Thursday, December 2, 2010

Deal or no deal?

Interesting developments across the water where culture minister Ed Vaizey has decided that the BFI will take on the production funding role of the UK Film Council. In the process announcing an increase in lottery funding for film from its present level of £27m to £43m by 2014.

There's a huge political element to the decision and in historical terms it's merely another chapter in the power play between various individuals and institutions who hitched their careers to particular sides of the UK body politic.

The BFI has survived a decade (plus a prefatory few years of intense lobbying) during which its gradual destruction by its enemies seemed certain. It was in 'merger' discussions with the UKFC up to the time of the UK general election.

The balance changed immediately following the election result and the BFI now has the (un)enviable task of building a low-overhead production division under political oversight which may expect its participation in commercially successful projects which really ought not require public finance.

Perhaps, (in the public funding context, and here as much as elsewhere in Europe) it's time to consider a 'facility' in the manner of a limited guarantee against loss - rather than a drawn down production loan - for those projects that notionally have commercial potential.

This might underwrite some market risk financing (but not the associated costs), promote producer equity participation, and clarify the commerce/culture ambivalence that spancils public funding for film in Europe.

It is an approach that could be tied, perhaps proportionally, to the retention of rights in the country offering the guarantee facility. For example - a guarantee of 30% of the production finance would hinge on 30% of the world rights being retained by the local producer.

It would also have the benefit of focusing producers' minds on the commercial viability of their projects because they will be faced with a choice of funding strands, either to apply for a guarantee or a soft loan of the sort given out at the moment.

Perhaps this has been tried elsewhere and it hasn't worked. Perhaps it might be seen as a mixed blessing, or unworkable by producers. I don't know.

What I believe, however, is that the nation states of Europe can't continue to subsidise a business that shows no sign of sustainability, wholly exploited by non-European producers, where only marginal profits are retained (if any), with even fewer measureable cultural outcomes, the lot being driven by substantial fee income which does not even appear on film budget lines.

The truth is there are two economies at play in the film 'industry'. The first, and the weakest, is the economy around what appears on production budgets. The second, and the most influential, is the economy around the financing and servicing of production deals.

Nobody talks about the fee income, the costs, in the economy around the financing and servicing of production deals. Back in the mid-nineties I was told of an Irish producer earning £500,000 as a fee on a particular film, not for producing the film (presumably that fee was in the budget) but for his role in facilitating the production deal.

I've no reason to doubt the story, it was related to me by a senior banker of good repute who had some peripheral dealings with the film business. What it illustrates is that the making of a film often masks the reality that the film is merely a mechanism for people to make a deal, which is how they actually make a living.

In a nutshell, they trade profitably off an unprofitable trade. It's time to re-focus.

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