Section 6.0
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Success factors for Public Support Systems
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.
Automatic support
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.
Diverse voices, new talent
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.
Rewarding success
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.
Recoupment policy
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.
Producer’s equity
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.
Spend-related rebate
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.
Figure 3
Support systems success factors
- project based support
Overall success factors
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)
Performance indicators
Production volume 2010 (€m)
Number of films 2010
Average budget 2010 (€m)
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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
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Success factors for Public Support Systems
Building sustainable film businesses:
the challenges for industry and government
24