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House of Representatives Standing Committee Communications and the Arts

Attention: Mr Luke Howarth MP Submission for the Inquiry into the Australian Film and Television Industry

Terms of Reference Factors contributing to the growth and sustainability of the Australian film and television industry

SUBMITTED BY: Pty Ltd 62-68 Church St, Camperdown NSW 2050 Introduction

Flying Bark Productions (FBP) is ’s oldest independent production company specialising in the production of animated, and to a lesser extent, live action original content for children and family audiences.

In this submission, FBP’s aim to highlight the unique position the company occupies in the Australian film and television industry as the largest SME in the children’s content space and perhaps on some measures, in the greater domestic film and television industry.

FBP aims to present the company’s cultural and economic value including some case studies of key projects which have driven success in the domestic and international markets. In addition, we have presented a summary of FBP’s strategic plan for sustained growth for the future and the key factors contributing to, or hindering the implementation of this plan and realisation of company goals.

FBP is a proud member of Screen Producers Association (SPA) and the Managing Director, Barbara Stephen has recently been appointed to the SPA committee to represent the unique interests of children’s content producers in the sector. As a member of SPA, FBP fully endorses the recommendations set out in the its submission and urges the committee to recognise the role SPA plays in voicing the commonalities for the independent production SMEs. There are many alternative perspectives regarding priorities for industry, but there are clear commonalities and FBP believes that SPA has performed a critical function in distilling clear recommendations with a view to growing a stronger industry for production businesses and members of the associate organisations. Company Profile:

FBP (formerly Studios) has been in operation for more than 40 years. The company has produced close to 400 commercial hours of iconic Australian content across, television, film, web and most recently exploration into the apps and entertainment virtual reality industry.

With an impressive historical library of titles spanning from the early 70s including Dot and the Kangaroo, the original Movies and Series, Flipper, and The Magic Riddle Flying Bark has successfully navigated its way into a modern future with recent domestic and international successful stories; The Great Adventures of Tashi (ABC, KIKA, nominated for an AACTR and Logie) which is based on the highly successful, Australian classic book series created by Australians by Barbara and Anna Feinberg, Maya the Bee Movie (staring Jackie Weaver, Kodi-Smit McPhee, Richard Roxburgh, Miriam Margolese, Justine Clark), CGI (staring Barry Humphries, , , Debra Mailman, Barry Otto and Richard Roxburgh).

In addition to these animation titles, Flying Bark is wrapping up on its first live action science-based, narrative sitcom, Oh Yuck (Channel 7 featuring the Umbilical Bros). FBP is also currently producing a modern-day CGI series to follow the local success of the film; The Adventures of Blinky Bill - an adaptation of the feature story with well-known Australian comedian, Akmal Saleh as a lead voice. FBPs Snapshot:

• Flying Bark has produced 6 x long-form TV series, 2 feature films and 4 service work projects. During this period Flying Bark has employed in NSW on average per year: - 75-100 unique employees (on fixed-term employment contracts) - 10 permanent full-time staff • FBP Feature Films (Maya the Bee Movie, Blinky Bill Movie) have sold in 176 countries and 100 countries respectively • On average FBP TV series have sold in 100 countries • FBP has engaged in 4 official treaty co-productions with Canada, France (2) and Germany. • Service projects produced for (country origin): China, USA, Germany & Australia Flying Bark Productions within the Industry Context

Unique position

FBP is predominantly an animation company; our business intersects the television and film industries as a creative independent producer and also with the high-tech industries in a highly competitive international environment where innovation is the norm and smart software-based solutions, atomisation processes and data wrangling is imperative for achieving quality, value and sustainability.

FBP is one of the few production companies in Australia which produces IP- owned television, web series and feature films as well as (more recently) animation service productions or fee for service work (defined as productions with little to no intellectual property ownership by FBP). This diversification into the broader creative service industry has enabled the company to provide long- term employment, through a sustainable pipeline of projects. The higher budgets with foreign investment and local PDV Tax Offset has provided opportunities to expand creative and technical skills and improve infrastructure, which was not otherwise feasible under the traditional sole-IP production model. FBP cannot overstate the importance of service production without simultaneously recognising the real opportunity for growth in our business, which is the IP production.

Factors impacting long-term growth and sustainability:

Original Content (IP) Verses Service Production:

The real value for SMEs operating in the film and television industry beyond fees for production (which are often limited being invested to finance production) - is through significant ownership of film assets and participation in future sales revenues. It was a masterstroke of the Australian Government to provide equity/ownership opportunity to local producers through the administering of the Film/TV Offset tax systems for TV and Feature Film (20 and 40% respectively). It’s in the Government and industry’s shared interest to further protect that equity from being traded to international investors and financiers.

FBP has enjoyed significant success in exporting its content across the globe, which illustrates an international demand for quality children’s content. To this end an ability to reach and connect with global audience through export of Australian content presents tremendous opportunity for strong economic growth and profitability. In addition, children’s content provides licensing and merchandise opportunity and additional revenue streams from local and global markets for publishing, toys, brand partnerships for specialised products.

Conversely, larger studio films, while supplying short bursts of investment in the local economy (but not always local labour support), do not offer the same potential for long-term, sustainable growth within the sector. Further, the stability of these productions is susceptible to shifts in foreign currency, competing incentive offered by international Governments, and lower labour costs and business overhead in emerging economies.

In addition, these productions often have a ‘flow on’ effect of driving up labour costs and impacting supply of creative and technical personnel to work on local production (feast and famine).

Accordingly, policy makers should be cautious to promote foreign production ahead or in place of local interest, as history has demonstrated the US studios tendency to abandoned ship for places with higher incentives, better value for dollar and flexible labour conditions.

Official Treaty Co-Production Models:

FBP has benefitted from an ability to finance production using official treaty co- production models particularly in feature film production.

Official Co-Productions provide a unique opportunity for producers to share finance, talent, expertise and ensure stories resonate with a broader audience.

Commercially co-productions tend to provide a wider platform for exploitation (sales/release) than locally produced content, as finance requires commitment to significant distribution in at least two or three markets (i.e depending on number of co-production partners). This further provides uplift to sales accompanied by greater confidence from buyers in the broader market.

Finally, the benefit of official co-production with any EU country is the important EU classification, which allows the content to avoid foreign content restrictions (i.e. France limits the level of foreign content, but an EU classification overrides this restriction) improving sales potential as local distributors can also access grants for marketing these films/shows reducing their risks.

Growth Opportunity: The Global Market

Domestic success is always the first step and necessary ingredient for realising the cultural and commercial benefits of local content production. However, the real potential for economic growth is in capitalising on the enormous wealth of the global content industry and the vast increase in buying entrants to the market, many of whom require non-studio (independent), alternate content. Recent and well publicised success of Australian content in global markets, coupled with highly competitive conditions for production and an ever- improving track record – is driving very strong export potential. “Brand Australia” is reputable, and the market has proven that localised quality brands enjoy sustained success - the UK or Denmark being strong examples of the impact quality local production can have on the “image and success” of an entire film/TV industry in the global setting. Australia punches above its weight, but there is undoubtedly room to do better. Flying Bark is one of the few producers attending TV, Film and kids-specific markets – and anecdotally we can report the volume and calibre of engagements with significant participants from North America, Asia (specifically China and Korea) and Europe has markedly changed.

Further, FBPs creative service business involving work with larger international studios has allowed for greater visibility for best practice and storytelling in mature markets where the future revenues for IP productions will be realised. This is having a positive impact on our ability to produce quality content for our local productions (IP). In other words, a diverse mix of production and partnerships has enabled our company to expand and improve the overall the commerciality of our IP product through achievements in quality, track record and value. FBPs value and success trajectory in the local landscape:

The cultural value of FBP’s projects for our local audience is paramount. We believe it’s the Australian authenticity of these works which makes them distinct in, and desirable to, the international market.

While animation is expensive, it is the most “exportable form” of film and TV production, especially for children, as language dubbing allows for localisation at minimal cost making it attractive for the international buyers.

This means that animation producers most likely have better access to international funding for productions than they do funding within Australia, and may then be faced with pressures to “internationalise said content” which could result in reducing the Australian value of that content.

This is not to say that all animations are faced with this dilemma. FBP specifically has set-out to be a market leader in this space by ensuring all series and feature films we produce are produced with majority Australian accents/talent, and writing and directing talent (regardless of co-production points systems) - and we are punching well above our weight by maintaining creative control on all our productions, at great expense.

We see this creative control as both a responsibility, and a benefit in distinguishing our content in the international market. We have found that the Australian brand in the children’s content space is highly regarded and is now a selling point internationally.

Cultural tests centre on creative contribution and control (key roles), voice acting representation (which could potentially be further emphasised), characters, settings, and relevance for audience, among other things. In this way, the regulation is there, but perhaps the settings need to be tweaked/evolved through the ACMA to ensure true measures stay relevant for our local audiences.

Furthermore, we need to be careful about what we as content producers and regulators deem to be considered “Australian”, and take a broad, diverse and open-view on story telling in the children’s content space.

Most recently, FBP received feedback from a Government adviser who expressed concern that some local animation is “abusing the system” by not portraying relevant Australian values – because the shows they are making are about spaceships and other fantastical elements. Such a narrow assessment of what constitutes Australian content is concerning and arguably contrary to popular view, as programs containing “fantastical” and sci-fi elements have historically enticed loyal local audiences. Much loved Australian projects like Tashi, Babe, and have proven there is national interest and love for such characters in fantastical worlds – and that these fantastical characters and worlds can still be regarded as quintessentially Australian in spirit. We have to be wary of placing such a narrow framework of what is or isn't 'Australian' in nature, and produce content which focuses on our core values and ideals and reflects the diversity of identities that makes someone Australian. What is critical in these programs is that we “hear or see” Australians on our screens, and that our storytelling reflects our sense of humour, values and diversity in characters and settings wherever possible.

Our children’s programs should unquestionably be reflective of the larger society we want to promote, and that’s an opportunity and not a burden for producers and broadcasters alike. The more relevant and authentic the content, the greater return will be, as far as ratings/program views and the greatest chance of success.

In a social landscape which has eroded the community’s trust in public personalities – children’s programs need to offer our younger communities and their families safe places to enjoy entertainment designed specifically for them in the social context they are living in. FBP's Economic Value:

1. Current Project Budget & Finance Data:

Total Production Budgets (73.2 million) last 5 year period.

Project Mix

• rv series

• Movies 52% • Service work

TV Series Financing

• Domestic market

• Screen Aust direct

48% • Screen NSW direct

• Producer offset/POV (indirect)

• International & equity investment Feature Film Financing

2%

• Domestic market

• Screen Aust direct

• Screen NSW direct 32% • Producer offset/POV (indirect)

• International & equity investment

Service Project Financing

• Domestic market

• Screen Aust direct

• Screen NSW direct 36% • Producer offset/POV (indirect)

• International & equity investment 2. FBP’s Employment and SME Value:

FBP has an average annual employee base of 75-100 staff and is looking to grow this two-fold within the next 12 months. The diverse mix of our longer-term employment profile includes professional services (legal, financial and executive), creative (in-house writing and development staff, direction, storyboard and design teams), technical (animators, software developers, engineers, data wranglers, systems administration and specialised hardware technicians) and project management and post-production personnel.

Unlike the live action industry, content is created using our facility’s pipeline and specific expertise with very limited reliance on contractors who own their own equipment and technology. Therefore, infrastructure, R&D and sustained contracts for key technical and production staff is imperative to maintaining the unique and specific “know-how” of our business. The labour market for the CGI/Visual Effects Industry is extremely competitive and due to past feast and famine trends, a lot of key talent have migrated to U.S, Canada and the UK. Flying Bark also struggles to secure talent when larger studio films are saturating the local market in companies like , however – this is a good problem to have. FBP recognise that Governments’ (state and federal) renewed commitments to supporting vocational training, job placement programs and upskilling in the high-tech space but the company is cautious about planned, future growth because of the current limitations in access to available talent.

FBP over the course of many years has commissioned and collaborated with hundreds of small to medium creative and technical service providers and estimates an annual service commitment to around 60 smaller business and individual contractors.

2. FBP’s Commitment to continued investment in innovation, technology and skills development;

- FBP’s is a part of UTS’ industry advisory committees for the Animation course and greater Design Faculty for the past 3 years. FBP has employed an average of 2 graduate students each year and will increase this number over the next 12 months as courses are refined for industry needs. - FBP is engaging with schools and universities in QLD and Victoria and hopes to broaden the range of engagement to better align industry/education objectives. - Technology and innovation: FBP has developed a smart, remote worker pipeline, which has facilitated employment of animation and technical crew throughout Australia working in regional NSW and other States and Territories. This is supported by a date cloud storage and render facility and proprietary sophisticated 3D tracking software. FBP plans to continue investment in this system in order to upscale production capabilities as larger CG projects commence in the next 12 months, improving access to talent outside the highly competitive area. - FBP has commenced investment, education and R&D programs in the emerging Virtual Reality and Augmented industry and plans to build a 10- person dedicated team for the design and production of entertainment and other applications for this technology with a keen focus on safe use for younger users.

4. Project Case Studies:

Australia/German Treaty Co-Production

Maya the Bee Movie (Maya), is a theatrical feature film produced as a 50/50 official Australian / German treaty co-production, and its success has been well regarded both domestically and internationally. The strengths of the film rest on the IPs origins as a classic, well-known character and the unique, female protagonist’s story in what is usually a boys-centric film market. Audiences in Australia flocked to the film and with a combined international box office of AUD38 million, it is the second highest box-office grossing film produced with the assistance of Screen Australia since its beginning in 2008 (second only to recent Lion).

Maya has been sold in 176 countries (leaving only a handful left). Its commercial success has since attracted significant international investment for a sequel co- production (Australia/Germany) and a further commitment for a 3rd film.

Blinky Bill CGI (modern) Movie and TV Series

Blinky Bill’s successful, iconic place in the historical fabric of the Australian cultural landscape has captivated audiences across all generations. Following the success of the Maya the Bee film, FBP recognised the potential inherent with bringing to life a modern take on a much-loved classic and left little doubt that Blinky Bill in CGI could deliver a compelling story for the newest generation. Finding support for a locally produced, wholly Australian production was challenging and local distribution company, Studio Canal, took up the challenge which eventually triggered significant investments from multiple sources in Australia and overseas. The film was produced for close to AU18 million and employed hundreds of local artists in a 4-year effort. The film reached close to 4 million in the Australian/New Zealand box office and had limited theatrical releases in most major mature markets including the UK and North America. Blinky has since sold in over 100 territories and sparked significant interest in Germany, where local public broadcaster co-commissioned a follow-up series with Channel 7, which is wrapping up. Company’s Strategic Plan (Summary)

- Continue to create highly relevant, quality content for Australian children and family audiences across multiple platforms and mediums: maintaining significant creative and commercial local interest (talent engagement, rights and future revenue opportunities). - Pursue and maintain as priority, the best creative, technical and business practices to ensure Flying Bark’s international competitiveness and thereby offering sustainable unique investment opportunities for attracting international partnerships. - Further diversification of creative and technical services beyond traditional forms of production, including software development and licensing, isolated post and digital effects services for larger studios including emerging industries (China, Korea, South America). - Further engagement with larger partners in emerging markets (through service and co-production opportunities) - Expansion of production collaborations, exploitation (sales and licensing exports) and service opportunities with mature markets (U.S, UK and EU Block) – through promotion of competitiveness, track record, secure investing environment (removal of red tape, co-production review) - Securing long-term international partnerships (broadcast, platform, distribution and private equity) for content funding across film, TV and multi-platform production including emerging virtual reality and augmented reality experienced for younger audiences. - Expansion of licensing and merchandising (additional revenue streams) for content, including branded content partnerships with corporate enterprise (domestic focus). - Collaborate with local Free to Air commercial broadcasters to improve success of local content on local services.

It’s relatively early to judge the success of the mixed production business model, but the signs are very promising as far as long-term sustainability and realisation of business growth objectives. Sustainability Key factors contributing to our Economic success:

• High quality, relevant Australian created and produced content, which prioritises success with local audiences as a viable springboard into the global market. • Strong, reliable and consistent local partnerships across broadcast/film distribution • Strong, reliable and diversified international sales and distribution partners and; • Ideally; strong licensing and merchandise agents and broader corporate partnerships domestically and globally. • Competitive budgets, secure financing including a sustainable mix of private, market-place (broadcast or distribution) and Government (indirect and direct where relevant) • Strength of highly skilled creative, technical and production teams with proven track record and ideally long-term employment with the company. • Innovation and technological advancements have dramatically improved our ability to compete with larger companies in mature markets at competitive price – continual license updates, hardware upgrades and proprietary software developments are essential to survival in the industry. • Consistent and reliable regulation and intervention (despite changes in Government). (Conversely uncertainty and department-led changes without consultation or transparent process and due implementation timeframes have caused major problems in the past). • Decreasing and stabilisation of the Australian dollar against US and other major currencies • Increase of the PDV tax offset to 30% of local spend and a lower entry threshold (i.e. moderate budget projects are eligible). • Further emergence of global players in the market is both a contributor (more buyers, better conditions for sale) and competitor/barrier for success (illegal copyright management, cheap YouTube content can attract large audiences and even deter audiences away from traditional broadcast/platform viewing - although there are strong reports to suggest, quality long-from content is still growing year on year). Key Barriers to success:

• Major reduction in local broadcast investment from all broadcasters including commercial and public (known as license fees) for television series. Specifically, in the past 3 years, license fees have fallen from 115k to as low as 40k per commercial half hour (costs are about 250-300k per half). • Lower license fees have resulted in little to no access to Screen Australia direct investment funding because of minimum license fee eligibility criteria (minimum 100-115k from one or multiple source broadcasters). • Smaller investment budget at the ABC and more restrictive rights terms (impacting future sales to other platforms by longer exclusive windows and demanding additional rights beyond tradition Free To Air and Catch Up services. • Additional rights for FTA broadcasters (Nine/ABC/Seven) were not supported by additional license fees (making these less commercial deals for FBP). • Greater number of international lower-cost production partners in emerging economies (greater complexity, higher risk and more overages caused by issues with communication, schedules and delivery). • Less creative and quality control and more pressure to “internationalise content” due to global market demands/sales requirements. • Co-production deals which force FBP to give up equity due to smaller overall contributions to production finance (less domestic finance, requires more international finance and ownership/equity is decreased). • Hard-wired union increases for writing, acting and crew despite downward pressure on budgets and federal and State funding. • Reductions in direct funding for local content in both Federal and NSW State agencies. • Long application periods and administration of PDV offset (not Producer Offset) – up to 12 months in some cases without clear timeframes. This has a very negative impact on our ability to maintain strong relationships with 3rd party financiers, particularly from international companies – and creates general lack of confidence. • High demand on upgrading hardware, software and technical pipelines and finding suitable. • Access to senior, mid-level and junior talent across all technical and animation roles in the face of increased CGI service work in Melbourne, Brisbane and Sydney. This will become even more competitive as US companies move productions to Australia as part of a larger push by the federal and State Governments. • Greater attraction schemes, larger federal budgets in competing countries (U.K, Canada and now many of the emerging economies including China, Korea and Latin American counties). • Vocational training is expensive and not well-supported, and more programs and incentives are required to boost private enterprise programs and support graduate programs in the industry. Conclusion:

FBP recognises the committee has an enormous task in reviewing representations from broadcast, the independent sector and associative industries. This submission aims to provide a lot of information and we invite the committee to contact the Managing Director on the details provided is further information is required.