Financial Instruments MEDIA 2007 Programme Creative Europe 2014-2020 November 2011
European Commission – DG Education and Culture - MEDIA Programme and Media literacy Unit Isabella Tessaro / Gunnar Magnusson
1
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”
MEDIA Production Guarantee Fund • Objective To support and facilitate the access of European film producers to bank credits Encourage banks to grant loans to producers by discounting contracts in view of cash-flowing productions • Instrument Guarantee fund Share with banks the risk related to loans made to producers Leverage effect
3
MPGF - How it works EU Budget
€8M €2M € 10 M
Audiovisual SGR
MPGF
€1M
IFCIC
€8M
Producer 1
Producer 2
Producer 3
Producer 4
Producer 5
Producer 6
Film X Film Y Film Z
European independent producers ask for a credit to their local bank who in turn applies for MPGF guarantee
€18M
MPGF – 2 mechanisms 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 activity since May 2011 • 14 guarantees delivered • Guaranteeing a total of € 8 million • Allowing to raise bank credits for a total of €18 million • € 1 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 Commission proposal
â‚Ź 1.6 bn
Creative Europe 2014-2020 Cross-sectoral Financial Instrument
Market Intelligence, Cultural and Media Literacy, etc 55 %
MEDIA Cinema, TV, video games
30 %
Culture Music, publishing, heritage, etc
15 %
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) 9
Comprehensive A2F approach Creative Europe MEDIA and Culture
Financial Instrument Capacity Building
CCS SMEs and professionals Training
Risk sharing
Banks
Capacity building
Guarantee Facility
Networking
• Fund € 180 million
Technical support
• Raising up to € 1 bn of bank loans
• Finance • Management
• Investment readiness
Networking • Access to market Dialogue • Co-production forums
• Covering 20-30% of the financing gap
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 subsector – 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