Study on the Role of Banks in the European Film Industry – Final Report

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Study on the Role of Banks in the European Film Industry – Final Report Ref. Ares(2013)3022427 - 10/09/2013 Study on the Role of Banks in the European Film Industry – Final Report Study on the Role of Banks in the European Film Industry FINAL REPORT 12 MAY 2009 Study on the Role of Banks in the European Film Industry – Final Report Notice This document is the final report of a study on the role of banks in the European film industry. Opinions given in this report are those of its authors; this report does not necessarily reflect the point of view of the European Commission, and the Commission cannot be considered liable for the accuracy of the information in the report. Neither the European Commission, nor any person acting under its responsibility, can be held liable for any subsequent utilization made of this report. Reproduction is authorized subject to citing the source. Study on the Role of Banks in the European Film Industry – Final Report © peacefulfish May 2009 Authors: Thierry Baujard Marc Lauriac Marc Robert Soizic Cadio peacefulfish May 2009 2 Study on the Role of Banks in the European Film Industry – Final Report CONTENTS LIST OF TABLES ...................................................................................................... 7 LIST OF CHARTS ................................................................................................... 10 LIST OF FIGURES ................................................................................................... 10 A EXECUTIVE SUMMARY ....................................................................................... 11 1 Foreword .................................................................................................. 11 2 The Brief .................................................................................................. 12 3 Approach .................................................................................................. 13 4 Definition of Financial Institutions................................................................. 14 5 Five Main Film Banking Services................................................................... 14 6 Market Conditions For Film Banking .............................................................. 15 7 MEDIA Countries Grouped Into 3 Market Segments......................................... 15 8 Key Conclusions......................................................................................... 16 9 Recommendations...................................................................................... 19 B CONTEXT, OBJECTIVES, CHALLENGES, AND METHODOLOGY OF THE STUDY .................... 23 1 Context of the Study: Film Banking, a Financial Service in Transition................. 23 1.1 The Economic Crisis ............................................................................. 23 1.2 Film Production: A Prototype Business .................................................... 23 1.3 Size of Market for Film Banking.............................................................. 24 1.4 Film Banking Expertise Within Financial Institutions .................................. 24 1.5 Emergence of New Types of Guarantees.................................................. 24 2 Objectives of the Study............................................................................... 25 3 Challenges of the Study .............................................................................. 25 4 Methodology ............................................................................................. 26 C MARKET PERSPECTIVE ...................................................................................... 28 1 Preliminary Remarks .................................................................................. 28 2 Synthesis of the Results.............................................................................. 30 2.1 Production Budget and Production Output................................................ 30 2.2 Independent Production Landscape......................................................... 31 2.3 Impact of Public Funding....................................................................... 32 2.4 Size of the Banking System ................................................................... 33 D FILM BANKING IN EUROPE AND THE VARIOUS MODELS IN PLACE ............................... 34 1 Film Banking in Europe ............................................................................... 34 2 Interim Finance ......................................................................................... 41 2.1 Introduction ........................................................................................ 41 2.2 Financial Institutions Offering Interim Finance.......................................... 42 2.3 Classic Contract Discounting Model......................................................... 42 2.4 Revolving Credit Cashflow Model ............................................................ 43 3 Tax-Incentive Financing .............................................................................. 45 3.1 Introduction ........................................................................................ 45 3.2 Financial Institutions Offering Tax-Incentive Financing .............................. 46 3.3 Tax Credit Cashflowing Model ................................................................ 46 3.4 Tax-Incentive Gearing Model ................................................................. 47 4 Gap Financing ........................................................................................... 49 4.1 Introduction ........................................................................................ 49 4.2 Financial Institutions Offering Gap Financing ............................................ 50 4.3 Classic Gap Financing Model .................................................................. 50 4.4 SuperGap Financing Model .................................................................... 51 5 Working Capital/Corporate Finance............................................................... 53 5.1 Introduction ........................................................................................ 53 peacefulfish May 2009 3 Study on the Role of Banks in the European Film Industry – Final Report 5.2 Financial Institutions Offering Working Capital/Corporate Finance ............... 54 5.3 Mid-Cap Credit Facility Model................................................................. 54 5.4 Asset-Backed Lending Model.................................................................. 55 5.5 Public/Private Loan Model...................................................................... 56 6 Bank Guarantee......................................................................................... 58 6.1 Principles of a Bank Guarantee............................................................... 58 6.2 French Public-Private Guarantee Model: IFCIC.......................................... 59 6.3 Spanish Public-Private Guarantee Model: Audiovisual SGR ......................... 63 6.4 German Public Guarantee Model: Landesbürgschaft .................................. 65 7 Further Models .......................................................................................... 68 7.1 European Investment Bank Loan Framework (2003-2007) ......................... 68 7.2 Bavarian Bank Fund (Bayerischer Bankenfonds - BBF)............................... 70 7.3 FICA - Investment Fund for Cinema and Audiovisual Works........................ 72 E CASE STUDIES ................................................................................................. 75 1 Case Study 1: Bilateral Co-Production Interim Financed in One Country............. 75 1.1 Presentation of the case........................................................................ 75 1.2 Validation Process of the Interim Loan .................................................... 76 1.3 Cashflow Plan of the Bilateral Co-production ............................................ 77 2 Case Study 2: Quadripartite Co-Production Gap Financed in One Country and Interim Financed in the Two Countries ............................................................... 79 2.1 Presentation of the case........................................................................ 79 2.2 Interim Financing by the Bank of Country D............................................. 79 2.3 Interim Financing by the Bank of Country A ............................................. 79 2.4 Financing Plan and Interim Finance Structure for the Quadripartite Co- production .................................................................................................. 81 F CONCLUSIONS & RECOMMENDATIONS................................................................... 82 1 Conclusions............................................................................................... 82 1.1 Introduction ........................................................................................ 82 1.2 Conclusions By Groups of Countries........................................................ 82 1.3 Conclusions Based on Interviews & Roundtable Discussions with Financial Institutions ................................................................................................. 83 2 Recommendations...................................................................................... 85 2.1 Introduction ........................................................................................ 85 2.2 Three Recommendations......................................................................
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