UK Film Policy Review encourages joint ventures; calls for more lucrative producer recoupment; suggests potential Sky investment legislation

As the UK Film Policy Review report was unveiled in London this morning, its 56 suggestions include having producers and distributors team up as joint venture partners on a film from financing stage, and having such joint ventures get priority treatment in terms of Lottery Funding.

The report states: “In outline, a mechanism would be created to allow Lottery funding to be invested in a film as 50 percent of the UK distributor’s minimum guarantee, representing an investment on behalf of the producer. In return for sharing the distribution risk, the distributor would allow a 50 percent share of its net revenues to be held in trust by the BFI for re-investment by the producer in future filmmaking.”

“They will share in both the risk and the potential rewards…I believe it has a real potential for building more sustainable collaborations put in place and hopefully more self-sustaining companies,” Former Culture Secretary Chris Smith, who chaired the Review, noted this morning at a presentation at the Department of Culture, Media and Sport (DCMS). Today’s report comes as the BFI takes over from the UK Film Council as the Government’s lead body for film, and as Lottery funding for film is set to increase after the Olympic year.

Smith said: “British film is in pretty good shape at the moment,” and he spoke about the two pillars of the industry, inward investment from the Hollywood studios, alongside the independent production sector which he noted “has had an exceptionally good year,” led by films including The King’s Speech. Of the Review panel, he said, “We wanted to look at, how can that be sustainable, not just for a single year?” The report focused heavily on films connecting with audiences — its title was “A Future For British Film: It Begins With The Audience…”

Producers’ Recoupment

The panel was adamant that producers should recoup funding from financially successful films so that money can be reinvested in the producer’s next films. “We’re saying there should be recoupment both on the Film Tax Relief and the Lottery Funding,” Smith said. And we’re also saying particularly in terms of Lottery funding, the BFI should no longer assume that successful return on a movie means that the Lottery money comes back directly to the BFI. We want to create that culture of rewarding success, if you make a successful movie, you get the chance to make another one.”

To help producers build sustainable businesses, the report recommends that the level of BFI producer equity corridor (at a blended rate of 37.5% currently) be treated in addition to, not in place of, the tax relief as producer equity recoupment. Also, it should recoup pro-rata and pari-passu [equally ranked] with BFI Lottery investment. Recouped funds would be held in trust by the BFI and handed out for the successful producer’s future projects.

Further, the panel suggested that the BFI itself should have relaxed policies for its own recoupment targets so that more money goes towards building sustainable production companies.

Also, the review suggested that new contracts be put in place so that directors, writers and producers can all share in a film’s success.

Broadcaster Backing

Another key point of the report was that the need for broadcasters to invest more in production and acquisition of British Films. The BBC and Channel 4 have steady levels of investment for film currently, but, as Smith singled out, Sky and ITV did not. “The hope is that they would see the wisdom from the point of view of their audiences, as well as their own future; if [movies] are so important for their audiences, let’s see them doing their part for British film,” Smith said.

The argument that Sky should invest in British film is an old one, but Smith noted that the panel recommended that the BFI meet with each broadcaster individually to work on a support plan for British film. “It’s not one-size-fits-all, each broadcaster is different,” Smith said. “I hope that the broadcasters would want to set up something voluntarily.” And if such contributions weren’t voluntarily reached, then the government should pursue legislative action (possibly in the new Communications Act) to compel Sky, ITV and Channel 5 to invest. Also, the BFI is encouraged to engage in the future with online players such as Apple, LoveFilm and Netflix about promotion and investment in British film.

Education and Audience Development

Other top points were to bring film education into every British school, to improve engagement with film and develop audiences of today and tomorrow. The report noted that there are a number of film education programmes and initiatives running currently, but that they should be brought under one programme run by the BFI.

Another move suggested to improve audiences for local films would be to create an annual initiative, British Film Week, which would involve cinemas (and other arts spaces and broadcasters) across the country screening current and catalogue British films.

Other Areas: Skills, Piracy, and Help For Indie Distributors

Other recommendations that Smith pointed out in a press briefing were stronger investment in training and skills development (perhaps with a merged Skillset and CC Skills), especially involving new technologies; and launching digital screens and projectors in more rural community and village halls; as well as a continued commitment to fighting piracy – including a recommendation for legislation making it a criminal offence to record a film in cinemas.

Other major points in the panel’s report include a recommendation that independent distributors get a break on the virtual print fee, such as abolishing the repeat fees each time a print moves to another cinema. Independent distributors could also benefit from the suggestion that the theatrical window could be relaxed for smaller films. P&A Funding from the BFI is recommended to continue as a top priority.

Other suggestions include the BFI creating a Research and Knowledge area, as well as creating a Research & Development Fund for digital innovation in film (working with NESTA and the Arts Council England).

Export didn’t get as much attention in the report as some other sectors, but Smith said it was crucial for the BFI to support such international activities. BBC Worldwide may be called on to help with the export of British films through its business with international broadcasters around the globe.

Commercial vs Arty Funding

As expected, the furore over Prime Minister David Cameron’s remarks last week about backing successful films were taken somewhat out of context when looking at the report as a whole. Smith noted that the recommendation was to “reward successful films,” not to only make successful films. Smith noted: “We advocated support for the widest possible range of movies…from overtly commercial to overtly arty and many in between.”

Smith emphasised that he didn’t expect Lottery funding to just start going to very commercial films, for instance. “Across the last 10 years of Film Council and now BFI support for film, they’ve got some right and they’ve got some wrong. That’s always going to be the case.”

Smith reiterated: “It’s important to have a relatively wide range of gatekeepers for public support. It shouldn’t just be a single kind of taste.”

Co-Productions, Eurimages and BFI Funds

The panel did not support the idea of the UK joining Eurimages, the Council of Europe’s co-production fund, at this time because of the membership fee and annual contribution. Smith did note that it’s “not something that should be ruled out forever.”

In terms of co-productions, the panel called for a more effective strategy to help co-productions, suggesting that the Film Tax Relief rules be easier for co-productions to access (in particular the ‘used or consumed’ definition could be opened up more.) The group also encouraged the BFI to consider making funds available specifically for co-productions. Smith said: “The BFI should look to encourage co-production and should a matter of policy become much more focused on coproduction in the suite of opportunities available to British independent producers. As part of that looking at the ‘used or consumed’ rules could make a lot of sense.”

For development and production funding, the panel called for the BFI to “deliver plurality of taste among gatekeepers of funds” though it didn’t suggest breaking out a separate development fund from the production funding. The report also praised the former Vision Awards from the UK Film Council that offered more slate-oriented funding for producers to work on multiple projects.

Animation projects and family films are suggested to get a special allowance of development funding.

Also, filmmakers who do market testing (audience research and test screenings) could get marginally increased Lottery funding.

Background and next steps

The FPR panel was comprised of former Optimum CEO Will Clarke, writer Julian Fellowes, Big Talk’s Matthew Justice, Sony’s Michael Lynton, Vue Cinemas’ Tim Richards, Channel 4/Film 4’s Tessa Ross, Olswang’s Libby Savill, and British Film Commission board chair Iain Smith.

During the Review, there were 300 submissions of evidence to the panel, and 100+ meetings with industry experts.

The BFI and DCMS will now construct their responses to the Film Policy Review, to be published “later this Spring.” Culture Minister Ed Vaizey said this morning: “I think the vast majority of the suggestions we will accept.”

The Report, the first Film Policy Review since 1998’s A Bigger Picture, is being launched for the industry today at 2 pm.

The full report can be found here.

Stay tuned to Screen later today for more analysis and reactions.