Alex Traila: „Romanian cinema has an image problem”
Alex Traila works as a consultant in the film industry and is the executive director of a brand new association, the Romanian Alliance of Film Producers, which reunites 45 Romanian production companies.
He has recently published an analysis on his personal website, alextraila.com, about the very urgent and grave problems the Romanian film industry is facing at the present moment, problems which are amplified by the pandemic, and he concludes that there is a very real risk that there might be no financing available for any local films in 2021.
The Romanian Alliance of Film Producers has also drawn attention in the past couple of months that the cash rebate system, which was introduced two years ago as a means to support the industry by having the state reimburse a part of the private expenditure of foreign film productions shot in the country, has been blocked.
About all these problems and more – from the poor image that Romanian film has amongst the general audience and political actors to the pressing need for a new law that would regulate cinematography – I had the chance to discuss with Alex Traila.
In your recent analysis, you said that one of the biggest problems right now is the drastic reduction of the local cinematographic fund, which is managed by the Romanian Film Center (CNC) and so, this implies the risk that we might have no productions that would be financed by the state in 2021. How did we get here?
The two main sources of financing the fund are ticket sales and TV commercials. There is a certain percentage (meaning 4%) of the value of a cinema ticket that is taxed and directed towards the fund. And it doesn’t matter whether the film in case is American, European or Romanian.
Starting from the moment the state of emergency was decreed in March when half a month’s worth of taxes was collected, and until September, when cinemas were briefly reopened before being closed again, there were zero revenues from ticket sales.
Similarly, there is a percentage of the fee which is paid by a given company for one minute of television publicity. From that per-minute cost, 4% is redirected to the cinematographic fund. Publicity has drastically fallen this year. There are some television channels where, for example, the market has fallen by 35%. So there are some funds that are being redirected to the fund, it’s not an absolute zero. But it’s considerably smaller than it used to be.
Furthermore, we mustn’t forget that there is a lot of state publicity on television right now, it’s not coming in from the private sector, which means that it’s not paying any tax. When the government entered the market with its national security adverts (infomercials about the pandemic – e.n.), it didn’t do this by acquiring per minute publicity, but rather, by creating an application system for an information campaign.
Practically, how much has the cinematographic fund shrunken?
Overall, the yield of the fund has fallen by over 50%. Over half of the fund has gone down the drain. Normally, around 50 million lei would be collected a year. And in some years, the figure went up to 65 million. Right now, we stand at around 20 million, while the account only probably has at around 3 million lei.
So are there no chances that any new financing contest will be organized this year?
No. This year would be a year without contests. To add to the problem, the CNC handles requests for financing, for distribution, and for participation in festivals, but also non-refundable support for artistic merits, for projects that have already won past contests, based on the director’s previous achievements. If, for example, at the next CNC board meeting, four producers will show up and apply with a request for automatic support, I’m not very sure the institution will have the money to help them. Or that it might only support the first two or three in line because it won’t have any money left for the others.
We must also take into account the fact that there is a non-refundable financing session going on right now, which regards festivals, events, and editorial projects, until the 15th of October. And that session is dedicated to events that are due to take place in the first half of the next year, and some of them are large events, such as TIFF and the Gopo Awards.
You also drew attention to another major problem, meaning that the fund isn’t receiving any money from the gambling tax.
That money never came.
When was this regulation introduced?
In 2016. It actually existed ever since the 2006 Law on Cinematography, but it was repealed in the context of the 2010 economic crisis when salaries were cut by 25%. Then it was reintroduced in the spring of 2016, under a new formulation.
Precisely, what does it say?
It says that from the taxes which are paid by gambling operators every year – according to the 2016 text – 2% will be redirected towards the cinematography fund until the 31st of May of a given year, covering the amount of tax for the previous year. As it was written, there should have been no problems in applying it, because it was a very clear indication. Logic dictates that the same entity that collects the taxes will then pay the percentage towards the cinematography fund. It’s that simple.
The thing is that from 2016 up to this year, this contribution has never actually been paid because there have been no official norms in place to apply it. Nobody is taking this responsibility onto themselves. The National Agency for Fiscal Administration (ANAF) says that they’re not the ones responsible, but rather, it’s the National Office for Gambling. On the other hand, they are also claiming that they’re not collecting anything, but rather, the Ministry of Finance is doing so. The Ministry of Finance says it’s not their responsibility, but of the Government’s General Secretariat, which is the main credit ordinator and which was regulating the National Office for Gambling at the time. And so on. It’s a back-and-forth situation which is used in order to avoid getting the job done, obviously. So, nothing has happened yet.
At the beginning of this year, we caught the news that an amendment to the Law on Cinematography was introduced in the Chamber of Deputies, specifically in regards to this statement, which would raise the percentage from 2% to 4%. With the help of a few deputies who were sitting on the Culture Commission, we proposed a reformulation of the text, which would clarify its situation – meaning, the money collected by ANAF on behalf of the state would then be redirected towards the cinematographic fund. Explicitly. It even specified the fact that the Ministry of Finance would have a legal term of 15 days, from the date of the adoption of the said amendment, to elaborate the measures that would apply it. The application measure, in effect, is a phrase: from the X bank account of the National Treasury, some money would be transferred to the Y account of the National Treasury until the date of Z. It’s not rocket science. The amendment was signed into law by President Iohannis in April. And the 31st of May is long past. We are now in October and the measures still do not exist, and the Ministry of Finance should elaborate them.
So practically, they don’t want to direct that money?
If they haven’t done it for the past four years, I don’t really know what else there is to say.
What kind of sum are we talking about?
Considering 4%, CNC claimed that it would almost double the fund, meaning 50 million lei. In 2016, when we initially made some estimations, it was somewhat less, but it was still a significant contribution.
In one way or another, this cash infusion would make itself felt. And, anyway, we still must take into account that if things go back to normal, there’s little chance that the sums collected in the fund up to March 2020 could ever be replicated in the near future. Or, in my opinion, ever again.
What are the perspectives?
They’re disheartening. Mountains upon mountains of paperwork have been done. And even though 2020 is one of those rare years in which we do have a Culture Minister that can really understand, at the level of principle, where the problems lie and what a possible solution could be. Within the limits of his power and influence, the Minister is putting in a lot of effort for these things to happen.
We’ve been in a permanent state of communication with the Ministry of Culture. We discussed with them when it came to the safety measures that would be applied in film production. Immediately after the state of emergency was lifted, we were amongst the first who could directly enter their production phases, starting with June. Since then, ever since things have been constantly reevaluated, we, the Romanian Alliance of Film Producers, have engaged in constant dialogue with them.
Where did the necessity of founding this Alliance, which brings together the vast majority of local active producers, arise from?
You know very well that our film industry is pretty fragmented. It’s functioning according to individual development. So naturally, everyone did things their own way and didn’t really consider that there was a need to be united. You didn’t have any strong motivations in this sense. You were busy with your own projects, whatever they were.
Until now. At the start of this year, there were some discussions about the necessity of such an association. It was a project that predated the pandemic, which had a lot more to do with promoting the country and its productions, and to have an entity to represent Romanian producers, that would also function as a sort of external ambassador. We felt that there was some sort of problem in our external representation, because the CNC has a limited capacity for handling these issues. We wanted to find a formula that had a better structure and that could develop a strategy about the ways in which the film industry can lead to a better representation of our country.
But what is its legal status?
It’s an NGO, an association that is a member of the Concordia confederation.
And so where would you go about doing this external representation?
In film markets, or at international fairs that promote Romania. Meanwhile, you can also develop some public-private partnerships through which you can create a series of connections through strategies in the fields of tourism, culture, and country promotion. Film can be a living component of this mechanism because it’s an organic function.
Here, in general, things are not really integrated, there is no horizontal thinking. We wanted to approach each particular fragment and force this horizontal way of thinking through film.
Up until the pandemic, the discussion was rather more centered on how we would create this Alliance. Then, the state of emergency was doubled by the issue of the cash rebate scheme at the Ministry of Economy and the predictions regarding the cinematography fund, and so things have accelerated and developed even further.
How many producers are a part of the Alliance?
Right now, there are 45 companies in it.
Do you know how many production companies exist in Romania?
This is indeed a problem, because the way in which the film production sector is accounted for has its deficits, in the sense that film production is regimented according to an economic activity code (CAEN). All of those who work in cinema, in one way or another, have a CAEN code. Regardless of what they do, they have the same code. For example, a small firm that is handling props has the same CAEN code as a production company. So it’s hard to have an actual inventory. We have some numbers at the moment and we’re talking about 2000 enterprises using this specific CAEN code.
But beyond this CAEN code, you should know how many active production companies exist in the industry.
Yes, for the moment I think there are around 50 production companies in Romania, operating at different levels – from some who produce one or two short films, to the big players. Some have a foot in utilitarian film, some have a foot in short film production.
The Alliance currently has 45 companies. But, obviously, beyond having this CAEN code, there is another basic condition every applicant must comply with, meaning to have produced or co-produced at least one feature film or to have been an executive producer or to have had an executive function under the credit of a producer at a feature film, or, if-else, to have produced at least three short films. That’s about it. It’s not very restrictive.
The most visible problem raised by the Alliance that got the attention of the media is the lack of functionality of the cash rebate scheme.
This is one of the industry’s oldest battles, it’s at least 12 years old. In the end, in 2018, the Government-proposed scheme was adopted. At the time, the political will determined that the fund should be administered by the National Strategy and Prognosis Commission, who was handling many state subsidies. That was probably the reasoning of the government at the time. But there is no direct link between those handling prognoses and cinema. Meanwhile, they have been mandated, and their organizational structure has changed so that they can organize multiple state subsidy schemes, and not just this one.
Until last November, when the administration changed, this was in the hands of the Prognosis Commission. Then, in January 2020, a famous Emergency Ordinance was passed, Ordinance #1, which transferred the scheme from Prognosis to the Ministry of Economy.
But until then, did it produce any effects while it functioned? Did some producers get any money?
It worked like this: you could apply if you were a film producer, a service provider or a local co-producer. The applicant must be a Romanian production company. You’d come with a project that obviously had to respect its eligibility conditions. The system is automatic, rather than selective, as it is in the CNC contests, where you have commissions that read and evaluate projects on an individual basis to determine which is good or bad.
In the case of this scheme, we are not talking about the quality of a project, because it’s much rather an economic measure than a cultural one. It is cultural in the sense that it stimulates film production, but it’s not oriented to evaluate a product in terms of its quality. In effect, it’s analyzed in terms of economic impact, a component of which is the promotion of the country, which is optional, depending on the content of the film.
You qualify for it if you spend at least 20% of the total budget of your film in Romania, but no less than 100.000 Euros. That is the condition. For a Romanian film, of course, this is not an issue, but the thing is that they cannot use it to pay back their credits from the CNC. But you could use it to cover other sums of money, be it private or foreign money.
But what is the functioning principle?
The principle is the following. You could apply to these funds if you were part of one of the three categories: a Romanian producer working on a Romanian film, a Romanian producer that is handling services for Hollywood, or a Romanian producer that is co-producing a foreign film. The main condition was that the lion’s share of the financing should already be covered. You would apply, then you would be informed if you were eligible, what the eligible costs were and an estimate of the reimbursed sums.
So you shoot the film and spend all of the money that you said you would. After finishing shooting and finalizing all of you expenditures in Romania, you would come back with an audit of those respective expenditures, you would file for payment, deposit the audit, they would take a look at the documents and, and once done with these technicalities, the payments would be made within a given amount of time.
From the moment of filing the said documents, with your cost and production estimates, you had two years to finalize your expenditure and file for reimbursement. Considering that the call for projects was opened in October 2018, precisely two years ago, it’s pretty hard to quantify a lot of the effects of this scheme, because not a lot of productions that entered it could actually take place and go through its entire cycle.
But you have signaled the existence of some debts that are attached to this scheme.
Right now, there are around 35 million Euros that still have to be paid, in the case of over 20 productions. This money should be paid by the Romanian state. It’s a large sum of money. The scheme’s budget is 50 million euros per year. And it’s money from the state budget.
You signaled the fact that these debts have not yet been paid and that the functioning of the scheme has been blocked.
These are the two main issues. First of all, the scheme has not been launched, so it’s impossible to come and apply again for future productions. Second of all, there is no horizon of expectation regarding the payment of these debts. It’s true that some are still within a legal term of analysis, but in other cases, all imaginable deadlines have been surpassed.
Can they take this to court?
You can sue. There are already some preliminary complaints that have been filed. I think that some of those who weren’t paid within the given deadlines have initiated the necessary procedures to take this to court.
Did you have any meetings with the representatives of the Ministry of Economy this year?
We had a lot of meetings. Starting with the 15th of March, we have been constantly getting the promise that, by the 15th of the next month, the scheme will be functionalized. We’re now in October and nothing changed. The point they’re in right now is that they passed a Government Ordinance in which some things in the older version of the scheme have been modified. They stipulated that, 30 days after publishing this ordinance in the Official Gazette, this scheme was to be adopted and functionalized. On the 28th of September, those 30 days had officially passed and the norms have still not been implemented.
Besides these two problems, what other things do you consider should be solved or improved?
These are the two main emergencies: relaunching the cash rebate scheme and solving the problem that exists at the Ministry of Finance. These two should have been solved months ago.
The problem at the Ministry of Finance, with the gambling tax, means that there is a lack of money in the system that blocks the continuation of financing, of project contests, of financing the flux of projects that are already prepared to enter production. Without having any financing in 2020 and 2021, things will be complicated.
The rebate is cash that enters the country and which can maintain, even further develop everything that pertains to technical teams and professionals in the field. There wouldn’t be enough films produced in order to cover the entire existing workforce at the moment. Even more so, to develop it. One must think in perspective.
You need both in order to maintain an equilibrium. If you release some money now in order to finance Romanian productions through the CNC, it doesn’t mean that the film will be done tomorrow or next year. Ever since you win the CNC contest, it lasts for up to two years to effectively enter production and to spend the money that you have obtained.
On the other hand, the cash rebate projects should arrive in a few months. There are some films which are already fully financed and should enter production quite soon. The cash is coming. And there are large sums at stake.
What would another problem be?
Obviously, the Law on Cinematography should be revised. In our opinion, it should be rewritten from scratch. There is a law project that was drafted at the level of the CNC, and a form of this law was debated at a roundtable organized by the festival Les Films de Cannes a Buchrest two years ago. Since then, it’s been sitting in the Ministry of Culture and it hasn’t advanced at all. The Ministry hasn’t offered the law project up for debate, and the Ministry is the one that is responsible for it. It’s the one that forwards it towards the Government in order to be granted approval, and then the Government must submit the law to the Parliament, in order for it to do its duty.
We need a new Law on Cinematography that should rethink the entire cinematic ecosystem in Romania. Things should be put into connection with one another. We should see how we could integrate the cash rebate. And then, obviously, the notion of receiving a credit from the CNC should be removed. It shouldn’t be a credit, it should be a subsidy.
We should think about legal mechanisms through which private and judicial individuals could effectively invest in film. To become investors in cinema, in order to develop a different category of films. And the state could intervene, for example, through the CNC, in the financing of auteur cinema, that has a great potential when it comes to international circulation, but a smaller one when it comes to box office success.
Then again, in what shape could someone intervene when it comes to cinema halls and cinematographic education? At a conceptual level, I think the CNC should have the possibility to make some strategic choices. To draft a strategy for the next five years that would help it decide what else to support, aside from film projects. Are we focusing more on education? Are we interested in bringing international programs to Romania which can handle professional education of a certain segment, on the basis of a strong partnership with the film industry, which could help you identify its needs?
So practically, the current law is totally obsolete.
The law is obsolete. It was drafted in 2005, when we weren’t even a part of the EU. Only the fiscal code itself changed countless times. Again, another strategic decision would be to settle on a given number of films to finance in one year. Maybe you could set a smaller number of films because cinema is underfinanced and, this way, you could cover more of the budget.
Of course, this is an analysis. I’m not saying that one solution is better than the next. But the idea is to have a certain degree of flexibility and, at the same time, to be able to analyze what is happening in order to be able to intervene wherever things are more pressing at a given moment. And it won’t always be pressing on all sides – we haven’t been having the same problems since 2005, a lot has changed since then. How can you integrate streaming platforms in financing structures? Do you only finance films that get released in cinemas? Does it make any sense to reserve financing only for films that go to cinemas or do you also extend towards TV shows and miniseries? These are things that should be debated at a conceptual level, in terms of principle and vision. And so, from there on, we can see where we are headed.
All of this should be part of a law. In the end, a law is a set of principles about the functioning of cinematography. It’s not only about how money is given out and what it’s given for. It’s about the functioning of the entire system. And where and under what shape the state can intervene through the CNC or other institutions. And I think we’re approaching the moment when we should have this type of public debate.
One of the biggest problems that Romanian cinema is facing right now is an image problem. Romanian cinema has an image problem.
In what way?
There is no audience attachment, in order to make the administration, the governors and politicians also attach themselves. In order for our decision-makers to support cinematography, the most important thing for them, meaning their voters, must also support it. But right now we can’t really say that the audience is taking the part of Romanian cinema. And the audience is made up of voters. So the decision-maker, the politician, who can only measure his efficiency by measuring his votes, won’t be interested in intervening and helping an industry that doesn’t give anything back to him, meaning votes. This is my impression, for the moment.
Do you really think that the two are related?
They’re very related. And then, people, including politicians, believe that if Romania isn’t represented on a positive level in its content, then our cinema does not promote the country, and leads to a negative perception of it. Which is completely false.
Of course, others are exploiting this too. It’s an image problem. And that is also due to the fact that we, as an industry, are not in any way organized. In the end, that is part of our mission at the Alliance: to try to explain how this industry works like, and what its actual, direct and indirect benefits are for the whole of society. Some are economic, others relate to the image, to education and formation. And the image has nothing to do with how positively the country or certain elements of its social reality are represented in one film or another.