A major government report released today, says two solutions are favoured by industry to best address the serious contraction in international work being experienced in Australia: increase the value of the rebates to offshore producers or peg them to the Australian/US exchange rate.
The location and post, digital and visual effects (PDV) offsets are worth 15% of the Australian production expenditure and lifting them to 30% is under discussion. Otherwise they could be pegged to the exchange rate once the Australian dollar reaches 70 or 80 US cents.
The report acknowledges that the current situation could mean skilled personnel and service providers are lost. While the high Aussie dollar gets blamed — it is now about on par with the greenback — so do falling US production levels, the global financial crisis and increased competition.
Many will be disappointed that Arts Minister Simon Crean is continuing consultations with industry rather than moving on this issue now as 81 submissions have already fed into the 107-page report and 79 producers took part in a series of forums. That said, some positive adjustments were made in 2010.
The delivery of federal assistance to film was completely overhauled in 2007 and a review promised three years later, hence the arrival of this report, albeit without recommendations, only findings.
Up to December 31 the enhanced location offset and new PDV offset — both part of the new package — lead to a total of $67m being paid to offshore film and television producers.
Turning to Australian production, the report closely examines another incentive announced in 2007: the producer offset (PO), a 40% rebate for Australian features which gives producers a stake in their own productions and therefore the potential for ongoing revenue streams. The PO has delivered $266.63m to local film and television, some of which had significant US investment.
The report notes that expenditure on film production, numbers of productions, quality, popularity and commercial focus is all up, but its writers sit on the fence when discussing the reasons, saying that the early signs are that this is due to the PO but also that it is too early to say.
With the level of government support for the industry at an all time high, precisely because of the PO, it seems obvious that this extra flow of money is making the sector seem buoyant — although quality and audience engagement could just as easily be down.
Long-term concerns over various PO issues such as the timing of payments, the secrecy around decisions, the administrative burden, and the expenditure threshold have been laid out but not addressed.
Of Screen Australia’s additional direct investment, $22-26m of the $60m likely to be spent on production per annum, will go to features. Reading between the lines, the government appears satisfied with the performance of its relatively new key agency. It notes that operating costs are expected to be 28% lower than the three organizations it replaced.
The review also aims to assess the sustainability of the independent production sector. Some sobering figures are provided: 76% of businesses employ less than 10 staff; 79% expected to earn less than $500,000 in revenue last financial year; 91% had turnover of less than $2m; 56% recorded no profit in one or both of the last two years; and 60% had intermittent levels of production.
As usual the need to include medium budget films ($10-30 million) in the mix was much discussed; they are seen to better support infrastructure and have more audience appeal. The report states it is too early to say whether the PO is encouraging greater private investment but, again, early signs are positive.
The report notes that the high level of talk about international co-production opportunities has not translated into production.
Separately, the Australian Federation Against Copyright Theft also released a report today. Written by IPSOS and Oxford Economics, it argues that movie piracy caused $1.37bn in lost revenue to the Australian economy, 6,100 lost jobs and $193m in lost taxes in the 12 months up to July 2010. It was found that a third of Australia’s adults participated in some kind of theft and an estimated 92 million movies were illegally viewed or obtained.