Will a U.S. Federal Tax Threaten Europe’s Production Boom? European Producers Don’t Think So: ‘The U.S. Is Falling Behind’

One of the hottest topics at this year’s Creative Investors’ Conference at the San Sebastián Film Festival is the likelihood and the effects of a U.S. federal tax credit for film production. Speaking at a panel titled “Europe’s Current Challenges and Opportunities,” Lorenzo de Maio of De Maio Entertainment said he doesn’t believe the measure would be a threat to the booming European production market.

“I’m Italian but live in Los Angeles, and [the tax credit] is one of the few things uniting Republicans and Democrats,” he said jokingly. “A stackable federal credit added to state credits is a very interesting opportunity because the U.S. has lost so much of its production capabilities.”

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“There’s a lot of capacity in the world, so the U.S. is falling a litte behind, honestly,” he continued. “Imagine if [a country like] Spain didn’t have incentives… It’s time for the U.S. to have it. It’s not controversial and will help rebuild some of the craftspeople that have left the business. The beauty of supporting the system is that you create new filmmakers, storytellers, companies, and cultural opportunities for co-productions. A whole ecosystem that thrives is something the U.S. lost a little bit, and it would be helpful to bring it back, but I don’t think it’s a threat.”

De Maio also spoke about another pressing topic at this year’s conference, which is co-organized with CCA Media Finance: the increase in U.S. private equity making up for a steep decline in pre-sales. “There are definitely new sources of equity coming in,” he said. “The fun of it for us is we can be quite open. With most of our [Fremantle] companies, we will look at equity or debt; we can cash flow. So what works for the project is usually the right answer if you have that flexibility, and there are so many opportunities to co-pro within Europe and so many ways of doing. The complexity is there, but it’s worth navigating it because it’s a thriving industry.”

Why Not Productions’ Pauline Lamy echoed that thought, saying that having U.S. equity come into the European market is “a new thing” for the company. “Because we can not presell a lot of films because of their language, having that type of money is really helping us make films at a bigger scale. ‘Fjord’ needed that; ‘Emilia Pérez’ needed that. A lot of films couldn’t work without this mixed system.”

Speaking of Cristian Mungiu’s Palme d’Or-winning film, Lamy said the co-production model between Romania, France, Norway, Sweden, Denmark and Finland felt a “natural” fit for the project.

“We are an independent cinema company and filmmaker-driven, so we try following filmmakers through all their projects,” she said. “Of course we are always trying to push them, but we would never force them to make a film in another language to have a bigger audience. Sometimes it happens; you can think about ‘Fjord,’ from a Romanian director who always worked in his own country, but with this story, you have characters who are in Norway and speak in English, so he could have an English-speaking cast and then have a bigger audience. It’s not a strategy; it depends on the project and the director.”

De Maio noted how “60% of European movies only open in their own territory,” so it is not worth forcing unnecessary co-productions for movies that might remain limited to their home turfs. “It is not about conquering the market but how we honor the DNA of the market.”

“We really have to think about what works for it,” he continued, offering Pablo Larraín’s Chile-Italy co-production “Maria” as an example. “That was a natural co-production. But we have local movies, and it’s not natural to force that. So we look at the DNA of the movie and let financing come from that.”

Then there is the matter of audiences, which has become an even more key aspect of financing at a time when distribution has become ever-harder to master. The producers on stage believe that the best way of tackling distribution issues is to understand what audience a project is for from its very inception, and keep that in mind through development and production.

“There is an audience that loves movies, a younger audience, too, and that is open to different authentic voices in a way five or ten years ago we wouldn’t be that confiden about,” noted StudioCanal’s Ron Halpern. “That’s a great thing for all of our local or mixed-language productions.”

“‘Obsession’ and ‘Backrooms’ are two movies that completely changed the way Hollywood is talking about films,” added De Maio. “Distributors need to bring the movie to the audience, and what’s happened with Curry [Barker] and Kane [Parsons] is that they brought their own audiences. They had a loyal following, so they were able to convert that audience, which doesn’t always convert from YouTube to cinema.”

“I think 75% of the audience for ‘Obsession’ was 18 to 34,” speculated De Maio. “That’s insane. It’s a horror movie based on YouTube IP. When we think about movies now, it’s really healthy to have a discussion about who’s the audience, how do we reach that audience, and then financially and creatively be aware of that when you’re building the project.”

Halpern said they have a “sense” of who the audience is from very early on in the building of their projects. When putting together the Andrew Garfield-Florence Pugh two-hander “We Live in Time,” Halpern’s team knew Pugh would “deliver the TikTok audience,” and she did. “If you can’t figure out your audience, then your film better be extraordinarily good.”