Soft Money - France

A French co-producer is surely the most sought-after. After all, they tend to bring equity finance and access to the world's most generous subsidy and incentive schemes to the table. Nancy Tartaglione reports

Want to access soft money in France' Marry a rich French person. OK, perhaps there is no need to go quite that far, but when it comes to accessing France's tax breaks, various regional initiatives and government subsides, it pays either to be French or certainly to get into bed with one of them.

France has long had a system of financing film, guaranteed by government mandates set up to protect the medium, which is regarded as one of the country's most prized cultural treasures. The subsidy and advance systems at the national level are there first and foremost to benefit the local film industry, but there are also ways for outsiders to get their hands on some extra cash; they simply have to be willing to play nice with les autres.

This may be self-evident in a country as protective as France, but it is also worth noting that while television pre-sales for film are slowing down all over the world, France is the only place where broadcasters have such stringent obligations to re-invest in local production. This ensures that at least some hard cash is to hand.

Indeed, the French system has three huge advantages: first, clarity; second, well-oiled efficiency; and third, a large part of the support system is automatic.

Canal Plus alone has to invest 20% of its annual earnings into French and European film production through straight acquisitions or pre-buys. About 9% of this figure goes to films produced in the French language while the remaining 11% goes to films produced by other European-qualifying films that may or may not have a French partner. Other broadcasters have lower quotas imposed on them, but these are likely to increase in the near future as a more level playing field is set to be carved out among the major broadcasters.

French film producers can access financing at both the development and the production stages. However, in a country where auteurs have long reigned, script development funds have failed to gain much significance until recently but local producers are now lobbying for more development financing. Among the organisations that provide preparatory aid are Procirep (a collective management association for film and television producers), the Centre National de la Cinematographie (CNC), the European Union's Media Plus programme, and specialist financial institutions such as Coficine. A few select producers can also access development money via France's tax-based financing initiatives, the Societes de Financement du Cinema et de l'Audiovisuel (Soficas, see below) administered by specialist banks such as Cofimages.

For access to each of these schemes, a project must be predominantly French. To access the CNC's development subsidies, production companies must also have a proven track record. Half of the grants given must be reimbursed on the first day of shooting and the remainder when the film is released. The CNC also has a separate scriptwriting fund for experienced writers or writer-directors. A production company cannot access these funds on its own.

There is also a 'rewriting' aid which can be used by those writers or writer-directors who can prove artistic experience on a previous film or who have won a prize for previous script work. This money can also be accessed by a production company and is not expected to be repaid.

The CNC
At the production stage, most film-makers go to the CNC. The CNC has a $19.5m (e20m) advance against receipts system, which awards between $290,000-$390,000 a project. A committee of media professionals decides how much, if any, to advance on three levels: for first films, for films directed by an experienced director and an advance which is given after the film has been completed.

In the first two cases, screenwriters or directors can submit their treatment as long as they have French nationality, residency or are a native of an EU country. Production companies recognised by the CNC can also apply if the project is a French film or an international co-production which meets the criteria set out by co-production accords. (France has a co-production treaty with nearly every EU country and others including Australia and some African and South American countries.) All films considered must be predominantly shot in the French language.

Once this money is awarded it must also be reimbursed on first dollar gross basis. This is negotiated either as a percentage of the support account funds (see below) which a film will generate at the box office, or as a percentage of foreign, video and television sales. If a film does not do well, the CNC takes a loss.

For producers with at least one film under their belt, there is the CNC's support account (compte de soutien). Every cinema ticket sold in France, whatever the nationality of the film, is taxed twice. For each ticket sold, approximately 11% is channelled into the CNC's support account. Every French producer has his or her own account which is filled with a multiple of the film's box-office receipts, otherwise known as automatic aid. For their subsequent films, the producer can access the account to pay for their next film, as long as it does not exceed more than 50% of the total budget. Although foreign producers do not have their own account and cannot directly access this money, they can indirectly dip into it via a French co-producer.

The more films a producer makes, the larger his or her account. Although the account is an incredibly advantageous aspect of making films in France, producers will often negotiate to repay advances from it, so a film does need to do well in order to stock the coffers.

Each film does not, however, automatically receive 100% of the money it generates. The status of a film is based on a points system set up by the CNC. A film that has 100 points (that is, it is completely produced, written, directed, shot and posted by the French in France) has access to 105% of the support account funds it creates. (The extra 5% is a bonus kicked in by the CNC.) International co-productions will lose points with the French co-producers only having access to a smaller percentage.

In 2003, the CNC's cinema fund expects to earn $103m from the cinema ticket tax, and $224m in total (including money raised from the government and a tax on French broadcasters.) Of this, it expects to pay out approximately $143m in automatic aid. The compte de soutien is a massively generous scheme which effectively means that once a producer has released his or her second film in France, they are set up financially, making a French co-production partner arguably the most sought-after in the world.

In addition, the CNC has several funds specifically earmarked for foreign productions which are sponsored by the foreign affairs and cultural ministries. The Fonds Sud is for Latin American, Mediterranean and Middle Eastern countries, and the Fonds Eco for Asian and Eastern European. Each country is judged to have an under-developed system of public subsidy of its own. Between them, the funds hold about $2m for films culturally tied to France. Qualifying films must be shot in one of the above territories or in France, in the French language or the language of the director, and distributed in France. Approximately $73,000 is awarded per project. For example, Egyptian director Youssef Chahine's Destiny benefited from the Fonds Sud.

Regional film funds
The Commission National du Film promotes France's technicians and locations to foreign film productions. Labour is a little less expensive in France than other countries in Western Europe, notably the UK, and its crews and effects houses are among the best in the world (many of the effects wizards at Industrial Light and Magic were poached from French schools). However, the country has few financial incentives in place to lure offshore shoots to the country and the systems can almost seem designed to turn foreigners away.

For example, when Steven Spielberg was scouting for Saving Private Ryan several years ago, he decided not to shoot in the obvious location of Normandy but instead went to Ireland. He said he understood that if he shot in France the film would cost him 50% more to make than elsewhere because of the social charges levied on productions. Even though he was mistaken ' social charges are added only on salaries and not on entire budgets ' this has been an issue for France and a hindrance to attracting foreign film-makers.

For local film-makers ' or foreigners making films that are predominantly French or European ' incentives do exist at the regional and departmental (county) level. The regional commissions, in places such as Alsace, Rhone-Alpes and Provence-Alpes-Cote d'Azur, provide subsidies to productions that come to the region to shoot at least a part of their film. The level of subsidy is only $49,000-$293,000 per film either as a cash package or through free accommodation and discounts on facilities. Of note is the Rhone-Alpes commission which has a higher level of investment (from $146,000-$390,000 per film) as it will also act as a co-producer, although not the sole French partner.

It is a similar story at France's departmental level: a predominantly French or European production must use local labour to access the cash. Productions can access both regional and departmental funds.

The decision not to provide incentives for completely foreign (read US) productions comes from the CNC as a way to serve French and European film better. It is also based on the idea that film is a cultural product and not a mercantile commodity. Within the CNC's points system, if a film has enough points to be considered French or European it can benefit from regional and departmental aid. But nationality is not necessarily the deciding factor in all cases. Country of residence plays a part, therefore an American living in a European country for a sufficient amount of time with local residency papers may also be considered European and benefit from the system.

SOFICAs
On the tax-shelter side, France has the Soficas, film-financing companies that raise money by offering substantial tax write-offs to investors. The Soficas reinvest this money in film and television via interest-bearing loans. A company or an individual which invests in one can write off up to 50% of tax on their investment, while individuals can invest up to 25% of their income with a 100% tax write-off.

There are seven Soficas in France which are guaranteed by companies, usually in the film or television sector, such as Gaumont and Canal Plus, for an investment period of eight years. For all intents and purposes, they act as private companies but may only invest in films that are approved by the CNC to receive this kind of support.

In total, the Soficas hold about $39m, but only $11.5m is invested annually in independent film, with the majority going to the French majors (there is talk of the government raising the cap to $78m.) A Sofica takes a small percentage of rights to a film for a certain number of years. Per film investments range from $98,000-$488,000.

Unlike the CNC subsidies and the regional film aid, for a production to access Sofica funding it must be French language and a majority French production, although it does not need to shoot in France.

Coficine and Cofiloisirs
Three of France's biggest boutique financiers, Coficine, Sodete-Ufca and Cofiloisirs - the first a subsidiary of bank assurance behemoth Natexis-Banque Populaire - are heavyweight backers of the French film industry. They can step in at any stage of financing, but usually do so at a time when most of the other backers and partners have been secured and they can weigh up how much risk to incur. Major pre-sales are often completed or at least (and certainly at the development stage) guaranteed by a director, writer or producer's track record.

Coficine, which has a state guarantee covering 50% of its losses, invests approximately $488m annually in films of French nationality or Franco-European co-productions. Of the 70-80 films per year that Coficine supports, in most of the cases it is the majority financier, according to Didier Duverger, the company's managing director. Recent credits include Roman Polanski's The Pianist, Alain Berberian's Le Boulet, Cedric Klapisch's Euro Pudding and Jan Kouen's upcoming Blueberry.

These banks are in a position to take such large risks as they are also guaranteed in part by the Institut pour le Financement du Cinema et des Industries Culturelles (Ifcic), which is 20% government-owned. The Ifcic guarantees loans to cultural companies and will cover up to 80%. It also provides short-term loans in conjunction with one of the three banks and can guarantee bank loans to producers.

Case Study: Carnages
Delphine Gleize's 2002 Un Certain Regard title, Carnages, was a baptism by fire for all involved. Not only was the $3.3m production Gleize's debut feature, but it was also a first feature effort for Paris-based Balthazar Productions and producer Jerome Dopffer.

The production submitted the script and examples of Gleize's short films to the CNC's selection committee and secured a $390,000 advance from the CNC via the 'advance against receipts' scheme.

Dopffer was obliged to either reimburse the advance on a first dollar gross basis one of two ways: either through his eventual support account (based on a percentage of the tickets sold for the film) or through the exploitation of ancillary rights to the project. Dopffer opted for the former. Eurimages, of which France is a member, also stepped in with an advance on receipts totalling $360,000. This was also reimbursed via a percentage of first dollar gross. To access Eurimages coffers, Dopffer had to set up the production as a three-way collaboration between member states: he brought on board Belgium's Need Productions, Spain's Oasis and Switzerland's PCT Cinema Television. Additional money was secured via Belgium's CNC, and pay-TV and distribution deals in Spain and Switzerland.

The script involved five distinct plot lines and shooting demanded specific locations in south-western and northern France. The committees in the relevant regions and departments (Aquitaine, Nord-Pas de Calais, Picardy, Les Landes) were presented with a package about the film before deciding how much to award the project. In total, Dopffer secured an additional $215,000 in cash subsidies from the regional funds. The production employed local technicians in each of the locales it shot and spent two to three weeks in each place.