Pact Launches UK Film Strategy

The trade body for independent producers, has launched an innovative new proposal for the public funding of UK film production, which aims to create a more sustainable film sector without the need for more public money.
Based on the report 'A New Business Model for UK Film', by Olsberg SPI for Pact, the strategy proposes that content creators would retain substantial IP ownership and have greater access to revenues from the films they create. The proposals represent relatively straightforward adjustments to current practices that will change the business model for the UK production sector on a fundamemental basis, empowering production companies and delivering market-driven grown.
Chief Executive for Pact, John McVay said: "This is not about seeking more funds. It is concerned with using what is already on the table to create organic growth: growth that is based upon success rather than subsidy.
"For too long the sustainability of the film production sector has remained an elusive goal, but it’s a crucial goal and one we believe is achievable if film producers are given the opportunity to share in the success if their film does well."
Pact estimates that over £100m is invested by public sources into UK film production each year, yet because of the current business model for film, producers of even the most successful films remain reliant on public funding and typically struggle to share in revenues from even hit films. Girl with a Pearl Earring (2004), for example, earned $50m at box offices worldwide and got 3 Oscar nominations, yet its producers, Archer Street, earned a zero return, despite its obvious success.
According to a recent UK Film Council report, over half of independent production companies are loss making, despite their films being amongst the most popular with audiences.This is because the current funding model ensures producers cannot retain their IP and thus have little to invest, or leverage in negotiations.
Under the new proposals, film companies will benefit financially from making successful films. This means they will then be able to invest in future films they make and gradually be able to reduce their reliance on public funds.
The key proposals are:
100% recycled: 100% of the recouplement of public investment should accrue to the UK production company, with 70% of such funds ring-fenced for future development and production via the Film Depository Receipt (FDR) system

• Film Depository Receipt system: A 'lock box' where 70% of monies recouped are placed on the production company's behalf, in an interest-bearing escrow account to be accessed only by the production company for use on future films. To be managed by a fiduciary agent such as the National Film Trustee Company
• Tax credit as producer’s equity: 100% of the tax credit should be treated as producer’s equity investment and this amount would therefore sit in the recoupment waterfall
• Higher tax credit for low budget films: Support for the House of Lords Communication Committee’s proposal for the tax relief level to be raised from 20% to 30% on UK films with a budget of less than £5 million
• Terms of Trade with public service broadcasters: A new deal structure with new terms including a reduction in the length of the licence period to 5 years and a 'use it or lose it' provision where rights revert to the producer if the broadcaster is not using them
• Containment of legal and finance costs: Public entities to agree a proforma set of principle legal documents to save time and money
  (BMcN/BMcC)