Producer recoupment: not the whole solution

We welcome PACT’s new business model for UK Film Producers (see story here).  Technologies and business models in the creative industries have evolved rapidly in the last five years but film seems resolutely stuck in the days of celluloid.

The breadth and depth of UK film talent is far in excess of what should be expected from our tiny island. Creatively the UK industry punches high above its weight, but it has always struggled to turn this into sustained economic success.

I would be more comfortable with PACT’s proposed model if it were for ‘UK Film’ and not ‘UK Film Producers’.

The concept that public money for film should be spent according to the needs and desires of the producers fails to consider the increasing requirements of public spending. Public money for film is derived from three key areas, lottery, Regional Development Agencies and European Development Funds.  The reason public money is spent on film at all is not  just to build careers and the value of film companies, it is to create jobs, spread spending throughout the country more evenly and provide income for local people and businesses. In this economic climate it is a brave person who proposes building the private asset base with public money.

The days of treating public money as an unrecoupable grant into deal structures where significant profits could be achieved are over.

It is certainly true that we need to find a way of encouraging more private investment into film and precious little has been done on this front to date.  However, we would perhaps be better advised to look at changing guidelines around Enterprise Investment Schemes and Venture Capital Trusts and do this in partnership with the Treasury to benefit all the commercial creative content industries not just film.

The real problem I have with PACT’s case is that it is proposing that producers have their cake, eat it and are then given a guaranteed supply of more cake. If I thought this would result in more profitable films and a more sustainable film industry then I would be supportive.

Many of us would support raising the tax credit, under PACT’s proposals this would be counted as Producer’s Equity. Using PACT’s own figures they project an increase in the public (or public derived) element of a films budget from 44% to 50% and a drop in the pure private and commercial element of a films budget from 56% to 50%. This is surely the wrong direction. We need to focus on tools to increase private investment in film not decrease it.

My observations of film budgets are that they have not gone down significantly despite new production technologies becoming ubiquitous. In low-budget films, we have witnessed costs increasing above the line and marginally decreasing below the line. There are a growing number of producers credited on films and increasing numbers of them are taking significant fees from the budget, particularly in low budget features. These are often partly ‘deferred’ in order to participate in Equity — this is on top of the normal 50% share going to the producer anyway. I accept that much of the producer equity share may be given away as well, but it is not presenting an attractive, transparent model to the private sector that would encourage new private investment into film, and this surely has to be the long term aim.

Though the film business is not one where the word ‘average’ is much used, last time I looked the average earnings for a UK movie were about £500,000. As any poker player will tell you the odds begin to be stacked against you if you are consistently making films for more than this.

The proposed model also misses out a vital piece of the film economy which is the crew. I would argue for open recoupment corridors for cast and crew, so they can benefit properly from their endeavours. Once they start to see money coming in from this route they are in a better position to adjust rates to help bring down budgets. Producers need to lead the way and reduce the above the line costs simultaneously.

We should also push much harder to evolve pay per view micropayments as the internet offers potential for new and increasingly sophisticated revenue streams for film.

PACT are to be commended for stimulating the debate but we need to be attracting more private investment and making films at a price that does not require 50% public subsidy. We all want profitable film companies and a profitable sector but just throwing the switch on the points to divert public money to the cause is not the solution.