The European Film Subsidy Trade War

Image from Joe Karaganis consultation to the European Commission

Last week I touched upon what essentially is a trade war occurring in various states and provinces in the US and Canada. The same phenomenon is occurring in Europe.

While the UK offers US studios generous subsidies to do vfx and production work for feature films there, the animation and video game industry receive none.

The video games industry has been unsuccessful trying to lobby for subsidies as they lose talent and work to subsidized regions like Canada. As far as the UK animation industry is concerned, where does the work go as they too are unsuccessful to lobby for subsidies?

“I know a couple of people who do a similar role to me, coming up with ideas for shows, who now just work out of LA. They’ve gone over there and they don’t bother knocking on doors in the UK any more.”

What’s surprising is that California’s thriving animation industry exists without subsidy. I believe the reason for that is agglomeration. We have a deep and large talent pool that has traditionally made California home for a very long time.

The Curse Of Harry Potter

Why are governments inclined to give their taxpayer dollars to US studios rather than home grown industries is beyond me but the subsidy war is not just a concern of mine. It is also a concern of the European Union which drafts film subsidy policy for various member states.

If you remember, last year the UK film subsidy was set to expire and was quickly renewed under the current EU rules until 2015.

This year the European Union will be taking consultations from those for and against film subsidies. One of it’s biggest concerns is the subsidy race and how this has benefitted US studios. Page 5 and 6 show how legitimate a concern the subsidy race is:

the Commission had identified “competition among some Member States to use State aid to attract inward investment from large- scale, mainly US, film production companies” (ie, a subsidy race) as a trend which would require some refinement of the State aid assessment criteria.

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Attracting blockbusters typically includes tax incentives and other measures to facilitate the production of these international feature films and television programmes in particular territories. The result is a potent mix of push and pull between international producer and locality.

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such subsidies distort competition among European production locations. In these cases, the question is not whether the film will be produced but only where this will be done.

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To the extent that this use of public subsidies in effect leads to competition with other Member States, this is detrimental both to the sector and to European taxpayers. It was not envisaged when the original State aid rules for promoting the European cinematographic culture were designed. Avoiding subsidy races is precisely one of the objectives of the State aid provisions of the Treaty. 

Furthermore Joe Karaganis, a consultant on digital media policy, has submitted his own recommendations to the EU along with others. He has called the subsidy race the “Curse Of Harry Potter“:

Territorialization may be a blunt instrument for achieving this kind of diversity, but such diversity strikes me as an entirely appropriate public policy goal.  Reasonable people will disagree about where/how to draw the line between the two, but clearly it should be drawn well south of the Harry Potter-level shakedowns described here.

The biggest issue, ultimately, is whether European audiovisual culture can move toward a model that isn’t as sharply defined by subordination to Hollywood on the one hand, and by the cultural and institutional fragmentation of the EU market on the other.  There’s nothing new in this question, but the persistent failure to resolve it over at least two decades of coordinated EU/EC policy suggests that some rethinking of the state’s role in promoting culture may be needed.

Soldier On.