Memorandum submitted by The Film Consortium
What direct and indirect contribution does the
film industry make to the UK economy?
A great deal of useful ground has already been
added by prior submissions and evidence to the Committee on this
point which does not need to be reprised. The fact of the matter
is that the contribution of the film industry to the UK economy
is a major generator of employment, a sustainer of cultural values,
a training ground for British talents (many of which then feed
into the North American cinema), and promoter of British identity
(including its transition toward a genuinely diverse and multi-cultural
sense of self). In strictly economic terms, to quote from our
own experience, we have to date financed some 22 films, leveraging
approximately £24 million of lottery investment into £100
million of total production investment over the life of the franchise
to date. By definition, over three-quarters of those budgets have
been financed by 3d party finance, including very significant
amounts of inward investment from foreign distributors and partners.
The continuing success of the British post-production base alone
(edit and sound houses, mixing facilities and the like) is hugely
impacted by that exercise in using lottery investment to attract
inward investment into the UK.
Is it important to preserve a capacity to make
British films about Britain in the UK?
There is some background on this issue which
we should suggest is of key importance to understanding the present
environment: as the British indigenous industry declined through
the 1970s (in terms of film output and cinema attendance), our
own industry faced and failed the challenge of re-inventing itself.
Only the intervention, from about 1986 onward, by major US companies
reversed this slow and painful decline —re-building the
entire cinema infrastructure, developing and then marketing a
hugely popular pay-TV platform for cinema, consolidating and professionalising
the UK video industry, and bringing to British studios the handful
of big-budget tentpole films (such as Lara Croft etc) which
each year sustain Pinewood and Shepperton and which account for
up to half the annual spend on filmmaking in the UK each year.
In effect, those US companies which made that effort are now in
a position where they dominate large swathes of the value chain
from retail (cinemas) and wholesaling (distribution) to film manufacture.
And that position covers the full range of platforms from theatrical
(cinema) to video (an arena which was first developed as a mass-market
medium in the UK) and crucially pay television (where Sky is so
visibly dominant today). But we must all acknowledge the debt
we owe those companies for 18 years of sustained investment in
our infrastructure.
However, that infrastructure was not developed
in any sense to support culturally British film-making per se,
and the question arises: would we be happy to live in a film culture
where the delivery systems are among the best bin the world, but
where no indigenously British films could be financed because
there was no system of support for their production? The answer
is surely not. As an ex-critic, ex-distributor, and former cinema
owner, I think the British film landscape would be poorer without
films such as Hilary and Jackie, 24 Hour Party People,
Sweet Sixteen, Topsy Turvy, In This world,
The Last Resort, and Bend it Like Beckham. It would
seem very odd indeed if the home of David Lean and Michael Powell,
of Ealing and Korda, could no longer support its own creative
voices in the way that all developed countries from Canada and
France to Spain and Australia have done and continued to do for
the past twenty years.
This gulf between the success of an American
led world-class infrastructure and the stuttering progress of
British home grown production is precisely why the closure of
the ambitious Film Four venture last year sent such shock waves
through the film industry: it demonstrated the fragility of our
home grown infrastructure.
What is the relationship between the film industry
and the rest of the creative industries including the broadcasters?
The relationship is fraught. On the one hand,
the production industry focus on British themes and values would
not exist today without the 20 years of investment which Channel
4 undertook from 1981 onward. On the other, the effective withdrawal
of the ITV companies from film-making, and the outrageously dominant
position of Sky, which imposes a dramatic preference for material
from American studios (and which has been extensively commented
before you already) is now a serious source of concern. Of course
I admire and like many of the "British" films which
have been made within that US-developed and owned infrastructure—the
best example being Working Title which to my eyes has re-invented
the ethos of Ealing for the modern day. But it remains the case
that the range of that work is very particular—the writing
of Richard Curtis, and the performances of Hugh Grant are the
totems of that highly successful mini-studio, and films such as
Bridget Jones and Johnny English have achieved their
success because they play on English stereotypes so amusingly.
Before Working Title, in the 80s it was the Merchant Ivory team
which mined another vein of Englishness (period drama) which at
the time was in vogue with international and American audiences
for a decade. I do not believe that in either case this represents
the full range of British voices, or portrays the full cultural
span of Britain today. For the health of our culture as well as
the health of our economy, it seems clear that public support
must be maintained for the widest range of expression, and the
broadcasters (including Sky) must be induced to play their part.
What should the relationship be between British
broadcasters and the film industry?
There are three specific ways in which the broadcasting
landscape should be adapted to maintain support from film-making
in Britain.
Firstly, a level playing field needs to be established,
so that producers and distributors and financiers of British films
can at the very least have access to the pay-TV platform which
at the moment is entirely dominated by the US studios and their
product flows. This is absolutely not the case at the moment.
Secondly, Channel 4 and the BBC must be encouraged
to increase their existing, modest, but invaluable investment
in film (currently some £20 million per annum), and the ITV
network which has been out of the game must be persuaded to re-engage
in the same area.
Thirdly, as you know, it is the practice of
the broadcasters and pay-TV operators, when investing in films,
to insist on buying out television rights in perpetuity and almost
always they insist on taking all television rights as part of
the package (whether they exploit them all or not). This is quite
different to the system that prevails generally throughout Europe,
where (by statute) rights are sold for finite periods of time,
and where different types of rights (free TV, pay TV, video on
demand) may not be "bundled" together—resulting
in a more competitive TV market for films, one where different
tiers of value are crystallised, and where the availability of
film across various TV platforms is wider. Such h a change would
be invaluable to distributors of films in Britain.
It is worth making one further point: the broadcasters
characterise their activity as "free enterprise" market
activity (as opposed to the film industry with its support mechanisms).
Clearly this is a rather specious argument: television operators
are working within a licensed monopoly (in return for the right
to sell advertising, secure licence fees, or sell subscription).
They do so on the basis that they must adhere to some content
and quality guidelines, and this regulatory framework has been
the envy many other countries. But the commitment to British content
(like the commitment to securing programming from independent
suppliers) should be extended to, and include, film as well as
television programming. Were that to be the case, then the broadcasters
(though their drama and development departments) would begin to
re-engage with film as they began to engage in film investment.
Logically, given the need to secure audiences, they would bring
not just investment but creative value and populist thinking to
the world of British cinema.
Does the film industry merit support from Government,
if so, how can existing support be improved?
Absolutely. Think only of the films of Mike
Leigh, Ken Loach, of films such as Love is the Devil, Bend
it Like Beckham, Bloody Sunday, Young Adam,
The Last Resort, Vanity Fair, Iris, 24
Hour Party People, Nil By Mouth, or In This World.
These are films that between them give voice to the full span
of British talents and voices across a wide range of budgets and
subjects, which would simply not have been made without public
funding support of different types. We ourselves have been associated
with some of those films (24 Hour, Bend it Like Beckham,
In This World), and our activity in owning and licensing
them yields further inflows into the UK industry as revenues come
back into the UK. That is of course not the case for British films
such as the Working Title films, financed by the US companies,
where the lion's share of revenues flow back to the US parent
companies.
As to the future of that support. The overriding
concern must be that it delivers two things: a continuing voice
for British culture, and infrastructural benefit to begin to make
up for the lost opportunity in the 1980s where (by our own market
failure) we handed over the future of most of our infrastructure
to non-UK companies. Much has been said about the lottery franchise
experience, some of it partisan or ill-informed. In our particular
case, not only have we been able to finance over 20 films and
bring some £75 million of new capital into the UK film economy:
the Film Consortium has also been able to leverage its position
by securing a listing on the London Stock Exchange (under parent
company Civilian Content plc) in order to secure further capital
support; and by building what is now one of the two best international
sales agencies in the UK. We would have been simply unable to
achieve all that without access to Lottery funds. And the result
has been to create a small, stable, publicly quoted group dedicated
to financing, making, and independently licensing British films.
This focus on infrastructure as well as project
finance must be a key consideration for policy initiatives in
the area. The levers available at the present time and for the
immediate future are lottery funding, tax incentives, and the
broadcaster role, and these should not be considered in isolation
from each other.
In the case of the lottery, it is crucial both
that the initiative is continued for project financing, and that
capital sums are made available for infrastructural development.
The early days of the Film Council initiatives in distribution
and the digital cinema network must continue to be supported.
In the case of the tax-assisted financing for
film, the same dual consideration applies: almost inevitably it
has taken some time for the market in tax driven financing to
evolve. That has now happened, and market forces are making that
activity competitive, reducing margins, and increasing benefits.
A new pool of investors has been introduced to the market and
it would be foolish to abandon the project just as the market
begins to deliver the benefits for which it was created. Look
only to the Canadian example, where over 15 years of tax-motivated
support has helped build a multi-billion dollar film economy in
a country which previously had no film industry to speak of. For
the future, however, policy makers should attend also to the infrastructural
aspect of the policy: as an industry executive as well as a board
member of the Film Council, I absolutely endorse the strategy
of seeking to use the lever to encourage consolidation between
production and distribution in the UK. That is a complex matter,
but I believe that if the Section 48 model is adapted and refreshed
in the light of experience, UK plc can benefit from a growing
pool of private investment in film and structural benefits which
lottery financing alone cannot deliver.
As to the broadcaster role, we have commented
on that above. Broadcaster involvement in the film market is key
because if plays across infrastructure as well as project finance:
the Film 4 model which came to an end last year was perhaps over-ambitious,
and was developed in the face of one of the periodic cyclical
downturns in the world market which characterise the film industry.
However, it was a serious attempt at infrastructural development,
building a creative and business enterprise, which spanned TV
drama and feature film, and a centre of excellence, which is now
sadly missed. Were ITV and Sky to commit themselves to film, the
benefits (managerial and creative) would be very significant,
and would eventually abolish the divide between film and television,
which characterises the industry at present. To quote again from
the Canadian example: a major quoted group such as Alliance Atlantis,
one of the major players across North America, would simply not
exist today if it had not been for a combination of subsidy initiatives,
a stable fiscal incentive programme, and broadcaster involvement
and investment.
How can the production, distribution and exhibition
of British films be improved in the UK? Is the right balance being
struck between these elements of the industry?
We return to the dual development task that
faces us.
Lottery investment in film project financing,
under the management of the Film Council, is now functioning far
better. A crude but simple measure is to look at the performance
of British films at the UK box office over the last decade. In
2002 alone some 10 independent British films (Gosford Park,
Bend it Like Beckham, 28 Days Later, Iris,
The Importance of Being Earnest, Dog Soldiers, Anita
and Me, 24 Hour Party People, Last Orders, and
Sweet Sixteen) achieved significant success at the UK box
office. Even the least successful of those films grossed nearly
£1,000,000 at the box office. This could not be more different
from the picture when we analysed it during the Film Policy Review
in 1998: at that time, only two or three independent films a year
achieved that level. Over the same five years, the export value
of those films has grown (and we should remember that export potential
is critical since the UK's £3.5 billion per year film economy
represents only about 8% of the world market). In our own case,
to take 2002 as an example, two of our films out of four that
year made it into the top 15 British films at the US box office.
When you consider that last year's British top15 in the US included
three very successful US studio films (Harry Potter, Die
Another Day, and About a Boy) that is no mean achievement.
In fact almost all of the films coming out of the franchise companies
are now properly distributed in the US. In the case of The Film
Consortium, we are regularly selling our films to companies in
the US such as Fox, United Artists, MGM and so on. In fact, Bend
it Like Beckham, which we sold to Fox last year, will in 2003
be the most successful independent film at the US box office,
having already grossed nearly $20 million there. Clearly the competitive
environment between lottery providers (the three franchises and
the two production funds within the Film Council) and prudent
Film Council supervision, are the drivers of this, and are delivering
better results from lottery film investment. Whatever one's reservations
about the lottery franchising structure, and the ill-conceived
investments in the early days, it would be churlish not to acknowledge
that progress. But this addresses only the issue of project financing.
We have referred above to the infrastructural
issues also, and here there is a major task ahead. There are three
key areas for work relating to the infrastructure:
Firstly, the film-TV nexus must be worked on.
At the present time, the free and pay TV operators modus operandi
actually disincentivises distributors from distributing British
(rather than American) films, and until a level playing field
is established that will continue to be the case.
Secondly, the tax related initiatives should
be modified rather than scrapped, and delivered in a manner which
automatically incentivises distributors and producers to share
and cross-fertilise their creative and financial decision making.
The long-term goal would be to develop a film ecology in which
several well-capitalised and integrated production/distribution/sales
companies are able to rationalise the sector. This is what has
been achieved in many other countries (France, Spain, and Canada
to name a few) and it makes sense.
Thirdly, following the dramatic improvement
in the exhibition (cinema) sector engineered by the US studios
must now be enhanced by improving the diversity and reach of British
and independent film generally at the UK box office. That requires
some capital intervention, and I believe the digital cinema initiative—bringing
diversity to what is available in the cinemas—is a perfect
example of a low-cost intervention which, if pursued resolutely
over a 5-10 year term, will bring enormous benefits. Clearly,
public funding has a major role to play here.
How effectively has the Film Council contributed
to a sustainable film industry since 2000? Does the council have
the right strategy and approach?
As you can tell from our prior comments we believe
that the Film Council has already achieved a great deal. We commend
that (although we have some concerns about the future after the
franchises, if all of the "gatekeeping" activity around
production investment is to be solely exercised within the Film
Council). But in our view it is clearly the case that this strategic
body is already delivering.
— Better film selection and better
film performance in the UK and internationally.
— A clear overview of the industry,
and the informational tools to back that up.
— A growing consensus across the production-distribution-exhibition
sectors.
— New initiatives such as First Light
to bring young people into the film culture.
— Strategic initiatives in distribution
and exhibition to improve diversity.
— Invaluable initiatives in training
across all sectors of the industry.
For the first time, in short, experienced industry
practitioners and experienced executives at the Film Council are
planning for the medium to long term, rather than simply focussing
on the narrow needs of the short term and of the production sector
alone. That is what the body was tasked to do, and it is delivering.
What has the council contributed to education
about, and access to, the loving image? What should the Council
do with the BFI and the Museum of the Moving Image?
Much of this has been covered by earlier comments.
The fact of the matter is that in the area of film heritage and
education the British Film Institute is a national treasure, which
has over many years become run-down and demoralised. But, under
the supervision of the Film Council that has begun to change.
Recent changes to the management of the bfi will accelerate
that process, and at a policy level Film Council initiatives such
as First Light, the Training programme, and the exhibition strategy
are all perfectly consonant with bfi strategy to deliver
greater access, better film education, and a well-trained labour
force.
6 June 2003
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