Germany’s film and TV sectors have been eagerly awaiting the biggest reform in the history of German film funding this year, and while the government of Chancellor Olaf Scholz struggles to navigate a major budget crisis, leading industry representatives are confident the planned overhaul will improve business despite the hurdles.

Overseen by Claudia Roth, the federal government commissioner for culture and media (BKM), the plan, unveiled this week, aims to create a more centralized film funding system to support production, distribution and cinemas.

A major European film and media hub, Germany boasts myriad funding organizations at the federal and regional level that support films and high-end series. In addition to the BKM, the German Federal Film Board (FFA) and nine major regional funders provide significant support. In 2022, they offered a combined €370 million ($400.6 million) in subsidies to the film and TV sector.

Roth’s planned reform includes an amendment to the German Film Law (FFG), a tax incentive model and a TV and streaming investment obligation with a rights sharing requirement.

The incentive model would provide producers of films and high-end series as well as production service providers with 30% of recognized German production costs in the form of a grant. The model would replace the BKM’s main rebate subsidy programs, the German Federal Film Fund (DFFF) and the German Motion Picture Fund (GMPF), which can currently cover up to 25% of costs when films are shot in Germany. The DFFF and GMPF combined budgets reached €175 million ($189 million) in 2022 but that was cut to €166 million ($180 million) in 2023 and further slashed this year to €133 million ($144 million).

Martin Moszkowicz, Constantin Film’s outgoing CEO, points out that the main problem with the current DFFF and GMPF systems is not their overall amount but that the amount of the rebate, both in terms of percentage and cap, are “not really competitive within the European rebate schemes.”

“For Constantin Film, both options, a tax incentive system or a more traditional subsidy —as we have it now, or as, for example, in Austria — would work and I believe both would boost the competitiveness of the German production market as long as they are mostly automatic measures with sufficient funds.”

Moszkowicz would also like to see “a reduction in bureaucracy on all levels.”

The BKM says it is aiming to improve conditions for filmmaking in Germany by simplifying the process, making the FFA the central contact point for federal funding and largely automating the system to ensure greater planning security, transparency and efficiency.

With the new investment obligation, the BKM wants domestic and foreign operators – in view of the “high profits” generated in Germany’s TV and streaming sector – to invest 20% of sales generated in the country back into European productions, 70% of which should be German language.

Broadcasters and streaming operators oppose the measure, which they describe as “unbalanced,” but leading producers argue that it is overwhelmingly supported by the industry and that the reform can only develop its full potential if all three measures are implemented simultaneously.

Leonine Studios CEO Fred Kogel describes the investment obligation with mandatory retention of rights for producers as “the key element of the funding reform. Such an obligation has already been successfully implemented in other countries such as France, Italy, Spain and Switzerland.”

The BKM says “more money will ultimately be available for film and series funding” due to the comprehensive reform, adding that it wants to “to continue to offer important international film productions more attractive conditions in Germany in the future. Our goal is to adapt our incentives for investments in German film productions to an internationally competitive level and to ensure improved planning for producers, which is constantly required.”

With regard to the incentive model, “the question to be clarified is whether this will be structured as a tax incentive or a grant,” says Kogel. “Both are conceivable, but it is important that the incentive is ideally uncapped and, if not possible, provides a budget that covers the industry’s financing requirements. According to current calculations, these are €360 million ($390 million).”

The BKM points out, however, that no final statements can be made at the moment regarding anticipated total funding amounts as that can only be determined after future budget negotiations have been concluded.

Nevertheless, the proposals presented to the BKM by various industry associations “are promising and cover the market conditions very well,” Kogel adds. “This is the biggest reform in the history of German film funding. What is unique here is that the majority of our industry is united and is pulling in the same direction. These proposals will definitely make Germany more attractive as a film location and will give us predictability and reliability in financing issues, which is important not only for the national market but also for international partners.”

The new funding system, which would go into effect in 2025, is expected to include an increase in the budget for the incentive model, Kogel says. “As already mentioned, the calculated demand is €360 million in total. In addition to the production segment (€284 million), this includes the requirements for distribution (€25 million), world sales (€600,000) and cinemas (€50 million).”

The government is aiming to pass the ambitious funding overhaul at the same time it is struggling with a major budget crisis and economic downturn.

Moszkowicz warns that “any budget crisis could affect the plans and the outcome for the new law” but adds that “a tax incentive system probably less.”

Kogel stresses that “the current budget crisis cannot be used to undermine the necessary course for a sustainable reform of film funding in Germany. Even if the incentive system is not pronounced as a grant – for which a corresponding budget allocation is required – but as a tax-based model, the financing and distribution between the federal and state governments must be clarified. Nevertheless, there seems to be a great political will to support the film industry accordingly.”

The tax incentive would be a major boost for Studio Babelsberg, now part of the Cinespace Studios group, which regularly hosts major international productions like “The Hunger Games: The Ballad of Songbirds & Snakes” and the Liam Neeson thriller “Retribution,” which received €20.7 million and €6 million in German funding, respectively.

Ashley Rice, president and co-managing partner at Cinespace Studios and Studio Babelsberg board member, has welcomed the plan, saying it “would open a new chapter in German film and TV production and is a positive step toward increasing Germany’s competitiveness with neighboring countries and globally overall.”

She adds, “Germany has some of the most talented filmmakers and craftspeople in the world and the new funding that would be introduced in 2025-2026 would have a positive economic impact for decades to come.”

Article originated in: Variety