The dynamic growth of the entertainment industry has not escaped the attention of Czech lawmakers, who have decided to address this trend with an amendment to the Audiovisual Act. The objective of the amendment is to modernise and strengthen the competitiveness of the Czech audiovisual market internationally and to introduce measures aimed at its financial stability. What specific changes does this legislation bring?
The audiovisual market encompasses traditional film and television production, as well as rapidly growing segments like video games and small-screen productions. This development is closely linked to the increasing globalization of audiovisual production and the ever-growing demand from end-users for content.
The amendment to the Audiovisual Act, which was approved by the Chamber of Deputies in October after two years of preparation, introduces a package of innovations to reform the existing system and make the Czech Republic more attractive, especially for film, series and video game projects. In this article, we provide a brief summary of the key changes introduced by the amendment. We will provide a comprehensive analysis of the amendment's various aspects and its implications for the audiovisual sector through a series of detailed articles.
Transformation of the State Cinematography Fund
One of the key measures of the amendment is the increase in support for audiovisual production, previously provided by the State Cinematography Fund. The current Fund will be transformed into the State Audiovisual Fund, the structure of which will undergo a fundamental change: a newly created board of directors, composed among others of representatives of audiovisual industry players, will be responsible for developing the Fund's concepts and will be complemented by separate boards that will decide on the allocation of support in four dedicated areas: cinematography, television works, animated audiovisual works and video games, and audiovisual infrastructure.
Changes to the production incentive system
The amendment also introduces major changes to the film/production incentive system, aiming to increase support for audiovisual production in the Czech Republic. The support is set to increase from 20% to 25% of eligible costs incurred in the Czech Republic, and the maximum possible incentive amount per project will increase from current CZK 150 million (approximately EUR 6 million) to CZK 450 million (approximately EUR 17.8 million).
The amendment stipulates that production of audiovisual works based on the same or derived script, such as films produced alongside series episodes based on the same or related story, will be considered a single incentive project. Thus, in the case of simultaneous production of a film and the episodes of a series based on it, only one incentive project will be eligible for an incentive.
The amendment also introduces changes to the minimum length and eligible costs for production of audiovisual works: it reduces the minimum required length for feature films, increases the minimum eligible costs for live-action, documentary, and animated works as well as series, and establishes a new category for animated works with a higher limit of eligible costs, allowing more projects to qualify for incentives.
The decision-making process for production incentives will shift from a three-step to a two-step system, with the allocation (essentially reservation) of funds for a project as early as at the project registration stage. The application for registration will have to be submitted before the production of an audiovisual work in the Czech Republic begins. Eligible costs will now also include costs incurred six months prior to the application submission in direct connection with the preparation of the project.
Extension of support to video games and small-screen productions
The amendment extends support to video games and so-called ‘small-screen works’, reflecting the growing importance of these modern formats. The amendment newly classifies video games as audiovisual works, meaning that from the effective date of the amendment, video game developers will be able to apply for financial support for their projects in the form of a grant with a profit-sharing model.
In addition to video games, the amendment also includes support for small-screen productions, which are made available through television broadcasting or streaming platforms. Producers of such works will now be able to apply for support from the State Audiovisual Fund. The support is primarily aimed at independent producers of films and other audiovisual works who are not financially linked to or commercially dependent on television broadcasters or on-demand audiovisual media service providers.
The Fund will specify the detailed conditions for assessing applications and the criteria for granting support for video games and small-screen productions in its Statute, which will be issued after the amendment comes into effect.
Fees for streaming platforms
The amendment also introduces an entirely new fee system for streaming platforms. From the effective date of the amendment, the scope of liable entities will expand beyond providers of audiovisual media services on demand (VOD services) based in the Czech Republic to also include foreign providers targeting Czech users. This means that the fee will apply even to providers not established in the Czech Republic. Targeting a service at Czech users will include actions such as advertising content specifically to customers in the Czech Republic or simply making content available in the country.
Once the amendment comes into effect, providers of audiovisual media services on demand will be required to pay a fee of 2% of their total revenues in the Czech Republic to the State Audiovisual Fund. This includes advertising revenues. The amendment allows providers to reduce the fee by up to 50% through direct investments, such as funding Czech productions or creating local versions of foreign works (e.g., dubbing or subtitles). However, if no direct investments are made, providers must pay an additional fee of 1.5% of their total revenues in the Czech Republic (i.e., this additional fee is proportionally reduced based on the extent of direct investments undertaken).
Conclusion
As evident from the above, the Audiovisual Act amendment entails significant changes to the existing framework of public support and fee obligations in the audiovisual sector. The amendment is currently in its final legislative stage and is expected to come into effect on 1 January 2025. Changes related to the production incentive system are set to take effect a year later.
Our dedicated entertainment law team will continue to keep you up to date with the latest developments in this area and will be happy to assist you with your projects. We specialize in all legal and technical aspects of audiovisual and video game production, including development, financing, securing incentives, licensing, and digital platform regulation. Whatever your problem, we can help you effectively.
