Building sustainable film businesses: the challenges for industry
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- Section 6.0 l Success factors for Public Support Systems 6.2
- Project funding
- Automatic support
- Diverse voices, new talent
- Rewarding success
- Recoupment policy
- Producer’s equity
- Slate funding
- Spend-related rebate
- Figure 3
- Section 6.0 l Success factors for Public Support Systems
Section 6.0 l
6.2 Project-based support that motivates activity by rewarding success In many regions and countries support for film is focused on project-based support only. Such schemes can nevertheless encourage sustainability of film businesses when designed around certain characteristics. These are as follows: Project funding Project funding, in particular production funding, should be designed to incentivise both domestic independent film production and international inward investment projects. It is crucial that the right balance is struck between these two if all of the aims of a holistic strategy are to be achieved.
Furthermore there is a trend in that public policy approaches have tended toward offering automatic project support rather than discretionary systems, in markets that have reached maturity. Discretionary systems are sometimes biased towards assessing film projects on cultural grounds rather than for their commercial potential. By also offering automatic support this can be balanced to enable a range of kinds of films to be made – whether aimed at a niche art-house audience or the mass market.
However for the sake of a healthy film ecology it is important that there is a balance between commercial and cultural film-making. Funding for cultural or diversity-related content or funding aimed at the development of new talent is in general discretionary. The motivation for funding these kinds of films differs substantially from that of more commercial films, so support for these kinds of projects is often sourced from a different strand of funding than the automatic support system.
In the most effective support systems project funding for film motivates producers to make films with the potential to connect to substantial audiences by rewarding box office or other measures of success with ‘bonus’ financial incentives. This form of support can be found in European countries including France, Germany and Sweden. In some cases this is administered through a separate block of funding which can be accessed by producers who have established a track record of making films that have reached a minimum level of box office. This financial reward for previous success is then invested in future projects, so contributing to building a sustainable business.
Where discretionary or selective funds do exist, it is helpful if the public sector recoupment policy is flexible so that where possible the producer can recoup their investment at least alongside, if not ahead of, public sector funders. Another advantage would be if the public investment is considered as producer’s equity (as is the case in Australia, Ireland and to some degree in the UK). This enabling of producers to derive revenues alongside public investors is crucial since in most cases the producer’s recoupment position will be behind all other financiers, creating a major obstacle to sustainability.
A good example of this flexible approach exists in Ireland, where the Irish Film Board will consider 50% of its investment as producer’s equity, i.e. it is recouped to the producer instead of the Irish Film Board. It terms this the ‘internal corridor’ by which a producer can share in the revenues generated by a film. In the UK producers funded through the British Film Institute (BFI) currently receive a blended producer equity corridor of 37.5%. In January 2012 the UK Film Policy Review Group recommended that the equity corridor be treated in addition to, not in place of, the existing 20% tax credit as producer equity recoupment. Also, it should recoup pro-rata and pari-passu 8 with BFI Lottery investment. Under the recommended system, recouped funds would be held in trust by the BFI and handed out for the successful producer’s future projects. The review group talked about creating a culture of rewarding success. Further, the review also suggested that the BFI itself should have relaxed policies for its own recoupment targets so that more money goes towards building sustainable production companies. Building sustainable film businesses: the challenges for industry and government 23 8. That is, equally ranked. Slate funding Another mechanism for project funding through which public support systems can encourage sustainability in film businesses is through slate funding where public funding is provided not just for one film project but for a number of projects being made by the same company. While this approach might reduce the risk for the company, slate funding is seen by some as increasing the risk for the funding body itself. A much larger financial commitment is required, and is placed at the hands of fewer companies, rather than spreading the risk/investment across a number of producers. However, slate funding is a useful supporting mechanism in cases where a company has demonstrated its ability to produce strong commercial films.
Many countries operate an automatic system which offers a rebate on spend in the country, discussed earlier in this report. This acts both as an incentive to inward investment productions, as well as a way of supporting local producers. A direct rebate will reduce both the cost of a production as well as the risks to investors, including the producer where the producer is an investor. All of these success factors for project funding in general apply only to the more mature film economies. In countries and regions which are at an earlier stage of development other priorities than company sustainability would dictate the design of support mechanisms. For example, they might prioritise the need to establish a critical mass of activity and/or to establish a new pool of talent.
Support systems success factors - project based support
Aus Bzl Can Frn Ger SthKor Spn Swe UK Country Holistic range of consistent, significant, strategic initiatives System that rewards project success Levy on broadcasters or distributors Levy on box office or exhibitors Levy on DVD or digital revenue Broadcasters mandated to invest in film Quotas on cinema and/or television System combines well with other country support (e.g. co-production)
Production volume 2010 (€m) Number of films 2010 Average budget 2010 (€m) l l
l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l 1401.0
119 11.8
93.7* 41*
2.3* 201
2.9 223.0
598.7 152
1.5 223.0
119 1.9
1498.0 261
5.7 374.3
74 5.1
137.8 76 1.8 292.5 37 7.9 Source: Olsberg SPI, International Support Systems for Film, June 2010 *Note: Swedish Figures are for 2009 Section 6.0 l
Building sustainable film businesses: the challenges for industry and government 24
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