Incentives aren't everything

In the first of a series of regular guest columns by Jonathan Olsberg, the Chairman of UK creative industries consultancy Olsberg•SPI says that governments need to also focus on developing film-making infrastructure alongside fiscal incentives.

A fiscal incentive – such as a rebate or tax shelter – can be a relatively simple lever to pull when trying to attract lucrative film and television productions to a territory.

The introduction of a generous fiscal incentive will turn the heads of producers and – crucially – its effects can be seen and understood fairly rapidly by decision-makers. To this end, recent years have seen a host of new or enhanced incentives introduced around the world as territories aim to attract shoots of varying types in a highly competitive landscape.

Governments have come to understand very well the attractive range of benefits that accrue from this activity, with film and television production creating a significant economic impact. For example, according to figures from Film London, 20th Century Fox’s TV series 24: Live Another Day has had a total production spend of approximately £37m during a UK shoot of over six months, employing a core crew of 130 that was supplemented by over 500 temporary crew. The production also had a UK cast of around 150 plus thousands of extras.

In addition to spend and job creation such projects can develop cutting-edge skills and deliver a range of other advantages for tourism, culture and so on.

These are also sectors undergoing significant growth. Driven by rising consumer demand for screen content – both in fast-rising markets like China and through new digital platforms in existing markets – production is strong. Official UK statistics released in January revealed that the creative industries – of which film and TV are a key part – are worth £71.4bn per year to the UK economy and with growth of almost 10% in 2012 outperformed all other sectors of UK industry.

But incentives are not the only levers that governments should pull in a bid to be globally competitive. Finance may be a central consideration for producers looking at where to base their projects, but a range of factors also come into play including studio facilities, infrastructure and skills. This point was underlined by UK Chancellor George Osborne at an event on creative sector tax reliefs at BAFTA in April, telling attendees that he understood that UK success was not only about tax incentives, and speaking about the UK’s skills and talent base.

Studios provide the bedrock of a territory’s production offer. Not only are they essential in providing the controllable, dedicated shooting space necessary for high-end projects but they also function as de facto creative hubs, providing a focal point for crews and specialist support companies and acting as platforms for future growth.

In the drive to provide an attractive fiscal environment for high-end productions governments should not overlook the importance of such facilities – even if their benefits can be less straightforward to quantify. While the effectiveness of a tax break can be understood fairly rapidly a studio development proposal can be harder to assess from a public policy standpoint. Studios are longer-term investments, increasing in value as the flow of production builds a skills and knowledge base around them.  

Territories looking to establish or strengthen their attractiveness to productions should be thinking far ahead with infrastructure planning. Olsberg•SPI’s work in this area for clients in the UK and around the world shows that it is vital that incentives are underpinned by a focus on developing suitable infrastructure.

The supply of dedicated studio space has at times fallen behind the demand in some territories, with an upturn in interest in so-called ‘pop-up’ spaces: former industrial buildings that can be adapted for shoots. While some film-makers like the seemingly lower cost and flexibility of such sites the convenience of a purpose-built site is clear, and purpose-built studios are critically important at a time when high-end digital film-making has such technical demands. If they do not exist in a country or region, any new incentive is in danger of failing to deliver against expectations.

In the UK the market is adapting quickly to a robust production sector, with expansion plans at existing UK facilities like Elstree, Titanic Studios in Northern Ireland and The Bottle Yard Studios in Bristol, and new projects coming on stream such as a recently announced studio in Wales, operated by Pinewood, and a potential Scottish studio. Meanwhile, the international market is also seeing new builds such as Pinewood Iskandar Malaysia Studios. Particularly interesting is the regional focus of some of the new plans, representing the fact that funders are confident that productions can be drawn away from the established centres as long as there is infrastructure in place.

In this fast-moving industry it is vital that authorities understand that a competitive edge is not sharpened by incentives alone. Tax breaks may remain a major draw but investing in infrastructure will help build for a healthy long-term future – and can make the difference between securing a consistent level of high-value production and losing it.

For more on Olsberg•SPI visit the website.