Pact outlines new recoupment proposals to help UK producers

UK producers body Pact will tomorrow launch a new proposal for public funding of UK film production, seeking to build a more sustainable film industry in Britain without calling for more public money.

In the most basic terms, Pact wants to let producers – not the UK Film Council, regional agencies or broadcasters — recoup public investment of funds in their films, to put that money back in the producer’s future projects.

The report “A New Business Model for UK Film,” by consultancy Olsberg SPI for Pact, details ways to make independent producers less dependent on public funding by empowering production companies as entrepreneurial ventures with more diverse business models (including more IP ownership of films).

The key proposals in the report are:

• 100% recycled: 100% of the recouplement of public investment should accrue to the UK production company, with 70% of those funds ring-fenced for future development and production via the Film Depository Receipt system.
• Film Depository Receipt system: A “lock box” where 70% of monies recouped are placed on the production company’s behalf, in an interest-bearing account to be accessed only by the production company for use on future UK films. If not cashed in within five years of creation, monies will revert to the public entities of the initial investment, for further investment in development/production.
• Terms of Trade with public service broadcasters: A new deal structure with new terms including a reduction in the length of the licence period to 5 years and a new “use it or lose it” provision where rights revert to the producer if the broadcaster is not using them
• Containment of legal and finance costs: Public entities to agree a proforma set of principle legal documents that apply to all films, to save time and money

Pact chief executive John McVay said: “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 success rather than subsidy. For too long the sustainability of the film production sector has remained an elusive goal, but it’s a crucial goal and one we believe is achievable if film producers are given the opportunity to share in the success if their film does well.”

Pact notes that more than $154m (£100m) is invested by public sources into UK film production each year, yet because of current business models, producers of even very successful films struggle to share in revenues from hit films, to build a sustainable business long-term. In one example, Pact notes that Archer Street’s Girl with a Pearl Earring earned $50m at the worldwide box office and garnered three Oscar nominations, but Archer Street earned a zero return. Also, Sixteen Films made $18,000 (£12,000) on Cannes Palme D’or winner The Wind That Shakes The Barley, which made $26m worldwide.

A recent UK Film Council report revealed that more than half of independent production companies in the UK are making losses.

One part of the news business model will be taking advantage of digital innovation to allow content creators to have more direct relationships with their customers, and exploit library rights in the digital sphere.

Pact also notes that if producers are in stronger financial standing on their own, they will attract more private and bank finance (a move Pact has witnessed through changes on the UK TV side) as well as more co-production opportunities. Also, if successful producers are re-investing in their own future projects, that means public funds can be freed up to back emerging talents who can’t get private funding.

The report recognises that the problems with UK film industry sustainability can’t be fixed overnight – it imagines after two or three years, producers will be able to put financing into their own films and develop new business models, and by years four or five, the public policy objective of the sustainable film business will start to be met.

It is yet to be seen, however, if the UK Film Council, regional funding bodies, Film 4 and BBC Films will be happy to give up their current recoupment positions to hand over 100% recoupment of invested funds in films to producers. The UK Film Council recently moved towards a 30% producer corridor on recoupments but this measure would go much further.

Pact has had formal talks with the UK Film Council and informal discussions with Film4 and the BBC. “We’re looking to engage in a dialogue,” McVay tells Screen. “I imagine most of them will poo-poo [the proposals], they like the status quo because they are in control. But over time it is good for them, it’s less people calling on them for funding.”

The report also calls for the UK to institute an automatic or semi-automatic support scheme to reward a film’s success, similar to schemes already in place in France, Germany and Denmark.

McVay noted that Pact had consulted its membership “pretty broadly” but of course some member producers may not be in 100% agreement with the report. A Pact committee to work on the report was chaired by Matthew Justice of Big Talk.

The group has been working on the report for five months and decided to launch it now ahead of the UK’s General Election on May 6. “We wanted it to get it out there before the election to make sure it’s part of the debate of the next government’s development of the sector,” McVay explains. “We think this presents real credible, do-able things about creating real businesses. We’ve had 10 years of platitudes in the UK film industry, the status quo just isn’t an option. Companies have basically become subsidy junkies,” he said.

“The main reaction [to the report] we want is engagement,” McVay said. “This is not done and dusted.”