Memorandum submitted by Pathé Distribution
1. Pathé is the oldest film company
in the world and is possibly the only pan-European media company
with the production and distribution of films at the heart of
its business. Pathé is also the owner of the largest chain
of cinemas in continental Europe.
2. Pathé's principal offices are
in London and Paris from which it produces around 15 films each
year and distributes around 50.
3. Pathé UK has been distributing
films for almost 15 years, but it was only with the award of a
Lottery Franchise in 1997 that Pathé was able to create
a fully integrated production and distribution mini-Studio with
a staff of approximately 50. The UK distribution activities were
further enhanced in 2000 with the establishment of Pathé
International, a sales agent responsible for selling Pathé's
films to distributors throughout the world.
4. Although the Lottery Franchises have
been the subject of criticism, the commercial reality is that
if Pathé had not received a Lottery Franchise, it would
not have created a substantial mini-Studio in the UK, nor would
Pathé have invested to date £31 million of its own
money (compared to £28 million of Lottery funds) in the development
and production of 19 British Films which Pathé went on
to support at the Box Office with advertising spend of a further
£15 million (inclusive of the forecast spend on eight of
the films which are still in production).
5. Pathe UK has finally arrived at a stage
where the quality and commercial potential of the projects on
its slate are truly exciting to the international market place
(including the latest films from Gurinder Chadha and Danny Boyle
and the CGI animated feature film version of The Magic Roundabout).
We hope to be at the beginning of a virtuous cycle where success
attracts success. That is the true measure of the value of the
seed-money provided by the Lottery Franchise.
6. Given Pathe's unique position as a bi-polar
Anglo-French company, it might be interesting for the Committee
to consider certain aspects of the French model for support of
its film industry, a model which is greatly admired by film-makers:
(i) The policy of the State has been consistent
for the last 50 years.
(ii) Save for grants and soft loans made
available to new film-makers and to films of cultural significance
which are the subject of discretionary awards through committees
and civil servants, all other State support is automatic: a tax
is levied on cinema tickets and the resultant fund is allocated
between the French films in a given year pro rata to their respective
box office grosses in France. The allocation to a given film is
shared between the producer, the distributor and the exhibitor.
(iii) The State obliges the broadcasters
to invest a portion of their turnover in pre-buying/investing
in the production of French films.
(iv) The State underwrites 70% of the value
of production loans made by specialised lending institutions (Coficine
and Cofiloisirs).
(v) Individuals are able to write off taxes
by investing in production investment vehicles (Soficas) which
provide equity finance to a slate of productions. However, it
is rumoured that the French authorities are intrigued by the perceived
success of the UK sale and leaseback structure and are looking
at ways to adapt the Sofica system to this model.
7. With respect to the Government's future
policies to support the film industry in the UK, we would respectfully
recommend that:
FISCAL INCENTIVES
(i) Fiscal incentives for production be
maintained until at least 2010;
(ii) such fiscal incentives for production
be conditional upon the producer demonstrating the contractual
engagement of a bona fide UK distributor to distribute the film
in the UK;
(iii) such fiscal incentives for production
be part of a consistent, long term fiscal strategy to support
the industry (given that each time the fiscal rules change, the
lawyers, accountants and the middlemen get rich at the producer's
expense; and the unscrupulous have a window to discover new loopholes
to abuse before they are rooted out).
BROADCASTERS
(iv) The broadcasters (including Sky) be
encouraged by the Government to demonstrate their commitment to
the cultural and commercial significance of the film industry.
One way would be for them to agree, without dropping their already
modest pre-buy prices, to take fewer broadcast rights for a shorter
license period (thereby enabling the producer to retain the catalogue
value of the film as a revenue generating asset).
June 2003
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