a large article explaning VAT and sales tax in detail at: http://en.wikipedia.org/wiki/Value_added_tax All Film Commissions can inform producers about the VAT rates and the procedures used for their country or region.

Tax Credit

What:

A percentage of the expenses in a region, state, or nation are given back to the local producer, co-producer or production service company by the government. The percentages of a tax credit range from 15% up to 65 % internationally. Tax Credits are used to support local film and audiovisual production and production companies but they are also important in attracting non-local producers to shoot in a country. Currently competition for inbound production, a good and fast economic opportunity for increased earnings, taxes, employment in a region, have driven countries to increased rates (%) for tax credits for production.

Typical names: Tax Credit Production Tax Credit

a Tax Incentive Tax Break

How it works: A local producer provides a government agency with a full budget for a production including a detailed breakdown of what is spent locally and what is spent externally. The expenditures can be for goods, services, facilities or manpower. The government authority, usually either the tax department or the ministry of culture, analyses the information and gives a preliminary approval and estimate of the amount of the tax credit. Once production work in the area is complete, a final cost report is prepared. The tax department audits the report and either provides cash, a credit note

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which can be used at a bank, or a credit for any taxes to be paid in the future, to the local producer.

Funds available:

Production

Post Production

Amounts: The tax credits that are most used are in the range of 20 to 35% of the total local spend. Some governments have put a maximum on the monetary value of the tax credit available per year, or per company or per project.

Source of funds:

The government’s tax department issues the tax credit from its general administrative budget.

Where: Eligibility Recoupment

Available in some cities, some regions and some countries in Europe, North America, the Caribbean, the Far East and Australia/New Zealand. There are 25 countries and 45 regional areas currently offering tax credits. Generally, only local producers or production service entities are able to source tax credits. Some tax credits are restricted to feature films while others are currently being opened up to include the making of video games and other internet content. Some tax credits have minimum amounts of production budgets which are eligible, some restrict the types of local costs that are deductable and some restrict the amount per project or limit the total amount of that tax credits per year. No.

Advantages: Production financing based solely on economic criteria; it does not usually require a specialist expert to apply for the funds (Italy is the exception); few delays in the process; banks discount tax credits.

Disadvantages: The tax credit requires an additional budget breakdown of the shooting budget and of the final costs report; some tax credits take 15 months or longer to claim back.

Examples: The Malta Film Commission has a simple, effect tax credit which has helped bring large budget productions to the island and is credited with building up an industry infrastructure there. One of its advantages is that the credit is given, in cash, shortly after the deposit of the final cost report. www.mfc.com.mt/ The DFFF in Germany operates as a hybrid of a tax credit and a subsidy fund, allowing local and non-local producers access to cash during production: www.ffa.de/dfff


The best source of information about specific tax credit availability, rules and regulations can be found in through the Film Commission for the country or the region.

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The guidelines for the Malta Tax Credit, above, are clear, informative and detailed. The CNC has published a study comparing Tax Credits, as well as other tax incentives, in a number of countries, “étude comparative des systèmes d’incitation fiscale … ”: http://www.cnc.fr/web/fr/etudes

Links: Article on the importance of tax credits to producers’ decisions about where to shoot: http://www.economist.com/node/15663736/print Summary charts of Tax Incentives, particularly Tax Credits, internationally (note: it needs some updating): http://www.blg.com/en/home/publications/Documents/publication_1520.pdf

Tax Shelter

What:

A government passes a tax law that allows for its tax payers, individuals and companies, to not pay taxes on the amount it contributes to the production of films. Sometimes it allows a bigger write off as an incentive, for example 150% of the amount the tax payer invests in production. Most tax shelters are open only to theatrical feature films although some are opening up to high cost television drama and to internet video games.

Typical names: Tax Shelter Tax Relief a Tax Incentive

How it works: A producer goes to a intermediate specialist who finds investors, investor groups, venture capitalists or merchant banks willing to put money into film production in exchange for protection from paying taxes on that money, plus a potential for earning income from the films revenues. The tax shelter is set up and contracts are made up by specialist accountants and lawyers who are generally paid by the investors. There is a significant amount of documentation required. The tax department of the government usually has a pre-approval process. The producer receives the money, which is cashflowed based on a negotiated drawdown schedule. Tax shelters are restricted to funding national productions, or the national side of a co-production or to foreign companies using a local production service organisation. The investors must be tax-payers of the country to be able to get the benefits of a Tax Shelter.

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Funds available: Production

Post Production

Amounts: Tax shelters are generally restricted to an amount per project, usually between 15 and 30%.

Source of funds: The production funds come from investors which are profitable companies or wealthy individuals who do not want to pay taxes on a portion of their earnings in a given year. The governmental tax department allows the non-payment of taxes because of the shelter and it absorbs the reduction in revenue. The taxes paid by increased production activity makes up for this reduction.


Film tax shelters are not widely spread. They exist primarily in Europe and then only in Belgium. France, Ireland and Italy. National productions or approved co-productions within minimum and maximum budget levels; mostly feature films. Little to none. The government’s allowance of declaring more than 100% of the total value to the production (eg. 150%) is specifically meant to lower the investors’ risk.

Advantages: Direct aid for the film cashflowed according to pre-approved installments, of between 15% and 30% of the budget; little scrutiny of the script, cast and crew and other artistic aspects of the production; small recoupment, if any, from the film’s revenues.

Disadvantages: The amount of documentation and financial analysis is high; accounting on both sides is extensive. Film tax shelters have been tried and while many succeeded in igniting an expanded national industry in a short time, many also failed. The reasons for failure included the poor quality of the films, expanded production budgets and larger costs for specialists putting together the tax shelter; the lack of political will to support the film industry after its initial success. The tax shelters which exist now are highly regulated: Section 481 in Ireland has had two “gatekeepers” who maintain control of the applications; the few approved Sofica’s in France work within tight restrictions; and the Belgium tax shelter is the result of several years of experimentation and improvement. The Italian tax shelter is working but to a much lesser extent than its Tax Credit counterpart; it, too, has extensive requirements.

Examples: Belgium: Tax Shelter for Audiovisual Productions, France: SOFICAs Ireland: Section 481, Italy: Tax Shelter

For more

One of the clearest explanation of how a tax shelter works in the film

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information:

industry is the Belgium publication listed below. While the procedures are similar to other countries, please note all of the numbers quoted may be unique to Belgium.

Links: Belgium’s relatively newer version of its tax shelter, which is aimed at “encouraging the production of audiovisual works and films” in the country. It generated €100,000,000 in funding for producers in 2011. There is a detailed brochure called “TAX SHELTER: Tax Incentives for Audiovisual Productions .be” that can be downloaded from the Publications site of: www.minfin.fgov.be France’s SOFICAs: www.ora-defiscalisation.com/placement-sofica.html Ireland: Section 481 www.irishfilmboard.ie Italy: www.anica.it

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C: Co-production

Co-Production

What:

Two or more companies reach an agreement to produce a film or audiovisual work together, pooling resources, talent and funds. Informal co-productions can be negotiated between any types of companies. Formal or treaty co-productions adhere to the terms and conditions of a bilateral agreement which has been ratified by the governments of two countries, are approved by the relevant authority in both countries and receive ‘dual nationality’. This status allows the project to benefit from all of the subsidy funds, tax credits and quotas of both countries. There are trilaterial treaties (based on linguistically similar countries working together) and multilateral treaties (see below). Formal co-productions can be realised only by two or more production companies which meet local government requirements (tax status, residency, corporate legitimacy, etc). Treaties may cover one or more of: feature films, television drama, animation and documentaries but few cover digital media projects. Note: Co-production is an overused term: it may refer to any form of co-financing (a TV pre-sale, distribution advances or private equity). It may refer to any creative and financial collaboration between producers and broadcasters when production funds come from television sources. Internationally, co-financing arrangements are more popular than inter-governmental co-production agreements, in part to avoid the restrictions of treaty terms and conditions and, in part, because many sources of funds do not require adherence to a treaty nor do they require national approval.

How it works:

Two or more producers negotiate an agreement to work together to develop, finance and produce one film. The agreement is based on “the co-production ratio”:

% of investment from one producer =

% of budget spent by the same producer =

% of creative contribution by nationals of the same producer =

% of revenues that is returned to the same producer One of the producers is the lead producer while the others are co-

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producers; the lead producer generally owns the underlying rights and has the higher percentage of the project (according to the ratio above). While the percentages of investment, budget and revenues are easily quantified, creative contribution is calculated using a point system that is set out in the relevant treaty. Points are allocated for key creators (writers, directors, actors, department heads, etc.) and sometimes for locations and / or production logistics. Treaty co-productions, which allow full access to national funds, quotas and tax incentives, require formal advance and post completion approval by the organisations in all the countries involved. These organisations are authorised by their government to approve co-productions (often the film institute, film centre or the ministry or government department responsible for cinema). The % share of a formal co-production is regulated by the minimums and maximums that are set out in the relevant treaty: typically either 20% or 30% is the least share and 70% or 80% is the maximum one producer can contribute. There is an exceptional 10% - 90 % share arrangement in Europe called “a financial only” co-production which allows the exchange of money but does not require any creative contribution by the minority producer.

Funds available: Development

Production

Post Production Sales & marketing (where support is offered nationally)

Amounts: Co-producers raise funds for the project from the financing sources available to them in their country. If the project is a treaty co-production, the minority co-producer has to raise at least 20 or 30 % of the budget of the project. (The treaties all have a clause which stipulates the minimum percentage.) Co-productions make up between 20 to 33% of the all productions of feature films in Europe. The amount contributed by minority co-producers has not been calcated but is estimated to be about 1/3 of the budget of a two country co-production and less if the project is a multiple country co-production. Canada, the country with most co-production treaties, paid for only 46% of the cost of its 27 co-produced features in 2009/2010 but 80% of its 34 long television drama co-productions.

Source of funds: Co-producers raise funds in their country from the financing sources available to them. There are special funds for co-productions in defined regions (Ibermedia, Eurimages, the Nordisk Film & TV Fond; see Pan National Funding for

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more detailed information). France has also pioneered the concept of “mini-treaties” which give up to 20% more than normal subsidy amounts to encourage more co-production; there are three signed with Canada (features, animation, television) and one with Germany.


Bilateral co-production treaties exist in the Southern Mediterranean but not as extensively as in Europe. Bilaterial treaties have been signed by a large number of international countries. Trilateral treaties are rare but do exist between the German speaking countries in Europe: Germany, Austria and Switzerland. Two Pan-national treaties exist in Europe and Latin America (see below). Where a treaty exists, only recognised national production companies can apply for official co-production approval. Each co-producer recovers their recoupable cost of production first from their country and secondly from a share of revenues from the rest of the world. (In the event the country provides more funds than that country can earn back, the co-producers generally agree that one or more countries’ revenues will go to that co-producer.)

Advantages: There are three main reasons for producers to co-produce: access to more financing, access to more talent and access to other markets. Countries who sign co-production treaties and encourage the development of co-productions also believe that the intercultural exchange is important and beneficial.

Disadvantages: Co-productions, especially treaty ones, take longer; depending on the country and it funding system; it could be as little as three months longer (those regions where a major percentage of production is co-production, like Scandinavia) or as long as a year longer (the eastern and southern countries of Europe have few deadlines for national funding and take many months to assess applications and announce funding decisions). Terms and conditions for treaty co-productions are complex requiring some economic and creative compromises. There are added bureaucratic regulations required. Costs generally increase and if the producer fees and overheads are capped by funding authorities, they must be shared with co-producers. The needs and likes/dislikes of audiences of the co-production countries need to be addressed in the content and the casting.

Examples: Information regarding the financing and co-production of the following titles is available on the internet. Ranging geographically, from the South Mediterranean, to the South Mediterranean and Europe, to pan-European to Canada and Europe: Black Gold, Where Do We Go Now, Simon and the Oaks, The Whistleblower.

For more There is an EuroMed Audiovisual III census of Co-Production by Lucas

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information: Rosant which contains a lot more facts, figures, treaties and case studies on the EuroMed Audiovisual III website.

Links:

The European Audiovisual Observatory has webpage about co-production with access links to several of its relevant databases at: http://www.obs.coe.int/about/oea/pr/coproduction.html European Convention on Cinematographic Co-Production Designed to encourage the development of film co-productions in Europe. This agreement allows most European countries to make treaty co-productions with each other (two, three or more countries for each project). Adherence to its terms and conditions is fundamental for support by the multinational production funding organisation Eurimages. The fulll Convention can be downloaded at: http://conventions.coe.int/Treaty/Commun/QueVoulezVous.asp?NT=147&CL=ENG There is a complete list of countries which have signed this agreement, updated regularly, at: http://conventions.coe.int/Treaty/Commun/ChercheSig.asp?NT=147&CM=8&DF=&CL=ENG

Acuerdo Latinoamericano de Coproducción Cinematográfica (Latin American Film Co-Production Agreement) Designed to encourage the development of film co-productions in Latin America. This agreement allows most Latin American countries to make treaty co-productions with each other (two, three or more countries for each project). Adherence to its terms and conditions is fundamental for support by the multinational production funding organisation Ibermedia. In Spanish: http://www.cinelatinoamericano.org/assets/docs/acuerdo_bol.pdf Background information and summary in English: http://www.ftaa-alca.org/wgroups/wgsv/sagreem/English/sv_p27.asp

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D: Television Funding for Independent Producers

Broadcasters

What: Television broadcasters give producers financing, either in the form of

cash or goods, services and facilities, in exchange for the exclusive right to show a programme for an agreed period of time. Some broadcasters invest an additional amount of money in a project in exchange for the right to a percentage of all world wide revenues and profits. Broadcasters sometimes refer to their agreement with an independent producer as a “co-production” but this type of contract does not follow the same terms and conditions prescribed in formal co-production treaties. Broadcasters sometimes commission a programme by hiring the services of a producer to produce a the project on their behalf.

Typical names: TV Presale TV License Fee TV Equity Investment

TV Co-production

How it works: Commissioning editors are charged with assessing and acquiring certain kinds of programming (eg: features or movies of the week, drama series, factual, documentaries, children’s, etc.). Producers submit their project to the commissioning editor who, if his or her opinion is favourable, usually gives notes on changes required by the broadcaster during development. The contract department of the television station or network signs a development contract. Once development is complete, the budget, schedule and key cast and crew are approved by the broadcaster. Production contracts are signed by both parties. The producer then expects that the broadcaster will come on set during shooting, see and approve rushes and various cuts of the film. The broadcaster’s financing is usually given out in installment which are negotiated between the parties based on the cashflow projections for the project. The producer delivers the programme and all of the supporting materials outlined in the contract including a final cost report. Once that is approved the broadcaster’s financing is paid in full. Documentaries are usually commissioned in stages with input from the

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broadcaster. Animation and series have more complex timelines for delivery to the broadcaster and a drawdown schedule with more installments for payment of the broadcaster’s funding.


Production

Post Production Sales & marketing

Amounts:

Television broadcasters usually pay consistent amounts for similar projects regardless of the producer or the budget of the project. Price range from several million Euro for primetime drama for a major country’s top rated channel, to hundreds or thousands of Euro for a documentary for a specialised channel in a smaller country. Most producers can find out the normal price ranges for each broadcaster and for each type of programme. The typical deals change depending on the type of broadcaster. In order from larger amounts to smaller ones: public, commercial, specialised (or boutique) and finally the newer IPTV internet channels. If a broadcaster commissions a programme, it expects to pay the total production costs including the producer’s fees.

Source of funds: Television budgets come from license fees, government allocations and/or advertising. Some governments require that, in exchange for a television license, the broadcaster must support national independent production.


Available worldwide. The broadcaster determines eligibility. A pre-buy to show a project on the television channel or network is usually not recoupable; it is a simple pre-payment for license fees. If a broadcaster co-produces it may recoup all or a part of its financing and it may share in any profits; it depends on local industry practices. If a broadcaster puts up an equity investment, it will recoup this investment as well as have a share in profits; most broadcasters accept pari passu pro rata deals. If a broadcaster commissions a programme, the broadcaster owns it outright and the producer has no right to any revenues.

Advantages: Direct aid for the film or audiovisual project, in the form of cash or goods and services when needed, of between 10% and 100% of the budget of film and audiovisual projects; support in the form of expertise for all

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stages from early development through to international sales; simple industry standard prices and contracts; a quarantee of a quality to all of the other financiers; a base upon which to sell other international broadcasters

Disadvantages: The choice of projects is not based on automatic support but on the evaluation of perceived quality; limited room to negotiate deals; few slots available for independently produced programming; broadcaster support can be withdrawn or reduced without notice (unless required by a government licensing agency for broadcasters)

Examples: EERT (Tunisia), ENTV (Algeria), FilmFour (Channel 4, UK), RAI Cinema (Italy)


Most of the larger television networks, public, commercial, specialised have their own websites with information about programme schedules, as well as lists of commissioning editors and their specialties, and some have information for producers wishing to pitch programme ideas.

Links: The MAVISE Database of the European Audiovisual Observatory has gathered all of the links to European Television Channels and Television Companies: http://mavise.obs.coe.int/

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E: Presales

Distribution

What:

The producer licenses a company the exclusive right to exploit a film in a country or in a territory for a period of time and for a number of media (cinemas, video/DVDs, pay TV, TV, internet). In exchange the distributor pays either a flat, one time payment (“buyout”) or some money against a percentage of all income earned by the film after recovery of all prints and advertising costs. If the buyout, the advance or the minimum guarantee is committed prior to production, it can help the producer fund production of the project. If one or more rights can be sold in advance by the distributor to a third party, the distributor can give a portion of that presale to the producer (eg. Preselling the right to release DVDs in exchange for a guarantee by the DVD wholesaler to the distributor).

Typical names: Advance Minimum Guarantee

Presale

How it works: Distribution companies interested in acquiring the exclusive right to a film for their country assess a script as well as key information including the filmmaker’s track record, the actors, the marketability of the story, etc. If a film has the potential to become popular, the distributor may guarantee money prior to production to prevent other distribution companies from acquiring the film. A contract is signed; the terms and conditions include a precise description of the amount of money the distributor will guarantee and when it is payable. Generally a distributor will pay an advance on delivery; in other words will give the producer the money in exchange for the finished film and the other items (“the delivery list”) which will allow the distributor to exploit its rights. This is called an advance or a minimum guarantee payable on delivery. If the distributor guarantees that it will give a producer a minimum guarantee later than delivery, the time period is defined in the contract with the producer; it is usually no later than the date estimated for first broadcast (generally 1 year after first theatrical release for pay or satellite TV, 2 years for free TV). The distributor will also commit to a minimum and a maximum amount of money to pay for the cost of marketing and promoting the film as well

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as physical costs of prints and digital materials (“P&A costs”). If the distributor can sell one or more of its rights to a third party – a DVD wholesaler or a Pay TV station or a national broadcaster – it is sometimes possible to get part of the sales amount to use the money for production. It is referred to as a “presale” because it takes place prior to the film being delivered to the distributor.

Funds available: Production Post Production Prints and advertising

Amounts: The size of an advance or a minimum guarantee varies from country to country and from company to company; it also depends on what rights the producer can give to the distributor. Distribution advances in the United States can run into the tens of millions of dollars while smaller countries in Europe may offer only thousands. Increasingly distributors in the rest of the world are not committing to presales, with the possible exception of Japan. In countries in which TV is sold separately and does not contribute to the revenues for a distributor, advances and minimum guarantees are generally not available. Distributors rarely risk advances on feature length documentaries, on a filmmaker’s first or second features or on smaller “art house” films. On the other hand, populist comedies, are often supported by distributors with advances, minimum guarantees, high prints and advertising spending commitments and sometimes even equity investments.

Source of funds: The distributor provides a legal contract guaranteeing that the company will pay the producer on delivery of the completed film, which can be up to a year after the agreement is signed. In order to be able to use that money during production, a producer has to find a bank, or another lender, who cashflows the funds until delivery (“to discount the contract”).


Generally available in most countries for popular films; smaller films can get distribution advances or minimum guarantees in competitive marketplaces, especially in North and Latin America and Europe. Any requirements are the result of a negotiation between a producer and a distributor. It is a classic negotiation between a buyer and a seller with the balance tipped in favour of the side which is most in demand. The distributor recoups the advance or the minimum guarantee as well as his fees and his costs before the producer shares in any futher revenue. Distributors rarely share in producer’s revenues or any profits.

Advantages: Financial support for the production; confirmation that a film is expected

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to be marketed to the general public; confirmation that an experienced third party assesses a film as commercial; local television broadcasters are more interested in acquiring films that have a guaranteed theatrical release in the local market; international film sellers and distributors from different countries pay more attention to films that have a guaranteed release at home.

Disadvantages: Distributors select projects based on economic criteria only; marketing decisions are made by the distributor, not the filmmakers; advances or minimum guarantees may be the only money a producer earns; often the larger the advance or minimum guarantee paid, the worse the terms and conditions for the producer on any future earnings.

Future Trends: The economic viability of distribution companies has been weakened by the delivery of films via the internet. There was a substantial drop in the number and amount of advances or minimum guarantees paid five years ago and they have only increased marginally since then. The number of distribution companies has also decreased worldwide. As VoD and internet television become more profitable, distributors will have to depend less on traditional means of marketing and exploitating rights and become more dependent on internet earnings. Experiments are on-going with “day and date” releases in cinemas and online (with IFC and Tribeca Films, New York based art house distributors, leading the way). There is an informative article with notable statistics on what is happening in Europe at: http://blogs.indiewire.com/tedhope/new-world-distribution-in-the-old-world

Examples: Arab Film Distribution distributes many films, including documentaries, from Arab countries in North America: www.arabfilm.com


The British Film Institute has a multipage article on film distribution at: http://www.screenonline.org.uk/film/distribution/distribution1.html

Links: The Wikipedia pages on Film Distribution and Film Distributors contain clear definitions, more references and many links to articles, associations, etc.: http://en.wikipedia.org/wiki/Film_distribution and http://en.wikipedia.org/wiki/Film_distributor

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International Sales Agents

What:

The producer licenses a company the exclusive right to sell a film to distributors and/or broadcasters anywhere in the world except for the country of the producer and those of the co-producer(s). In exchange the producer gets a percentage of all income earned by the film after the recovery of sales commissions and costs. An advance or a minimum guarantee may be given which helps the producer fund production of the film. If rights can be sold in advance by the sales agent to one or more distributors, the sales agent can give a majority portion of that presale to the producer.

Typical names: Sales Advance Minimum Guarantee

Presales

How it works: International sales companies interested in acquiring the exclusive right to a project assess a script as well as key information including the filmmaker’s track record, the actors, the marketability of the story, etc. If a film has the potential to be circulated internationally, the sales agent may guarantee money prior to production to prevent other companies from acquiring the film. A contract is signed; the terms and conditions include a precise description of the amount of money the sales company will guarantee and when it is payable. A sales company may pay an amount of money on delivery; it will give the producer the money in exchange for the finished film and any other items (“the delivery list”) which are needed for sales to other countries. This is called “an advance or a minimum guarantee payable on delivery”. If the sales company guarantees that it will give a producer a minimum guarantee later than delivery, the time period is defined in the contract with the producer; it is usually no later than two years after delivery. The sales company will also commit to a minimum and a maximum amount of money to pay for the cost of marketing, promoting and selling the film at international festivals and film markets. Presales are sometimes done to assist a producer to complete the financing of a film; in this case the sales company would take a smaller fee than it would for any sales after the film has been completed. In most cases the country of production and the co-production countries are sold directly by the producers and the International Sales company

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waives the rights and obligations of those sales. In this case the sales are limited to countries in the Rest of the World (the “RoW” rights).

Funds available: Production Post Production Prints, digital masters and advertising

Markets and festivals promotion

Amounts: The size of an advance or a minimum guarantee varies from company to company; with sales agents dealing in English language films more likely to pay advances than ones which sell non-English language films. Sales advances can run in the millions of dollars for USA and UK films, particularly those made with recognisable actors while non-English language films see advances in the thousands or tens of thousands of Euro. Sales companies rarely risk advances on feature length documentaries, on a filmmaker’s first or second features or on smaller “art house” films. Very few sales companies pick up these films prior to being able to see them so any presales have to be done by the producer.

Source of funds: The sales agent will provide a contract or written guarantee that the company will pay the producer on delivery of the completed film, which can be up to a year after the agreement is signed. In order to be able to use that money during production, a producer has to find a bank, or another lender, who cashflows the funds until delivery (“to discount the contract”).


Sales agents are found in most countries, but the biggest companies tend to base themselves in Los Angeles or London. There are sales agents in major cities. Paris, Madrid, Rome, Berlin, Prague, Warsaw, Copenhagen etc. all have strong sales companies which work internationally on libraries of films which are made up in large part by local productions. Any requirements are the result of a negotiation between a producer and an international sales compay (a classic negotiation between a buyer and a seller with the balance tipped in favour of the side which is most in demand). The sales company recoups the advance or the minimum guarantee as well as his fees and his costs before the producer shares in any futher revenue.

Advantages: Financial support for the production; confirmation that a film is expected to be marketed to the general public; confirmation that an experienced third party assesses a film as commercial; local television broadcasters are more interested in acquiring films that have a guaranteed theatrical release in the local market; international film sellers and distributors from different countries pay more attention to films that have a guaranteed release at home.

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Disadvantages: Distributors select projects based on economic criteria only; marketing

decisions are made by the distributor, not the filmmakers; advances or minimum guarantees may be the only money a producer earns; often the larger the advance or minimum guarantee paid, the worse the terms and conditions are for the producer on any future earnings.

Future Trends: The economic viability of distribution companies has been weakened by the delivery of films via the internet. There was a substanial drop in the number and amount of advances or minimum guarantees paid five years ago and they have only increased marginally since then. The number of distribution companies has also decreased. As VoD and internet television become more profitable, distributors will have to depend less on traditional means of marketing and exploitating rights and become more dependent on internet earnings. Experiments are on-going with “day and date” releases in cinemas and online (with IFC, a New York based art house distributor, leading the way). There is an informative article with notable statistics on what is happening in Europe at: http://blogs.indiewire.com/tedhope/new-world-distribution-in-the-old-world

Examples: Fortissimo Films has been selling international film, TV and video rights of art house and innovative films for 20 years; among its recent slate are films from the Arab world including Leila Kilani’s 2011 feature On the Edge: http://www.fortissimo.nl/ Pacha Pictures is a new company selling films from the Southern Mediterranean and Middle East from Paris: www.pachapictures.com


There is an international association of independent film sales agents based in Los Angeles. It also organises the annual American Film Market there: http://www.ifta-online.org/ The Berlinale, the Cannes Film Festival Marche and the Sales and Industry Section of the Toronto International Film Festival all publish valuable directories of the sales agents which attend their festivals. Their websites are generally only available to accredited festival attendees.

Links: The Wikipedia pages on Film Distribution and Film Distributors contain clear definitions, more references and hot links to articles, associations, etc.

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Online Platforms

What: A website that streams or allows downloads of films and audiovisual projects

advances finance to a producer for rights to original content.

Typical names: Production Finance

How it works: Video on demand and TV on demand sites which are mostly privately owned commerical companies, allow customers to stream or download to view or download to own. These sites operate in one of three ways. The customer pays to see a project on their computer or computer equipped TV screen, using a credit card or PayPal. The customer pays a monthly subscription to see as many projects as he or she wants. or The customer does not pay to see projects but viewing of the projects are advertiser supported so commercial are shown with the project. In order to keep customers loyal, these sites are starting to pay producers for original content, on an exclusive basis.


Production

Post Production

Online marketing

Amounts: The privately owned nature of the businesses currently running these sites means that there is very little information about either the per project payments or the total production finance available from these sites. As this practice becomes more predominent, better financial information will become available. Netflix (USA, Canada, UK and currently expanding into Europe) has announced that one third of this years acquisitions budget in its effort to compete with pay TV channels like HBO as well as other online competitors. YouTube has made £50,000,000 available this year to UK producers. Belgium Telecom invested € 100,000 in at least one film in 2011 and is investing in others. Note: this type of funding is a recent one, its business model is only now being worked out and is likely to change over the next 18 months to 2 years.

Source of funds: The major Video on Demand and TV on Demand websites, from their corporate budgets.

Where:

The majority of production finance is currently being spent in the USA (Hollywood) and the UK. Industry specialists forecast increases in

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Eligibility Recoupment

production support with major amounts expected to be available worldwide by 2015. Both France and Belgium have online platforms investing in local production. Producers who have original, commercial ideas and, currently, good track records for delivery of high quality content and for attracting audiences. The deals being made are confidential; this information is not available.

Advantages: Direct aid for the film or audiovisual project, in the form of cash.

Disadvantages: The deals appear to be exclusive which restricts a producer’s access to other media and, therefore, to additional revenues and profits.

Examples: Netflix, YouTube, Hulu, Orange, Belgium Telecom.


PaidContent.org publishes a newsletter with information about day to day changes to all forms of web content (digital books, magazines, newspapers, sports as well as films and audiovisual projects): [email protected]

Links: Article: http://gigaom.com/video/netflix-hulu-exclusive-content/

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F: Advertising

Sponsorship

What: A person, a group, a company or an organisation support the production

of a film or audiovisual project by donating money or goods or services without requiring either a financial return, editorial control or brand images or references in the project. The benefactor expects to be rewarded with increased exposure through association with the project but sponsors do not control the message being communicated by the project (as in product placement and other forms of embedded advertising). Often the sponsor gets a head credit, a presentation credit and/or a tail credit; expensive sponsorship of many projects may have the brand name in the series title: eg: Mobil Masterpiece Theatre.

Typical names: Sponsors (in the USA: fiscal sponsorship)

Benefactors Donations Underwriting (particularly on PBS)

How it works: A producer finds a sponsor and makes a deal either for a financial investment in a production or for specialised goods and services that are needed by the production. In return, the sponsor gets the opportunity to benefit from the good will and exposure generated by the production. Sponsors which invest in film and audiovisual productions see them as good marketing opportunities for their product, or for their message. Sponsors do not get a share of revenues, nor profits from a project but may be given some air time to advertise during the broadcast of the project.


Post Production

Amounts: Negotiable.

Source of funds: The sponsor’s own budget. The sponsor may be an individual, but most film and television sponsors are bigger national or international companies. Funds for sponsorship are usually part of a brand or service’s promotion, marketing and advertising budget.

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Generally available worldwide, particularly for television programmes and for documentaries. Some countries and some broadcast authorities have regulations limiting sponsorship. The USA has tax regulations governing sponsorship using tax deductable donations and foundations that has several non-profit film organisations acting as an intermediary for fiscal sponsorship, including Film Forum and Women Make Movies for films as well as several associations doing the same for documentaries (see below). While foundations may have eligibility regulations concerning sponsorship (generally restricted to subject matter), most sponsorship is granted on a case by case basis after a unique negotiation between the producer of a project and its potential sponsor. None.

Advantages: Direct aid for the film or audiovisual project, usually in the form of cash, or of goods and services as they are needed; usually between 5% and 100% of the budget of film and audiovisual projects can be sponsored; support in the promotion of the project at the time of its release;

Disadvantages: The choice of projects for sponsorship is based oon the evaluation of perceived quality and value to the sponsor; finding sponsors usually takes a long period of time; the title of the project may have to include the name of a brand or company; sponsors may require airtime for commercials.

Examples: Hong Kong producer DMG gets sponsorship for a television series for general audiences: http://www.marketing-interactive.com/news/9154 United Kingdom mini-series sponsorship for a niche audience: http://www.ridgewayrider.co.uk/2012/saracen-horse-feeds-sponsor-new-tv-series-with-carl-hester-and-charlotte-dujardin-coming-soon-to-horse-country-tv/


The article, “Benefits of TV sponsorship for brands revealed” (use the website’s search engine) explains what motivates advertisers to sponsor programmes: www.utalkmarketing.com A history of sponsorship on the American television market is outlined here: http://www.museum.tv/eotvsection.php?entrycode=sponsor UK’s Channel4 lists all of the sponsors it currently as well as the programmes being sponsored: http://www.channel4sales.com/advertising/sponsorship/current_sponsors

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This article explains how sponsorship works for documentaries: http://documentarytech.com/?p=6223 This article considers the implications of corporate sponsorship of documentaries: http://documentaries.about.com/od/introtodocumentaries/a/Raising-Red-Flags-About-Documentaries-Branding.htm Fiscal sponsorship of international documentaries is outlined on these websites: http://www.der.org/services/fiscal-sponsor/ http://www.documentary.org/content/fiscal-sponsorship http://documentaries.wordpress.com/sponsorship-info/ Sponsorship and its effect on the making of the film, Planet B-boy: http://trulyfreefilm.hopeforfilm.com/2010/10/how-big-brand-sponsorship-saved-our-indie-film-pt-1-of-2.html A web series sponsored by the Ford Motor Company: http://paidcontent.org/2012/04/10/ford-banks-on-yahoo-reality-series-to-launch-new-focus/

Links: The Wikipedia page on Sponsorship covers more than film and audiovisual project sponsorship: http://en.wikipedia.org/wiki/Sponsor_%28commercial%29 Considered a primary website for sponsorship information, statistics, etc.: http://www.sponsorship.com/ It includes a lexicon and glossary of sponsorship terms (requires registration): http://www.sponsorship.com/Resources/IEG-Lexicon-and-Glossary.aspx

Product Placement

What:

A branded good or service is placed in a film or audiovisual project in exchange for payment. Although the most famous product placement in movies is still the use of Reese’s Pieces in the studio film E.T., the James Bond franchise is still considered the prime example of lucrative product placement with Omegia watches, the Aston Martin or BMW Z3 cars among the many

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brands which appear throughout the series.

Typical names: Product placement

Embedded marketing

Branded entertainment

Brand integration

How it works:

The producer, either directly or through a specialised agent or advertising agency, attracts a company marketing a good or a service which agrees to pay, in cash and/or in goods or services, for one or more appearances in the film or audio visual project. Larger payments are made for bigger brands (for example: Coca Cola, McDonalds, etc.) appearing in high budget US studio films or TV shows with high market share. Smaller payments are made to independent films and documentaries, often in a form other than cash (for example: bottled water shown on screen in exchange for water supplied to the cast and crew for the production period). Negative product placement also exists with Apple reportedly having an agreement with the US Studios so its products are not placed in the hands of ‘villains’; Apple is known to pay in goods and services but not in cash. Note: Not all appearances of branded objects or services are the result of negotiated product placement and do not result in compensation but are the result of creative decisions made by filmmakers and their crews.


Amounts: Product placement is a modest contributor - € 1000s to € 10,000s - to financing outside of the US studios, big television networks and most commercial video games where prices can climb to $ 100,000s, even $ 1,000,000s (reportedly paid by BMW for its Mission Impossible brand inclusion). There is an article which quotes European prices for product placement on television at: http://adage.com/article/global-news/european-media-companies-dealing-product-placement/228121/ In the United States, PQ Media estimates product placement generates over $ 4 billion per year and forecasts that by 2014 it will reach € 6 billion. European levels are currently climbing and are expected to reach € 1 billion before 2014.

Source of funds: The company either pays a fee for product placement, or it provides a negotiated amount of goods and/or of services to the producer.

Where:

Product placement is a strong contributor to financing films and audio visual projects in the USA. It still earns the majority of the world’s total. Much of its size is due to a long history as an unregulated industry.

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Eligibility: Recoupment:

Internationally product placement has been restricted by legislation which, in Europe particularly, is in the process of being lifted via the EC’s Television without Frontiers. Most EU countries now allow it to be included in features, TV drama and reality shows, video games and increasingly on internet content. It is also used in other media including publications, gaming and sports. European product placement is currently experiencing double digit growth according to industry analyst PQMedia. Latin America (particularly Mexico and Brazil) and Asia (particularly India, China and Australia) are both emerging markets for product placement. In Africa there is product placement in a published comic called Supa Strikas which is popular throughout the continent and in Latin America. Many countries have restricted product placement of tobacco, certain foods and alcohol, especially for children’s, news and documentary TV programming. One example of this is the March 2011 Product Placement Legislation for UK Television; forecasts expect the UK to see £50,000,000 in product placement in 2012. Denmark has prohibited product placement. Significant cash payments are earned by films and television programmes that are expected to have large audiences. Producers, either directly or through an agent (for a percentage fee), approach advertisers and negotiate deals on a one to one, case by case basis. Legislation and regulations governing product placement change from country to county: not all advertisers’ brands are eligible for product placement; some types of production cannot include production placement; and sometimes there is an pre-production approval required by a governmental or semi-governnmental agency. Contributions from product placements in cash, goods or services is not recoupable.

Advantages: Direct financing aid for the film or audiovisual project prior to or during production and post production. There are instances, particularly with webisodes and other internet content where the brand goes beyond product placement support and pays the production company to film ads and/or subsidises the cost of production.

Disadvantages: There may be creative compromises and/or reluctance by the creative team; consumer may find obvious product placement objectionable;

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product displacement (see Wiki article) Product displacement typically occurs when a studio or broadcaster want to avoid giving a product/brand free publicity. Displacement is also used when companies refuse to allow their brands and logos from being shown, especially in scenes and story-lines that portray their products in a negative way.

Examples: International examples of product placement in films, television, on the internet and in branded entertainment appear as a newsfeed at: www.productplacement.biz


There is a large article explaining product placement at: http://en.wikipedia.org/wiki/Product_placement There is a good glossary of terms used in product placement and brand advertising on the Brandchannel website, which also has other resources,: http://www.brandchannel.com/education_glossary.asp The European Audiovisual Observatory has a 2010 document on the legal issues associated with product placement in Europe: www.obs.coe.int/oea_publ/iris/iris_plus/iplus3LA_2010.pdf.en

Links: The United States has a product placement association with a large membership list and information at: http://www.erma.org/ There is an organisation which provides international data and analysis of product placement, among other forms of brand advertising, at: www.pqmedia.com

Barter

What:

Barter is an exchange of goods and/or services that does not involve payment of a fee. Barter for the audiovisual industry usually refers to television programmes. It involves the producer giving a television station or network a programme or series, in exchange for an amount of TV time to show commercials. The producer then sells the commercial time slot to advisers and keeps all or a percentage of their money. On the internet, barter is a developing practice. Barter offers allow audio or video producers to access normally expensive high bit rate streaming for their programmes in exchange for embedding advertising. The inclusion of ads is being done using various methods: sponsorship,

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product placement, banner ads or commercials. It also refers to the simpler practice of advertisers trading space for their ads on each others’ websites.

Typical names: Barter Barter Syndication

Online Streaming Barter

How it works: Most barter agreements are done using agent who puts together a brand advertiser and a producer with a project which can attract the target market for the brands or products. (Target markets are identified by sex (male/female) then by age; television stations know who is watching their programmes and sell advertising to brands which are bought by the same demographic.) The agent, in return, either earns a fee or gets an smaller amount of the advertising time or space to sell to other advertisers. The programmes which get the highest payments for commercials are the ones which are expected to attract a high market share, in other words, the largest number of viewers watch at any specific time. Internet barter uses an agent, or a larger advertising agency, to introduce similar target market advertisers and negotiate an exchange. Recently barter deals have started occuring in the USA between internet websites and television broadcasters for cross media advertising.


Post Production Distribution

Amounts: Highly varied. In some territories, barter is the only way to “sell” into the country, to receive any payment for a programme. In the United States, barter can produce as much money for a programme maker as a sale to one of the top networks.

Source of funds: Advertising media budgets from the company which owns and sells the brand, good or service being advertised.


Generally available internationally although a few countries internationally have television legislation that does not permit barter. In order to barter content for advertising, if permitted, producers and agents need to attract advertisers who are interested in the same target audience. Barter is a considered a form of revenue even if its benefits occur during productions; is not recoupable.

Advantages: Barter amounts are paid directly the the producer or via a barter agent (who retains a portion of the sale as a fee), usually at the time of the delivery of the programme or of the content. Barter allows producers to earn revenues from markets or countries not able to purchase

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programmes. Barter syndication in the United States (the world’s most lucrative television market) allows producers more creative control and less editorial influence from television executives.

Disadvantages:

Barter and barter syndication are time consuming and usually require specialised knowledge and connections, necessitating the use of an agent. Agents’ fees range from 25 to 55 % of advertising sales. The barter of internet advertising (estimated to be between 5 and 20% of the global internet advertising market) is starting to come to the attention of authorities who are investigating ways to assure the appropriate taxation.

Examples: The NY Times article on the cancellation of “Two and a Half Men” details the financial aspects including a forecast of barter syndication sales of its re-runs: http://www.nytimes.com/2011/02/26/business/media/26cbs.html Future trends in syndication and barter for the US market: http://www.tvnewscheck.com/article/2011/11/01/55139/the-laff-is-back-sitcoms-new-syndie-favs


An independent American trade journal which has covered media barter for several decades and maintains a large archive (unfortunately not curated for just for the audiovisual industry): http://www.barternews.com/media.htm The African Broadcast Network’s commitment to work on establishing a south Saharian African barter for programming: http://www.abnafrica.tv/business_overview.htm A debate about the use of barter on Canadian television here: http://www.benedictionblogson.com/2010/01/20/canadian-religious-shows-barter-air-time-listen-up-tv/ A programme supplier presentation to advertisers: www.pegasustv.com/pdfs/pegasustv_program-acquisitions.pdf An up to date UK report on barter media trends: http://www.mediaweek.co.uk/news/1122339/Trend-report-Corporate-barter/

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G. Private Investment

Equity Investment

What: A person or a company buys a percentage ownership of a film or audiovisual

project in exchange for a share of the project’s future revenue.

Typical names: Equity Private Investment

How it works: A producer, perhaps through a broker, finds a person or a company to invest cash in a project prior to its production. The two parties negotiate a deal including the amount of investment, the timing of the cash drawdowns, the percentage of ownership as well as other factors. Most equity investments are negotiated based on the economic principal of “high risk = high reward”.

Funds available:


Production


Amounts: Negotiable.

Source of funds:

The individual or the company; in some cases specialised film investment funds are set up that combine a number of companies in order to fund a number of films, thereby lowering the risk for the investors. Note: If a single company pays the entire cost of production, the deal is referred to as a “negative pickup” (see Appendix).


Generally available: Southern Mediterranean; Europe; Latin America; East Asia; Anglophone countries; Africa. The practice of using equity investment to support local production is more prevalent than in the rest of the world in the United States, Russia, the Ukraine and Poland. The investor determines the producers and productions, usually based on a subjective criteria. Yes, and usually on terms that are less beneficial to the producer than pari passu pro rata.

Advantages: Direct cash finance for the film or audiovisual project.

Disadvantages: The choice of projects is not based on automatic support but on the evaluation of perceived quality usually by a person not experienced in the audiovisual industry;

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potential interference in script, key talent, on set; expensive recoupment terms; possibly the need for a producer credit and fees.

Examples: The industry range includes friends and family (‘angel investors’) financial support for a filmmaker, single investors putting money into a single film, to groups investing in multiple films. One US firm started investing in larger budget films a decade ago and continues to do so, simultaneously expanding into distribution. Its stated goal is to become a full fledged Hollywood Studio: http://relativitymedia.com/default.asp Note: The phrase ‘private’ investment signifies that most of these financial arrangements are confidential and are not shared by any parties other than the producer, the financier, their lawyers and possibly the broker who arranged the deal. If public funds are also used, the contracts do reflect deal terms but only as they affect recoupment.


There is a explanatory ‘how to’ article for producers on private investment in film by a LA based attorney, (note it has a distinct American indie slant) at: http://www.baselineintel.com/research-wrap?detail/C8/that_pesky_equity_component_of_independent_film_finance_plans There is an article about private investment in films written from the point of view of a hedge fund manager at: http://www.finalternatives.com/node/15656 There is a list of some in industry companies that arrange private investments at: http://www.scriptologist.com/Directory/Filmmaking/Financing/financing.html There is a comparison of crowdfunding and private investment at: http://voices.yahoo.com/film-finance-iq-crowdfunding-vs-equity-6834400.html

Deferrals

What: A member of the team making a film or audiovisual project agrees to waive a portion of his or her fees, usually with the provision that the amount is paid from contingency should any remain, from any additional production finance for from revenues.

Typical names: Equity Above the Line Equity

Below the Line Equity

Deferments

How it works: When a project is close to being completely financed, the producer,

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usually with one or more members of the cast and crew, agrees to reduce or renegotiate their fees in order to complete the finance plan. For feature films, it is often the producer, director and one or two lead actors who defer. An individual letter of agreement should be signed, stating how and when the unpaid fees will be paid. If a project comes in under budget, the deferrals can be paid from the under budget amount or from any contingency left in the production account after delivery. In most cases the repayment happens over time as the project starts earning revenues. In places where a tax credit – or a portion of it – is payable in the future, the deferrals may be paid at that time.

Funds available:

Production

Post Production

Amounts:

Negotiable.

Source of funds:

The individual agreeing to defer.


Worldwide. German national and regional film funders require deferrals or production company financing of between 5 and 7 % of the total cost of production. Deferrals are at the discretion of the individual. Producers should arrange a preferential recoupment tier so that the industry professionals are paid in first position. Several European and international film funds are currently allowing and encouraging this preferential recoupment of deferrals in the interest of recognising talent and/or building a better economic model for their industry.

Advantages:

Direct cash finance for the film or audiovisual project.

Disadvantages: Deferrals are usually organised at the last moment to close a financing gap; lower fees paid will reduce the amount of a tax credit or the co-production percentage; it may be a disincentive to those deferring; the longer term impact on the talent needed to make films and audiovisual projects is negative for the health of the indusry.

Examples: A typical example of a deferral in this industry: the producer and the director, who were to be paid € 100,000 each, agreeing to get € 75,000 by delivery and deferring € 25,000 until the project earns revenues. The € 25,000 amounts should be shown on the finance plan, and should be labeled as “equity investment” in all of the financing contracts to guarantee that if any revenues are received, the deferrals are paid and all of the transactions are transparent.

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There are two pages (372 and 373) about deferrals in the book Raindance Producers' Lab: Lo-To-No Budget Filmmaking by Elliot Grove. They can be accessed by a Google Books search.

Goods, Services and Facilites Support

What:

The provider of a good, a service or a facility supports the production of a project by either charging less than the normal price for it, or giving it for free. Industry facilities and services may include post production and CGI (computer generated image) specialists. Non-industry sources for goods and services can be any type of product from restaurant cast and crew meals and clothes for costumes, to limousine services.

Typical names: Goods Below-the-line Investment

Services Production Facilities

Post Production Faciliities

How it works: The producer, with the line producer for fiction, go through the detailed production budget and identify expenses that could possibly be replaced by goods, services and facilities at a lesser price or for no cost. The producer negotiates with the providers to discount their usual prices or to waive them entirely.


Post Production

Amounts: Goods, services and facilities deals can raise between hundreds or thousands of Euro to a maximum of two or three hundred thousand Euro.

Source of funds: The people or companies providing the goods, services and facilities.


Independent producers of fiction and documentaries worldwide count on making these deals to make projects. Not often used on high budget films. Producers and the providers of the goods, the services or the facilities negotiate deals on a one to one basis. Negotiable.

Advantages: Direct aid for the film or audiovisual project usually when it is needed;

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reduction in the cash needs of the production budget; reduction in the recoupable cost of production.

Disadvantages: The goods, services and facilities may not be comparable to the quality of the ones which require payment or which cost more; production equipment houses and facilities which support production and post production usually do so during their least busy periods so timing may be an issue.

Examples: In many countries, television stations which pre-buy films offer a license fee (in cash) plus goods, services and facilities. For a feature film the goods, services and facilities may include equipment, use of the station’s production staff and access to sound stages, edit suites etc. In Eastern Europe, a TV presale may be valued at € 70,000 of which € 20,000 is cash and € 50,000 is the value of their goods, services and facilities contributions.

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H. Crowd Sourcing

Crowd Funding

What:

A funding campaign, conducted via an internet site, to raise money from individuals in order to pay for all or part of the production of a film or audiovisual work. There are usually a range of incentives (“rewards”) to entice people to commit money via the website or through PayPal. The amounts per individual are a low of ten dollars or euro with the commitment of a simple thank you, to tens of thousands with the reward of a credit plus a list of a special status on the project to long lists of treats. Crowd funding is also used by musicians and other artists as well as start up companies related to digital innovation and socially or culturally motivated organisations. Increasingly, internet games are not only raising the highest amounts of money via crowd funding but getting more than asked for in days rather than weeks. Crowd funding is sometimes used also for covering the cost of international marketing, promotion and exhibition.

Typical names: Crowd Funding Crowdfunding Crowd Sourcing

How it works: The producer prepares a promotional package about the project to be made including webpages, video teasers, as well as more conventional synopses, artwork, credits, resumes, etc. The promotional package is then uploaded onto a website for the project or, more often, to an existing crowd funding website for multiple projects. Well know ones crowd funding sites include: Kickstarter.com, Indiegogo.com, KissKissBankBank.com, and FundIt.ie. The producer lists benefits which change for each level of investment; typically films start with € 10 for which an investor will get a thank you or a DVD with the highest level in the thousands. There are another 10 to 15 amounts listed with benefits that include everything from coming on set, to attending the premiere, to a credit on the project (anything from “thank you” to Executive or Associate Producer), to a social outing with cast, crew, etc. In the USA laws (which are expected to change in 2012) prohibit offering profits but producers from other countries offer future revenue and profit

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shares.


Production


Amounts: Typical successful crowd funding amounts are relatively small, from $ 100 with few over $ 150,000, however there are is a trend of both the number of projects and the amounts per project increasing. Kickstarter is forecasting that it will have raised $ 50,000,000 for films by the end of 2012; the average amount each successful film earns averaged $20,000 in 2011.

Source of funds: Pledges from the public usually paid via credit card or Paypal. Producers report that to succeed on crowd funding sites, they need to seed the initial activity with support from friends, family members and colleagues. As the number of funders and the amount of funding increases, so do the number of unknown investors.


Active sites with proven funding raising capabilities: the Anglo Saxon nations but especially the USA, which has the largest international platforms. Increasing crowd funding activity: Europe and Latin America. The laws of a country may affect the offers a producer can make on the internet. The established crowd funding website publish clear guidelines for eligibililty which must be met before the website will post a project and allow a fund raising campaign. Some crowd funding websites are curated, meaning that the owners of the site choose the projects they place on the site based on subjective criteria. Rarely any recoupment of smaller pledges. Larger amounts may be repayable as a percentage (no greater than pari passu pro rata) of revenues. No commitment for profit participation is fairly universal, although with the proposed change in the USA laws, there may be a trend – beginning next year – to allow profit points to be part of the deal in exchange for larger amounts of money.

Advantages: Cash contribution of € 100’s to the low € 100,000’s. Initial awareness of the project with motivated ‘fans’ and interested viewers which enhances audience potential. Internet presence early in the development process initiates internet and social marketing.

Disadvantages: The amount of money that can be raised for films and audiovisual projects is currently limited. Crowd funding is so labour intensive and time consuming that the advice most producers with experience give, is to hire a specialist to do all of the digital, technical and internet marketing

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work. Servicing the commitments for rewards and incentives may be expensive and are certainly labour intensive and time consuming following post production and delivery.

Examples: The Age of Stupid remains the most successful example of crowd funding as well as international marketing and promotion on the internet: http://www.spannerfilms.net/


A number of articles on Crowd Funding for projects and companies, including media, have been collected at: http://linkingasia21blog.com/category/crowdfunding/ The filmmaker, Jennifer Fox, who raise the most funds for a single film on Kickstarter wrote tips for producers on how to succeed at crowdfunding: http://www.huffingtonpost.com/tribeca-film/future-of-film-10-tips-fo_b_913604.html There is a larger, more detailed series of articles on the same film: http://myreincarnationfilm.com/press/kickstarter-success/

Links: Crowd funding websites for films, documentaries and digital media: www.kickstarter.com www.indiegogo.com www.kisskissbankbank.com www.cinemareloaded.com/en/ www.eppela.com/eng/ There is a curated website for documentaries, run by the Hot Docs festival, that may be a good model for financing documentaries in the EuroMed countries: www.hotdocs.ca/docignite

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I. Awards, Grants and Prizes

Awards, Prizes and Grants

What: A film festival, a film market, a pitching or co-production forum, a training

programme or an associated fund offers prize money for development, for production or for post-production as part of its competition. Note: see also Specialised Territorial Funds in the Subsidy Funding section, which are administered by National Funds rather than these, which are administered by the event and its organisers.

Typical names: Award Prize Grant

Fund

How it works: Guidelines for eligible projects are made available to the international film and audiovisual sector by the festival, market, programme or an organisation responsible for administering . Applications are required, usually by a set deadline, with proposed contents including story, script, treatment and other information. Specialised juries, sometimes including the fund organisers, select winners which are named either at the event itself, or within a published time period. Most of these awards and prizes require their organisation to be named in the head or tail credits.

Funds available:


Production

Post Production

Amounts: The monetary prizes vary greatly but the amounts per prize show a trend to higher amounts, as well as there being more of them. Script writing awards may be as low as € 5000 but production awards can exceed € 200,000.

Source of funds:

The organisation offering the financial incentive raises money from its own budget or from sponsors, advertisers, local broadcasters or foundations which supports annual funding of the prizes. There are funds which get government support (for example the World Cinema Fund get support from the German foreign affairs ministry).


Available internationally. The organisation giving the award establishes clear guidelines for eligibililty which are often found online or in print, on request. Usually none but some of the bigger awards have started to require pari passu pro rata recoupment.

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Advantages: Direct aid for the film or audiovisual project, usually in the form of cash, for

development, production or post production of film and audiovisual projects; support in the form of expertise for some stages from early development through to post production; additional marketing potential; endorsation usually by a jury of specialists about the quality of a script or project.

Disadvantages: The majority of these prizes are highly competitive; some funds get so many applications that they are able to finance only 1 to 2 percent of them (eg: the World Cinema Fund funds approximately 1 out of every 25 applications); there are requirements that an award winning project must be premiered in the city or at the festival giving that award; broadcasters who fund the awards sometimes ask for the rights to a TV license.

Examples: Two European festivals have supported filmmakers in the South Mediterranean and elsewhere for many years: The World Cinema Fund at the Berlinale: www.berlinale.de/en/branche/world_cinema_fund/wcf.../index.html The Hubert Bals Funds at the Rotterdam Film Festival: http://www.filmfestivalrotterdam.com/en/hbf/

For more information: Other Links:

The website for EuroMed AudioVisual III has a document listing major European prizes and awards supporting development, production and post production for filmmakers in the South Mediterranean: http://euromedaudiovisuel.net/2012/p.aspx?t=news&mid=21&l=en&did=582 This is not a definitive list but an indicaition that there are monetary awards given by a range of film festivals, film markets, training programmes and websites for excellence of completed films (shorts, documentaries and features) as well as development support and production and post production funding: The film festival in Amiens prizes: www.filmfestamiens.org/?Regulations-pdf Cinemart at Rotterdam has two script writing/development awards (which are different than its more famous Hubert Bals Fund, listed on the EuroMed AudioVisual III site, above): http://www.filmfestivalrotterdam.com/professionals/cinemine/cinemart_awards/ The Dubai Film Festival has a range of cash awards: http://www.dubaifilmfest.com/index.php/en/dubai_film_market/film-connection/awards/ Hot Docs has a special documentary fund for African filmmakers:

http://www.hotdocs.ca/funds/hot_docs_blue_ice_group_documentary_fund/

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The Mediterranean Film Festival of Montpellier has a development grant (click on it on the black bar below the title logo on the website): http://www.cinemed.tm.fr/ Sundance Documentary Fund: http://www.sundance.org/programs/documentary-fund/ The Tampere Film Festival gives cash prizes for completed short films: http://www.tamperefilmfestival.fi/site/index.php?page=home The Tribeca Film Festival has a number of cash awards ranging from $5,000 to $25,000 plus one for $50,000 in post production facilities; put “Awards 2011” in the search box to see winners to see categories and amounts: http://www.tribecafilm.com/ Torino Film Festival awards: http://www.torinofilmfest.org/?action=article&id=121&menu=1 Torino Film Lab awards: http://www.torinofilmlab.it/awards.php The Tokyo Film Festival has cash prizes for completed feature films: http://2011.tiff-jp.net/en/tiff/prizes.html The online platform, Vimeo, gives grants: http://www.cinema5d.com/news/?p=3947 Visions sud est: http://www.visionssudest.ch/?index&language=en

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SECTION V

Recommendations Regarding Financing Sources for the South Mediterranean Film and Audiovisual Production Industry

There are three key issues that are critical to address in order to create a sustainable film and audiovisual culture – currently and in the future – for the countries of the South Mediterranean. In the section that follows these three vital recommendations, there are recommendations for modifying current industry funding practices or adopting new ways to finance depending on each country’s goals for its national film and audiovisual sector. Build Audiences While the filmmakers of the South Mediterranean have demonstrated they have talent, their films are not being seen by enough people in their country of origin or internationally. The marketing, distribution and exhibition infrastructures are weak across the region. The marketing of local and regional films requires more expertise and innovation rather than spending more money on conventional promotion. The South Mediterranean distribution sector is currently highly dependent on releasing Studio ‘blockbusters’ for its economic health. Distributors need encouragement, perhaps even quotas, and economic support to become more aggressive in the release of local films. Some countries have as little as one cinema per each million people. Building more cinemas is too expensive a proposition to be viable . Initiatives like those in Tunisia, Morocco and Jordan to build an alternative circuit using digital projection equipment and existing buildings should be encouraged and supported. Additional factors which build audiences like film education in schools, free screenings and film festivals could be undertaken by the combination of government cultural and educational entities and the filmmaking community itself. Build Now for the Digital Future The Arab Spring demonstrated how adept the population of the South Mediterranean at using the internet; it was one of the remarkable factors that won the world’s admiration. Now the filmmakers of the region need to become innovators at the production and marketing of content for internet delivery.

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There are good existing models that can act as a base. For crowd funding, the Hot Docs curated site for documentary funding offers one alternative and the smaller European platforms appear to be more doable than the more elabourate Kickstarter and Indiegogo sites. YouTube works for exposure and marketing but it is also building specialised TV channels, one or more of which should be devoted to the cinema of the region. Social media, a cornerstone for the Arab Spring, can become powerful marketing tools for film and instrumental for building audiences. The filmmakers need to partner with the technology experts in order to come up with innovative solutions. Formal meetings and “hubs” can start the process towards partnerships that recreate the most effective of the international internet sites as well as design and build more unique sites tailored to the audiences and film sector of the region. Sustain and Grow the Industry Measuring annual feature film production is a good method to analyse the health of an industry. Each feature made indicates that there are many shorts, documentaries and other audiovisual projects being made, too. The South Mediterranean is currently making too few feature films to serve its audiences or its filmmakers, let alone to build a viable production sector. The region is missing the important reflection and preservation of its culture and its society that film provides. Film is an essential component of a nation’s art and its heritage. In the next five years, the nations of the South Mediterranean should aim at making one feature film per million population. The talent and creativity to be found in a million people is more than adequate to assure high quality results. In order to accomplish this goal, there will need to be a substantial increase in subsidy funding and broadcaster support coupled with the introduction of other types of financing including increased co-production, tax incentives and public encouragement for private investment.

Funding Recommendations Expand the Subsidy System The industry’s keystone project financing currently comes from the national film funds; most of them are significantly under funded. While filmmakers around the world complain about their subsidy funders, there is one aspect to the complaints coming from the South Mediterranean that should be considered seriously: the lack of transparency in the decision making process as well as the financial aspects of the administration of the funds.

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The introduction of regional funds would serve two purposes: support the industry and cause it to move beyond the capital cities which are currently the sites for the majority of production activity. Establishing a pan-national fund, styled after Eurimages or the Nordic Film and TV Fond, would increase co-production activity in a region that is blessed with a common language. Encourage Production through Tax Incentives Tax incentives are currently the most obvious area for growth of the industries in the South Mediterranean. Rebates or exemptions on value added tax would make the sector competitive with other international industries. Manpower costs in the region are comparatively low so combining that factor with a rebate or exemption would result in significantly lower production costs. The savings possible in the South Mediterranean would mean more European producers would consider the filmming in the region; it would soon become a viable alternative to Eastern Europe where production costs are rising. While tax credits will support local production, they are essential for attracting foreign producers to shoot locally. Inbound production has a strong economic impact (most film commissions operate on a total effect of 150% - 300% of the local spend) and require high numbers of manpower hours of employment particularly for males between 20 and 40 years of age. The larger budget Studio films and, increasingly video games, are able to access tax credits of between 20 and 40 % internationally and between 20 and 30% throughout Europe. Malta’s film tax credit ease of use and immediate cash back policy set the standard for the region. Tax shelters are complex and somewhat ineffective in their use of money; too high a percentage does not go on screen. However, they are instrumental in attracting private investment to this high risk industry. In every country that has tried them, they have kick-started an industry albeit too often with inconsistent quality results. In Ireland, for example, the year before the tax shelter was introduced there were 3 features produced while in the first year the tax shelter functioned, 21 movies were made. Co-production On a per project basis, co-production allows the optimisation of talent, lowered financial risks per country and increased revenue potential. Producers will have access to more funding and more types of funding as well as enhanced goods, services, location and facilities opportunities. Co-production increases audiences and markets which in turn positively affect tourism. (The Department of Tourism in Ireland last year questioned visitors arriving on Irish soil; 20% attributed the motivation for their choice of destination to films and/or TV programmes.)

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In order to succeed long term, co-production requires treaties so while a economic commitment is crucial, there needs to be both legislative and administrative support as well. The Marketplace In the South Mediterranean now, the key market for films and audiovisual projects is television. More people see local productions on TV than any other medium. The broadcasters of the region vary in their support for independent production and few are consistent in year to year commissioning of features, documentaries and other forms of programming. Public broadcasters should be meeting minimum annual targets for support while broadcasting licenses may have to be issued with clauses guaranteeing annual funding for independent production commissions. The distribution and international sales sectors are weak in most countries and are unlikely to get much stronger given the current economic forecasts for the industry. The region is reflecting the grime reality of the international situation. However, both functions are needed for a sustainable industry. The future of distribution, national and international, is changing due to the impact of internet delivery of video content in all forms. This area is turbulent and change is a constant. But the South Mediterranean, like its northern neighbours, cannot afford to sit and wait for the business models to evolve. There is a window of opportunity now to create and own innovative means of getting projects to the world’s audience, tailored to the specifics of the regions’s industry. Producers and technological specialists need to be encouraged to collaborate. Education is essential on both sides. Experimentation is a necessary expense. Advertising Is Willing to Participate If It Sees Results The first order of business is to analyse the place of advertising in relation to a nation’s production sector. What are the laws and what are the industry standards and practices regulating advertising in film and audiovisual production industry? Is product placement allowed? What restrictions do the laws or the broadcasters impose on sponsorship? Do the broadcasters allow and support barter? Advertising has a large economic footprint. While most of the advertising money is being spent on television commercials now, it is slowly and surely moving more of its global spend to the internet. Product placement, where it is legal and encouraged, is growing substantially each year. In order for producers to access advertising money for funding their projects, there needs to be a link forged between them and local advertising agencies. Both sides have to learn more about each other’s needs and practices.

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Encourage Investment Deferrals are an industry constant in the South Mediterranean, as are Goods, Services and Facilities investment in projects. Both types of support should be encouraged to document their investments and to be treated as an equity investor by all of the other financiers of the project. The more problematic area is how to attract private capital to the film and audiovisual production sector. The most effective route to private capital is the combination of tax shelters and a few films which succeed commercially. As online distribution increases and its revenues start to become significant, private investment should increase, too. However, venture capitalists will need to be well informed and to be given incentives to entice them to consider film a viable investment. Crowdfunding Needs to Be Tested Although crowd funding is currently delivering only a small percentage of a project’s budget, and then usually for niche audience projects, it is a rapidly growing source of funds. There needs to be some experimentation to see what can work in the South Mediterranean: sites like Hot Docs’ one film at a time approach, or a larger collection of projects like the leader in this sector, Kickstarter. While different efforts can and will be made, it would be good to encourage groups of producers to join forces rather than have experiment on a large number of individual sites. Promote the Region’s Producers’ International Awards Producers, by definition, are enthusiastic entrepreneurs. The South Mediterranean producers have proven themselves adept at winning awards, accessing grants and using resources and tools that are available to them internationally. Continue to inform them, encourage them, support their efforts – and celebrate them when they succeed.

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APPENDIX

Glossary of Film and Audiovisual Financing Terms

Advance: a first payment to a producer in anticipation of the producer’s percentage of all of the revenues to be earned by the film. Advances are usually guaranteed by distributors for their country for multiple rights: theatrical and non-theatrical showings, DVD, VoD, internet distribution, all forms of TV, etc. Ancillary Rights: rights which are held by a producer for a project that do not relate directly to exploitation of the project such as selling the musical soundtrack or individual songs, selling a novel based on the script, selling a video game, selling t-shirts, toys and other merchandising, etc. Ancillary rights sales can be lucrative but usually after the completion of a project rather than as a source of production financing. Android: Google’s mobile operating system software; also used as an adjective to describe hardware (mobile phones, tablets, etc.) that uses the system as well as formats which the system supports (movies, audio and video work, non-text web content). One of four main operating systems that allow audiovisual content to appear on smart phones, music players, tablets and computers; incompatible with the other three operating systems. Audience Designer: a person specialised at marketing a film using conventional methods as well as extensive use of new internet marketing techniques including blogging, social media exposure, interactive websites, mobile and tablet applications, internet games, etc. In the United States the independent sector has adopted another title for this role: Producer of Distribution and Marketing, the PDM. Barter: a direct exchange of goods and/or services without money entering the transaction. In the film and audiovisual sector it refers to television programmes being given to broadcasters free of license fees but in exchange for airtime. The airtime is converted to money for a producer by a barter dealer (or broker) who fills that time with advertising. If this is done during production of the programe, the ads may be embedded in the programme by the producer (in the form of commercials at atypical commercial break times, sponsorship or product placement). Internet broadcasters are being offered access to high bit rate streaming in exchange for including some embedding some advertising in audio or video content; this is referred to as ‘online streaming barter’. BitTorrent: is a peer to peer sharing protocol used on the internet to upload large files like films and audiovisual projects and allow them to be downloaded onto individual computers. This technology is used legally but is generally held responsible for facilitating piracy. Box Office: the total of all tickets sold minus any applicable taxes. In some countries the box office is measured by the number of admissions rather than the monetary value of the tickets sold.

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Breakeven: the amount of money earned by the producer from the sales of the film equals the amount of money the film’s financiers are owed. Any revenues after breakeven are called profits; profits are divided between the production company to pay themselves and their talent and the financiers. Blu Ray: an optical disc that allows the storage and display of large amounts of data like High Definition films. CEO: Chief Executive Officer, the senior person for a company’s results; reports to a Board of Directors; he is usually a Director and sometimes the Chairman of that Board In the UK and Ireland, the CEO may have the title Managing Director. CFO: Chief Financial Officer, the senior person in a company responsible for financial planning and reporting in a company, reports to the CEO and the Board of Directors. CMO: Chief Marketing Officer, the senior person responsible for all marketing activities of a company; reports to the Chief Executive Officer. For the film and audiovisual industries, this is the person responsible for all branding and advertising so will be decisive in sponsorship, advertising time and/or space buys, product placement and any form of embedded advertising on film, television and the internet. COO: Chief Operating Officer (or Chief Operations Officer), the senior person responsible for the day to day activites of a company, as opposed to its longer term strategies for the company’s future; reports to the Chief Executive Officer. May have the title of President. Cashflow: cash money received and expended over a finite amount of time. Producers may have to arrange access to cash during production by having a loan against a contract that is only payable once the film is finished. Catch Up TV: the digital distribution of a television programme using the internet, after its inital broadcast, so that anyone can see it when they want, if they live in the geographic area of broadcast. This service may be free, advertiser supported or for a fee charged per programme. The BBC’s iPlayer began in 2008 and has recently expanded into North America. Completion Bond: a form of insurance for expensive films and television programmes, particularly in the AngloSaxon countries, that guarantees that the project will be completed to high technical standards and delivered per the financing contracts’ terms and conditions regardless of over budget spending or inadequate production management or unforeseen problems during the shooting period. Cost Per Cflick: see Pay per Click Costs off the Top deal: a type of deal used to divide a projects’ revenue between a distributor or sales agent and a producer. The distributor or sales agent subtracts all of its costs for marketing, promoting and releasing a project before it shares the balance between itself and the producer of the project. A standard Costs of the Top distribution deal for a European feature usually shares the balance after costs with 50% for the producer and 50% retained by the distributor.

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Crowd Funding: Producers, or other organisations appeal for support for a film or other project not yet made – usually via the internet – offering small to large incentives to attract funding. The public may be pre-buying a DVD, investing in exchange for a percentage of all revenues or pledging money in exchange for credits. Crowd funding (then called crowd sourcing) started in the music industry in the late 90s and expanded to the film industry in 2004 in France. The film “The Age of Stupid” was the break through film: crowd funding paid for production as well as getting other forms of support, starting in 2004. Its producers continued to raise money and awareness via the internet throughout its international promotion, marketing and release until 2009. Crowd Sourcing: as well as raising money via crowd funding, producers can also appeal for other forms of help from the public by launching an open appeal. Crowd sourcing has been used for finding specialised information, labour, creative assistance (particularly effective for digital media and web content), publicity, physical and informational help with releases in other cities/countries, etc. The secondary, but important, purpose of crowd sourcing for producers is to identify and motivate the audience for their project. Curated Site: a website that groups film and audiovisual content, articles, books, music, fasion, etc. according to a set of criteria which could be as simple as theme, subject matter, personal opinions of quality, source of items, special interests, etc. www.Springwise.com is a curated VoD site while www.YouTube.com is not. D2F (Direct to Fan Marketing and Distribution): a distribution and marketing strategy directly connected to the project’s core audience. It uses the internet and social media to grow a database of a filmmaker’s fans then use news, giveaways, competitions, and other forms of interactivity to excite them to purchase and promote new projects. For more information: TopSpinMedia.com. DCD: Digital Cinema Distribution (as defined by the EU’s MEDIA programme: “Digital delivery - to an acceptable commercial standard - of content to cinemas for theatrical exploitation via hard disc, satellite or online (B2B - Business to Business”). DCP: Digital Cinema Package is the group of files used to store, distribute and project digital films. For more information see: http://www.dcpinfo.com/ Digital Content Protection is the name of the organisation that licenses technology to protect premium commercial films from piracy. See: www.digital-cp.com/ DIY: Do It Yourself refers to low budget, independent feature film and documentary production and distribution undertaken without any or very little professional assistance Distribute It Yourself referring to filmmakers marketing and distributing their project themselves rather than through third party specialist organisations (PR companies, distributore, etc.); the US independents are leading this, making extensive use of internet resources as well as conventional but localaised releases. See also Direct DIWO: Do It With Others refers to getting help, for free or at very low cost, from other people to produce and distribute low budget, independently made feature films and documentaries

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Day and Date: a movie opening that involves theatres in one or more cities, regions or countries on the same day. Delivery: the event when a film or audiovisual work is complete and all of the documents, marketing, production and duplication materials are ready to be given to a distributor or an international sales company. The date this event occurs means that the distribution and/or sales company must pay the producer all or part of any advance, minimum guarantee or flat fee. Delivery List: a list of the items required by the distributor and/or sales company. This is usually found as a schedule attached to a financing contract. For more information, there is a standard feature film delivery list (called Schedule 8) that can be downloaded from the New Zealand Film Commission website: www.nzfilm.co.nz/ Development: the stage of the making of a film or audiovisual project that begins with the initial idea and ends when the producer begins pre-production. It includes research, script writing, packaging, financing and initial stages of cast and crew hiring. It may include longer term planning of production needs including effects, specific location bookings, etc. Direct Distribution: distribution of a film or audiovisual project in a territory or country that is done by the filmmakers without going through distribution companies. Also referred to by the abbreviation DIY/DIWO in the United States. Discounting Contracts: a bank or another lender agrees to give a percentage of the total value of a contract in advance of its payment date. Producers often have to cashflow production prior to the date of payment by distributors, sales agents, some television broadcasters and, increasingly, by Video on Demand platforms. The cost of discounting contracts at banks is usually a legal fee plus interest while private or commercial lenders charge more. Equity (Equity Investment): financing provided by individuals or companies in exchange for the ownership of a percentage of all future revenues of a film or audiovisual project. Usually these investors expect high rewards in exchange for buying a high risk investment, so they recoup more than ‘pari passu pro rata’, sometimes charge interest on top of their capital investment, and sometimes demand one or both credits and production fees. FTA (Free to Air): a television channel delivered over the air, rather than via cable or satelite to a dish, which does not cost the viewer a fee or subsciption. First Day of Theatrical Release: the first day a film is shown in a theatre in a country or territory. This is the date used in some financing contracts for a major percentage of the distributor advance or minimum guarantee to be paid. It may also be the date which begins a period of exclusive exploitation (“the theatrical window”) by film exhibitors in a country or territory, Flat Fee: a one time payment. A distributor may pay an amount for the rights to a film for a territory for a defined term but not report nor share any revenues from the film’s exploitation.

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For internet advertising sector, a flat fee would refer to a single amount paid regardless of the number of clicks. Gap Finance: if a project has a large part of the financing in place but is missing a small percentage like 20% or less, some companies will lend the producer that remaining balance. The companies involved in gap financing usually need to have sales estimate projections by a professional sales agent and they restrict the size of the loan to half or one third of the total of the projections. Deal terms for gap financing are often more expensive than for other financing sources. Greenlight: a film financing term that refers to the producer’s decision to start the process of shooting the film or audiovisual project; usually based on having enough financing deals in place to cover all of the costs involved in production, post production and delivery. Hollywood Studios: large internation film companies which develop, produce and distribute films from their Los Angeles base. Companies include Disney, Fox, Colombia, Sony, Paramount, Universal and others. Their business model is exclusively market driven; their films are the highest budgets produced and as a group, they continously collect the major share of the world box office. IPTV / Internet Protocol Television: according to Wikipedia, IPTV is different than Internet Television because of its on-going standardization process (eg, European Telecommunications Standards Institute) and its preferential deployment scenarios in subscriber-based telecommunications networks with high-speed access channels into end-users via set-top boxes or other customer-premises equipment. Inbound Production: any production which shoots and/or is postproduced in a foreign country. Large feature film shoots are economically desirable causing intense competition between film commissions and between production service sectors. Less lucrative shoots, for example documentaries, are usually done with little local assistance and therefore little economic impact in the area. Internet Entertainment: the sector of the industry which develops, markets and sells video games online and on multiple platforms Internet Television: the digital distribution of television delivered via the internet instead of over the air, via satellite or via cable (Also known as Online Television). Investment: see Equity iPlayer: BBC’s streaming service for its radio and television shows was launched in 2007 as an innovator in moving television onto the internet. In 2011 it expanded to include links to many other UK broadcasters as well as expanding its availablity from the UK only to more European and some AngloSaxon countries. It plans to expand into more regions in 2012, move into HD delivery and add more broadcasters to its programming. iSO: Apple’s mobile operating system software; also used as an adjective to describe hardware (mobile phones, tablets, etc.) that uses the system as well as formats which the system supports (movies, audio and video work, non-text web content). One of four main

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operating systems that allow audiovisual content to appear on smart phones, music players, tablets and computers; incompatibile with the other three operating systems. License Fee: the amount of money paid by a television station or network to a producer in order to have the right to show the producer’s work (film, documentary, television programme, etc.) for a set number of viewings over a stated period of time. Historically license fees were paid for exclusive rights in only one medium – broad- or narrowcast on television. Both non exclusive rights and the ability to stream or offer downloading on the internet as well are now being acquired by television stations or networks in exchange for paying license fees. Line Producer: the person who is in charge of budgeting and overseeing the expenditure of the production; the nationality of the line producer is important for foreign films shooting in a country with a tax exemption, rebate or credit (the line producer and/or his company must be national and a tax payer). Market Share: a long used television system used to measure the percentage formed by the number of viewers for one programme over the number of television sets which are turned on at the same time, for example: 20.3%. Market share ratings are collected by a limited number of organisations in each country; the ratings are generally available the day following the programme. Advertisers use market share as one of the criteria in how much they are willing to pay to buy commercial time on a programme. The internet is affecting the collection of market share statistics for programmes. Now that the number of viewings after the inital broadcast (on Catch Up TV platform viewings and TiVo recorders), newer collection methodology is being put in place. Media: in financing contracts, the various means used to exploit the project; for example, on television, ‘the broadcast media’, or in cinemas, ‘the theatrical media’. MEDIA: the European Unions’ multifaceted programme to support the film and audiovisual sector in the areas of festivals, markets, training, distribution, exhibition and development. See: www.ec.europa.eu/media MEDIA Mundus: a newer European Union programme to support international cooperation for the film and audiovisual industry to strengthen cultural and commercial relations between Europe's film industry and film-makers of third countries including its South Mediterranean neighbours. See: http://ec.europa.eu/culture/media/mundus/index_en.htm Merchandising: products made using the logo, title, character reproductions, or other images from a film or television programme; clothes, novels, toys, comics, posters, stickers and other types of novelties (eg: Tshirts with the Superman or Batman logos, lunchboxes with Pixar images, novels based on the scripts for The Killing, etc.) Micro Budget Filmmaking: feature films made with budgets which are in the tens of thousands of euro. Some put not all crew are paid, frequently less than their normal rates. The most used, highly successful example is The Blair Witch Project which cost approximately $60,000 and went on to make $250,000,000 worldwide.

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Minimum Guarantee: the amount of money a distributor or an international sales agents guarantees to a producer in exchange for the right to sell and exploit the film. Minimum guarantee deals can be made prior to a film’s completion or after seeing the completed film; the amount of the minimum guarantee may be paid on delivery of the film or within a time period which is generally two years or less after it first theatrical release. MoW (Movie of the Week):, a movie made for showing on television but not in cinemas; a telefilm. Negative Pick Up Deal: large film or audiovisual companies, including The Studios, enter a contract with a producer to purchase a project on a given date and for a negotiated sum which is usually close to, or slightly more than, the total development and production costs. The producer must cashflow the production and is paid only on delivery. In exchange for covering all costs, including producer fees, the company usually retains all revenues including profits. Niche Audience: a section of the audience which shares a common element or interest; sports channels cater to an audience of sports lovers. Television and the internet are creating more highly defined content for smaller and smaller niche audiences which, in turn, attract advertisers who want to reach those viewers. So a channel or website or VoD platform devoted to horse riders is playing to a small niche audience. No Money Filmmaking: feature films made with budgets which are in the thousands of euro. No one is paid and materials used are often already owned or borrowed. Expenses are limited to film, equipment and food for the crew. Online Television: see Internet Television P&A / P&A costs: the costs of prints, advertising and marketing materials as well as specialists (eg: press attachee or audience designer) involved releasing a film and paid for by a distributor. PMD: Producer of Marketing and Distribution: in the American independent film sector, this title is being given to technology savvy people who develop strategies then do the various jobs involved in promotion and marketing of features and documentaries on the internet. This includes looking after frequent Tweets, blogging and constant updates on progress from pre-production to local releases on dedicated websites, co-ordination all social media marketing, etc. The role is similar to that of the European Audience Designer. Pari Passu Pro Rata: payments made to all financers at the same time and in proportion to the amount each invested. Pay Per Click (PPC): one of the most frequent internet advertising business models in which an advertiser places an ad on a website and pays the website owner every time someone clicks on the ad. Content sites usually charge a fixed price per click and attract advertisers because there is some synergy between the content and the good or service being advertised. Platform: either the hardware needed to run a computer programme or the operating system that runs it.

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Primetime: a period of time each day when the television audience is biggest; most weekday primetime occurs in the middle of the evening (20.00 to 22.30 but it changes from country to country). Private Investment: see Equity Product Displacement: a brand is disguised or digitally removed by the producer from a film, television programme or original online content either because the producer does not want to advertise without payment or is procluded from using the trademarked labels, logos, symbols. During production, the producer will replace, for example, the hood ornament on a car or after production the producer has the hood ornament digitally removed or changed. Product Placement: payment to a producer by an advertiser in exchange for putting the advertisers’ product on screen in a film, a television show or original online content. Rarely used in documentaries, news or other factual projects. Production Services: in order to attract foreign production to a country, film commissions offer production service support to help producers, obviously unfamiliar with the country or region, to organise all aspects of shooting and sometimes post production. Some countries have significant production service sectors (Malta and Morocco are notable); for more information, The Royal Film Commission of Jordan has a 209 page Production Guide which can be downloaded from its website. Profit: any monies earned by a film or audiovisual product after it has repaid the recoupable cost of production to its financiers. Profit Participation: a share of the profits given to the talent who made the film (via the production company) and to the financiers who paid for the film to be made. There are 100 points (or percent) to be divided, usually equally, with 50 points for the producer to keep and to divide between talent like actors, writer, director, music composer and 50 points to be shared by the financiers, usually divided according to each’s investment over the total recoupable cost of production. Net profit points are calculated after all distribution and production costs have been repaid from a film’s revenues, while gross profit points are calculated based only on revenues (there points are given only to the biggest Hollywood stars in low percentages). Public Agency / Body: an organisation set up by a government to carry out a specific task which does not merit a special department (in budget, size, number of personnel) which must abid by the same rules as a government department, particularly in the areas of administration, hiring, firing and accounting. PPV / Pay Per View: a service, usually offered by television cable companies, which allows a subscriber to view special or premium content for a fee; pay per view can be used for movies after their cinema release, but before they are available on DVD, or sports events, or concerts, etc. Recoupable Cost of Production: the total cost of production minus any amounts which are not repayable to a financier by the producer (for example: grants, television license fees,

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minimum guarantees and advances by international sales agents and distributors, awards and prizes.) Revenue Corridor: a type of deal used to divide earnings from the exploitation of a film in such a way that a single financier or a specific group of financiers, keep all of the money from one source. In co-production, all of the national financiers, would have a revenue corridor that allowed them to earn 100% of all income from that country without having to share it with any other out-of-country financiers. Revenue Tier: a type of deal used to divide earnings from the exploitation of a film so that some investors earn an unequal share of, for example, the first revenues; a typical first tier may be from € 0 to € 100,000 total revenues divided amongst a number of financiers in negotiated percentage amounts followed by a second tier that goes from € 100,000 to, say € 250,000 which would be divided by a number of financiers in negotiated percentage amounts (the first tier may have both different financiers and different percentages than the second one); complex co-productions usually have between 3 and 5 revenue tiers. Rewards: crowdfunding exchanges cash for a variety of rewards (benefits) ranging from merchandise, a variety of credits and social events relating to the project which in combination and signficance escalates with each increase in the amount of financial support. RIM: Blackberry’s mobile operating system software; also used as an adjective to describe hardware (mobile phones, tablets, etc.) that uses the system as well as formats which the system supports (movies, audio and video work, non-text web content). One of four main operating systems that allow audiovisual content to appear on smart phones, music players, tablets and computers; incompatibile with the other three operating systems. RoW / Rest of the World: the countries which are not sold; often this refers to all countries outside the country of origin or the group of countries in which a film or audiovisual project is being co-produced. Rushes: unedited images from an audiovisual project, usually viewed daily during fiction production, or after a short period of days shooting of a documentary; some financiers ask for the right to see rushes so they can control or confirm quality. Semi-Public Agency / Body – is set up by the government with a mandate to carry out a specific task (“to foster and promote the development of an audiovisual industry in a country”) without having the same internal accounting and hiring and firing regulations of a government department. This allows specialised accounting (for cinema production, for example) and the hiring of experts without the need for extensive public competition before filling the position. Service Producers: producers or production companies which facilitate and organise the physical aspects of production or post production for another company which owns the rights and developed the script for a project. Service producers work for other producers from other countries or regione, for a fee but they do not retain rights in the project.

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Single Fee Platform: a website which allows a single feature, short, documentary, television programme or made-for-the-internet content to be streamed or downloaded in exchange for a fee (eg: iTunes). Social Television (SocialTV): the technology that allows communication and other forms of social interaction (chat, video conferencing, etc.) while watching television. Broadcasters are motivated in expanding their reach which in turn expands their revenue potential. For more information: http://en.wikipedia.org/wiki/Social_television Soft Loan (also referred to as Soft Money): national, regional, local and multinational funders invest in production in return for receiving a portion of its revenues; the money is only returned to the funder if there is revenue rather than guaranteed to be returned (as in a “hard” loan from a bank). Studios, the: see Hollywood Studios Subscription Platform: a website which allows streaming or downloading of any and as much content (features, documentaries, shorts, television programmes and made-for-the-internet content) as the user wants in exchange for a monthly or annual fee (eg: Netflix) Syndication: a form of television distribution in which one or more programmes are sold directly to independent local television stations rather than to networks which show programmes on affiliate stations. It is frequently used in the United States where it is considered a big, if high overhead, business and in any territory with a significant number of independent stations. See also Web Syndication. Target Audience: in the film and audiovisual sector, this is the audience which will be most attracted to the project content and therefore important for being the initial, motivated viewers or users as well as the key to good word of mouth to promote the project to and beyond the peer group. Target audiences are defined by gender and age group (eg: Female, 25 to 35 years old) with other criteria like managerial level, educational level, economic level, geographic region also measured depending on the industry practices in a country. In order to attract and satisfy advertisers, television networks receive detailed analyses of their programmes audiences, particularly those shown in prime time . Their audiences are compared to their competitors’ programme statistics on a minute by minute basis. Web statistics are becoming as sophisticated, motivated by the annual increases in advertising sold. Target Market: in the advertising sector, the target audience is called the target market and is the group or groups of people most likely to purchase the product being promoted. Men in the 20-30 year old group are a key target market; advertisers establish the habits, buying tendencies, economic factors and likes and dislikes of the group before determining how to develop maketing strategies. This includes entertainment preferences and internet usage; advertisers then buy time or space on the select film and audiovisual content most likely to be seen or be used by their target market. TiVo: a digital video recorder, manufactured by the TiVo, which can record and save television programmes according to the user’s wishes (for example: every episode of a series, a movie shown once). It can also store downloaded audio or video projects, find

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shows using a range of criteria, personal photographs, music. It is currently available in a limited number of countries (Spain and the United Kingdom are the only European ones; none in the South Mediterranean). Underlying Rights: in order to exploit a film, all the rights to the intellectual property that films is based on, plus the rights to all sound and visuals have to be owned by the producer; includes rights to novels, stories, articles, the right to someone’s life story etc. used to write a script, the screenplay, the music and musical performances, the actors’ performances, decor, costumes, and special effects footage. VoD / Video on Demand: a website which allows a user to select a film, aTV or a radio programme and listen or see it immediately (streaming) or later (downloading). VoD websites may require a payment for each project (universcine.com, iTunes), or may require a subscription (movieuropa, Netflix), or may be available free of charge (iPlayer, 4onD). Most legal VoD services are geolocked, or restricted to a country or group of countries. Web Syndication: content producers distribute to various outlets either for a license fee, for advertising revenues, for subscription or pay per view fees or a form of barter (the content is embedded with advertising which earns the producer revenues per user/viewer/click). Window: a period of time in which a film can be shown only by one medium. The first window is generally reserved for cinemas, “the theatrical window”. During this period DVDs, Video on Demand and TV showings are not permitted. When the DVD window opens, cinemas can still show the film, but the advertising focus is on rentals and sales to the home video market. The TV windows follow with Pay TV first followed by larger networks and finally by smaller, specialised channels. Internet delivery of films and audiovisual projects is transforming the system of windows despite resistance by the US Studios and by distributors and exhibitors in countries with high production capacities. There is some experimentation, particularly in the USA, with specialised (art house) distributors allowing simultaneous showings in cinemas and specialised Video on Demand platforms. Windows: Microsoft’s mobile operating system software; also used as an adjective to describe hardware (mobile phones, tablets, etc.) that uses the system as well as formats which the system supports (movies, audio and video work, non-text web content). One of four main operating systems that allow audiovisual content to appear on smart phones, music players, tablets and computers; incompatibile with the other three operating systems. Please note: there are different terms, and even different meanings for the same term, used in the American audiovisual industry. There is a basic glossary of USA film financing terms at: http://filmdependent.com/newsletter/?page_id=16 and, although it is somewhat out of date, there is a larger glossary of USA movie making terms at: http://www.imdb.com/glossary/ and a British glossary of UK film financing terms for independent filmmakers at: http://www.raindance.co.uk/site/index.php?aid=193

EUROMED AUDIOVISUAL III PROGRAMME Regional Capacity Development Support Unit IDENTIFICATION OF...

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