Abstract
Public financial support to national film production is typically conditional on subjective artistic and sociocultural criteria and objectives. Yet the question remains as to whether state subsidies actually help films at the box office: did audiences get to see and appreciate films that otherwise would not have been made? While recognising the complex political and administrative context, the results of this study suggest that the public subsidy regime in Italy between 1995 and 2003 failed to assure the development of an industry as intended, since in an overwhelming number of cases the film revenues of those films supported were not sufficient to cover production costs, even when supported by a subsidy. Drawing from a variety of publically available sources, a dataset was constructed to estimate the profitability of films both supported and not supported by State aid to film in the Italian market. Our approach differs from that of others in that we measure the success of films in the market by the revenues they generate. By factoring in costs of production, a better idea of the costs to society of subsidising film production can be established.
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Notes
- 1.
Tullock, who originated the idea in 1967, was first to point to the negative externalities through rent-seeking behaviour (Tullock, 1967).
- 2.
See Sedgwick and Pokorny (2010) for a methodology for estimating profits using estimates of distribution costs and non-theatrical revenue streams.
- 3.
The euro has been in force in countries belonging to the Economic and Monetary Union since 1st January 2002. Accordingly, a large part of the costs and revenues of films included in the initial raw data are expressed in the pre-euro Italian currency unit, the lira. Therefore, all the monetary values of such films have been converted into Euros, at the fixed exchange rate of 1€ = 1936.27 Italian lire and expressed in 1994 prices.
- 4.
The three films were: I Cento Passi (2000), Tano Da Morire (1997), Le Affinità Elettive (1996).
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Appendix
Appendix
Law and regulation developments concerning public subsidies to film production in Italy
Law no. 1213, 4 November 1965 | Italian State confirmed its support and commitment to the film industry—one that can be dated back to 1927 |
Decree no.26, 14 January 1994, amended in 2004/5 | A distinction between films of ‘national cultural interest’ and ‘nationally produced’ films is established, each governed by separate administrative procedures |
Law no. 153, 1 March 1994, Article 8 | The categories of ‘first works’ and ‘second works’ related to films of ‘national cultural interest’ are introduced |
Law no. 137, 1, 6 July 2002 | New procedures to improve subsidy allocation, and control |
D. Lgs. No. 28, 22 January 2004 | Establishes a new set of guidelines for the regulation of the public subsidy to film industry |
Ministerial Decree, 27 September 2004 | Stricter prescriptions on subsidies to film production are introduced |
Ministerial Decree, 13, August, 2015 | Criteria published defining ‘cultural interest’, including technical criteria necessary for films to be considered eligible for public funding |
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Teti, E., Collins, A., Sedgwick, J. (2018). Government Failure: The Ineffectiveness of Italian State Subsidies to Film. In: Murschetz, P., Teichmann, R., Karmasin, M. (eds) Handbook of State Aid for Film. Media Business and Innovation. Springer, Cham. https://doi.org/10.1007/978-3-319-71716-6_19
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