A nagging question underpinned this year's UK Film Finance Summit - why wasn't everyone more miserable' Goodness knows there was plenty to worry about: a crashing economy, collapsing pre-sales and a depressingly complicated digital switch which threatens the future of exhibition.

The packed audience at London's Waldorf Hotel did not lack the expected consensus that the industry was in serious financial straits. The banks and financiers were as blunt as it is possible to be about the state of the business and the risk-averse culture that has set in. And then there is the popping of the private-equity bubble, the fear that studio cutbacks may restrict UK shoots, the threat to small cinemas struggling with digital cinema change ...

Yet the conference followed a pattern that is being replicated at events around the world - that film does not have to play the victim.

There is a sense that talent remains a constant - maybe even enhanced by new technology and business thinking - and that audiences see cinema as offering a good-value night out even in a recession. Screen International figures suggest the third-quarter global box office has held up year-on-year even if people are not exactly rushing to the escapism of the big screen (see box office, p23). The UK also has a huge advantage in a broadcast sector with commitment to film. What is more, there are ideas and, increasingly, tools that can keep the business believing in the light at the end of the tunnel even if it now seems depressingly distant.

Still, why not a longer face'

The certainty of change

The most obvious point is that the industry is always in difficulties. Each generation has its own story and many industry figures from previous eras are grimly intolerant of what they see as the whining of later generations.

After all, the peak of UK cinema-going was back in 1946 but it required a world war and period of grim austerity to get there. The markets of Eastern Europe once had a cinema-going tradition and a theatrical infrastructure that dwarfs today's, but few want a return to Stalinism. Film also has its false-memory syndrome that, for example, recalls the 1970s as a time when everyone was flocking to Taxi Driver and The Godfather when, in reality, the industry was in crisis in much of the world with cinema closures common.

The conference, however, was more focused on today's realities and - no matter how bleak the overall picture - on the silver linings rather than the clouds. And they can be found.


In the UK, there remains some nostalgia for the sale-and-leaseback era when finance was more readily available to those who knew how to work the system. The crackdown on what was a tax loophole for investors was a crisis waiting to happen. Some government was always going to step in.

The last few years in the UK have seen a painful transition to a tax-credit regime that at least looks stable. Holes remain in the system, with ongoing concern about the level of co-productions out of the UK. Nonetheless, the incentive fits alongside others around the world that have significant political advantages.

First, they are not pawns in trade negotiations. The European Union has insisted - some say too stringently - that new tax credits do not have the faintest whiff of protectionism. The South Korean film industry can attest to the shock that comes when a quota system that had been effective in growing the local market clashes with global trade agreements.

And politics should not be underestimated. Given the reliance on soft money, around the world we have seen rapid and dizzying shifts in film policy every time a new government was elected. The UK saw it in the 1980s, but those days seem consigned to the past.

Speaking at the UK summit, Jeremy Hunt, the shadow culture minister for the opposition Conservative Party - which leads the ruling Labour Party in opinion polls - committed his party to keeping tax incentives intact. Indeed, if elected, the right-of-centre party pledged it would actually increase spending and recognise the market cannot fully support an industry that actually makes big contributions to the UK.

A recognition of the economic as well as the cultural contribution of film has also won cross-party support. This week, Conservative mayor of London Boris Johnson praised a "highly productive relationship with a sector that has brought income, jobs, and a lot of pleasure to London".


"We have an unparalleled opportunity to reach niche audiences. There's an imperative to use that opportunity to find audiences," Ivan McTaggart, director of film and media funds at film fund Limelight told the conference.

That opportunity has been largely created by the internet, which allows much closer interaction with customers.

New York film strategist Alex Johnson told this week's Power To The Pixel conference at The Times BFI London Film Festival: "You need to know who the audience is and you don't have to be a big advertising agency any more. There are measurement tools and social bookmarking that are free and powerful."

That contact is vital for all areas of film, experts suggested. Hugo Heppell, head of production at Screen Yorkshire, suggested a sense of place and community was increasingly recognised as a vital part of the creative process.

But understanding demographic groups is also key at the script stage and when looking for finance. "We're still at the early stages of identifying audiences and getting films to them," said Andrew Orr, managing director of sales and production company Independent. "It's important to note the size of the audience and to get the budget to fit the audience."

The fact audiences are such a focus for financiers and film-makers marks a psychological shift. Under sale and leaseback, the link between finance and the end customer was all but non-existent. Recent court cases actually suggest the UK was not too far from the plot of The Producers, where a flop can be more profitable than a hit. At the very least, there were times when it was clear those milking the system most effectively were more focused on unlocking finance than the end product.

Now at last the industry knows where it stands.


It is important not to get too carried away with revisionism here. Some great films were made during the sale-and-leaseback era and the abolition of those mechanisms were part of wider government fiscal reform rather than being about the good of the business.

But there has been a shift of emphasis encapsulated in a word one hears more and more at finance meetings: 'value'. The measurement of value differs from previous splits that have sought to differentiate between art and commerce. That is not to deny the current financial problem: McTaggart warned the conference of a "flight to quality" - shorthand for a conservative concentration around those with an existing track record.

And Ian Hutchinson, director of film finance at the Bank of Ireland, put it more succinctly: "We have to look at projects where there is a likelihood the loan will be repaid."

This is not good news for newcomers, at least in the short term. But for them, 'value' in the longer term will not be lazy genre work but films that have a sense of who they are trying to reach and how that can be done.

That is a challenge to the existing business. The Power To The Pixel conference brought together film-makers who believe the task of digital distribution is to find routes to audiences where the value can accrue to the film-maker. A new generation is looking to digital distribution as a mechanism for cutting out the middle men. "The task is not to fix the existing business," said conference head Liz Rosenthal.

New opportunities

But the fact new film-makers are envisaging new routes to market may itself be a reason for optimism. Mark Herbert, at Warp X (see People, p11) said there may now be ways to innovate a way through the downturn.

Before the economic crisis started to bite, the industry was already in a period of profound change with the transition to new, more audience-focused models and digital distribution. Recognition the existing system is failing is focusing attention on new models.

Watching Magnolia Pictures' The Princess Of Nebraska by Wayne Wang draw more than 165,000 hits in its first two days following its launch on YouTube this week prompts questions about how the future film may be distributed and where the old infrastructure of sales agents and buyers fits in.

There will be serious battles ahead. UK Film Council CEO John Woodward warned: "The next few years are going to be pretty tough and we need to respond." But a finance conference that focuses not on current failure but on how the future might be won is a fascinating change.

Additional reporting by Audrey Ward


'A country the world wants to work with'

The Bond and Potter franchises are good news all round for the UK industry. Eleanor Kenny reports

The role of the James Bond and Harry Potter franchises in contributing to the UK industry's positive outlook cannot be underestimated. At the other end of the scale from innovative digital approaches, the feelgood factor for audiences and the obvious showcase for UK talent remain. And the huge budgets provide a welcome boost for UK crews.

Production costs for the last Potter film, Order Of The Phoenix, were approximately $150m, while the forthcoming Bond, Quantum Of Solace, cost around $225m and shot in the UK at Pinewood-Shepperton studios. The 007 stage at Pinewood is the largest in the UK and it is estimated that at any one time up to 1,000 people could be working on a Bond film, with similar numbers estimated for a Potter movie.

However, the benefit of these films goes beyond just boosting employment figures for UK crews - they also provide a worldwide platform to showcase the breadth and depth of the skills and services available in the UK. As a UK Film Council spokesperson points out: "The impact of these films is incredibly powerful. Their production here in Britain ensures UK crews have the window in which to create films of that scale. But the benefits aren't limited to the film industry, they put the UK as a whole on an international platform, spotlighting us as a country that international business wants to be working with."

Additional reporting by Olia Hercules.