When Padoan met Cameron

Give me a Blockbuster and I’ll raise the Balance Sheet!

[The recent investigation by the TV Program “Report” reopens the debate on public aid for cinema and culture, when in other countries the film industry is a good source of revenue, promotion for the territory, exportation of distinguishing products and values: and yet, the earnings from Avatar alone would be enough to cover the correction “maneuver” of the State budget (DEF).]


If Italy, a country of talent, among the talented people, had given birth to James Cameron, Minister Pier Carlo Padoan could have commissioned him to make a successful film to fund the $3.4 billion corrective action on the State budget requested to Italy by the EU Commission



Running through box office data, we find, in fact, that Avatar and Titanic, two of Cameron’s most famous films, earned about 2.7 and 2.1 billion dollars, respectively, in cinemas around the world; corrected for inflation (the films came out in 2009 and 1997) it is about 3 billion for Avatar and 2.5 billion for Titanic.



If we add the revenue from theaters and the revenue from other forms of exploitation (home videos, televisions, new media), the amounts indicated would go far beyond the Italian spring “maneuver.” So to a Cameron, you could also assign an honor to the merit, which I say, could be a lifetime payment as a senior member: come on, a pension today is denied to few, and never to a “savior 4.0” of the homeland.


Of course, our films have a largely domestic backbone; Checco Zalone, for example, with his Quo Vado earned the highest theater revenue ever recorded in Italy, making about 65 million euros in ticket sales. For a retirement that could be enough (Checco got ahead!), but for the “correction maneuver” this is still little money.


The most attentive people could find the reason for the reduced revenues in the average budget of Italian films: this is partially true. Take, for example, the recent Get-Out, the first work by Jordan Peele: with a budget of $4.5 million (very close to the cost of “mid-caliber” Italian films), it has already made about $176 million, about 3 times as much as the most profitable Italian film ever made.


The explanation of the distance – purely economically – between James and Checco is simple: more than 70% of the revenues from Avatar and Titanic came from abroad, while Quo Vado, and Italian films in general, have a very narrow market outside of Italy, most of the time non-existent [see Anica’s study: http://www.anica.it/i-quaderni-dellanica/quaderno-6-lexport-di-cinema-italiano-2006-2010].


Which direction emerges, then? That of an audiovisual market left to its own devices? Or, alternatively, might it be worth betting on the film industry, promoting international products and growing talented people – of which we have so many – who are able to emulate “Uncle Cameron” and – thanks to repeated generational changes – create, in the near future, universal works?


The comparison between “Padoan’s maneuver” and the Avatar and Titanic box office is not intended to be irreverent, but it is proof that the cultural industry – including the audiovisual industry – can be a source of wealth, as well as a tool for lifestyle enhancement. Furthermore, it is worth it in recessions – such as the one we are experiencing – where alternative forms of investment, strongly uncorrelated with traditional ones, can be very useful to diversify portfolios.


According to this perspective, public support for the audiovisual industry takes on colorations broader than those only referring to cultural exceptions: culture and the creation of value go hand in hand and feed off each other.


The drastic change in the audiovisual public aid schemes with the introduction of the tax credit for cinema in 2009 inspired this conviction. The introduction of a tax credit for film producers (internal tax credit, equal to 15% of the cost of the film produced) and for investors outside the industry, intending to invest in film products (external tax credit equal to 40% of the investment carried out), it wanted to mark the first step towards a modern form of public support aimed at fostering the access of film companies to the private capital market [for details on cinema tax credit rules see: http://www.anica.it/i-quaderni-dellanica/n2-agevolazioni-fiscali-per-il-cinema].

All of this is from the perspective of a rationalization of the use of state resources. In other respects, the tax credit for foreign films for expenses incurred in Italy (25% of eligible expenditures), which accompanied the internal and external tax credit, sought to stimulate foreign investment in Italy, to ensure continual work to our workers and to activate a multiplier of spending and investment in our territory.
This all, despite the years of crisis, was largely successful: from 2010 to 2016, more than 900 films were also funded through tax credit; the weight of private financing — calculated by using the ratio between the tax credits obtained by the producer and the distributor and the tax credit obtained by the external investor as a proxy — has increased from about 16% in 2010 to about 77% in 2016; if the State had to finance the same films with direct contributions in order to substitute private investors, it would have spent more than twice the approximately 135 million paid to investors in the form of tax credit. Since 2010, thanks to the tax credit, 27 foreign productions have filmed all, or part of their films, in Italy; on top of the approximately 77 million euros of tax credit received by the State, they have spent about 300 million euros in Italy.


Critiques on the use of tax credit, recently heightened by the investigation by the TV program “Report”, must therefore be contextualized in the framework described and must stimulate constructive reflections.


The risk of potential — and residual – misuse of the tax credit (particularly of the external one) should not lead to demonizing the tax incentive. The approach of the audiovisual industry to the financial world, and to private capital, has a medium to long-term temporary horizon [for more information on film financing, see The Economics of Audiovisual Industry: audio-visual book.] It is to be expected that on this route, deviations and distortive practices might be recorded. The task of an enlightened policy is to acknowledge and implement corrective actions without losing sight of the ultimate goal: to create a cultural industry consisting of companies that, on the one hand, are able to stay on the market according to economic-financial sustainability criteria, and in turn, promote our territory by attracting foreign capital.

The audiovisual tax credit is a potent weapon in this sense and must be protected, handled with care and accompanied by other measures.


Therefore, the responses contained in the new law on film reform — the so-called Franceschini Law — that, in addition to confirming the extension of tax benefits to all audiovisual works (including TV and Web native products), has provided for a series of original thoughts designed to improve the financial dynamics of the industry. Among these thoughts we mention four that are by no means trivial. First, the re-modification of the tax credit rates, a modification that allows producers to come to the table with external investors with greater negotiating power, narrowing the possibilities of harassing behavior by “aggressive” investors; this is thanks to the rise in the rate of domestic tax credit from 15% to 30%, and the reduction of the external tax credit to 30%.
Secondly, the disclosure of the investors’ return mechanisms — better specified in the decrees implemented at the time of definition — eliminating any doubt as to the fraudulent interpretation of the partnership agreement in profit sharing, on the basis of the agreement between producer and investor. However, these two previsions will have to be accompanied, in administrative practice, by prompt and systematic inspections by competent authorities.


A third prevision contained in the Franceschini Law is aimed at facilitating the investment, earned on the external tax credit, of mutual funds and capital companies subjected to prudential supervision; this measure will also help stimulate professional investment, managed by supervised financial intermediaries, and strangers to the “take the money and run” logic.


Last but not least, there is the prevision of setting up an autonomous section, under the Central Guarantee Fund for PMI, typical of MIBACT, and dedicated to audiovisual works. With the Central Fund’s state guarantee, banks will be able to provide ordinary financing to companies of the sector without being excessively penalized by the capital requirements of the Basel rules, on top of credits granted to under-capitalized companies such as audiovisual companies. The autonomous section will establish access criteria specially made for the sector, according to a project financing logic, allowing even more art house productions to take advantage of the guarantee.


Once again, Italy proposes an advanced legislative and regulatory framework with respect to the European overview: do not squander it. It is the task of the institutions to monitor the correct use of the tools put in place, the operators of the sector to demonstrate professionalism and behavioral ethics, and the communications organizations to exercise a proper and healthy media influence aimed at enhancing good practices. Only then can we hope that one day, Checco’s granddaughter will compete with James’s for “who has the highest box office results”; just so a future Minister of the Economy (Minister 8.0?) will be able to rely on more arrows in his arc to balance the accounts: why not, even on an arrow of cinema.




La Torre M., The Economics of the Audiovisual Industry: Financing TV, Film and Web, Palgrave, MacMillan, London, 2014

[link:  audio-visual book];


Committeri GM., La Torre M., Agevolazioni fiscali per il cinema, Quaderni Anica, 2008

[link: http://www.anica.it/i-quaderni-dellanica/n2-agevolazioni-fiscali-per-il-cinema ];


La Torre M., Leone C., Brivido & Profitto, Bancaforte, n° 1/2007

[link: http://www.goodinfinance.com/researches/brivido-profitto/];


La Torre M., La finanza del cinema, Bancaria, 2006 [link:http://www.goodinfinance.com/researches/la-finanza-del-cinema/ ]



La Torre M., La finanza del cinema: Spielberg e la lezione del mercato americano, in Bancaria,

n° 12/2006

[link: http://www.goodinfinance.com/researches/la-finanza-del-cinema-spielberg-la-lezione-del mercato-americano/ ]

La Torre M. Il Project Financing nel cinema, in “Il Project Financing” di Pompella M. (a cura di), Giappichelli, Torino, 2006;


La Torre M., Per un parco finanziario del cinema, in Banche e Banchieri, n°5/ 2004;


La Torre, M., Le Banche nel cinema: un modello di gestione del credito cinematografico, in

Bancaria n° 12/2003

[link: http://www.goodinfinance.com/researches/le-banche-nel-cinema-un-modello-gestione-del-credito-cinematografico/];

La Torre M., Economia e dinamiche finanziarie del cinema, in Bancaria, n°10/2003

[link: http://www.goodinfinance.com/researches/economia-dinamiche-finanziarie-del-cinema/ ].


Good or Bad?

Once again, Italy has developed a legislative and regulatory framework that is at the forefront in Europe. The Franceschini Law introduces important innovation from a medium to long-term perspective. As always, the market reflects the laws!

The tendency to highlight the “darker” sides of finance risks obscuring how much good the tax credit for audiovisual productions has generated in recent years and demeaning legislative innovations; the path to liberating culture from non-repayable public funding cannot happen in a few years; patience and attention to distortive practices are necessary, but there is no need to divert attention from the ultimate goal: making the cultural and audiovisual sector a real industry. Beware of populist media pressure and any potential backwards steps by the legislature!

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