When we think about films we invariably associate them with the cinema. Their premieres take place on the silver screens of movie theatres – this is the most awaited moment even with regard to festival films, because it enables the audience to see a new work for the first time.
Film festivals help in promoting films, spread word about their subject matter, although this function is reserved for the largest festivals: Cannes, the Sundance Film Festival, Berlinale. World famous film awards such as the Oscars, Golden Globes or Cesars, play a similar role. Regional film festivals, which apart from people from the industry mainly gather the local public, do not have such influence. Nonetheless, regardless of their impact on the promotion of the work, all these events encourage film culture and provide prestige for the authors and actors. A less measurable but very desirable result is the consequences they may have on their future careers. An award winning author will find it easier to find producers or raise funds through co-financing, while in an actor’s case fame translates into the number of proposals and ease of obtaining new engagements.
However, the main moment when we hear and speak about a film is the time of its cinema premiere. This rule also applies to films which win awards at festivals, although earlier success is usually a factor or determines the choice of a film by a viewer. For this reason it is worth looking at how the revenues from the sale of cinema tickets are divided.
The price of cinema tickets
A ticket is taxed with the goods and services tax, the VAT rate being 8%. The remaining portion of the price of a ticket is divided between the cinema and the distributor, the cinema obtaining not less than half of the ticket price. However, this amount cannot be termed pure profit because both entities must make appropriate deductions. Cinemas deduct a 1.5% tax which, according to the law, is due to the Polish Film Institute (PISF). This happens even before they split up the proceeds with the distributor, so in actual fact both entities perform this obligation on a joint and several basis. Next the cinemas pay the relevant charges to collective management associations, such as the Polish Union of Authors and Audio-visual Producers (ZAPA) and the Union of Stage Authors and Composers (ZAIKS). The rest is spent on equipment, promotion, staff and maintenance of the facilities. The distributor from his portion pays the license fees and covers the film promotion costs, and shares whatever is left with the film producer.
By tracking the flow of capital we will be able to see the role of the individual entities in the film industry. This analysis will disregard the VAT revenues which flow into the government budget. It is not directly associated with film production, which is evident from the nature of this tax and its substantive scope.
1.5% for the Polish Film Institute
A portion of the proceeds is paid to the Polish Film Institute (PISF). This is a government legal entity and embodies state sponsorship of cinematography. Its main role is to support the development of film art. The Institute finances its activities from its own funds, the payments from cinemas being part of them. Distributors are also required to pay a share from their own activity, as are cable and digital television operators and TV broadcasters. According to PISF data for 2016 the share of the last two types of entities is the greatest, in both cases nearly 35%, while payments from cinemas account for less than 10%. It would be true to say that PISF’s revenues from cinema payments are negligible, especially as its proceeds include government subsidies, revenues from the Institute’s assets including copyright, endowments, legacies and inheritances, funds from the Culture Promotion Fund, funds from state film institutions and proceeds from their privatisation.
The obligation to pay license fees is imposed by copyright law. The act stipulates that „an author is entitled to exclusive right to use and dispose of it in all fields of exploitation and to obtain remuneration for use of the work”. This regulation is contained in the copyright provisions. In addition, unauthorised distribution gives rise to criminal liability. In practice the fees are paid to collective management organisations, which are subsequently responsible for settlements with the authors. The Polish Union of Authors and Audio-visual Producers and the Union of Stage Authors and Composers are among such organisations. Thus the duties of a cinema and a distributor are similar. The difference is that the distributor’s performance is not limited to the above two organisations but depends on to whom the author entrusted management of his or her rights.
Does it pay off?
The above analysis indicates that practically the entire price of a cinema ticket remains in the film industry and makes up the remuneration of authors, provides funds for operating cinemas and supplies financing for the Film Institute. Even the amount deducted by way of VAT returns to the film industry because PISF receives budget subsidies.
However, at present the future of cinemas is uncertain. Due to the development of new technologies and the easily available offer of online rentals, we ask the question whether watching films in the cinema has become obsolete. On the other hand the richness of the cinema offer ought to be taken into account, as well as its diversity, especially in case of independent cinemas. This enables us to see low budget, independent and artistic works, which are not easily available elsewhere. In addition, cinemas encourage audience interest by organising events, discussions and meetings with authors. Online rentals usually offer commercial productions of one type, and as such do nothing to promote film culture. Going to the cinema is therefore a method of preserving actual freedom in the choice of films.
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