Sweetening the Deal

Various forms of public funding are used to encourage national film production, and one important quality of such funding is its ability to attract complementary private financing and thus maximize the resources available for national film. When the Norwegian government restructured its film support system in 2001, it was an explicit goal to attract more private investments into national films. Yet three years later, the government observed that while many national films now could show a healthy return on their private capital of more than 50 percent, there seemed to be a notable lack of participation from the traditional investment community in the financing of these films. The present article explores the economic reasons for the lack of involvement by applying project financing and transaction cost perspectives to a microanalysis of the financing and performance of all Norwegian films released theatrically in 2005.