Friday, December 24, 2010

The Greenland Isle

Happy Christmas & New Year from Irish Film Portal

Thursday, December 16, 2010


The IBEC Audiovisual Federation annual review for 2009 was published yesterday.

Not a good year in 2009, but things are looking up in 2010. The following from the executive summary.

This report analyzes the economic impact of a total of 257 audiovisual productions, the majority of which were completed in Ireland in 2009, comprising a total production value of €243.3 million. The report shows a drop in the production of feature films and independent TV, including major TV drama, but animation production shows a significant increase. Figures for 2009 show an overall decrease of almost 1.5% on the previous year, but our estimates for 2010 are showing a significant increase of 50%.
Irish Expenditure
The total expenditure on Irish goods and services arising from the audiovisual productions for 2009 was €157.2million which shows a decrease of €10.6 million (6%) for the sector. This decrease reflects the drop in the Irish spend within the Feature Film and the Independent TV production sector (see Appendix I). Although 2009 shows a slight drop in expenditure we estimate an increase of over 40% for 2010, which is a record for Irish expenditure.
The total number of Irish employees, in terms of placements, increased from 12,660 in 2008 to 14,198 in 2009, but the number of full-time equivalent jobs decreased from 1,631 in 2008 to 1,368 in 2009. This shows that more people were working in the sector but for a shorter time.

I believe this the reality of employment in the film and independent production sector, rather than the constant glib references to '6,000 jobs' or '10,000 jobs'.

I do wonder how the income tax and PRSI returns to the exchequer are calculated, and whether 1,368 'full-time equivalent' employees would make a significantly greater tax and PRSI return than the actual 14,198 part-time 'placements'?

Also, 1,368 'full-time equivalent' employees would have no periods of unemployment where they might be entitled to benefits or allowances, unlike the 14,198 'placements'. And, where the 'placements' are employed on a Schedule D basis, they could be entitled to a tax rebate at year end, in addition to the many expenses they are entitled to claim which would reduce their taxable income.

Benefits of Section 481 to the Exchequer
The gross gain to the exchequer is estimated to have been €55.5 million in 2009. This includes direct benefits in terms of PAYE, PRSI, schedule D and corporation tax, and indirect benefits in other forms of tax, including VAT and excises. The indirect benefits are taken into account by the multiplier effect of investment in audiovisual production.
The cost to the Exchequer of Section 481 is the tax foregone on the €106.6 million, which was invested under the scheme and is estimated to have been €43.7 million. This results in a net benefit to the state of €11.8 million in 2009.

What bears further investigation here is that in 2007, which was a particularly low year in terms of feature film production output (€19.3m as against €58.6m in 2009), the net benefit to the Exchequer is calculated at €18 million. This would seem to suggest that Exchequer benefit and levels of output in film production do not necessarily coincide, and that television production delivers a better return. Why might that be?

Saturday, December 11, 2010

The Tourist

€9.00 will get you a ticket for The Tourist at the nearest cinema to the Irish Film Portal. Take a left after the windmill and it's a twenty minute drive. You pays your money, as the saying goes, and you takes your chances.

The Tourist is one of those films that turns 100+ minutes of the viewer's life into a vacuum. The producers have employed the talents of many really creative people like chemical properties in a laboratory, but they cannot replicate someone else's successful experiment.

This is what Hollywood does. And when it does it in Europe, using the template of an original French film, it tends to stray so wide of the mark that you can't help hoping that a new generation of movie brats are plotting the downfall of the rickety Hollywood edifice with this century's Easy Rider.

As The Tourist unspooled before me I couldn't help being reminded of Leap Year. It wasn't the producers' signature title telescope. Nor was it that it also had a tacked-on British Oscar-winning writer in Julian Fellowes - Simon Beaufoy had a similar uncredited role on Leap Year.

Nor yet was it thst it also had a very talented European director in Florian Henckel von Donnersmarck, and a highly talented cast. It was a little of all of these things but mostly it was its attitude.

Take some scenic locations, add some funny accents and local colour, use a vaporetto instead of a Renault 4 and what's not to like?

Of course when you're a supposedly educated American character in Italy you speak Spanish, but who's being made fun of? Really?

Only Johnny Depp could sell that dummy and get away with it in Europe. In America, where they need a Paris, France navigation title, it's a joke on who exactly?

I don't know if France and Italy collaborated with The Tourist in the same way that Ireland did with Leap Year. We ponied up €13m for that cultural travesty but one of the the pay-offs is supposedly measurable in the numbers of tourists who will seek to experience the world of the film in this country.

Venice's Rialto Bridge and Inis Mór's Dún Aonghasa are two of the most iconic locations in Europe. Seeing them rendered down as a sort of national product placement is more than a little dispiriting.

Perhaps I should just get over it. Ok, any offers for Newgrange? Start with a meet cute on December 21st, call it Sunrise.

Tuesday, December 7, 2010

The day of reckoning...


The Budget for 2011 is due at about 3.45 this afternoon. What will it mean for film making in Ireland? At a guess, not a whole lot of change. The employment trump card has been played to good effect. Perhaps a 12% cut is in store for the Film Board, or maybe as much as 14% if the cut is averaged across capital and administration.

Whatever the outcome I expect there will be considerable emphasis laid on tasking the IFB with incentivising inward investment and leveraging spend in the local economy.

I don't think Section 481 will be affected, and if there are to be any changes (the rate at which tax relief is applied?) they may not be announced until the Finance Bill in January - political stability permitting.

The Arts Council seems likely to suffer a significant cut which would require a general re-prioritisation of its policies. A likely result is a diminution of funding for The Irish Film Institute, the film festivals, accessCinema, and the various film resource centres. It might also cause the Council to re-think both its limited commitment to the art of film making as a form of production activity and the amount of capital it has made available for film exhibition.

After... (later)

From the Dept. of Tourism, Culture & Sport
Culture & Film – allocation of €150 million
· An allocation of €65.2m for the Arts Council which is a 5% reduction on the 2010 allocation will enable it to maintain its major programmes and activities.
· The Irish Film Board allocation of €18.4m will enable it to continue to support indigenous Irish audiovisual industry and attract inward investment from international productions.
Minister Hanafin said “funding for the Arts Council will help sustain its main arts organisations, keep regional venues open and programmed and support festivals and touring. The Council supports over 50 venues, approximately 200 festivals and 400 arts organisations.
The Irish audiovisual industry is a positive force for change, as it is responsible for increased inward investment and providing high quality local employment - this year alone over 10,000 jobs in cast, crew, extras and post-production were supported on almost 50 film and television productions. The Section 481 Investment tax relief for the film and television production sector will remain in place.”

Minister Hanafin went on to say “the vast majority of writers, artists, sculptors and photographers who are currently availing of the Artists’ Exemption will still be covered by this provision – even with the reduction in threshold from €125,000 to €40,000 – which for a long number of years helped nurture new talent and give them a foothold to launch a career in their area of expertise.”

The actual 2010 outturn figures and 2011 budget for the IFB looks like this -
IRISH FILM BOARD Current Capital Total
(GRANT-IN-AID) 2,772 16,500 19,272 [2010]
(GRANT-IN-AID) 2,431 16,000 18,431 [2011] -4%

A very good result for the IFB. Even the 12% cut in current (administration) spending should be bearable, although it will be interesting to see how it is introduced by the agency.

It would be useful to get a breakdown on those 10,000 jobs. How long did they last? What was the average income? How much income tax was paid on foot of the 10,000 jobs? How many were single work opportunities? How many were multiple employments of the same individuals? How many of the jobs are derived in part from the TV license fee? How many are permanent jobs? How many are self-employed, and how many are PAYE workers?

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.

Wednesday, December 1, 2010

Anglo and Film

People in the film business will be aware of Anglo Irish Bank's involvement with film in Ireland over the years, although they may not be aware that it dates from as far back as 1990.

Anglo was a partner with the Irish Film Board in the Company Development Initiative (CDI) scheme which was intended to boost the development and business capacity of several production companies. The three-year scheme was announced in May 2001 with the IFB contributing €3.175m, Anglo contributing €1.9m, and the successful applicant companies contributing €1.27m.

The first five companies approved for CDI in November, 2001 were Magma Films, Element Pictures Octagon Films, Treasure Entertainment, and Little Bird, the latter including associated partners Comet Films, Fubar Films and Wildfire.

At the time Michael O'Sullivan, Senior Manager with Anglo Irish Bank, said, "We are pleased to be working with Bord Scannán na hÉireann/the Irish Film Board on the Company Development Initiative. This represents an important extension to our involvement in the development of Irish production companies and is an excellent opportunity to build on our film financing activities."

Interviewed by the Sunday Tribune O'Sullivan said Anglo was "involved in 16 or 17 productions, between section 481 tax-based investment, 'discounting' of presales contracts, which enables producers to release funds for production, and providing working capital. In the year to 5 April [2001], Anglo was involved in production activity with a capital value of nearly $100m."

The IFB announced a second phase of CDI in June, 2003, and the successful applicant companies were Subotica, Grand Pictures, Distinguished Features, and Cartoon Saloon.

Anglo is best known for its Section 481 financing activity, which I presume is ongoing. It claims to have raised in excess of $500m in Section 481 financing for film and television production in Ireland.

It has been involved in financing, among others, Intermission, Breakfast on Pluto, Tara Road, The Wind that Shakes the Barley, Garage, The Tudors, The Escapist, PS I Love You, How About You, Shrooms, The Clinic, and Triage.

To give some scale of the funding involved Anglo raised €21m from about 600 investors for the first series of The Tudors in 2006. It raised some €4m for the largely undistributed Triage. Section 481 investors would achieve a return on their investment of approximately €2,300, usually inside a year.

A recent report by Shane Phelan in the Irish Independent (November 26) states that former Anglo CEO David Drumm owes Anglo the sum of €8,414 in respect of a loan taken out to enable his Section 481 investment in Triage. I seem to recall that Sean Fitzpatrick, former Chairman of Anglo had a similar outstanding loan, perhaps not for the same production.

The Independent reports, Documents seen by the Irish Independent reveal Mr Drumm, who is filing for bankruptcy with liabilities of €10.26m, invested €31,750 in the company behind the movie, Darkroom Productions Ltd, in 2008. The investment was part-funded through a loan of €8,414 from Anglo, which was due to be repaid nine months later. However, despite securing a significant tax break because of the investment, Mr Drumm never paid the money back.

What's interesting about all of this is what it reveals about the mechanics of the Section 481 scheme, as it is worked by the Irish financial services sector. These are the type of people availing of the scheme and all they need in order to profit from it is a certain level of tax liability, plus a loan. Not even the cash in hand.

Where's the risk in that?