Pact Says Film Industry Could Contribute More

The trade body for independent producers said the recent UK Film Council report titled, The Economic Impact of the UK Film Industry, was positive news, but, with over half of UK independent film production companies making a loss, the UK film sector could deliver even more to the economy if the funding structure was changed.
Chief Executive for Pact, John McVay said some straightforward adjustments to the current public funding practices could lead to more sustainable film production companies and offer them the potential to grow, at no extra cost to the public.
He commented: "A previous report by the UK Film Council showed that over half of UK independent film production companies are loss making, despite producing some of the most popular films.
"We believe that if there are changes to the current business model of film, production companies have the potential to grow sustainable businesses and contribute substantially more to the UK economy."
Currently producers of even the most successful films remain reliant on public funding. For example, Girl with a Pearl Earring (2004) earned $50m at box offices worldwide and got 3 Oscar nominations, yet its producers, Archer St, earned a zero return. This is because the current funding model ensures producers cannot retain their IP and thus have little to invest or leverage in negotiations.
Based on the report titled A New Business Model for UK Film, by Olsberg SPI for Pact, Pact proposes that content creators would retain substantial IP ownership and have greater access to revenues from the films they create, thereby empowering production companies and delivering market-driven grown.
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 (below)
• 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/GK)