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MEDIA 2007 ProgrammeCreative Europe 2014-2020

Financial Instruments

European Commission – DG Education and Culture - MEDIA Programme and Media literacy UnitIsabella Tessaro / Gunnar Magnusson

November 2011

The market for Film Banking

– This sector is perceived as “high risk” by most financial institutions

– The market size for film banking services is limited by production output and budget levels

– The back-office cost of film lending does not justify the return for many of the players

– Productions budgeted at €1.2m start to become interesting for a few financial institutions

– Therefore, film industry expertise within financial institutions is rare making film banking a niche business

“Study on film banking in Europe”

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MEDIA Production Guarantee Fund

• ObjectiveTo support and facilitate the access of European film

producers to bank creditsEncourage banks to grant loans to producers by

discounting contracts in view of cash-flowing productions• Instrument

Guarantee fundShare with banks the risk related to loans made to

producersLeverage effect

MPGF - How it worksEU Budget

MPGF

€ 8 M

Audiovisual SGR

IFCIC

Producer 3

Producer 4

Film X

€ 2 M

Producer 5

Producer 6

Producer 1

Producer 2

Film Y

Film Z

€ 10 M

European independent producers ask for a credit to their local bank who in turn applies for MPGF guarantee

€1M

€8M

€18M

IFCIC

Co-investment Solidarity € 2m

Annual € allocated € 1m € 1.5m

Total fund amount € 4m € 6m

Multiplier ratio 10 4 to 6

Share of risk 50% 55%

Guarantee fee 1%500-1000€ + 0.75% + 1.75%pa

Estimated total amount of loans raised 2010-2013 € 80-90m € 50-60m

MPGF – 2 mechanisms

MPGF activity since May 2011

• 14 guarantees delivered • Guaranteeing a total of € 8 million• Allowing to raise bank credits for a total of

€18 million€18 million• € € 1 million1 million out of the 4 used so far• Producers in 6 different countries (3)• Potentially 150 transactions, helping to

raise bank credits worth €150 million

Creative Europe Programme

MEDIA Culture

Market Intelligence, Cultural and Media Literacy, etc

Creative Europe2014-2020

Cross-sectoralFinancial Instrument

€ 1.6 bn

Music, publishing, heritage, etc

Commission proposal

Cinema, TV, video games

55%

15%

30%

The EU Cultural and Creative Sectors

• 1.400.000 SMEs in the EU (7% of SMEs)• € 566 billion turnover (4.5% of EU GDP)• 8,500,000 jobs (3.8% of EU workforce)• 14% annual growth 2002-2008 in the

world creative industry• Media and Entertainment industry will be

injecting $ 2,200 bn in the world economy in 2012 (PwC)

Cultural and Creative Sectors Facility

• Guarantee facility to share credit risk– With banks investing in portfolios of loans– To SMEs of the CCS

• Transnational capacity-building / expertise for banks: non-financial leverage

• Transition from grants to loans where possible• Managed by the EIF• € 180 million fund raising credits for up to € 1

billion to the benefit of SMEs in CCS (as per current Commission proposal)

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Comprehensive A2F approach

Training• Finance• Management• Investment readiness

Networking• Access to market• Co-production forums

CCS SMEs and professionals

Capacity building

Networking

Technical support

Banks

Guarantee Facility

• Fund € 180 million

• Raising up to € 1 bn of bank loans

• Covering 20-30% of the financing gap

Creative Europe

Financial InstrumentMEDIA and Culture

Capacity Building Risk sharing

Dialogue

Role for MEDIA Desks

• Possibility for MD to engage with banks in their respective countries

• Become contact points for banks interested in working with the film sector

• MD cooperation with Audiovisual SGR and IFCIC is welcomed by the Commission

• The Commission can assist in creating links/connections with local banks

• Possible MD links with the EIF in the new Creative Europe Programme

• Thank you for your attention

• Questions/Comments?

Response to limits of the MPGF

• Limited scope– Only audiovisual sub-

sector– Only production– Only cash-flowing via

contract discounting• Lack of critical mass• Cost of the guarantee• Difficulty in attracting

new banks so far

• Diversification

– All CCS

– All activities

– More banking products

• Critical mass• Free guarantee• Capacity-building

scheme and structured cross-border networking