Building Sustainable Film Businesses: the Challenges for Industry and Government
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Building sustainable film businesses: the challenges for industry and government An independent research report from Olsberg•SPI sponsored by Film i Väst, PACT and the Swedish Film Institute June 2012 This report was prepared by the UK-based international strategy consultancy For further information please contact: Jonathan Olsberg Olsberg • SPI Suite 36, Pall Mall Deposit Studios 124–128 Barlby Road London W10 6BL United Kingdom t +44 (0)20 3176 4844 e [email protected] www.o-spi.com © 2012 Olsberg•SPI Building sustainable film businesses: the challenges for industry and government An independent research report from Olsberg•SPI sponsored by Film i Väst, PACT and the Swedish Film Institute Building sustainable film businesses: the challenges for industry and government 3 Foreword from the sponsors The challenge of creating sustainability in the Tomas Eskilsson independent film sector is an issue for every Chief Executive country, not just Sweden and the United Kingdom. The structure and economics of film production Film i Väst are not particularly well suited to building sustainable companies wherever one is situated around the world. Although this is a problem easily recognised, it is far from clear how to address it let alone devise solutions, whether for the companies John McVay themselves or those public sector agencies which Chief Executive support the film industry. Producers Alliance for Cinema and Television So when we were approached by Jonathan Olsberg with the request to sponsor a new, thorough study into the topic we immediately saw an opportunity. Not just to get the report written, but also to stimulate a discussion on a much wider platform both within Sweden and the UK and around Charlotta Denward the globe. Director of Production and Promotion We hope that you, the reader, find the report to be Swedish Film Institute a useful contribution to the debate. We certainly do and we are eager to engage in that debate with you. Section 10 of the report contains information about our organisations and how to contact us and we look forward to seeing the dialogue expand. Building sustainable film businesses: 4 the challenges for industry and government Introduction from Jonathan Olsberg Ever since we opened our doors in 1992 the SPI has been examining the issue of sustainability question of how to find the elusive solution to for many years on behalf of its clients wherever they creating viable, sustainable, independent film are around the world. This has involved advising businesses involved in feature film development individual companies on their plans for growth and and production has been constantly on our minds. helping public agencies support independent film Is the idea of a healthy, vibrant, independent film businesses without making them totally dependent sector a holy grail that can never be achieved? How on public subsidy. do film companies become successful, wherever The problem is a perennial one, and will not be easy they are situated around the world? And how can to solve, particularly in the current financial climate. governments adapt their policies to achieve greater However, it is the tough economic environment sustainability in the light of uncertainties over itself which has led us to believe that now is financial realities and digital change? absolutely the right time to look afresh at the issue We wanted to take a fresh look at these issues and of sustainability. The global financial crisis has led to provide our own thoughts and hopefully some very deep cuts, in many countries, in public funding. solutions, hence this report. So perhaps now it is even more relevant to stimulate We are hugely grateful to our three sponsors, Film renewed efforts to help the film industry establish a i Väst, PACT and the Swedish Film Institute for their refreshed business model; a model which will enable interest in the topic and willingness to make this successful companies to leverage investment from report possible, although we take full responsibility the private sector and therefore lessen dependency for its contents. We thank them for permitting us on the public purse. to express our own opinions and perspectives and hope they are pleased that they did so. Do they endorse all of our views – you’ll have to ask them! Building sustainable film businesses: the challenges for industry and government 5 Contents Section 1.0 Section 5.0 Section 9.0 Executive summary 8 Public support for film 19 Where do we go from here? 35 1.1 Introduction 8 5.1 Current trends in incentive 9.1 Achieving ‘investment 1.2 Research and information ‘rivalry’ 19 readiness’ 35 provided in the report 8 5.2 Tendency to focus on projects 9.2 Think company not project 35 over companies 20 Section 2.0 Section 10.0 Building sustainable 5.3 European Competition Policy About the sponsors 36 film businesses 9 (State Aid) 21 2.1 What is a sustainable film Section 6.0 Section 11.0 business? 9 Success factors for public systems 22 About Olsberg•SPI. 37 2.2 Definitions of sustainability 9 6.1 A holistic range of initiatives with consistent levels of support 22 Section 12.0 Section 3.0 Appendices 39 Success factors for building 6.2 Project-based support that sustainable film businesses 10 motivates activity by 10.1 Australia 39 rewarding success 23 3.1 Sharing in downstream 10.2 Brazil 41 6.3 Where broadcasters are revenues generated by 10.3 France 43 mandated to invest in successful content 10 independent content 25 10.4 Germany 45 3.2 Achieving diversified 6.4 Uses of levies and quotas 25 10.5 Singapore 46 revenue streams 11 6.5 Systems that combine well 10.6 Sweden 48 3.3 On-going relationships with with those in other countries 26 10.7 United Kingdom 50 successful talent 11 3.4 Strong, dynamic leadership 12 Section 7.0 Thanks 54 3.5 International and corporate State of the markets 27 business relationships 12 7.1 Understanding today’s 3.6 A supportive and consistent audiences for film 27 public policy environment 13 7.2 Global markets meta-analysis 28 3.7 Having more than a fair share 7.3 Distribution trends 28 of luck! 13 7.4 Production trends 28 Section 4.0 7.5 Public source funding 30 Why Governments invest Section 8.0 in the film sector 15 How digital innovations are 4.1 Production spend: changing the film business 31 the ‘Multiplier Effect’ 15 8.1 Understanding fast-moving 4.2 Employment generation 16 changes in consumer 4.3 Skills and talent development 16 behaviour 31 4.4 Direct investment return 17 8.2 New opportunities to create 4.5 Export earnings 17 relationships with brands and the advertising world 32 4.6 Increased tourism 18 8.3 Evolving patterns in windows, 4.7 National brand building 18 formats and other forms of 4.8 Film as a driver of the ‘distribution’ 33 creative economy 18 8.4 Breakthroughs in digital production 34 Building sustainable film businesses: 6 the challenges for industry and government List of tables Figure 1: Company strategies - success factors 14 Figure 2: A comparison of selected rebate incentives targeting international mobile productions 19 Figure 3: Support systems success factors - project based support 24 Figure 4: US box office gross 29 Figure 5: Filmed entertainment revenues by country/region 2010-2015 30 Figure 6: Distribution windows (months after theatrical) 33 Building sustainable film businesses: the challenges for industry and government 7 Section 1.0 Executive summary 1.1 1.2 Introduction Research and information provided This report presents a case for a renewed effort, in the report by film production businesses in tandem with the In addition to the chapters which address those screen agencies that support their activities, to focus themes mentioned above, the report also contains policy on building sustainable film businesses. Such some research and other information about subjects focus is already evident in a few such organisations that are relevant to the core goal of company and indeed (in our view) the sponsors of this report sustainability. This additional research we hope will are among those that recognise the benefits of be helpful as background to the main findings of helping companies achieve long term success and this report. develop robust, sustainable business models. They include: Regrettably, we cannot offer the reader one chapter which neatly summarises all the answers. This is l A discussion and explanation of the many because there is no ‘one size fits all’ solution. So benefits that accrue to governments as a result it may be necessary to dig around a little to find of having a thriving film sector indicators of solutions that could apply in the l A brief examination of current trends that can be particular country or region in which the reader observed in public policies aimed at the sector is based. l A high level analysis of the state of the global Some common themes do emerge however and markets for film and some of the developments they are analysed more deeply in the following that are occurring chapters, such as: l A look at how digital innovations are continuing l The suggestion that owner/managers of film to change the film producer’s options and businesses might in future think of themselves opportunities, and finally not as people who make great films, but as l An examination of conditions in seven countries people who run businesses that make great films where we have observed some of the most l The fact that there is much talk about interesting policy and business tendencies: sustainability without necessarily defining what is Australia, Brazil, France, Germany, Singapore, meant by it – two different definitions are offered Sweden and the United Kingdom.