For a Few Euros More - How public film financing shapes creative decisions in Germany

A stated goal of German film funding is the protection of a distinctly German film culture against market forces that incentivize filmmakers to make risk-averse decisions, which are considered detrimental to artistic exploration. Widespread criticism, albeit subjective, suggests that the success of these policies does not match the funds allocated to that end. Previous economic work has shown how financing can shape project strategies. By viewing interactions between filmmakers and polities through a principal-agent framework one can examine how these interactions shape the decisions of artists. By understanding the channels through which artists are affected, it is possible to assess whether the functioning of the subsidy apparatus is beneficial to the reaching of its goals. This study is based on a series of semi-structured expert interviews with filmmakers that have released films in Germany. They were asked to explain their approach to filmmaking and how they dealt with challenges of financing. By asking them to recount individual projects and their financing processes, it was possible to find commonalities between their individual interactions with public financiers to answer the following research questions: 1. In what way does the landscape for film funding in Germany help to achieve its cultural goals? 2. In what way does German public film funding shape project strategies employed by filmmakers? The key takeaways of this study were that filmmakers are effectively incentivized to favour quantity-oriented strategies over quality. Filmmakers perceived difficulties in predicting principal-behaviour and thus struggled to form consistent strategies. At the same time, they face looming liquidity problems if cash flow is not continually generated, meaning that they are virtually forced to keep maximizing their chances to obtain funding. Being unsure how to maximize the chances of individual projects, the dominant strategy becomes raising the expected value of funding by maximizing the number of applications. Instead, the same effort could be redirected towards optimizing individual ideas. Similarly, artists are incentivized to make their ideas easy to digest and less specific, because in their experience there is little in-depth engagement of decisionmakers with individual projects, due to the modus operandi of most subsidy committees. Without this in-depth engagement, intricacies would be missed or misunderstood, which would result in a denial of funding.