Oral evidence

Taken before the Culture, Media and Sport Committee on Tuesday 13 May 2003

Members present:

Mr Gerald Kaufman, in the Chair
Mr Chris Bryant
Mr Frank Doran
Mr Adrian Flook
Alan Keen
Miss Julie Kirkbride
Rosemary McKenna
Ms Debra Shipley
John Thurso
Derek Wyatt

__________

Memorandum submitted by Working Title

Examination of Witnesses

Witnesses: MR TIM BEVAN, Co-Chairman, MR ERIC FELLNER, Co-Chairman, and MS DEBRA HAYWARD, Head of Film, examined

Chairman: Lady and gentlemen, thank you very much indeed for coming to us this afternoon. I am sorry we were a little bit late, but we had some private business which ran over. Derek Wyatt.

Q165  Derek Wyatt: Good afternoon. What would your recommendations be to this Committee as to how we could improve a British film industry funded by Britain rather than America?

Mr Bevan: Basically we are a company that is funded by Europe and the United States.

Q166  Derek Wyatt: We understand that.

Mr Bevan: We believe that if you are going to be competitive in the motion picture business, not only within your own market but within a worldwide context, there is one thing that you have to tap and that is distribution. The distribution business, like many other businesses, for the film business is run out of America by the majors and that has been the case for the last 50 or 60 years. If you cannot harness that distribution, then you do not really stand a chance and that is because, at the end of the day, we are lucky enough, since 1992, to have worked with an international distribution structure - originally it was Polygram, now it is Universal - where you have an international distribution structure like that, you have a pyramid and at the top of the pyramid you have one person who says "I want this film to work round the world" and the distribution falls into line. So for us it is not really a concern where the film is actually paid for, it is the distribution that is important.

Q167  Derek Wyatt: So are you saying it is an irrelevance then? I am asking you as Brits, as well as the fact that you are sponsored by outsiders, as it were. Is it important in the cultural milieu of British society that we have a film industry and if it is, then should we have some compulsion about distribution? Should we follow a French system or a Spanish system or not?

Mr Fellner: I think it as Brits and as human beings it is essential that we support our culture, but the problem with the film business is that those two words "film business" ----

Q168  Chairman: Could I interrupt, Mr Fellner? I see that my very good friend, Mr Alexander Walker, does not look as though he is hearing very well. So could you speak more loudly?

Mr Fellner: He may be hearing, he may just not be liking what he is hearing. He knows what we have to say. But the film business, I am sure a number of the other people that you have chatted with have said this; those two words sit uncomfortably with one another because on the one hand you have the cultural aspect of film, the creative nature of it, and on the other side you have the imperatives of business and putting those two things together is tough. And coming back to your question; yes, it is essential that we support the cultural notion of Britain and everything that that stands for, but at the same time we also have to support the business aspects of what we do, which means that we have sell films and make films that will work on a global scale. What we try and do is a little bit of both and I think that the problems that the industry sometimes has is when it has a confusion about what it is doing; whether it is trying to make a cultural film for a global audience or a global film for a local audience. You have got to decide and budget accordingly and go from there.

Mr Bevan: I would argue that in terms of what we do culturally, the most important thing is to get a movie to as big an audience as possible and that you have to harness whatever distribution machine you can in order to do that. For instance, we made a picture a few years ago called Billy Elliot which had the benefit of being distributed by Universal and the machinery of Universal and, indeed, before that we made a film called Four Weddings and a Funeral which had the benefit of being distributed, at that point, by Polygram, a worldwide distribution outfit. Both of those films were small British films which, because of the cultural representation of this country, were seen by very large audiences around the world because of the distribution machines. The same movies could have been made and been distributed independently and they would not have reached as big an audience.

Q169  Derek Wyatt: Could you just unwind a bit of what you have just said there because we talked last week to the Bend it with Beckham director and writer who said that she had to give away 75p in the pound to every British distribution company in order to get it seen here. So she lost a million pounds actually on Bend it with Beckham and it was only until she took it abroad and luckily got buy-ins that she actually covered her costs. So are you saying that, in fact, your costs are covered from day one because the distribution buys in immediately at the cost level? Is that the key?

Mr Bevan: The key is that if you are a part of a worldwide distribution organisation and it has a film like Bend it Like Beckham to distribute, it knows that it is going to be a very difficult film and, let us say, plucking territories. Germany and France are difficult, but in the UK you stand a chance. But they are balancing that equation in their mind all the way through. And also, if you are part of a big worldwide distribution organisation, because they have got muscle, they tend to have television deals and ancillary video and DVD deals which do make it less risk prone.

Mr Fellner: Also, it is one organisation distributing around the world. I imagine what she was referring to was that the only area that they truly controlled was the UK and the rest of the territories are being sold to different companies that all had their own agendas in terms of how they were going to release the film, when they were going to release it, whether it was a priority to them or not, whether they thought that they could make money from it or not.

Q170  Derek Wyatt: What I am hearing from you though is that we cannot do it, we do not have the muscle in the distribution. But should the Government legislate or should the planning laws say any film in Britain should have a local screening?

Mr Bevan: No.

Q171  Derek Wyatt: Or are you totally against the concept of actually trying to protect or help the British film industry?

Mr Bevan: We are integral to the British film industry in that we make British films here. It is about choosing which pictures - you try and decide - we make films that cost from a million dollars to $70 million and we always say that if you have a million dollar movie it needs to find a million dollar audience around the world and a $70 million movie you had better find a $70 million audience around the world. And by the way, either sum is huge and it is very unlikely that with a million dollar movie that you are going to find your audience to support that movie just in this country. It is an international business.

Mr Fellner: I do not think that we would ever say that we should not, or the Government should not, try and support British film because, of course, there are areas where it needs support. But I think to enforce legislation on to a creative business in terms of it having to have a release, that is tricky because then you get into a scenario where a film - not because of faults that the film makers have made, just because that is the way the business works - is not a very good film suddenly having to be forced into getting a screen release in the UK just because it is British. If it is no good, then ----

Mr Bevan: One thing that has certainly happened in the 20 years since I have been working in this industry is that the British movie-going audiences have become much more supportive of films. When we first started with films like Launderette and Wish You Were Here and Sid and Nancy a £3 million gross was a huge thing and now our films are regularly doing £15 to £20 million at the UK box office.

Mr Fellner: Yes, the audiences are looking for them and when they find a good British film they support it.

Q172  John Thurso: I am very interested in the comment that you made that really the industry has to work out whether it is in the business of producing art, culture or whether it is in the business of being in a business and people need to be clear in their minds what they are doing. And I suppose, when one asks what should be the British film industry, one should make that division as well. In other words, is it about the industry, which are the people in it and making money, or is it about the art and the culture and the two, to a certain extent, from what you are saying, must be divided to be intellectually pure in your approach? But what I would really like to understand is the sort of business aspects of it. It has always struck me that we are a country that is extremely bad at venture capital and the City is pretty bad at raising venture capital and that the film business is a business, from the evidence that I have heard, which is very much about venture financing on a one time basis every time. Can you explain to me how one goes about the business of raising the funds to put a film on and where the money comes from and how you best go about getting it, as much as you can?

Mr Bevan: I will speak for us, Working Title, to start with and then Mr Fellner will speak for the others. We are fortunate in that we have evolved a relationship with a Hollywood major over the years. So what happens is that Universal Pictures, along with Canal Plus, which is a French television company, they finance Working Title, which means that they finance our overhead, we employ 30 odd people here in the UK and five in Los Angeles. They finance our project development, which is the critical part of the whole food chain in film production, which is developing a screenplay, be it from an original idea, be it from a book, be it from an article or whatever, which is several million dollars a year for us. And they also finance our production. Now, when they finance our production, they look to lay the risk off as much as they can and one of the reasons that we are able to make our big movies here in the UK at the moment is that there is some lease back which is a critical factor in making bigger movies like Bridget Jones or Richard Curtis' Love Actually or currently Thunderbirds here in the UK, because they are always looking for the cheapest place to make those movies. So for us it is a big corporation who have the distribution in our films who are funding us entirely. Eric will speak for everybody else.

Mr Fellner: Well, I mean I can speak as best I can, but I imagine there are other people you have seen and will be seeing, Jeremy Thomas and Steve Wooley and other independent producers, who you have chatted to. But the way they structure their finance is more on a pre-sale basis, a small amount of equity, an element of Film Council money and an element of bank debt and they just piece it together that way. Coming to your point about venture capital, I do not think there has been much venture capital in the British film business for quite a while. Because it generates so many headlines, people are quite scared of the film business because most of the headlines generated are about disaster, they are not about success. And I think since Goldcrest there has not been any sizeable equity in a sustainable slate of movies out of the City. There has been European money, there has been American money, but I do not think there has been much City investment.

Q173  John Thurso: Is there room, as there is in the theatre, for people who regularly invest in productions?

Mr Fellner: There is room for that. I mean, there are small independent movies that get pieced together with £10,000 increment, investments from 1,000 people or a 100 people and you do hear about them. But it does not create a sustainable model. I mean you saw Michael Kuhn last week and he was talking about the fact that it is a hit-driven business and unless you have a slate of movies which allows you to get the hit, you can never create a continuous industry. You can create a film here and film there and one will be lucky and one will be unlucky, but to create an industry you need to get a substantial flow of films on a regular basis so that you can get that percentage break of the occasional hit that pays for the failures and turns out a profit and then keep rolling, keep rolling, keep rolling.

Mr Bevan: We believe that our model is a good one; it is that we are harnessing one of the giants in the movie business that we get money from them to make our movies because we have creative autonomy because we have got a bit of experience in this business as we tend to make films - at least half our slate is British content - and that we are putting our cultural message out there that way. There are five other studios and we think that harnessing those, the giant distribution machines, is the way to do it. I always liken it to the motor industry actually; Aston Martin is a great British label, but it is owned by Ford; Bentley is a great British label, but it is owned by Volkswagen; Rolls Royce by BMW. The label is fantastic, it is all British, but it needs the distribution and financing of a multi-national in this day and age.

Q174  John Thurso: Is there a difference therefore between a British film industry, which is basically about production work, the actual making of the films, the studios, the technical side of the film business, where effectively you make them here because they are cheaper to make here, it is more cost effective? And what you are really saying is that that is the kind of USP that we can give, is our ability to deliver that quality of technical skill and that for the rest really we have to use the American system and work with it rather than try and compete with it?

Mr Fellner: We can do both. I think we use the American system and use the USP of British crews, British actors and British ideas and I think that Tim is absolutely right in terms of how to create an industry, but we must not forget that on top of that industry there is also the point that Derek was making earlier about the cultural side, where there is also room for films that do not necessarily fit into the industry model and that is where Government support, Film Council support, Lottery support is absolutely essential because you need to be able to get the occasional film, a few films, a handful of films made that otherwise would not stand a chance and can break out.

Mr Bevan: And the senior creative side of that industry - writing, producing, directing - is a very difficult industry to get in to because of the capital required and that is where you have to help. You know, we can sustain in terms of making big films here, yes, in crews and all the people who technically work on films, that is what keeps the food chain moving, but in terms of cultural originality, you have to invest in our future there, which is the writers and the directors and the producers.

Q175  John Thurso: So the best thing that the Government can do is to concentrate on that area which is the most under-supported area to keep the creative talent going and leave the guys who know how to run the business to do the business side?

Mr Bevan: Training, yes.

Q176  Chairman: Before I call on Chris Bryant, could I ask you this; the Rank Organisation in its day was a British film company. It was based in Britain and it made films which, while not always made in Britain, were clearly and definably British films. You are based here, you are British. Nevertheless, your scope is very, very much wider. You make films in this country, you make films about this country, you make films like Fargo which would not claim to be or could not conceivably be described to be as a British film, wonderful though it was. How would you define yourselves?

Mr Bevan: I think we define ourselves now as film producers basically. I keep on coming back to the studios, but each of the six main studios have deals with a number of people who supply films to them and each of the main studios has two or three main producing deals, names such as Joel Silver, Scott Rudin and people like that. We would consider ourselves to be one of those people supplying films to the studio. And in doing so, in supplying one or two big films to the studio each year, which is part of their main international worldwide slate, we buy ourselves the freedom to make smaller films as well.

Mr Fellner: British producers working on a global and international level trying to export our product. Working Title have been asked many times by all the majors to basically set up in LA, move to LA, work out of LA. We have refused for last 20 years to do that because we are proud of the fact that we work out of the UK and we can make films that we really want to make.

Q177  Chairman: Obviously you are strong and powerful enough not work to order, as it were. You have explained to John Thurso the various ways in which you raise your money, but I would assume that none of the organisations and institutions that provide you with money either seeks to - or if it did seek to, does not succeed in imposing any wishes on the content of the film?

Mr Bevan: It is creative collaboration, I believe is the word. And what we have learned along the line, because unfortunately film production is extremely expensive and the more expensive it gets, the more nervous people get and I talked about the script a little bit earlier and I think it is a very important part of it. Debra works specifically in that area and I think at some point it would be great if she could speak to that because we believe that a decent script, if we get that right, and of the 40 people who work for us round the world probably 20 of them work on script development, is if we get that right then most of the rest of the process will fall into line. But if we do not get that right, then the film down the end does not stand a chance. And because we are lucky enough to have a great depth of development because we have been working together as a team for such a long time is that we probably have as good a development slate as any producer in the world and within the film business those that pay recognise that and they will give us the freedom because of that.

Q178  Mr Bryant: You referred to the growth of a British audience for British films and a growing appreciation over the last ten or 20 years, I guess. And that seems to have been matched on television as well in that of the top 100 television audiences of all time I think only one American movie makes it into the top 100 whereas several British movies have. Have the broadcasters, in your view, in Britain played a strong enough role in ensuring we have a strong film industry?

Mr Fellner: Well, Tim and I would not be here if it was not for the broadcasters in the 80s were forced, I think - I do not know if you remember the regulations in the 80s - they were forced to spend a certain amount of money on investment in feature films and we were both beneficiaries of that. They no longer do that. You can pre-sell your film to the BBC or to ITV - I mean I am talking as an independent, our deals with the broadcasters are very different, but an independent can pre-sell their film but they are not getting nearly as much money as they should get to help them get the film made, given that the broadcasters will benefit enormously by your top 100 list. You can tell that ----

Mr Bevan: The short answer is no. They do not do enough.

Q179  Mr Bryant: And for satellite broadcasting, apart from sport, it is their major driver.

Mr Fellner: Correct. They buy finished films but in terms of investing in British films, I think the only satellite company around closed their film business about six to nine months ago.

Q180  Mr Bryant: But Canal Plus in France has played an enormous role?

Mr Fellner: Enormous, but they have ----

Mr Bevan: They are paying the price for it at the moment unfortunately.

Mr Fellner: But a lot of it was politically motivated.

Q181  Mr Bryant: Say more.

Mr Fellner: Well, we are not part of the process so we cannot be absolutely one hundred per cent sure of what happens, but in a number of meetings we had with the executives at Canal, it was made quite clear that the Government expected them, in a certain way, to continue their substantial investment in French film making.

Q182  Mr Bryant: But Channel 4 seems to have gone in the other direction?

Mr Fellner: I do not know whether Channel 4 produced the ----

Mr Bevan: Canal Plus is actually a pay cable station. It is not a free to air broadcaster which Channel 4 obviously is.

Mr Fellner: Because of the politics there.

Q183  Mr Bryant: Sky Satellite has not gone in that direction - BSkyB.

Mr Fellner: Exactly.

Q184  Chairman: Can I just interrupt there because perhaps our witnesses can actually explain something to me that I fail to understand which reaches a wide agenda and that is this; there was a recent box of DVDs of classic Ealing comedies. Those were put out by AOL Time Warner subsidiary. They had on them, at the beginning of the movie, Canal Plus logo. How did that come about?

Mr Fellner: Because they bought the library that owned the Ealing films. The library was Pathé. So that is how. Fargo goes out under MGM. MGM had nothing to do with the making of Fargo.

Q185  Mr Bryant: One of the other things that you referred to was British crews, British actors, British ideas and I wondered whether, when you look at some of the successful British films over the last decade, some of them have been, in some sense, quintessentially British and I see now that you are doing a film called Wimbledon. I wonder, once you have done cucumber sandwiches and Pimms and English weddings and funerals and once Mrs Brown and the Royal Family is done, what other brands will there be to do?

Mr Bevan: There are a lot of place names to go, you know. We did very well out of the first one, Notting Hill, and we have only got as far as SW19 so ----

Mr Fellner: Westminster is in the pipeline.

Mr Bevan: But it would be very expensive.

Ms Hayward: We actually have got another brand in the pipeline, as it happens, which is Marathon actually, which is about the London Marathon. But I mean we do not consciously set out just to find what is a British brand. It does not focus down as easily as that really.

Q186  Mr Bryant: But British actors and British crews, what is the unique selling part of that?

Mr Bevan: Well, if we can use British crew on a picture, we will. On bigger movies it always comes down to cost and what we have discovered on the bigger films is that we can be very competitive with anywhere around the world simply because we have as good, if not better, technicians and we can get through things quicker. We have a fantastic visual effects world here which I think is absolutely part of the future of British film. There are several companies in England which are on the cutting edge of visual effects.

Q187  Mr Bryant: But we have had some people before us worrying about whether we will still be able to say the same about our technical competence in ten or 15 years time and you were saying something about ----

Mr Bevan: I would not agree with that at all. For instance, I am working on this picture Thunderbirds at the moment which has several hundred visual effects shots, all of which have been by Frame Store which is a British fairly mature company, it is 20 odd years old now and I would say that they are on the verge of being really well competitive in terms of they do big sequences from all of the Hollywood pictures that you see and Thunderbirds is the first film that they have done entirely. But that is a big success story, that company, and that ain't changing.

Q188  Mr Bryant: Several of the original Thunderbird marionettes are in a cupboard in Ferndale in the Rhondda by the way.

Mr Fellner: No, the American companies are starting to use the British effects companies not just because they represent better value but also they have better ideas, the sequences they do in the films are better. They are really, really good technicians and artists.

Q189  Mr Bryant: Could I just ask one other question which is; the process of making a film relies on an awful lot of co-operation on location from local authorities, from other organisations. Is Britain good at that or not as good as it might be?

Mr Bevan: It is getting better. It is definitely something that we have had problems with in the past, but we have had a run of pretty large movies that we have made here recently, for instance Johnny English which has just been out in the theatres; there is a big car chase in central London and we had a great deal of help on that. And in fact, the final sequence for Thunderbirds is a huge sequence that just happens right outside these windows, as it happens, and there are something like 19 authorities working with us on that and they have been very co-operative.

Q190  Chairman: On that, when we conducted our previous inquiry eight years ago, we recommended then that the Film Commission system should be enhanced and it clearly has not been, from what you say. Whereas in the United States and Canada, for example, the number of films supposedly set in New York City and United States cities and actually filmed in Canada or in other cities and states in the United States are a tremendous tribute to the Film Commission system there. Again, can you tell us what you think we ought to do here? We did make this recommendation ----

Mr Bevan: I think that there is a direct link between tourism and what we do. The fact of the matter is that on these big movies, where they do several hundred million dollars around the world, that represents a lot of people going to see these pictures and an aggressive Film Commission - because the London Film Commission sort of enables you - what it does not do terribly effectively is solicit movies to come here, I think, which is what the American and Australian and Canadian Film Commissions tend to do because they realise that tourism and getting a big sequence in a movie are directly compatible. So I guess it is something that is worth backing and proposing that it has a bit more money and is a little bit more aggressive and all the rest of it.

Q191  Chairman: Why are we so slow on this, do you think?

Mr Fellner: There was a meeting that your colleague, Dr Howes, arranged just recently. He arranged a meeting to get all of these bodies together and to talk about how they could co-operate more co-operatively and it was the first time, I think, that somebody had actually tried to make that happen and hopefully from that things will happen and London will be easier to shoot in. But as Tim said, to do one sequence just down the river and then to the Square here - 18, 19 different organisations you are dealing with and the New York Film Commission has had years and years and years of experience of corralling all the different authorities. They have got their own police force, they have worked it all out and as a result, for a film maker, it is one stop shopping. You go there, they then arrange everything to happen - if you want to shoot on Fifth Avenue or Central Park, whatever. And I think that if Dr Howes and others are serious about making it work, then hopefully in three or four years time it will be just as easy to film in London. But you are right, it does take a commitment to make that work.

Q192  Chairman: Thank you very much indeed. Enormously helpful and a great privilege to have you here.

Mr Bevan: Thank you.

 

Memorandum submitted by the Motion Picture Association

Examination of Witness

Witness: MR CHRISTOPHER P MARCICH, Senior Vice-President and Managing Director, examined

Q193  Chairman: Thank you very much for coming. We are hoping to see some of your constituent organisations fairly soon. We are very grateful to you for being here. You have heard these immensely successful British based film makers and they have told us how they have got together, as it were, this portfolio of product. What are we missing that we do not have more such organisations? Or is a country our size only ever going to have one organisation of such scope? And what is that, taking into the account the different context, we can learn from the MPA?

Mr Marcich: Thank you, first of all. It is an honour for me to be here and thank you for inviting me. In our own submission of written evidence, we underscored a few of what we consider to be the pillars of success of the British film industry and one certainly has been on the film production financing side. We emphasised the importance of Sections 42 and 48 to a successful industry here and we believe that those have contributed to attracting significant investment and that a continuation and stability and predictability in the structures that are offered here is important to the future success of the industry to creating more success of the sort you have just heard from the previous panel. Beyond that, I could not be so presumptuous as to offer you a single simple formula that could lead to further successes. It is a combination of factors that leads to a successful industry. There was some mention of development which I think cannot be over-emphasised. Project developments, script development, production is crucial, distribution also is very important and the overall regulatory environment in which companies are to function. So it is a mix of factors, all of them important.

Q194  Mr Flook: I notice in your biography that quite a large element of your responsibilities is region-wide anti-piracy activities. Could you just say a little bit about that and the way in which video tapes take money away from the people you represent and how that might impact on British film producers?

Mr Marcich: Yes, I would gladly speak to that issue. One of our major areas of activity, in fact something like 80 per cent of the resources of my office, goes to trying to combat piracy and although video piracy, as such, is important, right now we are really fixated on what we consider to be a global threat to the film industry right around the world and that is digital piracy, that is Internet piracy, it is peer-to-peer piracy. And there one could slightly modify one of the questions posed by this Committee and say; will there be an international film industry, a film industry, five years from now, given the threat of digital piracy? What we are trying to do is work to make sure that there is a film industry future for the British film industry, as well as the worldwide film industry, and to combat piracy. We are quite involved on a European level in trying to get in place the proper legislative framework, as well in trying to harness technology to make works available on the Internet, but also make sure that the copyright holders, those who created the works, are able to count on being able to make those works available in a secure environment. So it is a crucial battle and it is one that is going on now and it is global, it is the case in the United States as well as in Europe and elsewhere.

Q195  Mr Flook: Can you put a figure on it though in terms of the hard videos against the sort of digital?

Mr Marcich: Piracy rates range from, in the video world, slightly under 10 per cent of the market to as high as 85 per cent for a country like Russia right now, which is in the business of making DADS on a commercial scale for export, but pirate. So the range is huge and the losses are in the billions of pounds.

Q196  Mr Flook: And in the UK are we looking at 10 per cent or are we the lowest in Europe?

Mr Marcich: The UK has a very effective anti-piracy organisation called FACT which does a very good job in combatting video piracy, smart card piracy and now is looking at the Internet. The problem is that in the future for the Internet we do not yet have the sort of framework in place that will be needed in order to make sure that piracy can be contained in that environment.

Q197  Mr Bryant: There has tended to be two different world attitudes towards ensuring that you have an indigenous film industry. The United States model, which is the free market broadly speaking supported by the MPA, and in Europe on the whole either State subsidy via forms of grants or quotas as in France and Catalonia, and various other parts of Europe which the MPA has tended to campaign against. Are you still opposed would you still want to see WTO preventing that kind of quota direction in Europe?

Mr Marcich: The MPA has not supported quotas, you are absolutely right. Our position with respect to the need to ensure a local industry and a local forum of expression of one's culture probably has evolved since the last time we discussed the issue. I think that there is a much greater awareness now that one needs to find ways to make sure that the trading system in which this industry operates is also able to accommodate policies that are aimed to promote local cultural expression so that grants for certain types of films, for example, they should not feel threatened by a trading system. So there has been an evolution in our thinking. It is not say that we do not favour a market oriented approach. We absolutely do. It is just that we understand that within the context of a free market system there is a need to find a way to accommodate certain other policy objectives.

Q198  Mr Bryant: For the most part the British model has tended to eschew the quota system as well and has wanted to have something of a mixed economy, but one of the major elements, perhaps not as major as many of us would like, but one of the major elements in the British film industry has undoubtedly been the role of the broadcasters and, in particular, the BBC which is, of course, a State subsidy and again that is something that the MPA historically has campaigned against through the WTO. Is that still your position?

Mr Marcich: If you mean have we campaigned against subsidies to public broadcasters, I do not know that to have been the case in the past. It certainly is not the case now. What we are interested in seeing is a system in which the funds that are given to public broadcasters are used in fulfilment of a public service remit. If subsidies are given that go beyond that, then they should be looked at and I think that that is the responsibility of public authorities. But we are not right now campaigning, in the WTO, context to try to undermine the support that governments give to public broadcasters.

Q199  Mr Bryant: One of the suspicions, whether fair or unfair, that has been levelled already by witnesses to us in this Committee has been that many of your members, because they have the whole system locked in of distribution, of production, are able to exclude others from being able to essentially make a decent living because they have to pay 75p in the pound to ensure that their film is available in any cinema in the country. Is that a fair charge or an unfair charge?

Mr Marcich: I think it is not a fair charge. I read through the record of the previous sessions and I think there was contradictory information provided in terms of what that relationship is. There are some, at least through written evidence, who would argue that distributors are too strong vis-a-vis exhibitors, then there were a number of witnesses who argued that the exhibitors are too strong and take advantage of the distributors and producers. I think that here, as elsewhere, this is something that should be left to the commercial players to work out. The terms of trade is something that we do not get involved in as a trade association.

Q200  Mr Bryant: Sorry to interrupt you, but if the distributor and the exhibitor and the producer are inextricably linked, either because they are the same organisation or because they are bound together, and it is therefore convenient, as was alleged to us, to make sure that the cost is at the exhibition end so that there are not additional monies by virtue of the profit going to actors and so on, then there is a competition problem, isn't there? Because it is very difficult for new entrants to come into the market.

Mr Marcich: There are competition authorities that watch the behaviour of market players and there could become - I mean if some of what was said during previous sessions in oral evidence were to be true, the competition authorities would undoubtedly be concerned, but the sorts of comments that were made I think are quite exaggerated. There were some comments suggesting that the exhibition market here was controlled by affiliates of the major studios. In fact, they account for a minority of the screens in the UK and if anything ----

Q201  Mr Bryant: What percentage? Do you know?

Mr Marcich: Off hand I do not know, but I think that it might have been in the order of one third and I think it is going down. I think these theories, these conspiracy theories, are not supported by the evidence of reports in the press in recent weeks that some of the studios are divesting themselves of theatres. Most recently Warner Village was reported in Screen Finance. It just does not stack up. I think there is a tendency to see more there than actually exists. And again, I think that the relationship between distributors and exhibitors is one that is watched by competition authorities and it is one that we, as a trade association, stay away from because it is not appropriate to be dealt with at that level. It is something that is to be left to the individual companies to work out on a case by case basis.

Q202  Chairman: Before I call on Mr Wyatt, following on your exchange with Mr Bryant, let me put this to you; the huge power of the Hollywood studio system, as it used to be, was broken by the Anti-Trust legislation which separated production from exhibition. The studios that make up the MPA have got the same names as the old studios, but they are very, very different indeed. For example, MGM is not even in Culver City any more but I think it is down in Santa Monica somewhere. It is an entirely different organisation. But the fact that the power of what you can call Hollywood is now immense once again is partly due to that system that was created by Mr Wassingham as described in the New Yorker two or three weeks ago, but it is also partly because they have now put it together again, haven't they? They have now put together a structure of production, distribution and exhibition and because of that they can decide upon whatever internal pricing they like and that can be disadvantageous to those who are trying to use the system, particularly of distribution and exhibition, who are not part of the MPA. I am not saying that this is sharp practice or anything, I am suggesting (a) that it is a fact, and (b) that it accounts for the huge power that now exists.

Mr Marcich: Well, I would have a slightly different take on the situation. I think that the involvement and decision of some of the companies to invest in exhibition in part was a response to a market failure 20 years ago when many countries were severely under-screened. In fact, when some very prominent individuals were predicting the end of the theatrical business as we knew it then in favour of kind of a showcase screening stars and then everything would go to video and television, and so there was 20 years ago a great deal of pessimism about the future of the exhibition sector and whilst some of the major studios moved into the exhibition business to make up for what was an absence of investment and have, by the way, contributed significantly to a turn around in the fate of the cinema business, I still go back to the basic point that, if anything, current developments seem to suggest that the studios are apparently divesting themselves of their cinema holdings and I do not think that they would be doing so if your theory were in fact correct. So I will leave it at that, I think. I really do not have much more I can say on the subject, but I do not see the evidence as you see it and I also see that the direction that the industry seems to be going in right now is one that would speak to a very different - or suggest a different set of conclusions.

Q203  Derek Wyatt: If I have understood it correctly, George Lucas' last film he sent digitally from his San Francisco ranch. Does that change the rules of distribution? Is that a revolution or would it just have been that you will all do it digitally in the next three or four years?

Mr Marcich: The digital projection and digital screenings hold open the prospect for a very significant change if certain basic conditions are met and one of them that has yet to be resolved is to agree on a standard for digital cinema that will provide the consumer with a better quality experience that will justify the investment of £150,000 or more per screen that would be required. There is also a very significant concern about piracy when films, when works, begin to move over a satellite feed into a cinema theatre diminishing distribution costs significantly. There is a great risk of digital piracy and that has to be resolved as well. But yes, digital cinema should make a big difference. It should facilitate the distribution of films generally, including riskier films, and should make them available more readily in more remote areas. So it should produce benefits right across the board, but I think we are still a little way away from seeing that developed on a commercial scale. Although Mr Lucas did make his film available in digital format there are very few cinemas in fact that are equipped for digital projection right now.

Q204  Derek Wyatt: But does it change the power structure or will it change the power structure? Or will it just mean that the film studios will just buy those digital transmission rights? Mr Marcich: I think that it will make it easier for new market entrants in the distribution field. I do not think that the studios will change the role they play now as distributors, but it may make distribution as a business one that is more approachable for smaller entities.

Q205  Chairman: What Mr Wyatt has been talking about is something that when we visited Los Angeles eight years ago we were told was about to happen and was inevitable. I remember that when we visited Sony in Culver City they showed us this and they were confident - they were confident - that almost immediately this is going to be the way of distribution and exhibition of movies, that all that celluloid will no longer have to be trundled around, that it would save lots of money, that it would be quicker, that you would get better images in the cinema, etc., etc. Why is it that eight years later the only person who seems to be doing it, in terms of economics and technology it makes such obvious sense, why is it that it has not happened?

Mr Marcich: Well, I think that first of all there has been tremendous progress towards the realisation of the potential of digital in the cinema business. On the production side you now have digital technologies used rather extensively and I think eight years ago what the studios were looking at then was the revolutionary opportunities digital was bringing to the film making process itself. Digital cinema, to my knowledge, has been something that, yes, has been worked on for some time but the technology is only now starting to produce the sorts of results that are considered to be necessary conditions for the implementation of digital cinema and there I am really talking about the issue of quality. There is a feeling that in order to justify the migration that the investment that will be required to migrate to this new technology, it has to deliver a better experience to the consumer. That is a crucial issue. And secondly, the issue of being able to apply rights management technologies to avoid a disaster in the firm of digital piracy. But we are getting closer now.

Q206  Chairman: Is it because there was, at that time, over-optimism about the progress of the technology? I remember when we went there and were shown all these things and I see from the draft programme that we have for our visit to Los Angeles next month that we are going to do exactly the same as we did then. We are going to go to Sony Image Works to discuss digitalisation and film production. At that time what we were told was that in terms of watching movies on computers, for example, and other uses of computers for concerts, public exhibition, etc., etc., the problem then was what they called the "herky jerky" images that you got. We are going to be shown this, but do I take it that in fact that problem has now been conquered? So that at least the technology can now do faultlessly what we were told eight years ago was imminent?

Mr Marcich: I believe you will see tremendous progress, certainly in the application of digital technology to production and also to its projection or through making available works on computers or television sets and digital format. Yes, there has been a tremendous amount of progress and there is progress being made on the digital cinema front.

Q207  Chairman: The other question that arises, without an adverse reflection on anybody, is can it be that people can be wrong that huge experts can turn out to be wrong? When we went, not eight years ago but somewhat more recently, to the West Coast, we were told that the efforts that were being made at that time to advance digital TV in this country were bound to be fail because it was a cul-de-sac and that the real issue, the real future, was convergence of computers and television sets. Now, here in this country Sky is about to get 7 million subscribers for this year for its digital service. The digital service in many ways is now converged because of all the interaction that you have got. Nobody is criticising, but is this not an example of people who eight years ago, four years ago, thought they knew exactly what the future was going to be to some extent having been in error? And to what extent, when we discuss these things with your member organisations, ought we to be a little cautious about accepting what they say as the absolute vrais mot?

Mr Marcich: It is possible for any of us or any of them to be wrong and I think that you will find many perspectives in Los Angeles on what the future may hold. There is a lot of experimentation going on now with digital technologies and I do not know who has "the answer" if there is a "the answer". But there is much experimentation and I think you will see evidence of that when you talk to folks in Los Angeles. You will then be able to make your own choice as to which one is right and as to the vision the future.

Q208  Chairman: When we had Working Title, we talked about the Film Commission and that was one of the things that our Select Committee looked at last time. Another thing that we looked at, and there was a very great deal of input to us from your studios, was the tax regime in this country which could make filming in this country more hospitable. There was at that time this huge drive by the Irish which was very successful. Gordon Brown has changed the tax regime very considerably. In terms of Hollywood majors coming to this country to make movies, do you think that the tax regime is now as hospitable as you would like it to be or are there other changes that you feel could be made?

Mr Marcich: Our members do feel that what is provided now with Section 42 and Section 48 is in fact a very hospitable film financing regime. You will have a panel shortly talking about financing. There are ways, undoubtedly, in which the system could be improved, but we consider it to be one of the pillars of the success in the investment in film in this country and we certainly would urge that great care be taken in any changes that might be contemplated. It is not to say that the system might not be improved, but let us not give up something that has a track record of success and has worked.

Q209  Mr Doran: I am sorry, I missed the start of your evidence, Mr Marcich. I was called away and had to take a phone call. But looking at your evidence, you are very complimentary about what is available in terms of the British film industry and what it can offer and the film industry is a fairly hard nosed business and there are obviously significant advantages to your member companies. Can you say a little bit more about what these advantages are to the larger producing companies from America?

Mr Marcich: In the UK, in addition to some of the aspects of film financing that I just discussed, the overall regulatory environment is hospitable, a can-do environment which encourages investment in production. The skills that are available here as a result of some of the training programmes and as a result of some of the ongoing investment in production are absolutely top of the line. So it is really an entire environment that makes the UK attractive to our companies and causes them to re-invest hundreds of millions each year in productions.

Q210  Mr Doran: One of the things that we are obviously looking at is how we can improve the British film industry and I am a politician so that makes me a little bit cynical, but if the American companies find everything here to their liking in the way in which you have described, then that may mean that we are not making the best of things. Given your partiality and obviously the interests that you represent, can you say a little about areas in which the industry here might improve which would be to the benefit of your members as well?

Mr Marcich: I have heard and seen some of the comments on possible areas of improvement. I think there has been a lot of focus, which we will hear more about this afternoon, on distribution and promoting distribution. We have not seen specific proposals on how distribution might be incentivised, how there might be incentives created on the distribution side, but that is one area that is being looked at that we would, of course, look at. I think here in this environment our companies feel very much a part of the fabric of the industry and are involved in the consultations that take place on possible changes in the regime. So I know that that is something that is of great interest here and it is something that our members will certainly be willing to take a look at with an open mind and make constructive comments on if they see that there are ways in which that segment of the industry could be improved.

Q211  Mr Doran: I think one of the things we are lacking on this side of the water is a co-ordinated approach, but let us fantasise for a little and assume that there was, what would your role be in that? How would you work with the British industry to constructively take these things forward if you could? Would you be simply be passing messages forward or would you be in a negotiating position?

Mr Marcich: Well, in this sort of an area, when you get into the details of incentives and legislation that would shape the future of the industry, I think you would find experts from the individual companies providing their views and suggestions directly and we would serve a facilitating role, if such were needed, as a trade association. But you would find that you have here, in the form of our members, companies that do feel very much a part of the industry and who will be participating directly because they have been welcomed to do so in the past. So I am confident they will again.

Q212  Mr Doran: Because in the course of inquiry we have heard quite a diversity of evidence. We have just heard from Working Title, which is clearly a very successful company which has managed to build a very successful relationship with one of your member companies and that has opened doors for it which are not available, are not open, to lots of other British film makers. The standard story seems to be a focus on one project which can be all consuming for a number of years while a project is pieced together and then one of the significant problems that seems to be met that one of the key areas to raise finance is by selling distribution rights, for example, in America, which a lot of the time is selling off future profits because there is a price which is available to an unknown quantity is a lot lower to something which comes with a bit of muscle. And it is the lack of muscle at that stage which is a major concern to the British film makers who are a level below the Working Titles of this world. Is that a problem you recognise?

Mr Marcich: I do recognise that that has been identified as a problem. I recognise that Working Title has had a particular experience and I think that a number of other members of the MPA would have welcomed the opportunity to work with Working Title, which has a successful track record. So it is not that the companies themselves are not interested. I think that they are. It is a matter of finding the right partners and the right conditions for that kind of a working relationship and it may be that with some of what is contemplated now more of that sort of success story can be encouraged. And while we provide our views as a trade association, you must realise that our individual members have their own minds about many of these issues and will come in as individual companies as they see fit as well.

Q213  Mr Doran: I understand that and one of the difficulties that an organisation like yours suffers from, I know from my own experience with American oil companies, that getting a common view on some issues is very difficult so you tend to get the lowest common denominator. That is not a criticism, it is just an observation. But the problem on this side is that we are looking for structural change, but it is very difficult to see how that can come about in a global industry which is controlled from the other side of the Atlantic.

Mr Marcich: Was that a question or a comment?

Q214  Mr Doran: An observation inviting comment.

Mr Marcich: I think that in the UK the role of the individual companies that are our members is slightly different from the sort of conclusion one would take from your statement, your comment. They regularly re-invest in this country very significantly and contribute in ways in which we have tried to illustrate in our written evidence as part of, as I said before, the fabric of the industry here. Their parent companies may be in Los Angeles, but they also act as local players here and I think they are more than willing to look for ways to improve on that role and on that performance here. So I am not at all pessimistic and I think that this process and some of the other discussions that are going on here will produce results.

Q215  Mr Bryant: Just to follow up another question from earlier about the tax regime. Some people suggested to us either last week, or the week before that, that one of the problems about a beneficial tax regime was that you never knew how long it was going to remain and, of course, you work across quite a long span, the production process gets to the final date of the film, is that a problem?

Mr Marcich: Of course it is. Predictability is very important to investors and it is something that has been emphasised by others and I also tried to emphasise in my own remarks. It is why maybe I may have seemed like too much of a defender of the status quo and too happy with the present situation, but one of the worst things I can imagine is to create uncertainty about the environment by de-stabilising some of the elements that have been very successful without knowing what will be coming along next. And then there is a learning curve when there is a change in, say, the financing environment. It takes time for industry to make the adjustments, whether it is our own member companies or other companies here. So long lead times are certainly critical if change there is to be and I think change has to be considered very carefully before implemented.

Q216  Mr Bryant: And on DVD formats, obviously part of the selling process, the distribution process now is how you are going to get out there in the DVD market, a very important part of people's consumption of movies now. We have ended up - correct me if I am wrong - with different regional formats around the world partly for, as I understood it, for piracy reasons, though it seemed to me that that was a bit of an excuse for trying to make it more difficult for people to distribute into an American market.

Mr Marcich: I certainly do not think it was designed to make it more difficult to distribute in the American market. I think that some of the underlying thinking on regional coding had to do more with the sequential release of the different timings of the sequential release of films around the world. If you think back to seven or eight years ago when DVD was first being implemented and deployed, films were not released at the same time around the world and so you had the possibility of having a film long out of the movie theatres in one country and moving towards a DVD release in one country whilst just getting to the movie theatre stage in another country ----

Q217  Mr Bryant: Well, Britain always seemed to be the last in that. You used to be able to see films in Argentina and Rome long before you could see them in London.

Mr Marcich: I think the release patterns are changing and if you look at the comments of many who are involved in distribution, you see that there is a tendency towards day and date release and technology is in part driving that process. But eight years ago that certainly was not the case and there were countries in which films were released significantly later than in other countries and with DVD, with multiple language tracks on DVD, DVD would have cannabalised the theatrical business had a film been available on DVD at about the same time as it was being released in a movie theatre. There would be an impact on the theatrical business.

Mr Bryant: But for a consumer, you go to Spain or you go to the United States of America and you pick up a movie and you see it there and then you are not able to take it home and watch it because it is in a different regional format. That just seems profoundly unfair.

Chairman: You can have your DVD altered. It is quite simple.

Mr Bryant: Well, I am even simpler than the process, so I do not think I would manage it.

Chairman: It costs a little bit of money, Chris, but it can be done.

Mr Bryant: Well, the Chairman is on your side, not mine obviously.

Q218  Chairman: Your whole line of questioning is very important, even though it can be got round, because my assumption is, perhaps I am over-suspicious, but it is market rigging, isn't it?

And they would do it with compact discs if they could, namely that, for example, pricing of DVDs in the United States is much cheaper than it is in this country because American consumers are much more demanding than British consumers who will accept anything that is done to them. And that being so, there would be a huge tendency of British consumers to order DVDs from the American zone, say over Amazon.com, if they could actually play them on their DVDs here without spending extra on having their DVD players doctored. Isn't it all due to market rigging, the zoning of DVDs, rather than anything else?

Mr Marcich: No, it is not. There is a crucial issue with respect to sequential release. One of the greatest factors in price differentials that I can see between Europe and the United States has to do with VAT rights. If you put a 22 per cent, or 21 per cent, or 19 per cent VAT at the retail level on DVD or music CDs you have a higher cost factor and that VAT is probably the most significant, in my estimation, from my perspective as a consumer, I think that that probably is the single greatest contributor and, in fact, there are many in the industry now in Europe who are campaigning to make video and music eligible for what is called the cultural rate of VAT. So eligible for lower VAT treatment under European directives and we think it is an idea worth considering indeed. And then some of the sorts of concerns you have been expressing would be addressed through the appropriate vehicle.

Q219  Chairman: Only because we are a minute off your allotted time, I will leave you with the last word on this. Thank you very much indeed, much appreciated.

Mr Marcich: Thank you very much.

Chairman: The fact is that a standard DVD in this country with VAT removed is more expensive than a DVD in New York with sales tax added.

 

Memorandum submitted Screen Finance

Examination of Witnesses

Witnesses: MR TIM ADLER, Editor, Screen Finance, MR ANDREW SOMPER, Joint Managing Director, Scotts Atlantic, MR DAVID ELSTEIN, Chairman, MR MARC SAMUELSON, Deputy Chairman, MS FIONA CLARKE-HACKSTON, Director, British Screen Advisory Council, examined

Chairman: Sorry, the reason that we are holding you up is that I am trying to have explained to me what the prospects are of our being interrupted by a division and the collective wisdom of three parties round this table is that we just do not know. That being so, I very much welcome you here today. A number of you are very old friends and we are delighted to see you here and thank you very much for coming. Mr Bryant.

Q220  Mr Bryant: Mr Elstein, do broadcasters do enough for the British film industry?

Mr Elstein: If you ask me in my capacity as Chairman of BSAC, I would say that we are about to do a second stage report on that to follow up our fiscal policy paper. If you ask me as an individual, I think that you have already heard a lot of evidence over the last couple of weeks of what I would call wishful thinking; that if only X did more Y, Y would be happier. Whether X would be happier and indeed better off is a more interesting question. I think it is important to understand the reason why broadcasting and the film industry are separate businesses which have some overlap, but ----

Chairman: There you are. Nobody knew and now it has happened. Sorry to interrupt you in mid-remark, Mr Elstein. Could we make a great effort to be back here no more than ten minutes from now?

Mr Elstein: Needs must, democracy beckons.

The Committee suspended from 16.17 pm to 16.27 pm for a division in the House

Q221  Chairman: Mr Elstein, although we are not fully assembled, we have got (a) a quorum, and (b) our questioner. So if you do not mind, we will proceed.

Mr Elstein: I think I was saying "but" which is always a good point on which to reflect further. Broadcasting has a general duty to the creative community - I think the BBC put that in its written evidence - and the way broadcasters fulfill that duty is across a wide range of programming. It is hard to see what the specific duty to film production is, other than what the commercial or political imperative might be that commands attention from the broadcaster. I certainly do not see the market as being rigged against film makers. I think film producers who persistently complain that they get low licence fees from broadcasters do not understand the broadcast market place. It is an open market place. Films attract the licence fees, US films, UK films, that they justify in terms of their significance to the schedule, no more no less. Nobody is hard done by. In terms of satellite broadcasting, there is a historic structure of deals in place from before BSkyB merged the BSB and Sky businesses which are entirely done with the US majors, which I am confident BSkyB would not voluntarily enter into today. They are certainly not going to voluntarily extend the terms of those deals where they do not have to, which is effectively to UK producers. So I think it is fair to say - and BSAC is well positioned to host and manage a debate because we contain within our membership broadcast organisations as well as film organisations - that film producers historically feel under-privileged and broadcasters feel over-criticised. And Parliamentarians feel over-walked, by the sound of things.

Chairman: All I am saying, Mr Epstein, is I voted against these new hours. I am very sorry about this. You did manage to get about three whole sentences out.

The Committee suspended from 16.30 pm to 16.41 pm for a division in the House

Q222  Mr Bryant: And so, Mr Elstein, you were saying? Can I ask a different question actually. You have done some work on diversity in film and I wonder whether you can say something about that because so often I meet people from the film industry and every single one - not every single one, but the vast majority seem to be middle class white men. I know this is a very old Labour obsession, but it would be good to see a bigger diversity, especially in the technical base. Often actors and singers and other parts of the talent base are obviously much more diverse than the whole of the industry.

Mr Elstein: Obviously BSAC were delighted when the Film Council appointed a Diversity Officer, Marsha Williams, recently and the reason for our delight was that we have been very active on this issue ever since the end of the Film Policy Review Group activities where, in a sense, the failure to come up with policy on cultural diversity and achieving diversity in the film industry had been a kind of glaring gap in that Committee's activities. BSAC commissioned a report written by Simon Orberry on a Committee led by Simon Orberry on this very subject with a list of recommendations and we had hoped that by now most of those recommendations would have been implemented. So it has been disappointing, to say the least, that three years have passed and not a lot of progress - well, no progress has been made, other than to acknowledge or re-acknowledge, as was recently done, the need to take action. That said, we have got to the point now that Marsha Williams has set herself a number of tasks. The Film Council will address its internal structures in the light of the issues relating to cultural diversity as their first task and hopefully move on quickly, broadening out the industry as a whole. But you are entirely right in your comments. Many of us are acutely aware of it and hopefully, after perhaps an unnecessarily long delay, we are on course to actually take some action.

Q223  Mr Bryant: Just finally, going to the cinema is, I guess, for many of the people in the room one of the most enjoyable pleasurable things and for many people it is the highlight of their family entertainment. But sometimes some of the cinemas themselves, even many of the new multiplexes, are not as quite as inviting an environment as they might be and they seem particularly American. My local Showcase cinema actually shows a great big thing before the start of the film which says "Don't forget to get your candy here" and then at the end says "If there is an emergency, please use the exits at the front of the cinema because they are closest to the parking lot". It is a minor detail that they are not. But is there any way that somehow we can create more of a British environment when people go to the cinema?

Mr Elstein: I am sure this is an anecdotal piece of rapportage rather than a serious piece of analytical study and the fact of the matter is that the exhibition sector has expanded at a rapid rate. There is a huge amount of investment that has gone in there and, for the most part, to my untutored eye, it looks like pretty good value for the consumer. So I am slightly puzzled by the comments you have made. We can certainly raise them with our own membership, which includes the exhibition sector, but it does not seem like a very bright thing to do to tell the people of the Rhondda where the parking lot is not, if they know what a parking lot is in the first place.

Q224  Mr Bryant: But it is true in the Trocadera as well, it feels like an American experience dumped into London rather than a British cinema-going experience and I just wonder whether that makes British films sit just slightly oddly in the middle of it.

Mr Elstein: Marc, is that your experience?

Mr Samuelson: I do not think so. I think that what is relevant is, I suppose, that MacDonalds is one of the biggest and most popular restaurants in the country and it could not be a more American experience. I suppose that that it is the price that is paid for the amount of investment that has gone pouring in to building all of the multiplexes is that yes, they do feel like some of them dropped in from outer space or from the US. I think that the young audience quite like some of the aspects and I think that there are other sides of the Americanism that are really very positive. There is a much better level of service than there ever used to be and I think that that is an American style of service in many cinemas.

Mr Bryant: But then they are forced to eat this food that is terrible for them and drink drinks that are terrible for them. The whole - sorry, this is to take up a Debra Shipley issue - I will stop, Chairman. I will give in.

Mr Elstein: Do you think roast beef sandwiches and tripe and onions should be on tap?

Mr Bryant: I give up. Debra can ask that question.

Chairman: When I went to see Chicago at the Warner West End the man sitting next to me, as the film proceeded, ate an entire Chinese meal. This is life today, Chris. It is not life as you would like it and it is not life as I would like it.

Mr Bryant: Chairman, he was doing it vindictively against you.

Q225  Chairman: Well, there is that as well. And the fact is, isn't it, that part of the experience now - and it may not be an experience that those of us who started going to the cinema in the 50s or 60s or even earlier might like, but it is like holiday and hotels, it is like MacDonalds and Wendies, you could be anywhere in the world now when you are a watching a film in a multiplex, but the people who go to multiplexes, which a few exceptions such as Mr Bryant and myself, actually like it.

Mr Elstein: Well, maybe there will be a market soon in kind of the "throwback" experience.

Q226  Chairman: In Stockport they have got a wonderful project for re-constituting, almost as it was, one of the most great super cinema palaces and I went and had a look at it. But this is self-indulgent and it is nothing to do with a serious inquiry. I asked the representative of the MPA what changes he might suggest in the tax environment in this country that might make this country more hospitable to people coming from abroad to make movies. What changes in the tax environment would be more likely, in your view - and please, I put this to anybody on the table who would like to answer - to indigenous companies being created of which Working Title - and I think you were here for part of what they were saying - will make it more likely and more possible to get that done as distinct from companies being formed to make one movie and then ending their existence when that movie has been made?

Mr Elstein: Well, Chairman, I think you are in possession of a paper that BSAC has submitted on the current issues relating to tax breaks. I could refer you back I think six years to a previous BSAC submission to a previous Government on how structural change could be induced into the British production and distribution industry by means of tax breaks granted to companies with ongoing investment, as opposed to individual films and we would be happy to re-submit that paper if you were so interested. I think it is important to differentiate between a tax regime which is attractive to runaway pictures, the ones on the roam from Hollywood looking for a place to locate, given the strength of our underlying craft industry, the quality of our studios, it would remiss of us not to respond to whatever else is going on in the world and have a tax regime that takes advantage of our underlying strengths and does not waste them by allowing other countries to, in a sense, drive us out of the market. But I think the most important thing for this inquiry is; is the tax regime conducive to the making of good quality, marketable British films which reflect our culture and our concerns? I will ask Marc to speak in a moment, but in that connection our view is that Sections 42 and 48, or versions of them, are essential to the health of what we call the British film industry. We have already accepted that British film industry cannot be an equivalent to Hollywood. Apart from what Michael Kuhn told you, there is no serious room for a competitive distribution mechanism comparable to that which the studios themselves maintain. So we have to limit our ambitions. But the quality of what we produce and the marketability of it will continue to depend of Sections 42 or 48 or versions of them. And the simple truth, Chairman, is that we have only just begun to see the way in which those tax breaks could work in the last 12 to 18 months, that the distortive effects of introduction of the television abuses have only recently been eliminated. So it is galling to imagine that within a year and a half those tax breaks, or one of those tax breaks, might go without any substitute there to take its place. The other thing that we have concentrated on in the current paper is how to embed, to borrow a recently popularised phrase, the distribution function within the tax break structure. We do not take the view that the tax rate should be transferred to distribution. That would have all kinds of knock-on effects, almost certainly undesirable, but there is a way in our view - and this is what our paper hopefully demonstrates - of tying the distribution function and its market sensibilities into production decisions by tailoring the tax breaks in such a way that you get that relationship going that much earlier. The truth of the matter is that there are virtually no tax break driven British films being made that do not have some distribution relationship in place before they are made. So it is not as if you are going to revolutionise and kind of create a date line for producers and distributors who otherwise would never speak to each other, but what you can do is to entwine them that much more firmly and give the next generation of tax breaks the successes of the present sections a stronger underpinning for the future. But Marc, perhaps you could elaborate.

Mr Samuelson: If I may, Mr Chairman. Thank you. Before I just talk about the detail of what is in our paper, I would just like to add that it was very interesting listening to Tim Bevan and Eric Fellner's evidence because they are brilliant producers, I am sure they are the best producers in Britain, but their experience is almost irrelevant to the experience of everybody else. It was quite amusing when Eric said he would talk about everybody else; it is everybody else. They are owned effectively by an American studio. They were able to build their company under the auspices of Polygram, which was an absolute one off, and by the time Polygram was sold to Universal, they had established themselves. But there have been many years of making a great many films with all the experience gained, enormous amount of money spent on script development, all the resources and building on their successes and being able to continue even though they had failed. There are no other companies that have had that experience. For everybody else I think that there are some very good companies out there. I work as an independent producer. I know that most of my peers are talking very closely to international sales companies and distributors all the time and, in fact, I think that alliances are growing up and there are companies like Jeremy Thomas' company, Recorded Picture Company, which now has its own sales company, Hanway, and it is in effect a distributor, a worldwide distributor. It sells its own films around the world. That is a vertical integration which is much to be encouraged and there are several other examples; Renaissance Films will be another one where producers are becoming sales agents and as the market develops I think we will see more of that. Of course, what will throw a huge, humongous spanner in the works is that the main tax break on which a lot of this activity is founded will come to an end in 2005 and I have been involved in the industry long enough to somewhat despair of the fact that we seem to be on about a seven year cycle where we get some kind of new regime, it was the capital allowance regime previously, it was more recently the Section 48. It takes a couple of years to bed in. We have a couple of years of actually operating it and then it ends. Then we have another seven years where the industry plummets to incredible lows. Everybody tries to analyse what is wrong with it. Eventually then we come up with a new tax break and then it just lasts another short period, five to seven years. What we actually need, if I may say, if we were really going to try and solve this once and for all, is we need a permanent fiscal regime which we know is there forever, that is how you treat a film from a tax point of view. The end. Because that would allow long term planning, long term investment. It would be something that - we talked about venture capitalists before, they look at the industry and they say "But a crucial part of your whole financing scheme is time limited". What we have come up with is if we accept that there does have to be support for there to be a British film industry, why should we be the only one in the world that can exist without support? So if we accept that there has to be support, it is really a question of what is the most efficient, what can we actually do and it is our submission that now that television has been eliminated and now that deferments have been eliminated and now that co-productions are being brought under control, that the Section 48 system is actually working very efficiently. We think that it is low cost, the benefit reaches the productions and, more importantly, an infrastructure has grown up of specialist companies who consolidate individual investors on the one hand and productions on the other. It is a very difficult job to do and you have to have done it for a few years before you can start to make that work. Andrew can talk about that because he is one of them. What we would suggest is that if it were possible to keep some version of Section 48, albeit that it is felt to be somehow tarnished politically incorrect to do so, but if we were just trying to do the best thing and that was an irrelevance, some version of Section 48 would remain but what we would suggest is that, at the moment, the way that the value is assessed of a film is the production cost. It is simply what is spent on making the film, that is the value that can be used as part of the tax break. That is the value that the tax break is attached to. We are suggesting that partly instead of that the investment made by distributors would be the thing that attaches to the tax break or that attracts the tax break so that if, for example, half of the budget of a film was being invested by distributors and sales agents, rather than the production being able to say "Right, we have got a film worth £5 million. We can now go and try and arrange some tax finance for that", actually the producer will be left with £2.5 million to find the tax break on but the distributor would have control of the £2.5 million that they were putting in. They would be able to raise a tax fund based on that. They would be able to have very much more influence over which films get made. It is obviously set out in detail in the paper, but we do think that it would have the effect of driving distributors right into the mix of the decision making process as to which films got made.

Chairman: I think that is very important and I am grateful to you for setting it out with such clarity. Adrian Flook?

Q227  Mr Flook: Thank you, Chairman. Mr Somper, the history of Parliament seems to be littered with special interest groups claiming tax breaks for their various bits and bobs. How important is a tax incentive success of your company?

Mr Somper: I think I would like to look at it from the perspective of what my company does for the film industry. And what we are trying to do is aggregate the benefits coming flowing through to the film production companies and, at the same time, involving investors which, during the 80s and prior to that, looked at film as something that they would never get involved in, it was far too risky. So the advent of the tax breaks in 1999 had such a big effect on the City because they were going in with tax based products initially. In the first two or three years I think a lot of the opportunities were lost because it was focussed predominantly on the television industry. As that went away last year, the complete focus of the City and IFAs who sell investments to individuals is on film. So from a period of ten or 15 years ago no-one would touch film at all, all of a sudden we have companies like Close Brothers, Tether (?) and Greenwood, Vinder Fry (?), we have banks that are lending to individuals, all of them becoming very familiar with the structure of a film deal. First of all, they got involved purely on the sale and lease back benefit and that is a tax deferral product. It was one that has been highly popular. It has become part of an independent financial advisor's stock in trade. It would be quite incredible; after all this time he would be doing pensions and insurances and then he has a film product, a film specialist. So the familiarity with the film industry has grown enormously. Since last year, it probably started two years ago, we had the biggest change now that the film industry is the main focus and that is the development of individuals coming through companies such as mine and others who invest not only for a pure tax deferral basis, but they are also investing equity, venture capital which was talked about earlier in the previous sessions as ----

Q228  Mr Flook: Or as Angels, if it were the theatre.

Mr Somper: Well, Angels are going into it on the basis that they love the theatre and therefore it would be quite nice to be involved in it, but they know they are probably going to lose the money. These are highly sophisticated individuals, mainly from the City. The investors are normally people who are senior executives from either companies or banks, highly sophisticated individuals, and they are now looking at film structures as real investments. They are looking at return on investment. They are looking at the company that is organising the investment. And that is a massive change. So in the last two years approximately £30 or £40 million worth of equity has been raised by a number of companies such as Movision, Vision View, which is a joint venture with Close Brothers, and I think that that development has massively changed the way in which London is looked at now by the Americans. Our American independent colleagues, instead of the traffic being that way to Hollywood, it is now back to London because they see London as the hub of film finance and not only for the UK tax benefits, but also as a centre for them to make European based films because of the low cost centres of making films in other countries.

Q229  Mr Flook: Mr Adler, would you have anything to add to that?

Mr Adler: Well, I am a disinterested party. I do not have an axe to grind here, but ----

Q230  Mr Flook: Feel free to grind away.

Mr Adler: One thing that I would like to get across, I have reservations about subsidy full stop, but having looked at the film finance equation, subsidy is absolutely crucial and I do not understand why there is talk now, just as things are beginning to go right, that the Section 42 and Section 48 relief is being used in the right way, now that there is talk of having the plug pulled.

Q231  Mr Flook: Well, talking about that subsidy as such, there was in 96 something set up called the Film Franchise - £92 million went into three sorts of studios. Did they bring about any significant change? Was it a good investment of, ultimately, taxpayers' money?

Mr Adler: My view is that the thrust of the Middleton Report, the Advisory Committee on Film Finance, the initial recommendation was to keep the whole of the Lottery money intact, to basically set up a Working Title type ----

Q232  Mr Flook: One company as opposed to three.

Mr Adler: One company as opposed to three. However, a decision was made to split that money into three. I think in hindsight it was the wrong one.

Q233  Mr Flook: Anything to add to that, Mr Somper, in terms of the last few years?

Mr Somper: In relation to the film franchises, it is a highly difficult basis. It is much better to leave the benefit so that it percolates amongst a number of different companies rather than focussed necessarily on three particular ones.

Q234  Mr Flook: So it should have either been spent on one or spread even more broadly than three?

Mr Somper: I just think the overall tax benefits so that different companies can grow to be able to take advantage of the benefits coming in through Section 48 and 42 rather than necessarily pinpoint one particular company.

Mr Elstein: I think it is important also to recognise that, however well intentioned the Lottery money being put into three franchises was, there were two key structural problems. The first is that each of the franchises had to submit each individual film for separate approval by the Film Council. In other words, you could not actually generate a slate of films even though you had multi-year, multi-film franchise. Effectively it was just one organisation corralling a whole range of individual films. So you were not structurally any better off, frankly, than you had been before. There was some marginal saving in terms of overhead, but that is all. The second problem is that because every decision was unpredictable because there were no absolutely clear criteria being applied, it meant that if you were - how can I put it? - the possessor of a strong movie, you were not going to spend any time trying to pick up Lottery money because of the level of bureaucracy and the level of delay was insupportable and the unpredictability of the outcome. So almost by a process of definition and self-definition, it was the weaker projects that ended up being Lottery funded projects. The ones that were most marginal. So cumulatively what you generated was an inadequate process of restructuring the industry because nothing could get restructured and a succession of marginal films being approved, many of which subsequently failed commercially. Now maybe they would have failed commercially anyway. More likely they would not have been made in the absence of the Lottery franchises, but I think it is now broadly accepted that the attempt to use the Lottery monies to induce structural change were misguided and have certainly failed.

Q235  Chairman: Thank you very much indeed. That was an extraordinarily valuable session and we are most grateful for the trouble you have taken and we apologise for the interruptions.

Mr Elstein: We will now go and vote with our feet.

 

Witness: LORD RICHARD ATTENBOROUGH, examined

Q236  Chairman: Lord Attenborough, welcome.

Lord Attenborough: Good afternoon, Chairman.

Q237  Chairman: We have called you Lord Richard Attenborough, which I think makes you the younger son of a Marquis. You are a British film industry all in yourself and you have seen it all, right from the days of the structured studios through to today. Having listened to the financial observations of BSAC, what do you believe that we need to do, not to restore things to the days when you were employed by studios, but to restore things in a way that we have a British film industry comparable to, analogous to, if you like, the United States film industry?

Lord Attenborough: Chairman, I do not that we can ever do that quite in superficial terms simply because the scale of the whole American operation is so enormous and it has such control and grip all around the world of the principal infrastructures which make it possible not only to make movies, but indeed to distribute them. I was very interested to hear what David Elstein and Marc Samuelson were saying to us now, but if I may go back just momentarily; there is no question whatsoever that the industry cannot succeed without some form of assistance. There is no possibility. And in the whole world, there is not a country in the whole world, including the United States and India, where all, in some way or another, have major fiscal advantages in terms of operating their industry. I think the whole question that started under Section 48 when I was still involved - I should say that for ten years I have not been involved in any of the industry organisations, the BRITISH FILM INDUSTRY, BSAC. I retired ten years ago, so I am not up to date with everything that those bodies are presenting as their cases, but of one thing I am certain; is that until we accept that a form of subsidy, in some form or another - whether it be a tax concession or whether it be actual funding - is accepted as a prerequisite for the British film industry, the British film industry will continue to jump and flop and climb up again and fall again, etc. The sadness about the Section 48 situation, that it is to come to an end in 05, is very sad not only in itself but in the message that it sends out to investors and people around the world. If it is deemed that Section 48 did not work - and I accept we failed to be as wise as we should have been in that the concessions under Section 48 which were intended unquestionably to foster indigenous production - that particular loophole was used outrageously by some of the television operators and I think did an enormous disservice to the industry. Also for a number of years, even way back, ten years ago when I was involved with BSAC, I was advocating what David and Marc were broadly saying, that if we simply fund production and then close our doors, we are simply not facing up to the problem, particularly with the demise of the major companies that did exist in this country; Rank, Ealing, bless them, but Rank and ABPC and that somehow or another we have got to face a situation that make movies as we do under varying circumstances and with varying success, if nobody shows them, we are wasting our time. What are we putting money into, no known manufacturer would do this. He would not make teddy bears and have no way of selling the teddy bears, or whatever they are. So somehow or another it seems to me we have to examine the two together. I would like, if I may, afterwards to come onto production itself. There is, it seems to me, no reason whatsoever, either fiscally or, if I may say, ethically, why because the terrible word distributor is a sort of ogre in our lives because "Those devils have not shown my film as I would have shown it" or they have not put the money behind it, or they had not got the marketing skills, or whatever it is. It is no good continuing to say that. They are our exit doors. They are the way we get out. What are we making films for? We are not making films to please ourselves in terms of incestuously getting pleasure from the function itself. If we make a film that we care about, presumably there is something in that film, whether it be our background, whether it be our morals, whether it be our convictions, whether it be our anger, whatever is, we want people to see it. I am not in favour of two men and a dog in a barn. I want an audience. I want people to come to the cinema. So we must make films which have that degree of attraction, that element in which the audience says "I can identify myself with what is happening in that movie. Somehow or another there is something there that pleases me". Now if we accept that, then it seems to me to offer this principle of Section 48 to distributors to themselves, provided the criteria are set down firmly, that the financing of the movie is the financing which does not invade the autonomy of the artistic freedom of the person who makes the movie, but says under circumstances which are agreed initially script, budget, players, director, etc., if we say "Okay, that is yours, you do that and we will guarantee this amount of money for the backing of your production" and in return, in order to get that funding, we say to them "Here is a way in which you may benefit in the same way the producers variance in terms of Section 48". Then it seems to me we start to say to distributors "We are in with you right from the beginning. We are in with you in terms of distribution". So the problem of marketing, of selling, of judging a budget to a particular subject matter makes much more sense because they have got their money in but they feel that they are on the wagon, that they are with us, they are going with us, the whole project goes through as one rather than production being one group, exhibition being another, distribution being another. The skill of BSAC - and I am sorry to mention BSAC again, but the boys and Fiona were here - is that it does bring together the whole industry and it is one of the platforms which I believe the Film Council and the Government should pay attention to in terms of understanding that cinema is no longer alone. Cinema does depend, sadly very often, on television, but now with television, with video, with DVD, etc., etc., we are a whole industry and cinema is basically the provider. And that is why I think it is so desperately important that the primary function on everything that you ladies and gentlemen suggest to Government is based fundamentally on the subject matter; the work itself, the selling of it, the marketing of it, the exhibition of it has to be involved. But primarily it is production and production is script. Without scripts, without really first rate scripts, we collapse. What do the Americans do? The Americans have blocks of screenwriters and they put money into one project, ten projects, 100 projects and perhaps three or four come through and those are the ones they take through. The Film Council, in my judgment, should pay, if they have got the funds, more attention to screenwriting. We should make sure that they have sufficient funds. Why was Balcon such a success at Ealing? Balcon was such a success because he had a group of writer, director, producers, but essentially a writer, Timmy Clarke, etc., who worked there and were guaranteed a living and a revenue and an interest in what they did. They put an idea and that group of really superb film makers talked about that subject together until it went back to the person concerned. But it was the writer who first convinced the director, convinced the producer, convinced Micky that this was a project with which they could attach the sort enthusiasms and funding and everything else, but it was not a one by one movie. It was a whole block of potential and if something was not working, Micky did not make it. And if something suddenly came up the middle, Micky could do it. We do not have that anymore. Rank does not - the studios exist, but an organisation does not exist anymore. Now, I have heard talk that there should be a suggestion that we should build great studios in London for enormous sums and that that would be the way of solving the problem because everybody would there. Without the funding of the propositions that are put forward, it would be a total waste of time. I am involved in building some studios just outside Cardiff, but we are building studios as processes, as facilities and so on, really up to date, we have not built studios since I was working in 1947 at Borehamwood. A film that I did there and it was razed to the ground a few years later. It is not really the studios we need. Micky did not depend on the buildings at Ealing. Micky depended on an idea and a passion, not only about cinema and the cinema's opportunity to influence people, to bear people one to the other, to display thoughts and ideas and concepts and passions and so on. That is what Micky cared about. That is why it went. That is why it worked. And into that come those fantastic comedies, all of which had something to say in addition to the particular comedic element. So I believe, if I may say so, Chairman, that we should try to persuade Government that this hot jump idea ending it in 05 is very sad. It will rock the situation because it has been very successful really in the main. But we should be saying to Government; Give us an ongoing position. Allow us to continue. Tell us that you understand in the same way that you accept art galleries or libraries or whatever art form. Will you support us into the future? And in so doing, let us jointly tackle the problems that exist; the subject matter itself, the screenwriters, the manner in which we finance them. We have technicians and people second to none in the world. Why do the Americans primarily come here? Partly because we are cheaper than Los Angeles, but also because our talents, our cameramen, our sound recorders, our designers are the best in the world. There is nobody better. And if you put all that together, we have a hell of an opportunity, but it has to have a long term basis. It cannot jump, stop, start and start and stop all the time. So if this Committee could persuade Government to look at 05 and bring together the particular problems that everybody can identify so easily and see if we can judge how we can solve that overall problem, primarily focus on production but then on the manner in which we can promote those producers, I would have thought that this Committee would be able to have its hat raised from the rest of the ----

Q238  Chairman: Thank you. We did have a bit of an impact last time, so let us hope ----

Lord Attenborough: Indeed. Absolutely. No question.

Derek Wyatt: I just wonder actually, Chairman, whether it is possible to ask the Treasury team responsible for 48 to come and give evidence in front of us?

Chairman: We have, in fact.

Q239  Derek Wyatt: Can I ask therefore, Lord Attenborough, what you would say, if you were on our side, to them? There is a sense that it is clear that TV production companies did scandalously use 48. So what is the change that we need to do? Is it a matter of wording? How would you close the loophole so we could go on?

Lord Attenborough: Well, other than a guarantee of some form, which I do not quite know how you arrive at it, whereby the movie that is made, or the project that is made, is to be exhibited in the cinema and can ultimately go on television, but it must have a guarantee. Therefore you need the distributor. Therefore the distributor needs the exhibitor. Therefore those groups have to come together. We will fail unless we understand the overall industry.

Q240  Derek Wyatt: The second question is the place of film in our culture in the sense that post-206 we will be looking at a new licence fee. Do you feel that as we develop in the 21^st century a licence fee should be a cultural fee which could include film and radio and video and so on? Or do you think it ought only to be a cultural fee for television?

Lord Attenborough: I do not know that I can answer that question. I would have to think about it very carefully because the implications that follow are very considerable. I mean it is a revolutionary idea. I do entirely endorse a licence fee for television. I think that public service television - when I was Chairman of Channel 4, I believed passionately in public service television so that I would also plead - and I am not sure what your Committee feels about this, but I would be very distressed if the BBC, in the form of public service television, literally had to go onto a total commercial basis.

Chairman: The issue that you are talking about now, which is a very important issue, is one that we shall inevitably cover when we do our inquiry into the run up to the new BBC should there be one.

Q241  Derek Wyatt: But in the sense of the cultural concept, and of course as an MP you always think of your own community, I have a community of 40,000 that does not have a cinema, does not have a theatre, does not have a museum, does not have an orchestra. We are an hour from London, the people do not come to London, they cannot afford to come to London. How can British film develop if actually people cannot watch it physically because there is not a local cinema? I wonder what initiatives there are across Britain that have said "Okay, you can do it". I am interested to understand better really how we can get cinema locally.

Lord Attenborough: In the same way that I was suggesting - not originally because the points were made earlier before I joined you - in the same way that I believe that distribution has to be considered in the mosaic, so does exhibition and I believe that we have to be bold in exhibition and I believe that we have to make some form of statement whereby there is an incentive to show British cinema and to show it whether it is in fact made up of the sort of supposed elements which are prerequisites to financial success. I believe that there is a huge audience and in the old days that I remember there were things called art theatres which were very successful. Gerald, we remember those very well indeed. Where did you see Fellini or where did you Kurosawa? We ought to now be seeing Ken Loach, for instance, if he is not getting onto a normal commercial run. Where are those? Now, I think Government, if it is going to make concessions and funding, is entitled to say; If we do this, in the same way that we should have some sort of control through the Film Council or whatever it is in regard to production, so we should have control, which we would if we used this distribution idea, and we should have some sort of say over what goes into those cinemas. We only give our grants and our concessions to British movies for which you have to demonstrate a 70 per cent funding, a 70 per cent participation, etc., etc. etc. We do not get the sale and lease back, etc., etc., etc. concession without being a British movie. If that is worthwhile and matters so much, why can we not transfer the importance of that particular element to the cinemas?

Q242  Derek Wyatt: Why not make a change to planning law to say that when you have a cinema you have to show a percentage of British films?

Lord Attenborough: Well, I do not know whether my grandchildren would be pleased with that.

Q243  Mr Flook: Tim Bevan, who was here earlier today and I think you may have missed him, but he is Working Title and he said that, like you, he very much believed in a good script. But last week we had Gurinder Chadha - I think she was the writer, the director and the producer of Bend it like Beckham - who modestly said that she thought you needed to identify marketing to get a film off the ground and to get it out there. I am struck by your idea that the script was very important, etc., etc. and you portrayed it as more a sort of theatre sense of entertainment, very cultural, very intellectual. But this marketing in a populist age is very important. Would you therefore agree with that?

Lord Attenborough: I agree. I have no problem with that at all. I do not think we quite know how to market at the moment, but the kings of marketing are the Americans. They are kings throughout the world and they pay salaries and grant facilities to marketing operations. If I send a picture to Universal and I say to Ron Myer "Ron, I would like you to look at this. Would you read this subject?", I will bet you the first proposal that Ron puts is "Dick, I will tell you what; I will be back to you in a week's time. I will give it to our marketing people and see what they think".

Q244  Mr Flook: And we do not look at it that way?

Lord Attenborough: Not at all. We do not consider that because we are not involved in distribution and the marketing is basically a distribution skill. So we have to bring the two bodies together. Marketing is absolutely vital - vital. And we depend on very few companies. We do not have specialist marketing people. No, that is incorrect. We do not have a large number of specialist marketing companies. And when you get the right person, he is worth his name in gold, he really is. It is terribly important.

Q245  Mr Bryant: Just pursuing that issue about marketing, it seems to me that sometimes one of the problems is that marketing of movies is predicated on "This kind of film is for this kind of person" whereas to hark back to another era, you saw everything that was on at your local flea pit and so you fell upon movies that you would not necessarily have chosen to see. I wonder whether we have lost that felicity of falling onto films that you would not ----

Lord Attenborough: I entirely endorse that. I absolutely endorse that, but that is the point that I am making; that if you could get some sort of arrangement with the exhibitors whereby movies that the British industry make has a right of exhibition - has a right of exhibition because if you make certain tax concessions or certain facilities, if you do that then you open up another screen, you open up another possibility. And so movies which people know very little about are suddenly there and because they are subsidised - awful word - but because they are supported in some or another, they have a life which takes it through. There are so many movies which we all count on word of mouth and word of mouth cannot happen by Wednesday. Word of mouth, if you are lucky, is there by Thursday, Saturday, Sunday and the next week. If you have not got the support, word of mouth does not count and you have lost that movie in seven days.

Q246  Mr Bryant: Local authorities play a role in cinema distribution or exhibition because they have a role in deciding whether or not a film can be show locally. They do not normally tend to use it, but sometimes on controversial films they will say "You cannot show such and such a film here". But do you think it would be valuable if local authorities had a more positive role? They tend to subsidise theatre and arts organisations, but not very often art house cinemas locally. Do you think that that should change?

Lord Attenborough: I certainly think it should be looked at. It does not exist at all, to the best of my knowledge. It is absolutely minuscule the number of movie houses that are supported by local authority. But you see, I think it is fair enough to say to a local authority or reply to a local authority "Well yes, if we are going to support that movie theatre, we want certain conditions. We want certain rights. We want certain authority". Then you get into all sorts of censorship and questions and that can become very dangerous. But overall, Chairman, I have tried to do it for 40 years now, through the BRITISH FILM INDUSTRY, through BSAC, is to look at our industry as any other industry would be viewed in commercial terms, once you have set the integrity and the autonomy to agree of your product without examining and also taking on board distribution and exhibition, therefore marketing, therefore selling, therefore publicity, therefore image, we will go on doing what we do. Years ago in the 70s, we established a company called Eagle Lion and we were so cocky and so silly we did it purely with Rank and British Lion and they opened up huge great offices across America and lost a cool fortune. If only they had adopted the scheme that has been put to you this afternoon and involved the distributors and used their skills in the United States, not trying to go in as conquering heros. They do it to us. They come to the studios, they do not teach us how to photograph a particular scene because they know that that particular cameraman or that particular set designer is probably as good as anybody else in the world. They accept that it is a co-operative. There are very few outres. The movie business, in my judgment, is a co-operative operation and there is a director, a director who is a dictator to a certain - benevolent in my case, of course - but it is required. It is absolutely required. And until people like - a man called Jake Eberts who ran Goldcrest, who set up Goldcrest, and if only we had had the sense to pay him the sort of salary that America did pay him, we would have been in a very much better position here because we would have succeeded with Goldcrest whereas Polygram sadly collapsed.

Q247  Mr Bryant: I was just going to ask about Dragon Studios because I know the MP for Ogmore is here as well and I know that this is one of your projects and you referred to it earlier. A lot of people would be very excited as something coming to the M4 corridor in South Wales. How realistic are your expectations, do you think, and when do you think we might actually see films being made there?

Lord Attenborough: 05. If I do not feel it is realistic, then I should leave the industry and excuse myself. Of course I believe it is realistic. In South Wales there is a cruel unemployment situation. We can train blue collar workers, plasterers, carpenters, electricians, etc., to man our studios at a very proper union-agreed fee which, because it is outside the M24, will be at a significantly lower figure than the main studios in the UK, which I have to charge in order to live here. So that hotels, transport, food, everything that you have in that part of Wales will, in fact, mean that our below the line figure in financing a movie - that is anything but the subject, the directors, the stars, etc. - all the below the line figures will be something like 30 per cent below what the other studios in the country are. You are looking at a wonderful place, beautiful countryside, no smoke and filth and dirt and so on and I think it has a hell of a chance. We are not in production. We are not producers. We are renting studios, but they will be studios, as I said earlier, the finest studios in the world. We have gone to Stuart Craig, who is the best production designer in the country, and said "Stu, how best do you want your production design department to be created? How best can we facilitate it?" You go to the cameraman "What is the best way in which this, this, this" or the most up to date special effects or whatever we require. And we will be able to provide studios that are better than anywhere else in the world, let alone Europe, anywhere. Because there are some wonderful technicians in Wales. We will have television there, we will have film and, in my judgment, it is a phenomenal investment. I am not backing it, Chairman.

Q248  Mr Bryant: But I think you might have encouraged us ----

Lord Attenborough: But it is a British operation. The funding is one hundred per cent British.

Q249  Mr Bryant: We did not really need to be given a biography of you, but we were, and it must have been written by somebody close to you anyway, it is a few years out of date, but it says "This ardent socialist and pro-European is still an active film maker". I will not ask you about your views about the euro, but I just wonder; we have been talking about "Is there a British film industry?" but are we being a bit narrow? Should we be thinking about "Is there a European film industry"?

Lord Attenborough: I think it will inevitably flow, I would have thought. I mean we have the lingua franca. That is what makes all the difference to our position and there will be major, I am sure, input of studios. The European studios are all old as well and if we can provide the sort of opportunities that in terms of production - oh yes, we shall have European. But we do not need to give up our indigenous projects. We are idiots, you know. We get lost with the Americans. Years ago, everyone said; Oh, we have got to invade the American market. We must get into the American market. How do we do it? Oh well, we bring over a second rate American movie star, stick him in the film and that means that the movie will be shown. Rubbish. What are the best movies as far as we are concerned? They are indigenous movies. They are movies in subjects and so on that we understand better than anybody else and the result is that when we make a film like Billy Elliot, or you make a film like Four Weddings, or you make a film like - I do not know, I cannot remember all the titles ----

Q250  Mr Bryant: East is East.

Lord Attenborough: ---- but if you make movies which are essentially English or British, then you will break the market. That is what attracts America. Not a pale imitation of what America can do ten times better. Back to scripts.

Q251  Chairman: I am absolutely confident that Richard Attenborough wrote this biography because if I may refer to a private joke, I see that it says "He went on to star in such international classics as The Angry Silence".

Lord Attenborough: Now Gerald. I am surprised it did not come up sooner. I made a film which attacked the principle of sending men to Coventry and I found the principle obscene and I found that the manner of certain sections of trade unionism appalling in that bullying awful stuff, instead of true trade unionism which I am passionate about and have been a member of my own trade union for 50 years. So I have no qualms whatsoever. But the boss there wrote a review in which he attacked me for making an anti-union movie. So I decided I had to put this right and I discovered that in Wales the cinemas were owned by the miners and the miners' halls. So I went down to - my memory, I will think of it in a moment - I went down and I asked the miners' union "There is a cinema where nobody charges. Will you come in and see this film?" and they came in and saw the film. And after the movie I went on the stage and talked for about three quarters of an hour about the film and why I wanted to make it and what I cared about. And when I left, the local chairman of the miners' union brought me a lamp. And I have that lamp and it is the most valuable and the most treasured possession - bugger the Oscars - that takes pride of place in my study. And I think you were wrong, Chairman ----

Q252  Chairman: Dickie, you have never lost any opportunity of telling me that and I thought we would end up your session by giving you a further opportunity.

Lord Attenborough: You are very kind. Thanks very much indeed.