Public investments in culture and communication A key challenge for Europe

1. Public investments in culture and communication A key challenge for Europe by Flavia Barca Dir. Institute for Media Economics Fondazione Rossellii Bruxelles, 22nd November 2011

2. Topics • Fondazione Rosselli: mission and activities • Approach to the Study, methodology, goals • Key data of the Study • Main results • A brief conclusion

3. FR: mission and activities Fondazione Rosselli (FR) was created in Turin in 1988, inspired by Carlo and Nello Rosselli's values and their attempt to shape public policies based on individual freedom and social justice.

4. FR: projects and activities FR’s main objective is research applied to the economic, social and political fields, dealing with public policy at both the national and European levels.

5. FR: research institutes The research is carried out in several research institutes, of which the main ones are located in Turin, Milan and Rome. Research results are divulgated in periodical reports, other forms of published material and meetings such as conferences and seminars.

6. Institute for Media Economics - IEM Since 1991, IEM mission is to promote efficient and sustainable policy measures in the fields of media, communication, culture and creativity. The Institute carries out qualitative and quantitative research, strategic consultancy, support for public policies, observatories, studies and publications. Its main fields of enquiry include: the perimeter and dimensions of the media market; the impact of the media and communications industry on the social and economic fabric of the country: from production to training, from culture to the guarantee of pluralism; technological development and the processes of technological and economic convergence; business strategies of media groups; the concept of public service and its reshaping in a new digital habitat; legislation and regulations on the new products and services; changes in business model in the communication industry; the economics of culture and creative industries. All the phenomena are interpreted, analysed and forecast on a global scale.

7. The Communications Industry in Italy The Institute regularly produces a Report on the Communications Industry in Italy, which examines the weight of single media markets (from TV to press and tlc), analysing resources, penetration and users, as well as the most significant trends, paying special attention to the theme of innovation and Italian competitiveness

8. The Communications Industry in Italy Each year the IEM Report also contains an in depth analysis of a topic based on original data: the 13th edition focuses on Public investment in culture and communications. The decision to focus on this issue seemed particularly relevant at a time when the whole concept of culture and its boundaries are being redefined , as are its funding sources. We are convinced that the nature of these financial resources, and the strategies behind the allocation of resources, inform, define and condition culture itself - the creative, production and distribution processes that shape it and give it visibility with audiences – and, as a result, economic and social development. Measuring public investment in culture and communications has, therefore, 3 main aims: To give public policies the transparency needed to identify and monitor public strategies (open data);

9. The Communications Industry in Italy To analyze how very scarce resources are administrated, and compare strategies through sectors and markets, and identify possible indicators to evaluate the efficiency of those strategies on the economic (direct and indirect effects and, in particular, through the effects on innovation and creativity) and social development; To assess public investments and strategies at European level, as far as culture and creativity can be considered today a key asset of the European Union towards other economies. In this context we believe that Italy, with its great tradition of cultural and creative production, could be an interesting laboratory for monitoring public policies on culture and creativity. And with this aim our research institute is working, with the support of ISTAT (Italian National Statistical Institute), MIBAC (Ministry of Cultural Heritage and Activities, General Secretariat, Service I - Coordination and Studies) and UVAL (Public Investment Evaluation Unit – responsible of Regional Public Account).

10. The study: goals, methodology, key data The study we are presenting today is, therefore, the first step of an Observatory on culture and creativity that Rosselli Foundation is carrying on, and that will be developed through following editions, in collaboration with other Italian institutions and in the future - we hope - also in collaboration with institutions based in other European countries.

11. The Study: main goal The main goal is to analyze and measure the amount of public expenditure in culture and communications, using a broad definition of “culture” that includes 8 sectors: Videogames TV Music Radio Culture & Communications TLC Cultural Heritage Perfoming arts Publishing Cinema Next to those sectors we decided to analyze investments in communications infrastructures. This choice is dictated by the desire to reflect on culture as a point of interaction between various interconnected sectors within the same industry, where creation is upstream on one end of the chain and distribution lies downstream on the other end.

12. The Study: methodology The research has been conducted at two levels: MACRO LEVEL: RPA general overview provided by the Regional Public Accounts (RPA) database. For each subject belonging to the Enlarged Public Sector, the RPA database reconstructs the aggregation of revenue and expenditure flows at regional level on the basis of the balance sheets of the entity itself MICRO LEVEL: BY SECTOR investigating the individual items of State investment in culture and communications, sector by sector, along with the relevant regulations The two levels are not comparable as, at macro-level, according to RPA methodology, the category “culture and recreation services” is very large and includes segments (like sporting activities or gaming halls) that go beyond the wider definition of “culture” being used in our analysis. At micro-level only the following sectors are analyzed: radio, television, publishing, cinema and live entertainment, telecommunications. Whereas videogames and music are not considered as in Italy they do not get public funds and cultural heritage will be monitored from following edition of the Observatory.

13. The study: key data The future of Europe as a union is not about economy but identification (Gerald Bast) There is a need for a public cultural policy acting as a navigator through the transition to a full-digital world

14. Key data (macro-level) “EPS Spending in culture and communications, 2000-2008 Note: figures in millionsofeuros. Source: IEM elaborationof RPA figures. In the last available year spending in the enlarged public sector for culture and communications was 20,5 bil € - 2% of the total (1.3% only for culture).

15. Key data (macro-level) Drastic reduction in spending since 2004- 2005 ! “Total spending the “enlarged” public sector markets, 2002-2011 Culture Communications Note: figures in millions of euros. Source: IEM elaboration of RPA figures. 2009-2011: estimates

16. Key data (micro-level) “Contributionsto the communicationsindustry and live entertainment, 2008 • Public intervention in the culture and communication industry has been divided up, by sectors of intervention, into 4 macro-areas: • Radio and TV (sub-divided into public radio and Television, local TV and local radio stations); • Publishing (newspapers and magazines); • Cinema and live entertainment (split into: cinema, music, theatre, opera, dance, circuses and travelling shows); • Communication • The lion’s share of this figure goes to Rai (public broadcaster) which collects 1.7 billion (almost 60% of the cake) by license fee and contracts with PA. Note: figures in millionsofeuros. Source: IEM

17. Key data (micro-level) The overall quantification relating to the latest year where figures are available from various sources (almost all relating to 2009) is 2.9 billion euro in favour of the culture and communications industry. There has been little increase compared with 2003 (+2.1% in nominal terms). Public resources for the culture and communications industry, 2003 and 2009 (%) Note: figures in millions of euros. Source: IEM elaboration and estimates from various sources.

18. Key data (micro-level) Television and Radio Even though the various items are misaligned in terms of timescale, the overall sum can be quantified as 1.9 billion euro, of which 1.6 relating to the compulsory TV and radio licence fee. The latest adjustment for the year 2010 fixed the license fee at 109 euro. From 2002 the growth rate has been 19%. Rai licencefeerevenuetrends, 2002-2010 Note: figures in millionsofeuros. Source: IEM elaborationof Rai figures 2010 revenueisan estimate.

19. Key data (micro-level) Currently, the Communications Department in the Ministry of Economic Development assigns non recoverable grants to local television broadcasters. Over the years, the grants have progressively increased in the various Financial Acts, assuming more and more importance for company’s financial sustainability and contributing to a significant rise in employment, above all in the journalism profession. The positive trend came to a halt in 2009: when considerable cuts in public contributions occurred (-41%). Funding for the year 2010 is estimated to be around 130 million euro . Contributionstolocaltelevision under Law 488/98, 1999-2009 Note: figures in millionsofeuros. Source: IEM elaborationof FRT data.

20. Key data (micro-level) Local radio stations Over the years, funding has seen considerable growth, going from 6.2 million euro in 2002 to 21.8 million euro in 2009. There was a particularly high upsurge in 2007, when the resources doubled compared with the previous year. Contributions to local broadcasters under Laws 448/01, 2002-2009 Note: figures in millions of euros. Source: IEM elaboration of figures from Governmental offices. Local broadcasters also receive further public support on a national level thanks to the annual provisions from the Department of Information and Publishing within the Prime Minister’s Office. In 5 years the resources have increased from 13 to 21.5 million euros (+65%).

21. Key data (micro-level) Publishing contributions to publishing are handled by the Department of Information and Publishing within the Prime Minister’s Office, with various kinds of interventions in the budget which has increased until 2007. For 2008 the figures stood at 140 million, before dropping to 50 million in 2009 and rising again to 170 million for 2010. The largest area of spending relates to subsidized postal tariffs. Currently there is an attempt to reorganize criteria for access to direct contributions. Budget lines in the Government provisional accounts, 2003-2010 Note: figures in millions of euros. Source: IEM elaboration on the provisional accounts from Prime Minister’s Office.

22. Key data (micro-level) Cinema and performing arts The General Entertainment Fund (FUS) remains the main public funding mechanism for the sector today. Public intervention is not merely restricted to “direct contributions” from the various state entities, it also intervenes indirectly through tax credits and tax relief or donations. In this area, the most innovative scheme, widely welcomed by people in the industry, was the introduction of the “tax credit. Share of FUS, 2010 Evolution of FUS, 1985-2010 Note: figures in millions of euros. Source: IEM elaboration on Ministry of Culture data.

23. Main results, key issues at stake and a brief conclusion

24. Main results REGIONAL ADMINISTRATION INVESTMENTS COMPENSATE THE DECREASE IN PUBLIC SPENDING ALLOCATED BY THE STATE In 2000 public spending allocated by the State (predominantly the Ministry of Culture), represented 47% of the total cultural expenditure, while in 2007 that proportion dropped to 35.7%, the same as the financial weight born by Municipalities. Meanwhile there has been an increase in the proportion of funding by the Regional authorities (12.3%), in line with the increasing weight of this subject in the support of cultural activities in Italy “EPS spending in culture bytierofgovernment, 2000-2007 (%) Source: IEM elaborationof RPA figures.

25. Case study

26. Case Study: Apulia Financial support for the audiovisual industry in Apulia (an analysis of the impact of the Apulia Film Fund) A big challenge for a more exhaustive framework is analysing the increasing volume of resources coming from the regional spending level. Since 2005 after the reform of V Title of the Constitution and a sentence of the Court that introduced a process of anti-trust legislation in this matter, a number of regions have set up regulatory, fund-granting (Film Fund) and organizational (Film Commission) bodies. In only a few years, a number of excellent local examples have become models of inspiration both nationally and abroad. Over 4 years, from 2006-09, these resources increased fivefold. In 2009, the budget was close to €30m.

27. Case Study: Apulia • At the beginning of 2011 IEM carried out an in depth study for Apulia Film Commission aimed at: • Analyzing actions of AFC between 2007 and 2010 in support of AV productions; • Measuring economic and social returns for the local area. Apulia Film Fund objectives • to attract direct and indirect investment to the Apulian audiovisual sector; • to enable professional development for regional artistic and technical staff; • to provide opportunities for international culture, art and business; • to publicise Apulian audiovisual culture through comparisons with other productions in the field; • to encourage contact between local public and private institutions with the best international expertise; • to contribute to the promotion and sharing of Apulian cultural identity.

28. Case Study: Apulia Apulia Film Fund: trend of available resources Resources made available to the AFC between 2007 and 2010 totalled approx €4.1m, of which €2.8 was allocated to the FF for the 3 public tenders hold annually. In 4 years from the outset of the fund resources increased fivefold, showing constant growth. Since 2008, the AFC has also benefitted from further resources (ERDF) for hospitality costs up to a maximum of €612,000 in 2010. 4.109 1.612 1.319 951,6 Source: IEM from AFC data. € in thousands.

29. Case Study: Apulia Considering only FF-provided funding between 2007 and 2010 (€1.9m), beneficiary production companies spent a total of €11.4m in the region (ratio of 1:6) This expenditure led to a multiplying effect on the local economy, generating an estimated twofold impact (Kelly multiplier) totalling €22.5m. Total 35,8M€ 22,5M€ 11,4M€ 1,9M€ Source: IEM from AFC. Data FF grant Direct expenditure Total economic impact for related activities

30. Main results INVESTMENTS IMPACT MANY LEVELS OF THE VALUE CHAIN The public resources analysed here are used for a variety of many different kinds of activities, not only from the point of view of different sectors but also within the various industry segments: from the production of content (movies, television programmes, shows, journalistic reports) to distribution, from operational costs to refunds for specific items of spending to the building of infrastructures. THE MAJORITY OF RESOURCES GO TO DIRECT CONTRIBUTIONS The majority of these resources are in the form of direct contributions and only a minimal part come from indirect contributions (through mechanisms like tax credits and tax shelters, indirect funding for film production or funds for subsidized credit and postage refunds for publishing companies).

31. Main results • INVESTMENTS ARE MAINLY ADRESSED TO INSTITUTIONS • A very limited portion of these funds is for “projects”, with resources being used, in many cases, to cover: • operational costs (public service concessionaries, publishing companies, local broadcasters, opera-symphonic foundations and permanent theatres), • fixed costs, • and in just a few cases (RAI, opera institutions and theatres) on the basis of a “planned programme” (which translates, according to different cases, into a percentage of public service broadcasts, or a certain number of concerts or theatre shows, or even in the evaluation of initiatives organized by film clubs). The majority of resources is directed to “istitutions” (Opera, Cinecittà-Luce, Centro Sperimentale) and their personnel.

32. Main results THERE IS A LUCK OF TRANSPARENT INSTRUMENTS TO MONITOR PUBLIC INVSTMENTS AND EVALUATE THEIR IMPACT Increasingly in Italy an external audit of the administrative and financial management of the State administrations obliges Ministers and other public institutions to a transparent and proper use of public funds in terms of effectiveness, efficiency and economicity. The qualitative criteria are usually based on a points system that assesses circulation capacity, technical-managerial capacity, the training of the staff and the “cultural impact” of the project. In the other sectors, quality is not a criteria for the attribution of funds: it does not apply for public broadcasting service (even if the service contract foresaw the introduction of a Qualitel index for public service programming) or for funds to local broadcasters (many people are calling for the introduction of qualitative appraisals, which are not as yet required under the law) or for contributions to publishing (which are based on the sum of costs and the print run/circulation). We need to identify new indicators to evaluate investments in culture and creativity.

33. Main results IN SOME SECTORS INVESTMENTS GO TO VERY FEW INSTITUTIONS, IN OTHER BENEFICIARIES ARE VERY FRAGMENTED If we measure the degree of apportionment of public funds, that is the number of direct beneficiaries in relation to the amount of funding allocated, we see that the indicator is extremely variable depending on the market under consideration. It is very high for the Opera foundations. Public funds and beneficiaries, 2009 Note: figures in millionsofeuros. Source: IEM elaborationfromvarioussources.

34. Main results THE RATIO OF PUBLIC RESOURCES COMPARED TO MARKET VALUE VARIES FROM SECTOR TO SECTOR Cinema and performingarts Tv, radio, publishing Note: figures in millionsofeuros, latestyearavailable. Source: IEM elaboration and estimationsformvarioussources.

35. Main results One element of assessment used in the segments that receive public resources is the relationship between the segment and the importance of its downstream market, with the aim of quantifying the weight of the public intervention on the market and the allocated funds’ capacity to generate a market. For television and radio, the incidence upon the various segments varies from 10 to 20%, while for publishing it stands at around 6%. Vice versa, when the same comparison is made for cinema and live entertainment, in various cases State support is actually greater than the money generated at the box office (excluding the other “windows”).

36. A brief conclusion • We hope that this work can be a useful starting point to think about the logic that underpins the spending strategies, and thus open the way for a broader debate on public policies with regard to culture. • A lot of attention is paid to public spending trends in Italy, especially now that the country has to meet commitments and respect European obligations regarding the stability of public accounts. • On the one hand, the budget decrease illustrates the need to make public spending more efficient and productive, but on the other hand there are parts of the economy (above all culture) that need considerable support from public investment because they are subject to market failures. • But support must follow specific, transparent and coherent policies. • The presentation of the report in Brussels fits into this context and intends to become an annual appointment on the issue of investments in culture to share information, methodologies, policy indices with other European Institutions and to identify the most effective strategies for promoting European cultural production.

37. Key issues at stake • Sustain public investments in culture and creativity as a key driver of knowledge, welfare, social inclusion, innovation; • Adopt transparent and coherent instruments to monitor public investment in culture and to evaluate related strategies and their impact; • Identify new strategies to involve private sector in supporting culture; • Insert Cultural Literacy at the core of public policies addressed to culture.

38. Thanks for your Attention Contact us at Fondazione Rosselli Institute for Media Economics - IEM IEM Director: flavia.barca@fondazionerosselli.it Senior Analyst: bruno.zambardino@fondazionerosselli.it Head Office: Corso Giulio Cesare 4 bis/B 10152 Torino tel. +39 011 19520111 Corporate Communications and Media Relations: monica.bartocci@fondazionerosselli.it Istituto di Economia dei Media Office: Palazzo Corsini, Via della Lungara 10, 00165 Roma tel. +39 06 6869502 www.fondazionerosselli.it