Tendencias actuales en el mercado audiovisual y Incentivos Internacionales
para Coproducir
Steve Solot, PresidenteLatin American Training Center – LATC
Enero de 2011
Seminario Internacional de Fondos Nacionales e Ibermedia
Promovido porEl Programa Acción Audiovisual yel Banco Interamericano de Desarrollo
1) What is LATC?
2) The Context: AV‐Technology‐Consumers
3) The Transition
4) Emerging AV Business Models
5) Copyright vs. DRM
6) US Studio Trends
7) World Film Market Trends 2009
8) International AV Co‐productions and Incentives
TOPICS
1) What is LATC?
A regional media training center located in Rio de Janeiro, specialized in creative training programs for audiovisual content producers and the protection of intellectual property rights (IPR).
Methodology emphasizes new technology business models and digital rights management (DRM) concepts for the new generation of filmmakers in Latin America.
Offers a full array of consulting services for audiovisual projects including script re‐write, project development and packaging, coproduction orientation, legal advising, as well as international representation.
Founded by Steve Solot, former Senior VP Latin Operations, Motion Picture Association ‐MPA (Paramount, MGM, Sony Pictures, NBC/Universal, Warner Bros., Twentieth Century Fox, and Disney).
IFTA FoundationIndependent
Film & Television Alliance (Los Angeles) www.ifta‐online.org
NALIPNational
Association of Latino Independent Producers (Los Angeles) www.nalip.org
CILECTCentre International de Liaison des Ecoles de Cinéma et de Télévision (Brusseles)www.cilect.org
FIA Fundación para la Investigación del Audiovisual (Valencia, Espanha) www.fia‐uimp.com
EGEDA‐Spain(Entidad de Gestión de Derechos de los Productores Audiovisuales)www.egeda.es
IFPIndependent Feature Project (New York) www.ifp.org
5
LATC is Affiliated with:
4 Basic Modules:
New Technologies in the Audiovisual SectorIntellectual Property, Piracy and Audiovisual WorksLegal Aspects of Production and Commercialization of Audiovisual WorksPanorama of Film Production
Additional Optional Modules:
The US Model of Independent Audiovisual ProductionHollywood and the US Studio SystemThe US Hispanic Audiovisual Market – Potential for Latin American FilmsThe US Model of Independent Audiovisual ProductionNew Business Models in the Audiovisual Sector and Digital Rights ManagementRights Licensing Procedures under Creative CommonsBasic Elements of Screenwriting for Film, Television and New Platforms
LATC Modular Audiovisual Seminar Program
Introducción por Steve Solot, Presidente, LATC (Latin American Training Center)Prólogo de Manoel Rangel, Presidente, ANCINE (Agência Nacional do Cinema)Prólogo de Enrique Cerezo, Presidente, EGEDA (Entidad de Gestión de Derechos de los Productores)
Países seleccionados y autores:Argentina:
Dr. Juan Carlos Alesina (Alesina & Asociados)Brasil: Dr. Fábio de Sá
Cesnik y Dr. Guilherme Anders (Cesnik, Quintino & Salinas Adv.)Canadá: Jennifer Liscio (Canada Film Capital Limited Partnership)Chile:
Dr. Andrés Young (Universidad de Chile)Colombia:
Dr. Gonzalo Castellanos V. (Universidad de los Andes)España:
Dr. José
Antonio Suárez Lozano (Suárez de la Dehesa Abogados S.L.)México:
Lic. Enrique Ramirez F. y Lic. Ramón Orendáin Urrutia (Chevez, Ruiz, Zamarripa y Cia., S.C.)Puerto Rico:
Dr. Luis M. Pellot‐González y Dra. Janira Beltrán‐Sellés (Pellot‐González Tax Attorneys
)Portugal:
Dr. Filipe Leitão de Sousa (Leitão de Sousa – Advogados) EE.UU:
Barbara L. Rosenfeld (Tax Incentives Consultant to Entertainment Partners) Venezuela: Dr.Carlos Julio Fernández y Dr.Pedro Dolányi (Gazsó, Dolányi & Fernández A.) Programa IBERMEDIA:
Elena Vilardell (Unidad Técnica IBERMEDIA)
“Incentivos fiscales para la producción y coproducción en Iberoamérica, Canadá y los Estados Unidos”
2) The Context:
AV Technology vs. Consumers?
“An invention without any commercial future”French inventor Louis Lumiere referring to cinema in 1896
“Who the hell wants to hear actors talk”Hollywood mogul Harry Warner referring to sound in 1926
“TV will last only six months because people will get tired of
staring at a plywood box every night”Hollywood producer Darryl F. Zanuck referring to TV in 1946
“A new generation of media consumers has risen, demanding
content delivered when they want it, how they want it and
very much as they want it”News Corp Chairman Rupert Murdoch referring to the new digital age in 2006
The Context: AV Technology vs.Consumers?
The New Era of Digital Content Delivery
Video over IPto Personal Computer
DVD-Video& HD-DVD
DigitalSatellite
Broadcasting
Digital TelevisionBroadcasting
Broadband DSLSet Top Box
Digital Cable TV with Personal Video Recorder
Wireless PersonalEntertainment Devices
D-VHS
High DefinitionD-VHS
3) The Transition
Audiovisual enters the new frontier of alternative choices, screens and platforms. Anywhere anytime media.
Audiences are becoming increasingly fragmentedamong products, channels and platforms.
The industry is confronting unparalleled levels of complexity, dynamic change and pressure to innovate.
Coexistence of two types of consumers (lean back vs.lean forward).
The Transition
Theatrical
DVD
Open TV
Pay TV
Ancillary Rights
Traditional Distribution Windows
$
MovieReturn on
Investment
CinemaRelease
VHS, DVDPay Per
ViewFree TV
$ $ $
Typical Motion Picture Distribution Pipeline
Emerging Internet
distribution
4) Emerging Business Models
Emerging Business Models - YouTube
Emerging Business Models - Itunes
Emerging Business Models: Catch-up TV/ABC
Catch-up TV/ Hulu
Catch-up TV/Tivo (PVR)
DVD Rental + Streaming
Cinema tickets
Use of the cinema for different content and different times
Different ways to get the content
Concerts, opera, sports, Education, etc
Cinema Events
Ghost House Pictures made a
seven‐figure deal with a
Uruguayan commercials
director to direct his pitch for
an alien invasion film ‐‐
based
on the heat generated by
"Ataque de panico!" (Panic
Attack), a four‐minute, 48‐
second short about an
apocalyptic robot attack
Alvarez directed through his
commercial production house
for less than $500.
‘Panic’ pushes Hollywood buttons - Uruguayan director Alvarez scores big deal on short (Variety , 11/2009)
New way to fund
creative ideas and
ambitious endeavors.
Every Kickstarter project
must be fully funded
before its time expires or
no money changes
hands.
www.kickstarter.com
Kickstarter
CinemaNow
MovieSystem NetCine
MovieLink
CflixCflix
SightSound
Online Movie Services
Lean back Consumers
‐
TV.‐
News, Football, TV series.‐
Prime time.‐
30 second spots.‐
Remote control.‐
Triple pays
Lean forward consumers
‐
HDTV, TV on PC, PSP, Mobile TV.‐
Preview episodes, news segments,
interactive shows, video blogs.
‐
On Demand, On replay via PVR.‐
Click through, IM advertisement.‐
Cellphone programming of PVR, social
connection across devices.
‐
A la carte niche channels, on demand
season pass.
‐
3D content
The Future Consumers
5) Copyright vs. DRM
(Digital Rights Management)
Technologies or processes that describe and identify digital content protected by
Intellectual Property Rights and which enforce usage rules set by rightsholders or
prescribed by law for Digital Content.
Copyright law and digital rights management – DRM technologies are two
complementary approaches to reconciling these competing demands.
Copyright is
a set of legal rules designed to incentivize creators to create
and
distribute their content by limiting what the public can and cannot do with that
content.
DRM is
a set of technological “rules”
that can protect copyrights in the digital
environment where it would be otherwise difficult to protect them (i.e., where
there is an exponential threat of piracy).
Copyright vs. DRM
An integral part of the business plan;
Necessary for new media distribution platforms;
Which DRM and why;
Considerations BEFORE production decisions taken;
DRM and the AV Producer
6) US Studio Trends
Europe/ ME/Africa54%
Canada5%
Latin America
6%
Asia Pacific35%
US Foreign Revenue by Region
7) World Film Market Trends 2009:European Audiovisual Observatory
8) International Audiovisual Co-productions and Incentives
The Concept of International Film Co-productions
Since the mid‐1920s, starting in Europe, film producers have frequently teamedup with producers from other countries to finance and make films, a practice known as co‐production.
Under co‐production treaties signed between Governments, a qualifying film is granted two or more “nationalities” and thereby is eligible for national tax incentives and other forms of state support aimed at promoting film production, distribution and/or exhibition.
National fiscal incentives and international co‐production treaties serve as two vital tools for achieving many nations’ policy objectives of creating a sustainable film industry and promoting audiovisual culture and education. Fiscal incentives and subsidies for film and television production are recognized under WTO (GATT) international trade rules.
Today, these incentives and treaties make possible the production of most films which are aimed at international audiences, and are significant and growing components in government audiovisual regulatory policymaking.
In Latin America, since the early 1990’s, a number of government programs based on fiscal incentives, subsidies, tax shelters, etc, have arisen and rapidly assumed an important role in encouraging production of audiovisual content, as well as distribution, exhibition and film project development.
This trend is growing and taking on an even more prominent role as policymakers consider new mechanisms applicable to the globalized audiovisual context and the digital environment.
The Concept of International Film Co-productions
The Success of International Co-productions in Europe
Despite the general acknowledgement of the importance of international co‐production, there are few technical studies which confirm that conclusion.
The most important analysis which clearly demonstrates the commercial advantages of co‐productions vs. films of a single nationality was published by the European Audiovisual Observatory and presented in the Film Policy Forum in the Council of Europe meeting in Krakow, Poland in September 2008.
This study analyses the circulation and performance of European co‐productions both inside and outside their national markets and compares their performance to that of entirely national films.
It compares circulation in terms of the average number of release markets for each of the two types of film.
The data sample comprises more than 5 400 films with theatrical release between 2001 and 2007 in 20 selected European markets. The three most important conclusions are:
1) European co‐productions travel better than their 100% national counterparts to
the extent that, on average, co‐productions get released in more
than twice as many markets as national films. 77% of all co‐
productions get released on at least one non‐national market, compared to 33%
for entirely national films.
2) European co‐productions earn on average 2.7 times as many
admissions as their national peers. 3) In terms of admissions, non‐national markets are more important for co‐
productions than for entirely national films. Non‐national admissions
account for 41% of total admissions to co‐productions compared to
15% for entirely national films.
The Success of International Co-productions in Europe
International Development facilitators and funding information (development-production- post-production) accessible for producers from Latin- America
• Visions Sud Est (Film Festival Fribourg, CH-Switzerland);• Open Doors Showcase & Factory (Int. Film Festival Locarno, CH);• Horizontes Latino & Films in Progress- PP (Int. Film Festival San Sebastian, ES);• Huesca, Festival de Cine (ES);• Göteborg GIFF Fund (SE-Sweden);• Film I Väst – PP (SE-Sweden);• Sundance (US);• Special Documentaries: Jan Vrijman Fund (IDFA, Amsterdam);
• Hubert Bals Fund – Cinemart – Rotterdam Lab –Collab (cooperation Stichting FF and Argentina)Binger Film Lab;
• World Cinema Fund – Berlinale Talent Campus with Talent Pitch & Script Station – Berlinale Co- production Market;
• Producers’ Network – Cinéfondation La Résidence – L’Atélier;
• Cine Latino Toulouse – Cinema in Construction (PP) – Cinema in Development - Cine sin fronteras;
International Development facilitators and funding information (development- production- post-production) accessible for producers from Latin- America
The Panorama of Incentives in Latin America
Argentina currently maintains international co‐production agreements with Germany, Spain, Colombia, France, Chile, Italy, Morocco, Mexico, Uruguay, Canada, Venezuela and Brasil.
The subsidy and credit system regulated by the National Institute of Cinema and Audiovisual Arts – INCAA offers mechanisms to promote film production and exhibition in cinemas and other electronic format through Law 17.741.
In 2008, a new Resolution was published which establishes Pesos 3.500.000 as the ceiling for subsidies granted to national feature films.
In Mexico, since 2007, Article 226 of the Income Tax Law (Eficine) offers a 10% tax deduction for investment in national films. In addition, the Mexican Film Institute‐IMCINE, offers incentives through the two traditional funds, FOPROCINE and FIDECINE, which provides financial resources for “artistic” film or those with special merit, and commercial films, respectively.
Mexico also offers a new High Impact Film Industry Support Program, which provides an incentive of up to 17.5% based on the local spend of international film productions.
In Colombia, Law 814 published in 2003 provides two primary mechanisms to promote co‐productions in the Colombian film industry, as follows:1) The Film Development Fund (FDC) which receives funds based on
a “parafiscal
levy”
(a
type of tax) paid by exhibitors, distributors and producers derived from the exhibition of
films in Colombia; and2) Tax incentives based on a deduction offered to taxpayers via donations and investors in
Colombian film projects. The tax deduction may be up to 125% of
the amount invested or
donated (for donations the limit is 30% of net income).
In Brazil, international co‐productions may or may not make use of an international co‐production treaty. In either case, The National Film Agency – ANCINE provides specific procedures to be followed for productions which seek the Brazilian Product Certificate (CPB), and intend to seek financing using existing incentives. The most significant incentives are included in the “Audiovisual Law” (Federal Law 8.685/93, modified by Provisional Law 2228/01), which allows individuals and corporations to invest a portion of their income tax (3%), as deductible expenses, with a limit of R$3 million per project. In addition, Article Three of the Audiovisual Law allows foreign film distributors in Brazil to invest in authorized Brazilian film projects, up to 70% of their withholding tax due on remittance of earnings derived from distribution of foreign films.
The Panorama of Incentives in Latin America
INCENTIVOFISCAL
Brasil - Mecanismos de Financiamento ao Audiovisual
INVESTIMENTOPRIVADO
INVESTIMENTO COM
INCENTIVO FISCALRECURSOS
PÚBLICOS
- FNC (Lei nº 8.313/91) – Fundo Setorial Audiovisual (FSA)-Editais- Programas públicos em geral
-Lei do Audiovisual (Lei nº 8.685/93)-Artigo 1º, 3º e 3ºA.-FUNCINE (MP nº 2.228/01)
-Mecenato (Lei nº 8.313/91)-Leis Mendonça – SP (Lei 10.923/90)-Lei Municipais e Estaduais de Incentivo (PROAC/Governo do Estado de SP)
- FICART (Lei nº 8.313/91)- Conversão da Dívida Externa (Lei nº 10.179/01)-Crédito (BNDES)
Film
Comission Co-produções
internacionais
Rio Audiovisual
FUNCINE RIO 1
December 2009
Resources from BNDES (R$ 9 million), INVESTE Rio (R$ 4 million), RioFilme (R$ 4 million) and SESI/RJ (R$ 1 million)
Initial value of R$ 18 million.
Financing Fund for the Domestic Movie Industry (Funcine) for:
investment in production of competitive movies, building of movie theatres in regions where the offer of such places do not exist participation in equities in innovative companies in the infrastructure and distribution sectors
Companies applying to the fund must be based in Rio de Janeiro.
Rio Audiovisual
STATE AND CITY JOINT INCENTIVES PROGRAM 2009/2010
November/2009,
Distribution of R$ 5 million among different projects in the following areas:
Development of Feature Movies and TV Series PilotsDevelopment of Electronic Games based on national movies or series; Development of Multiplatform Audiovisual Content for new and traditional mediasSupport for Movie Festivals Incentives for Exhibitors Production of Short FilmsIncome Prize for distributors
Rio Audiovisual
AUDIOVISUAL TECHNOLOGY PARK Plan for the creation of the Rio de Janeiro Audiovisual Technology Park, in the newly‐revitalized Docks Area of downtown Rio.
STUDIES ON THE ECONOMIC IMPACT OF AUDIOVISUAL INDUSTRYFundação Getúlio Vargas will be contracted to develop a complete study of Rio de Janeiro’s audiovisual industry and its impact on the city’s economy. The study will be helpful in the elaboration of policies for the sector and in the creations of indicators to evaluate these policies.
RIO DE JANEIRO INTERNATIONAL FESTIVAL R$ 2 million investment, made through RioFilme, the City of Rio de Janeiro is the main sponsor of Rio de Janeiro International Festival in 2009.
STATE TAX EXEMPTION FOR IMPORTExemption of state taxes on the importation of production, post, infrastructure and exhibition hardware for Rio de Janeiro’s audiovisual sector
NEW TAX INCENTIVES (ISS AND IPTU)A new bill (PL 133/2009), sent to the City Council in April, proposes exempting audiovisual companies, labs, studios, production, distribution and infrastructure companies devoted exclusively to Brazilian movies, either Brazil‐made Brazilian‐themed, of the Building and Territorial Urban Tax until December 31st, 2014.
International Co-production Initiatives in the U.S.
In the US there is a new acknowledgement of the value and importance of international audiovisual co‐productions, although the US does not maintain bilateral co‐production treaties with any country.
The Independent Filmmakers Project – IFP offers the program No Borders International Co‐Production Market as part of its Independent Film Week, which is an opportunity for US producers and those from other countries to meet industry professionals such as producers, investors, distributors, sales agents and others. The IFP also operates the International Alliance Program with partners in various regions of the world, and the Latin American Training Center ‐ LATC www.latamtrainingcenter.com serves as the official Latin American affiliate.
As part of the LATC‐IFP partnership, five US independent producers participated in the 2010 Rio de Janeiro International Film Festival in a panel discussion, and also met with local producers to explore co‐production opportunities in Brazil. Both programs aim at promoting international co‐productions.
In addition, last June, the Producers Guild of America (PGA) organized the first International Film Co‐Production Showcase (CoProShow) competition, in conjunction with the second annual Produced By Conference (PBC) at Twentieth Century Fox Studios in Los Angeles.
The goal of CoProShow was to provide international film producers with a unique opportunity to engage in an open dialogue with their U.S. counterparts and have one‐on‐one, co‐production meetings with American producers.
International Co-production Initiatives in the U.S.
Types of US State Production Incentives
I.
CASH REBATES AND GRANTS
‐
Do not
require
a tax
return‐
Processed
through
Dept. of
Commerce
instead
of
Dept. of
Revenue
II.
TAX CREDITS
1) Refundable2) Refundable
and
transferable3) Non‐refundable
but
transferable4) Non‐refundable
and
non‐transferable
Key
difference
is liquidity.: Refundable
and
transferable
tax
credits
can
be
converted
to cash, but
a non‐refundable, non‐transferable
credit
cannot
be
monetized, but can be used to reduce
local taxes.
New US tax bill extends film TV incentive Provision
When President Obama signed the $858 billion tax bill in December, he extended a significant federal tax incentive to film and TV producers. The tax
law contains a provision that reinstates Section 181 of the Internal Revenue Code ‐‐ the so‐called runaway production incentive ‐‐ which allows producers to immediately deduct the cost of qualifying expenditures in the year they occur rather than having to spread or amortize those costs over a period of years after the film goes to market.
The deduction applies to the first $15 million of qualifying production costs. The amount rises to $20 million if the project's aggregate costs are "significantly incurred" in areas eligible for designation as a low‐income community.
Section 181 covers TV as well as film productions. For television it applies to $15 million or $20 million per episode, with a maximum of 44 episodes.
Some conditions apply. "Seventy‐five percent of the service wages in your budget have to be performed and paid in the U.S.,but they don't have to be paid to U.S. citizens.
Section 181 can be combined with state and local incentives to achieve significant savings.
"Given the aggressive efforts by other countries to attract film productions with tax incentives, the extension of Section 181 should help keep production jobs in America.”
New US tax bill extends film TV incentive Provision
TIMING AND POSITIVE FACTORS THAT MAKE THE DIFFERENCE
One of the Key Cities for the 2014 Soccer World Cup
Host City of the 2016 Olympics
Merger of Municipal and State Film Offices
The Audiovisual Center of Brazil
New Incentive Plan
Cohesive city and state political posture
Principal Scenario for Brazilian AV Production
Host City of leading Film Festival
Host City of new RioContentMarket 2011
THE RIO FILM COMMISSION
One-Stop Centralized Office for Permits, Police Support, Union relations, etc.;
New internal operational structure in a unique partnership of municipal, state and civil society (O.S.);
New Grant of R$1.000.000,00 (/4 projects);
Partnerships with Tourist Office, Hotel and Convention Bureau, Film Industry Unions, AV Export Promotion Entities;
Technical training program for crews.
RIO FILM COMMISSION GRANT
Production of feature or documentary films and TV series
R$1.000.000,00/4 – R$250.000,00
Applicant producers must have a contract with local producers established either in the City or the State of Rio de Janeiro
Original and never seen projects partially or totally shot in the City or State of Rio de Janeiro
The application must be submitted by the local producer
RIO FILM COMMISSION RIO GLOBAL
Investment of up to R$3.000.000,00 in international or national feature films with great commercial potential internationally
Candidates:
Twilight Saga: Breaking Dawn, Bill Condon
Non Stop to Brazil, Brad Anderson
Rio, I Love You, Various
New Woody Allen Project, Woody Allen
The Rio Film
Commission serves as
the central link for all
relationships between
government entities, the
private sector, and
unions to ensure that
the on-location filming
process operates
smoothly.
RIO FILM COMMISSION NETWORK
o Fast and Furious 5 (Feature), Conspiração
o Twilight Saga:Breaking Dawn, (Feature) Total/Zohar
o Rio, Eu Te Amo (Feature), Limite Produções
o Rio (TV series pilot), Mixer
o Tropa de Elite 2 (Feature), Zazen
o Lipton Ice Tea (comercial), Zohar
o Are We There Yet? (TV Program), Nat Geo Kids
o Riscado (Feature), Cavídeo
o Fear Factor (reality show), Utopia/Edemol
o Assalto ao Banco Central (Feature), Total Ent.
o Maraca (documentary), Kino Tv
SELECTED RECENT PRODUCTIONS
Thank you!
Steve Solot, [email protected]
Latin American Training Center – LATCwww.latamtrainingcenter.com
