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NOW WOULD BE THE PERFECT TIME TO FOCUS ON PACT'S EXTREMELY WELL THOUGHT OUT PROPOSAL:

"A NEW BUSINESS MODEL FOR UK FILM PRODUCERS" - APRIL 2010

JOHN MCVAY IS RIGHT ON THE MONEY IN THE TELEGRAPH THIS WEEK.

SEE PACT REPORT SUMMARY AFTER THIS:

UK Film Council 'was not helping to grow a sustainable British film industry'

Film producers have criticised the UK Film Council, recently earmarked by the Coalition for closure, saying that its key functions can be carried out 'with minimal administration costs'.

By Neil Midgley, Assistant Editor (Media)
Published: 5:45PM BST 20 Aug 2010

The comments have come from Pact, the UK trade association that represents independent film and TV production companies, as it outlines its own proposals for how public support for the film industry should continue after the UKFC's abolition.

Pact says the distribution of National Lottery funding for film and the administration of the tax credit should go to existing public bodies, such as the British Film Institute, but that it is just as important to ensure that this funding is used more effectively to foster a sustainable British film industry that can attract private capital, create jobs and exports, and reinvest into creating more British films.

The trade association says that the UKFC had three core functions: the administration of the tax credit, encouraging inward production and distributing National Lottery funds into film development and production.

“These three core functions for development and production can and should be carried out with minimal administration costs as part of existing bodies," said Pact's chief executive, John McVay. "But what is just as crucial is that we acknowledge that funding under the Film Council was not helping to grow a sustainable British film industry, and that we now address this."

Pact suggests that a government department, such as the Department for Culture, Media and Sport, should administrate the tax credit. Under their plans, the role of the British Film Commissioner in facilitating the shooting of big-budget Hollywood films would also revert to government, with National Lottery funding administered by the BFI as a "respected figurehead".

“Creating British businesses that can invest in British films benefits everyone – producers, writers, directors, actors and crews, and, ultimately, provides a richer, more diverse range of films for British audiences,” said Mr McVay.

THE REPORT

Pact's film report: A New Business Model For UK Film Producers
Pact has launched an innovative new proposal for the public funding of UK film production, which aims to create a more sustainable film sector without the need for more public money.

For a copy of the report click here

If you have any questions about the report email clare@pact.co.uk.

A summary of the report is below:

A New Business Model for UK Film Producers

The film industry benefits from vital public support, yet, thanks to the current business model, even for very successful films, producers are often unable to retain a fair share of the income that the film generates, leaving them, in many cases, loss-making and reliant on public subsidy.

This is due in part to the fact that investment terms from public bodies prioritise their recoupment over producer earnings, and without their own funding, producers have little negotiating leverage with investors. For example, The Wind that Shakes the Barley (2006), achieved $26m in worldwide box office revenues and a Palme D’or at Cannes, yet the production company, Sixteen Films, received just £12,000 in returns. These trends are widespread in the industry and evidenced by the UK Film Council’s recent report ‘Analysis of the Corporate Finances of SMEs in the UK Film Industry’ which showed that over half recorded independent production companies are loss making, despite their films being the amongst the most popular with audiences.

UK film is critical to our economy and our culture but despite the best intentions of public policy to date, sustainability of the sector remains an elusive goal. Pact’s proposals aim to break the cycle of dependence, without the need for extra public money.

Pact believes it is possible to shift the balance of responsibility away from an over-reliance on public sector financing, and thus presents realistic opportunities for entrepreneurial production companies to grow and to involve the wider private investment community.

In order to achieve this shift, a public sector film business strategy is needed that supports the empowerment of production businesses rather than the current one that focuses much more on the direct intervention of public agencies to provide the solution.

This report contains measures that will result in more successful independent UK film companies with healthier financial results, which will be more attractive to corporate investors and lenders and have real opportunities to become ‘investment-ready’, without any additional public money.

No cost to the public
The adjustments we suggest are simple and cost-neutral. This is not about seeking more funds. It is concerned with using what is already on the table to create organic growth: growth that is based upon creative and economic success rather than subsidy.

The Pact Proposals in Summary

• “100 Per Cent/ Recycled”
100% of the recoupment of public investment should accrue to the UK production company, with 70% of such recouped funds being ring-fenced and only available to invest in future development and production: the Film Depository Receipt (‘FDR’) system (see below).

• Film Depository Receipts
The FDR system acts as a ‘lock box’ whereby 70% of monies recouped are placed, on the production company’s behalf, in an interest-bearing escrow account with a fiduciary agent such as the National Film Trustee Company. These accumulated funds may be accessed only by the production company and used only for the development and finance of future UK films being produced by that company.

If such FDRs are not ‘cashed in’ within 5 years of their creation, then the funds revert to the public entity/entities which generated the initial investment, for further investment in development and production.

• Tax Credit as Producer’s Equity
100% of the tax credit should be treated as producer’s equity investment and this amount would therefore sit in the recoupment waterfall.

• Higher Tax Credit for Low Budget Films
We support the House of Lords Communication Committee’s proposal for the tax relief level to be raised from 20% to 30% on UK films with a budget of less than £5 million

• Terms of Trade with Public Service Broadcasters
A new deal structure to incorporate the following terms for licences:
• A reduction in the length of the licence period to 5 years
• A new ‘use it or lose it’ provision under which rights would revert to the producer if the broadcaster was not utilising its broadcast rights

• Containment of Legal and Finance Costs
In order to save costs and speed up decision-making the public entities should agree a pro-forma set of principal legal documents which would apply to all their films.

Conclusion

These proposals, taken as a whole, present a package of measures that, for the first time, represent a co-ordinated approach to public funding and intervention, in order to grow, organically and gradually, a sustainable and successful UK film industry. Sometimes it is better to have a ‘good’ idea than a ‘big’ idea, and Pact believes this report is filled with good ideas – that will work.