What has been the impact of the health crisis on cinema?
The Expert opinion. Isabelle Terrel, Chief Executive Officer of Coficiné: “The coronavirus health crisis is going to promote upcoming changes in the cinema industry."
In January of 2020, Isabelle Terrel was appointed Chief Executive Officer of Coficiné, a subsidiary of Natixis, where she began her career in 1988. This headstrong and committed woman took on the job under the most difficult circumstances that the cinematographic industry has ever seen. She shares her realistic and pragmatic view of the situation with complete honesty.
What is Coficiné’s mission?
Isabelle Terrel : Coficiné is a specialized financial institution dedicated to the funding of cinema, audiovisual media and cultural industries broadly speaking. We have developed a real skill and technical ability in this sector by establishing ourselves in an system which aims at facilitating and supporting both large-scale and independent production by various means, notably through the provision of loans by specialized organizations and by profiting from the state’s counter-guarantee via the intermediary of IFCIC*. Whilst it doesn’t really have an equivalent in Europe, this system is not a new concept in our vibrant cinematographic sector. Coficiné grants financial loans to different sector contributors: producers, distributors and managers of technical theatres and industries, the majority of which are independent. Our expertise allow us to provide tailored loans and solutions adapted to the needs of our clients, whilst keeping a handle on the risk factors.
Building on the skills acquired in France, we have gradually extended the scope of our activity to the international field. For a long time, our international activity was limited to co-productions with France. Today, 30% of our outstanding loan payments are linked to productions by foreign producers (Spanish, Scandinavian, Italian, Anglo-Saxon/English/British, Australian) with no connection to France).
You became the Chief Executive Officer of Coficiné in January 2020. A fairly unusual year...
Isabelle Terrel : An activity which from one day to the next comes to a complete stop is not something that had ever happened before. It is an unprecedented, apocalyptic situation, which affects all the major players in the industry. All of our clientele has been greatly affected, at each stage of production and distribution, particularly in cinema. With the lockdown, all filming stopped in France and around the world from one day to the next. This is a huge problem, because when a shoot stops, the completion of the film becomes uncertain. And yet the payment of the majority of financial contracts set up as part of our loan scheme (subsidies, grants, payments from TV channels, distributors, streaming platforms and international sellers), is contingent on reaching final stages of production and the release of the film in theatres. Usually if a film is stopped, the insurance takes over, only as it happens the majority of insurance contracts don’t account for the risk of a pandemic. On the 16th of March, we had 20 shoots on the go which were stopped. You can imagine the concern on the part of the producers involved… Films in post production fell behind, but that was less of an issue because everything was already in the bag and release hadn’t been arranged yet. As for films in development and animation, they took less of a hit.
What about other sectors involved in the marketing of films?
Isabelle Terrel : Several films which were released just before the lockdown and which were doing well such as “La bonne épouse” by Martin Provost and “De Gaulle” by Gabriel le Bomin saw their careers ended no sooner than they had begun. Others were due to be released the week following the lockdown. Three films we had funded were affected: “Forte” by Kaia Lewkowicz, “Pinnocchio” by Matteo Garrone, funded in Italy, and “Jumbo”, a début film by Zoé Wittock.
It is a disaster for all the key players, from the producers to the cinema operators. For the feature film producer, the release of their production in movie theaters is what makes it a feature film. Once gaining access to sponsored funds, the main funding process comes in: the minimum guarantee provided by the movie distributors, TV channels’ pre-purchases and international sales which enables them to pay off their loans. As a result, any film that doesn’t end up being released incurs significant financial costs for the producer. For the distributors it is even more problematic. The professionals who front the publication fees (anywhere from 500 000 to over one million euros) for the release of films, as well as the guaranteed minimum fees granted to the producers to fund 8 to 15 films a year, found themselves with the impossible task of releasing films without revenue coming in. International sellers face the same problem. In Cannes, Berlin, Venice…all the festivals were cancelled.
How did the professionals react?
Isabelle Terrel : Thanks to the measures that were put in place at short notice– reduced working hours, suspension of certain loans, the possibility to request prêts garantis par l'État (PGE*) from financial institutions, suspension of deadlines on the reimbursement of loans that were in effect to support the treasury – nothing has gone wrong at this point. To limit the losses on the films in the process of being released, some distributors chose to sell films that were released on streaming platforms, such as “Forte” by Katia Lewkowicz, which Amazon bought for an inflated price in order to be able to release it in July 2020. It is important to recognise that these films which appear on streaming platforms are not considered to be feature-length films, meaning the producer is obliged to reimburse the aid he received and give up all sponsored funding (Canal +, channels, tax credits etc.). The sale price for the streaming platform has to be sufficiently high in order to compensate for other financial losses and essentially to pay indemnities to those who had bought the film initially. Not all films allow for this.
Other distributors waited for the reopening of movie theatrer and re-released their films (“De Gaulle”, “La bonne épouse”).
Throughout this period we frequently held discussions with the CNC* and contributors to manage the crisis, consider how we might promote recovery in the industry, oversee the return to filming on set and avoid pile-ups at theater exits. A collective approach was ultimately taken to establish a hierarchy, ensuring for example that priority was given to the completion of films whose production had already begun before embarking on the production of others.
As a specialized institution, have you provided a particular type of help to the sector?
Isabelle Terrel : In a crisis like this, I think that the existence of financial or specialized institutions that know the ins and outs of the trade is a real godsend for the profession. We have adopted measures in line with the problems we’ve encountered: for filming that was brought to a stop, we upheld existing loans and extended those funding the projects that were waiting for filming to resume. For films whose release date was pushed back, we reduced our financial terms without giving it a second thought in order to limit the additional financial charge. For movie theater operators with multiplexes under construction or in the process of modernization, and whose loans have been in effect for 10 to 15 years, we pushed back the payments on capital and interest by a period of six months in order to preserve their treasury. We did the same thing to support technical industries.
Rather than panic it is important to react quickly to support the treasuries of organizations during the lockdown period, whilst trying to gain a better understanding of the implications of the situation. We took action without a second thought - it seemed to us to be the obvious thing to do.
Cinema theatres reopened in June, but was the audience there?
Isabelle Terrel : Movie theaters are the crux of the cinematic industry. They are businesses which depend on the market and, at the same time, create the market. They collect the revenue generated by ticket sales, retain 50% of the net sum of taxes and 100% of revenue on snacks and food sales. The remaining benefits are then given to the distributors. Of this sum, the latter makes up the cost of publishing paid in advance on this film. Otherwise they receive the guaranteed minimum cost agreed with the producer, collect their distribution fees, and in the event of any excess they give it back to the producer. In 2019 record audience numbers were recorded in France, with a total of 213 million spectators - one of the highest figures recorded since 1966. In 2020, after 3 months of complete closure, the theatres reopened in June, but the return of audiences to the cinema has been slower than anticipated: the audience is there, but far fewer in number. Without a doubt, concerns over hygiene measures and the wearing of masks in theaters as well as concerns on the part of the audience and in particular the range of films on offer, all contributed to this outcome. British and American productions are more or less guaranteed to draw in audiences for half of the summer. Besides “Tenet” by Christopher Nolan, these are no such films at present. Disney will not release “Mulan” in theatres, but directly on its streaming platform, as well as the next Pixar film. It’s a hard hit for theaters, seeing as of the 117 million theatre admissions for American films in 2019, 6 Disney films featured in the top 10 (10 million admissions for “The Lion King”, 5 million for “Avengers”). Another big disappointment is the news that the release of the latest James Bond film, “No time to die”, which was arranged for the 12th of November along with the reopening of the industry, has been put off until April 2021.
What have been the consequences of these setbacks for French cinema?
Isabelle Terrel : Filming has picked up again very quickly in France. The majority of films that were stopped during the lockdown have now been finished. Some significant shoots, such as “Le Petit Nicolas”, which really needed to be filmed in summer as lots of children were involved in its production, went straight ahead with filming to avoid losing funding and to limit the risk that the second wave of the epidemic brings everything to a halt again. Others, such as the next “Asterix, L’Empire du Milieu”, have out of caution chosen to hold off until spring 2021. The return to filming has been facilitated by the creation of an insurance fund under the initiative of the CNC which, subject to certain conditions, takes on the risks of costs associated with interruptions to filming due to Covid-19. Thanks to the establishment of this fund, the adoption of strict sanitary protocol, potential aid from the IFCICs counter-guarantee, and the support of institutions like Coficiné or Cofiloisirs, we can adopt the attitude of: sure, it’s not ideal, but let’s go ahead nonetheless! This is not the case in other countries. Between June and September, there are no fewer than 84 new shoots that Coficiné has supported in France and abroad, of which 54 are feature-length.
What is the situation like for production in autumn of 2020?
Isabelle Terrel : Filming has picked up again very quickly in France. The majority of films that were stopped during the lockdown have now been finished. Some significant shoots, such as “Le Petit Nicolas”, which really needed to be filmed in summer as lots of children were involved in its production, went straight ahead with filming to avoid losing funding and to limit the risk that the second wave of the epidemic brings everything to a halt again. Others, such as the next “Asterix, L’Empire du Milieu”, have out of caution chosen to hold off until spring 2021. The return to filming has been facilitated by the creation of an insurance fund under the initiative of the CNC which, subject to certain conditions, takes on the risks of costs associated with interruptions to filming due to Covid-19. Thanks to the establishment of this fund, the adoption of strict sanitary protocol, potential aid from the IFCICs counter-guarantee, and the support of institutions like Coficiné or Cofiloisirs, we can adopt the attitude of: sure, it’s not ideal, but let’s go ahead nonetheless! This is not the case in other countries. Between June and September, there are no fewer than 84 new shoots that Coficiné has supported in France and abroad, of which 54 are feature-length.
What are your expectations for 2021?
Isabelle Terrel : It is difficult to establish expectations because there is still a lot of uncertainty, but we’re remaining positive. In the face of the crisis our team has proved itself to be strong, responsive and loyal to its clients ; our actions were reassuring for and appreciated by our clients in a market shaken by the health crisis. We see clearly now the opportunities to pursue our development internationally, where institutions like ours don’t yet exist.
In terms of activity, we envisage that the number of loans we provide is going to go down slightly in cinema production, remain the same in animation, and increase considerably in audiovisual media, notably with streaming platforms.
The organizations of the cinematic industry have survived thanks to the different measures put in place and to the PGE who supplemented the treasuries. The question of their reimbursement still remains…The impact of the crisis on the profitability of various companies is still difficult to assess. Television and animated film are affected to a lesser extent, but as for cinema the health crisis is going to bring on changes that were waiting to happen. For the entire profession, there are a lot of pertinent questions that come up: Are there perhaps too many films? Will the sudden stop mark the end of the tradition of going the cinema? Will theatres see the same audience numbers as before? How will streaming platforms get involved in the process of investment in productions in France? Aside from these nagging questions however, one thing is certain: there will, despite everything, always be films for the cinema, but the sector is going to have to adapt. It is imperative that these changes are supported.
*IFCIC - Institut pour le financement du cinéma et des industries culturelles (Institute for funding of cinema and cultural industries)
*Prêts garantis par l’état (state-guaranteed loans)
*CNC – Centre national du cinéma et de l’image animée (French National Center for Cinema)
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