Building sustainable film businesses: the challenges for industry

Section 4.0  

l

  Why governments invest in the film sector

4.4

Direct investment return

Most independent film transactions involve private 

investors, banks and other financiers. There is 

consequently no reliable statistical evidence in the 

public domain of how much revenue the average 

independent film actually generates. And because 

the independent film business is a business of 

prototypes – i.e. each film is a one-off – it would be 

reckless to draw conclusions even if average returns 

were made publicly available. 

A rule of thumb for public film funds is that they 

rarely deliver over 50 per cent recoupment of 

investment. Of course, this is understandable 

because the aims of this ‘soft’ investment are many –  

cultural, economic and social – whereas pure  

private investment only has financial return as  

its motivation. 

Because the public investment is therefore pushed 

down the recoupment schedule it is difficult to draw 

conclusions as to return when there are so many 

financiers above them in the ‘recouping waterfall’. 

However, the fact that there is a direct financial 

return, in addition to all the other benefits described 

in this section, could be considered an added 

bonus compared to many other public investment 

initiatives in the creative economy.

4.5

Export earnings

As discussed elsewhere, a film is an asset with 

a significant global market and the value of the 

international territories (as defined by the US 

studios) has been increasing year on year for a 

decade. The importance of international revenues 

for UK independent films is underlined by various 

estimates that non-UK income is thought to provide 

anywhere from 50% to 70% of an individual film’s 

net revenues.

The value of the international market continues 

to grow as new countries develop audiences and 

consumer demand increases for a range of film 

genres. In addition to the growth of the BRIC

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territories there are a number of other territories 

developing their appetite, such as Turkey, Indonesia, 

Mexico and in the Middle East.

Film content is relatively unique in that it is a capital 

asset with a seemingly increasing shelf life, which 

continues to grow as new markets emerge around 

the world for filmed entertainment content. This 

expansion is also fuelled by the creation of new 

formats and modes of delivery.

With many countries having identified growth in 

exports as a key objective for economic policy, film 

is increasingly seen as punching above its weight 

against these aims. This is not just the case for 

countries making films in English, but can also be 

seen in more niche markets such as (recently) Iran 

and Denmark.

Building sustainable film businesses:

the challenges for industry and government

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4.

 Brazil, Russia, India and China

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Section 4.0  

l

  Why governments invest in the film sector

4.6

Increased tourism

Film

5

 has significant positive effect on tourism as 

has been shown by many studies in a variety of 

countries around the world. Tourist visit decisions 

are based on several factors but experiencing a 

destination through a shared, film entertainment 

experience can be a major element. The positive 

impressions caused in audiences are deep (latent) 

and long-lasting and often repeated as a film works 

its way through the typical distribution windows. 

The tourism impacts are also valuable for internal 

tourism as well as foreign-based .

Film and television, of all media, have a great ability 

to touch upon many cultural characteristics. Screen 

products can inform and excite audiences, in the 

same instance, about a nation’s language, history, 

literature, society, landscapes and personalities. This 

all happens in the form of a narrative framework 

which gives the audience an emotional, as well as 

intellectual, connection to the country. 

The effect is likely to be most persistent when the 

production achieves broad distribution or even 

cult status or is part of an existing, wider historical, 

literary or cinematic brand. 

The longer and wider-reaching impact of a 

film or television programme can outlast and 

spread far beyond the initial release of the film 

itself, delivering messages which contribute to a 

broader consciousness of a nation’s culture among 

international audiences.

An interesting example of the film-induced tourism 

effect was found regarding Bend It Like Beckham 

and China. According to official UK representatives 

in Beijing, Bend It Like Beckham significantly raised 

the UK’s profile in China, the fastest growing tourist 

market in the world. Prior to seeing the film, Chinese 

people had an image of the UK largely derived from 

classic films and books such as Sherlock Holmes 

and Dickens, as a traditional and reserved country. 

They were therefore surprised and delighted by 

the depiction of multi-cultural harmony in the film 

and this was a major contributing factor toward an 

increased number of tourist visits

6

. 

4.7

National brand building

As discussed above in relation to tourism, feature 

films contribute to a wider ‘branding’ of a country’s 

inhabitants, society and culture. This can have a 

very strong influence on creating a desire to engage 

in business transactions as well as tourism visits. 

The same effects that are experienced by potential 

tourists about a destination are to be found also in 

the international business and trade community. 

This can assist in building export markets and 

inward investment.

There are also geo-political benefits to increasing the 

understanding of a nation worldwide as a result of a 

film’s impact. Film can enhance the profile and brand of 

a country or region for creativity, skills and innovation. 

For example, the Bend It Like Beckham effect was also 

important in attracting Chinese students to study at  

UK universities.

4.8

Film as a driver of the creative economy

Many nations have come to realise the substantial 

economic and other benefits to be derived from the 

expansion of the fast growing creative industries. 

They have become key contributors to GDP

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growth  and are the focus of a variety of initiatives of 

different types to stimulate the development of the 

creative economy.

In SPI’s view, the film sector (particularly production) 

is the most powerful driver of activity in other 

creative industries. This is because a large scale 

production normally uses the output of more 

creative industries than any other single creative 

industry. Consequently, film is more potent as an 

engine of growth than any other single creative 

industry.

For example, the UK has 13 official creative industries 

and film directly drives economic activity in 10 of 

these 13 by using or purchasing their services or 

output. This includes publishing (writing); performing 

arts (acting and directing); music; photography; 

design; fashion; software; architecture (set building); 

television (medium of delivery) and advertising 

(distribution). The only activities not directly involved 

are fine arts/antiques, crafts and radio.

Building sustainable film businesses:

the challenges for industry and government

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5.

 ‘Film’ includes cinema features, documentaries and television 

programmes in this context.

6.

 See the SPI report ‘Stately Attractions’ How Films and Television 

Programmes Promote Tourism in the UK.

7.

 In the UK in 2010 the GDP contribution of the Creative Economy 

outstripped that of the Financial Services Sector, at around 6.5% of 

national GDP.

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