Small European Film Markets: Portraits and Comparisons

Italy

Italian films had domestic market share of 19.7% in 2022– a figure echoing pre-pandemic levels. This level of domestic share positions Italy within the top European markets for domestic film contributions to box office revenues, where it ranks third in the EU, behind France and Finland. However, the box office revenue and cinema admissions show that Italian cinema has struggled to reach pre-pandemic levels. According to UNIC, the box office revenue in 2022 was €306.6 million (-51.7% compared to 2019).

Globally, the 2022’s box office revenue was just over half of what was recorded in 2019. The question of how to reach international audiences and enhance export is a key consideration for stakeholders within the Italian industry and policy domains. According to a study by the Association of Film and Audiovisual Industries (Anica), there are three ‘engines of export’: co-productions, global SVoD providers, and distribution companies with international scale. Italy perceives a competitive challenge due to the prevalent number of films produced with budgets under €2.5 million. According to the data, 75% of its initiative titles produced in 2022 were ≤ €2.5 million while 25% were > €2.5 million. In France, on the other hand, which is used as a benchmark, 52% of titles are > €2.5 million and 48% had a budget of ≤ €2.5 million (Anica, 2023).

Even though there is a rise in co-productions, the Italian industry is disadvantaged by scarcity of risk capital, particularly in the animation genre.

On the other hand, Anica’s study highlights the quality of Italy’s arthouse cinema and its presence in international festivals as a strength. The export growth is supported by new distribution companies with diverse catalogues and policy support measures, like the Film Distribution Fund for foreign distributors of Italian films and the Fund for minority co-productions, along with production incentives.

Four main drivers are identified behind the increased level of production and foreign distribution from 2017 to 2022: the global uptick in title demand, the entrance of international VoD providers that have enhanced series and film production, the 2017 expansion of the tax credit policy to encompass video-TV productions, and the penetration of foreign investment, which has facilitated deeper international ties for local companies.

A total of 355 films were produced in 2022, exceeding pre-pandemic levels. There were 253 100% Italian films (147 fiction and 106 documentaries) (DGCA, 2023).

Italy has seen increase in the number of co-productions. Between the spans of 2017-2019 and 2020-2022, there was a 51% increase in projects co-produced with foreign partners. There is also a rise in the diversity of collaborating countries, with an average of 25 countries per year in 2020-2022, up from 16 in the 2017-2019 period. France is the leading co-production partner, followed by Switzerland, Germany and Belgium (Anica, 2023). During the 2020-2022 period, the foreign investments in the film and TV sector from minority and majority co-productions amounting to €103 million, representing a 49% increase from the 2017-2019 period.

Between 2017 and 2022, investments in the production of theatrical films more than doubled, from €263 million to €581 million. Investments in VoD audiovisual works were worth 15% of the domestic production investments in 2022, compared to 53% by broadcasters and 32% by exhibition. Global streamers were estimated to have invested €145 million in audiovisual works, compared to €245 million by broadcasters. 

Italy is considered to be disadvantaged by the production of few works by authors recognized abroad, many low-budget works, a poorly exportable comedy sector, and few genre works. According to Anica’s analysis, the budget for the production of theatrical films in France was €1.182 billion in 2022, while in Italy it was €580 million. In contrast to France, where productions above €2.5 million accounted for 52% of the total, only 25% of Italian productions reached that threshold. Italian initiative films, which are films produced with 100% Italian funds or majority or equal share co-production, had total production costs of €581 million in 2022, with fiction initiative films accounting for €484.46 millions of these costs (DGCA, 2023).

Tax credit support is the leading source of national public investments in Italy: in 2022 tax credits for production alone were worth €175.35 million (+29.8% compared to 2021). Italy provides tax credit with a rate of 40% of expenses for production of Italian and non-Italian films (see Ministry of Culture).

In 2022 there was an increase in film production tax credit both in terms of number of works (171) and credit requested (€165.28 million). During the same year, foreign cinematographic and audiovisual productions requested a total tax credit of €338.45 million, which generated a total investment of €844.36 million. Between 2016 and 2022, 157 films applied for international tax credit for a total of over €360 million of credit requested and a total investment generated over the seven years of €998 million (DGCA, 2023). The highest number of films (51) were American, while 47 were UK films.

The top 10 highest-grossing films in Italy in 2022 were all international titles, with no domestic films making the list. Walt Disney S.M.P. Italia led box office revenues with earnings exceeding €80 million for the year. Warner Bros. Italia and Universal Pictures followed, with revenues of approximately €63 million and €45 million, respectively. While Warner Bros. has historically seen substantial earnings from the Harry Potter film series in Italy, the studio’s most successful release to date has been Joker (US, CA, AU 2019), which premiered just one year prior to the Covid-19 outbreak.

A substantial portion of the box office revenue – nearly one-third in 2020 – came from just two of its richest regions, Lombardy and Lazio, with Lazio including the capital, Rome. Between 2017 and 2021, the breakdown of film genres was as follows: 68% fiction, 31% documentary, and a small fraction of 1% in animation.

Distributors are viewed as one of the drivers for export activities. The Italian distribution sector faces the obstacle of not having large and strong companies that compete at global scale. National distribution companies (or company divisions) operating within the international sales of film and television titles remain small in size and can be considered micro-enterprises (<€2 million). Comparing the Italian and French distribution sectors, Anica’s study concluded that France has the same number of distribution companies, but they are large companies with a strong concentration of revenues.

Italy had 1% of the global box office in 2022 (UNIC, 2023). The number of Italian feature films distributed internationally doubled from 2017 to 2021, according to the Anica’s study.

Of the feature films that were sold internationally in 2021, nearly half (49%) were co-productions, over a quarter (26%) were acquisitions or commissions by international streaming services, and nearly a quarter (24%) secured theatrical distribution.

Anica’s study tried to quantify the economic impact of Italian films that circulated internationally. It calculated this value, based on investments from minority co-production partners, funding from governmental and European entities, advance commitments from buyers, and international sales, to be in the range of €59 million to €114 million for 2021, a significant rise from the €19 million to €30 million range in 2017.

In addition, the study analysed Italian catalogue films. There are 33 Italian companies that distribute catalogues of Italian films abroad, with approximately 4,300 production titles up to 2016 (3,880 fiction, the rest documentaries and animation) with annual revenues between 6 and 12 million, an increase of 10-15% in 2021 compared to 2017 values, compared to those of recent production. The films with the greatest market are those from the 1960s, 1970s and 1980s. The films of these 30 years cover 65% of the demand for libraries from abroad.

The reconfiguration of public investment strategies, emphasizing a tax credit mechanism, is a central topic in current policy discussions. Total public support in 2022 was €30.78 million, with €23.98 million allocated as selective support (DGCA, 2023). Both the Film Distribution Fund and the minority international co-production fund demonstrate a clear focus on enhancing international distribution efforts. There is a recognized deficiency in public support for animated feature production.

Anica’s study outlines that Italy’s market competitiveness is hindered by a scarcity of public support, unlike other markets. According to the comparative analysis in the study, Germany allocates €9 billion, France €5 billion, and Italy less than €3 billion annually to the audiovisual sector, including public broadcasting.

In addition to other funding sources, regional film commissions contribute to a total annual funding pool of €52 million, as disclosed by the Italian Film Commissions body. These commissions have individual annual budgets that span from €19 million (Rome-Lazio Film Commission) to €400,000 (Vallée d’Aoste Film Commission).

Italy stands out in Europe for having one of the highest investment obligations for global streamers. Streamers must invest 20% of their annual net revenues in Italy in the production of European audiovisual works.