The European Film Industry: Challenges and Opportunities in a Global Market

An Overview of Europe’s Film Industry

Ivana Katsarova

Despite pioneering both technological and content innovation in cinema, the EU film industry is currently characterized by the strong presence of Hollywood productions (70% market share in 2013). The major US companies benefit from vertical integration, encompassing both production and distribution, which allows them to spread risk and reinvest profits. To address the financing challenges faced by EU film companies, various film-support schemes have been established, totaling €2.1 billion in 2009.

Within the EU, the "big five" – France, Germany, the UK, Italy, and Spain – account for approximately 80% of releases, industry turnover, and employment.

Challenges Facing the European Film Industry

The European Commission has identified several structural weaknesses hindering the EU film industry from reaching its full potential both within Europe and globally:

• Fragmentation of production
• Financing issues
• Limited attention to distribution and promotion
• Insufficient opportunities for international projects

The European Parliament also aims to overcome distribution barriers through the LUX Prize, established in 2007. While the award doesn’t include a direct grant, the winning film is subtitled in 24 official EU languages and screened in 40 cities and at 18 festivals.

Background

In the 1990s, European film companies dominated international film distribution, holding the largest market share in both the EU and the US. However, by the early 1920s, the situation had reversed, with emerging Hollywood studios supplying the majority of films shown in Europe. This trend continues today, with Hollywood majors holding a strong presence and European companies accounting for only 26% of the market. The dominance of Hollywood studios stems from their vertical integration.

Among the top 10 media groups worldwide, only the French Canal+ Group represents the EU. The control over distribution enjoyed by US majors has created significant entry barriers for EU film companies, whose market share was under 2.5% in 2010.

Situation and Trends

The Specific Character of the Film Industry

The film industry’s delicate balance between cultural and industrial components creates tension between creative and market considerations. Its reliance on public funding and extensive regulation stems from its nature as a "prototype" industry. Films require critical mass to achieve profitability and offset the costs of less lucrative productions. Consequently, the industry focuses on developing market strategies, with copyright protection serving as the primary form of control.

A Closer Look at the European Film Industry

Despite growing production levels in 2013, the estimated share of EU films declined. While the EU industry remains dynamic, with the "big five" dominating releases, turnover, and employment, its core comprises nationally based companies, many of which are relatively small and specialize in a single segment of the value chain. Research indicates that the majority of EU films struggle to recoup their costs, hindering their growth and sustainability. The lack of large, vertically integrated groups capable of competing with US majors is perceived as a significant weakness.