The competitiveness of the Icelandic film industry

Abstract

The Icelandic film industry is at a crossroad at the moment. Heavy cutbacks in government funding will lead to a lower number of films and TV programs being produced and fewer people being employed by the industry. This will lead to less growth and will limit progress. Last decade domestic and foreign revenues of the Icelandic filming industry are estimated to have been about 9 billion ISK. The main objective of this research was to study the competitiveness of the Icelandic filmindustry and to what degree it was built on cluster formation. The research was qualitative. A number of interviews were conducted with key participants in the film industry. The Icelandic film industry is in some ways competitive. One of its strengths is the simple and efficient system of reinbursements from the State Treasury of the production costs incurred in Iceland. Other strengths are for example exotic film locations with good access. Good infrastructure, minimum red tape and industrious and skilled workers have a positive influence on the industry´s competitiveness. The weaknesses are that there is little in the way of film cluster formation and little awareness concerning possible synergistic effects which could improve the industry´s competitiveness. The local market is small and demand conditions volatile which limit the industry´s growth. Reimbursements from the State Treasury of the production costs incurred in Iceland need to increase from 20% to 25-30% in order for the film industry to gain competitive advantage internationally. The general macroeconomic environment in Iceland, such as an unstable currency and currency restrictions, has reduced the competitiveness of the film industry. At the same time the low value of the ISK has been beneficial. The findings have practical implications for both the industry and the government.