AN APPRAISAL OF THE FINANCING OF THE MODERN AUSTRALIAN FEATURE Fil.1-1 INDUSTRY, THE ROLE OF THE AUSTRALIAN Fil.1-1 COMMISSION AND THE DEVELOPMENT OF PRIVATE ENTERPRISE.

briann kearney M.Gen.Stud. - 9100

Supe~visor : Dr. Peter Gerdes AN APPRAISAL OF THE FINANCING OF THE MODERN AUSTRALIAN FEATURE FILM INDUSTRY, THE ROLE OF THE AUSTRALIAN FILM COMMISSION AND THE DEVELOPMENT OF PRIVATE ENTERPRISE.

briann kearney Master of General Studies ... 1985

G) briann December, 1984 Brief :

This paper covers the rise of the modern Australian feature film industry from that beginning in the late 1960's and the relationship of the Australian Film Commission to this rennaissance. It touches briefly on the period prior to 1969 as it relates to the ownership structure of the traditional media owners with a comparison of the foreign owned film industry. In turn this brings the former, i.e. the modern Australian Film industry and the Australian Film Commission, plus the latter, the traditional media owners and the foreign film distribution/exhibition domination, together in the 1980's development of private enterprise in the Australian film industry of today. This is to certify that this paper has not been submitted to any other institution or university for consideration by them in either a diploma or degree course. I hereby declare that this paper is my own work and that, to the best of my knowledge and belief, it contains no material previously published or written by another person nor material which to a substantial extent has been accepted for the award of any other degree of diploma of a university or other institute of higher learning, except where due acknowledgement is made in the text of the paper. briann kearney M.Gen. Stud. - 9100

AN APPRAISAL OF THE FINANCING OF THE MODERN AUSTRALIAN FEATURE FII.11 INDUSTRY, THE ROLE OF THE AUSTRALIAN FII.11 COMMISSION AND THE DEVELOPMENT OF PRIVATE ENTERPRISE.

In appraising the feature film industry it should be briefly

established that a feature film is defined as a one off production

shot on 35 mm film which is approximately 90 minutes in duration

and is intended primarily for cinema exhibition. There are, of

course, exceptions and a feature film can be shot on 16 mm or

70 mm (or Super 16 for that matter) and it can be either shorter

or longer than 90 minutes. International standards define a

feature film as 60 minutes or longer but there appears to be

no universal agreement on the issue. However, a completed film

does comprise of two distinct properties

a) A visible master - negative and release print of the film

and

b) The invisible property rights vested in the producer by the Copyright legislation in Australia and by the 1. International Copyright conventions.

Even in 1984 the Australian feature film industry still constitutes

the smallest and, perhaps, the least stable sector of our country's

industries. One of the reasons for the instability of the film

industry is the difficulty experienced in predicting the revenue

earning performance of a film at the production planning stage

and this sets up one of the major sources of uncertainty in the

commitment of investment funds. More especially because the

1. Kirsten Schou,The Structure and Operation of the Film Industry in Australia .. A Resources/Research and Survey Unit Publication, April, 1982, p.7 Page 2.

commercial value of a feature film, in contrast to most other products, is not determined by the physical dimensions of a tangible property but by the revenue earning potential attributable to its intangible qualities, it is extremely difficult to predict at such an early stage the commercial performance of any film.

Only about one in seven Australian feature films recoups its production costs. However, the modern Australian film industry is still young and fragmented and even in the eighties the Australian

Film Commission (known as the AFC or the Film Commission) points out that our film industry is, indeed, a fragile industry. There is little developed infrastructure and, therefore, no natural continuity. . o f pro d uction.. 2 · Without careful nurturing by the AFC and without the support of current tax concessions to private enterprise there is little doubt that it would not, could not, survive.

Historically, Australia has been credited with making possibly the world's first feature movie, THE TRUE STORY OF THE KELLY

GANG (1906), with a running time of more than one hour. Yet there has never been an industry here to equal that in Britain or Europe, and certainly none to come anywhere the scale of the Hollywood film industry. Of course, there have been highlights over the decades with films such as Raymond Longford's

THE SENTIMENTAL BLOKE (1919), Ken Hall's ON OUR SELECTION (1932)

and Charles Chauvel's 40,000 HORSEMEN (1941), all films made under

2. 1982 Australian Film Commission Annual Report, p.vii Page 3.

the growing foreign control of the Australian film industry through an oligarchical distribution/exhibition system - a

situation which, to a large extent, still exists in 1984.

It was this dual control of cinema distribution and exhibition that stiffled the indigenous feature film industry from the early twenties until the seventies, and, surprisingly enough, still has the power to stiffle that same industry today.

The film industry in Australia is highly concentrated and to a large extent vertically integrated with the major Australian chains as well as with major international film corporations.

Even though the distribution and exhibition sectors in the film industry in Australia have become more competitive and less restrictive over the last decade, in terms of economic models of market structure the distribution/exhibition sector presents a case of oligolopoly, a situation certainly not allowed in, for example, the United States since the Paramount Decree in 1952.

All film industries throughout the world operate on three levels

1. Production

2. Distribution

3. Exhibition

Production consists of a producer making a product, i.e. finding a script and investors, organising filming, pre-production, production,

and post-production work and then finding a distributor for his Page 4.

product.

Distribution is the stage where an agent, the Distributor, on behalf of the Producer, disposes of the final product to as many outlets as he can find.

Exhibition is the outlet where the product is shown to as many· viewers as possible.

Until the early 1920's Australia had a film industry that incorporated all three aspects of filmmaking to the benefit of the Australian producer. However, competition from overseas productions began to become very apparent by 1920 and overseas producers had agreements or links with local distributors. The

1928 Royal Commission into the Motion Picture Industry agreed in its findings that most of the distributors in Australia were connected with American producers, yet it it was suggested by the Government of the time that the reason why Australian films were not enjoying the same popularity and financial return as their American counterparts was because of their lack of appeal to Australians, and their lack of 'professionalism•. 3 • There was no mention of the fact that Distributors, who filled the central role in the industry, were linked with overseas Producers and that they obtained the product from these Producers and then hired it to Exhibitors with whom they were also linked through financial agreements. Yet, if a distributor is linked with a producer he is far more likely to push the product of that producer with whom he is financially tied than he is to spend money buying

3. J. Tulloch, Australian Cinema - Industry Narrative and Meaning, George Allen & Unwin, Aust., 1982, pp.111-112 Page 5.

and promoting the product of someone to whom he has no obligation of any kind.

Therefore, from the 1920's until the late 1970's, three overseas owned film production combines controlled almost the entire

Australian distribution/exhibition scene thus assuring their own products of both distribution and exhibition throughout Australia to the almost total exclusion of Australian feature film. The three companies who won and held this position for so long were

1. The Rank organisation

2. Twentieth Century Fox

3. Warner Bros.

Up until the beginning of the eighties the ownership link-up between producer/distributor/exhibitor appeared in the following way :

PRODUCER DISTRIBUTOR EXHIBITOR

RANK GUO Distributors CIC .. GREATER UNION

20TH CENTURY FOX Fox Distributors .. HOYTS

WARNER BROS. Village International Village Distributors .. VILLAGE

UNITED ARTISTS United Artists .. HOYTS

By 1981 after changes within the structure of the producer/ distributor/exhibitor establishment, the situation was as

follows : (See over) Page 6.

PRODUCER DISTRIBUTOR EXHIBITOR

RANK · THORN-EMI WALT DISNEY GUO Distributors .. GREATER UNION

20TH CENTURY FOX Fox-Columbia Distributors •. HOYTS

WARNER BROS. Roadshow Distributors ~. VILLAGE

PARAMOUNT UNIVERSAL MGM CIC •. GREATER UNION

AVCO-EMBASSY Hoyts Distributors .. HOYTS

The 1984 ownership links of the five major domestic distributors

of Australian produced feature films are -

GUO DISTRIBUTORS Fully owned by GU Organisation

FOX-COLUMBIA Wholly owned by 20th Century Fox Film Corp.

ROADSHOW 1/3 owned by Village 1/3 owned by GUO The remainder held by various shareholders

CIC Wholly owned by Paramount and Universal Pictures.

and the ownership links of the three major domestic exhibitors

of Australian produced feature films are -

GREATER UNION 50% owned by Rank 50% Amalgamated Holdings

HOYTS For a number of years Hoyts was owned by 20th Century Fox but subsequently it was bought from them by Aetna Insurance Group which in turn sold it in June, 1982 4. to the Lieberman farmily of Melbourne.

VILLAGE 1/3 owned by GUO 1/2 owned by Positive Investments The remainder held by Australian shareholders

4. Malcolm Wilson, U.S. Owners Sell Hoyts for $4Om, The Sydney Morning Herald, 30th June, 1982 p.2 Page 7.

United Artists, a small production company in comparison with

'the other producers, continued to supply films to Hoyts under the name United Artists even though it was taken over by M.G.M. in 1981.

It is also noted that from March, 1982 Paramount, Universal 1

M.G.M., UA and the distributor, CIC, all operate under the name of United International Pictures (UIP).

There are, of course, less major Australian-owned independent distributors and independent exhibition outlets. For example,

Seven Keys is an Australian owned distribution company. However 1 it does have close ties with the Hoyts exhibition chain and thus it is limited in the type of film it can, and will, handle.

The films that they distribute are required to fit in with the image of the 'commercial' product demanded by the Hoyts

Entertainment Centre-type exhibition outlets.

Filmways is an entirely independent Australian owned distribution company and is able to handle work of independent producers because it can also offer distribution through its own exhibition outlet - THE DENDY group. This company has often assisted the

Australian filmmaker and an example of this can be seen with

FAST TALKING, produced by Ross Matthews and directed by Ken

Cameron. Filmways are distributing the film after two major

distributors turned it down on 'immoral grounds'. Cameron Page 8.

points out in an interview that 'none of the major distributors

'have any real commitment to Australian cinema. Fear of commercial

failure is the one thing driving the industry at the moment. It's

not ea 11 e d Hoyts Entertainment. Centre f or noting.h. I 5.

Added to the coni~pif!S already mentioned we have the,, .. c +-t,,

Sydney Filmmakers Co-op and the Australian Film Institute. Both

of these organisations receive Government funding to a lesser and

greater extent and they both handle the distribution and exhibition

of films through their own theatres and by hiring films to various

groups, organisations and individual people. Still, the five

major distribution companies appear to control in the order of

95% of the feature film product to commercial cinemas in Australia,

and the three major cinema chains together control about 45% of

all full-time cinemas in the country. GUO and Village control

in the order of 200 Txhibition outlets, while Hoyts controls about

50 making their combined share, i.e. GUO and Village plus Hoyts,

of city cinema seats to be approximately 90%. All this implies

a high level of concentration in the film exhibition industry

and, again, in terms of economic models of market structure the

distribution sector presents a case of oligolopoly which is,

incidently the most common industry structure in the Australian . 6~ cinema.

Even given that the distribution/exhibition sectors of the

film industry in Australia have become more competitive and less

; S·. J. Hyams, Director Ken Caine;~m : Moving .in a DifferDnt.- Direction, •Rolling Stone, No. 375, May 1984, p.70

6.K:Schou, The Structure and Operation of the Film Industry in Australia, ibid, p.8 Page 9.

restrictive over the last decade, in many ways there is little

'change in the overall structure of the production/distribution/

exhibition set-up that has existed for many years. An examination

of the domestic market shows that Australian films hold only a

small share of the market with less than 4% of all the 35mm films

registered with the Censorship authorities produced locally. Yet

perhaps, in the eighties we will see a change to the overall

existing structure of ownership and control with the move from

national into international media ownership by Robert Holmes A'Court

in 1981. Mr. Holmes A'Court took over Associated Communications

Corporation, Lord Lew Grade's company, a company which includes

involvement in such organisations as Rank, Central Independent

Television, Elstree Film Studios and Pye Records, and it is his

interest in Rank which could have some interest to Australian

filmmakers. 7 • Mr. Holmes A'Court, whose parent company of the

$75 million empire he has built up in the past dozen years is

called Heytesbury Securities, is not exactly the traditional

Australian media owner. Prior to his attempt to takeover

Ansett's empire and a share in Channel 10, a bid which he later

withdrew, he appeared to have had little interest in media

ownership at all. However, through the Bell Group, the company

that successfully took-over Associated Communications Corporation,

Mr. Holmes A'Court holds control of TVW a West Australian television

station which owns City Theatres an independent exhibition outlet

in Perth.

7. Finance Action, The Battles Over!, The Sun 15 January, 1982, p.59 Page 10.

We, of course, have not seen much as a result of this takeover but it is interesting in as much as Robert Holmes A'Court became involved in the commercial film industry at the same time that two of our traditional media owners, Messrs. Rupert Murdoch and

Kerry Packer, moved into film production with their companies,

R.& R. "Productions and Adams Packer Film Productions. The difference between Holmes A'Court and the latter gentlemen was that Holmes A'Court first acquired the means of production (Rank) plus held the distribution and exhibition outlets for any product that he cared to produce. Whereas, both Murdoch (GALLIPOLI) and

Packer (wE OF THE NEVER NEVER) moved into the production of films without first gaining control of these vital distribution/exhibition areas. This was a situation that caused, at least Adams Packer Film

Productions, difficulty in 1982 as they attempted to clear WE OF

THE NEVER NEVER for taxation purposes.

It is interesting to question this interest in film production by these traditional media owners and this should immediately elicit a question of why? We are all aware that from 1840, when the

Sydney Herald became the first regular daily, the print, the radio and finally the television industries of Australia came under the control of four companies :

1. News Limited 2. Consolidated Press Holdings Ltd. 3. Herald Weekly Times Ltd. 4. John Fairfax Pty. Ltd.

In a relatively short space of time these four companies developed

in Australia the largest degree of concentration of ownership in Page 11.

the mass media of anywhere in the English speaking world. 8 ·

'In the past, for Australians, filmmaking had not proved a lucrative

industry. However, it was an extremely profitable one for

overseas producers. In 1975, for example, $22 million in film

rentals alone went back to America. 9 · an d b y 1 981 it was estimated

by various sources that this figure had increased to approximately

$40-50 million, although since foreign corporations enjoy the

tax privilege of not having to declare actual figures it is only with an estimate. Therefore, in the past,/the situation of foreign

distribution/exhibition domination it would certainly have proved

as uneconomical for Australian media owners to become involved in

the feature film industry as it was for any other individual

Australian producer.

Sandman, Rubin and Sachsman list the making of money as the most

important of the four elements necessary for the survival of any

of the mass media, i.e. television, print, radio or film. The

other three elements required are that it 'entertain', 'influence'

and 'inform'. But the elements of commercial film are even more

simple than those for the other media. Only two are really

essential - it must make money and it must entertain, and, again,

these elements are very closely linked. If a film entertains it

will draw a large audience and thus make money. There is no need

for commercial film to inform or even influence. It could, of

course, but commercial film rarely ever does, and modern Australian

films it would seem have aspirations little different to their

foreign counterparts. Albie Thoms points out as early as 1972

8. Tony Buckley, You Know Where We've Been But ... , Cinema Papers, Melbourne, March/April 1975, p.32

9. J.S. Weston, Australian Mass Media Controllers, Consumers, Producers, 1975, p.4 Page 12.

that "most of our filmmakers are attempting to beat Hollywood at its own game, for most Australian films are further variations of the tired Hollywood narrative filmmaking tradition. 1110 • More than ten years later director, Ken Cameron, also comments on the commercial feature film industry while discussing the viability of his film MONKEYGRIP - "If you make anything confronting there's a fear about it commercially. 111 1.

Yet prior to 1970 there was little incentive for Australians to make any film much less commercial films that required the sort of exhibition outlets their foreign counterparts enjoyed. Australian film would never be screened and no matter how entertaining the film might be, without distribution through the existing commercial exhibition outlets there is no way of drawing any audience and, quite simply, without an audience a film can't make money.

But the renaissance of filmmaking in Australia cannot be said to be in any way due to the Australian public demanding to see an

Australian product at their local city or suburban theatres. The modern Australian film industry occurred, in the main, because of a new industry - television production. It opened up work in visual communication to a growing number of people. Many of today's feature filmmakers have either worked directly for commercial television stations, the Australian Broadcasting

Corporation (formerly Commission), for small production companies making television commercials or for a large production house

10. A. Thoms, Polemics for a New Cinema, Wild & Woolley, Glebe, 1978, p.72

11. J. Hyams, Director Ken Cameron Moving In A Different Direction, ibid, p.70 Page 13.

such as Grundy's or Crawfords, on television series. Even so, it should not be thought that in those early days television station managements fostered the making of Australian films, nor that they felt in any obliged to show Australian made films through their outlets to allow a means of exhibition for Australian producers.

Even with the introduction of an Australian content level it did not bring about any change of policy. The stations moved towards the cheaper and more accessible avenues of Australian content and produced their own programmes such as Sport, News, Current Affairs and Talk shows.

The Australian Broadcasting Corporation, whose upkeep comes directly from the taxpayers money, never actively involved itself in the screening of Australian-made independent film productions. In 1975 a director, James Ricketson, pointed out in a letter written to

Cinema Papers that part of the function of the then Australian

Broadcasting Commission was to provide diverse programmes and cater for minority audiences and that independent filmmakers have a contribution to make to Australian television.12 • Seven years later the situation appeared to have changed very little when the excellent four part series WOMAN OF THE SUN, the first episode of which Mr. Ricketson directed, was turned down by the A.B.C. on the grounds that it was not the type of programme in which they wished to be involved and the series was eventually screened by

Channel 0-28 in June, 1982 to resounding critical acclaim.

12. James Ricketson, Letters, Cinema Papers, ibid, p •. 85 Page 14.

During the forty year period from 1928 - 1968 there was practically

'no interest, either Government or private, in the plight of the

indigenous filrnrnaker. The only exception to this seems to be

Union Theatres, a major theatre chain of the thirties and forties,

which enjoyed a relationship with Cinesound, an Australian

production company of the period. The reason for the link appears

to be because of difficulties experienced by Union Theatres with

film supply, a situation which Cinesound was able to ease. Thus

Cinesound was able to produce a series of continuous feature films

which were given guaranteed city releases and suburban runs. 13•

Sir Norman Rydge took control of Union Theatres during 1937 and

closed the Cinesound studios, ostensibly for the duration of the

Second World War but, as it turned out, they were actually closed

for good and Cinesound's last film was DAD RUDD M.P. made in 1940.

Union Theatres then began its accumulation of Australian real

estate and over the next decade its issued capital was bought up

by the Rank Organisation. It was also during the thirties that

20th Century Fox acquired their interest in Hoyts Theatres and

so by the early 1940's both Rank and 20th Century Fox, in

conjunction with Hoyts and Greater Union, were working their

way towards the positions of major exhibition/distribution

controllers of the Australian film industry.

The indigenous film industry, therefore, limped through the

forties and fifties. Georgio Mangiamele made three short

films, THE CONTRACT (1953), THE BROTHERS (1958) and THE SPAG (1962),

13. J. Tulloch, Australian Cinema, ibid, p.52 Page 15.

all three of which were in 16mm and dealt with rnigr~nt problems.

·In 1960 Tim Burstall released his first feature THE PRIZE which won an award at the Venice Film Festival and began the career of one of the key figures in the industry's revival. 14• Then in 1962

came the publication of the Vincent Report. This report recommended

strong measures to support local television and feature films, but

a Liberal Government, under Sir Robert Menzies, declined to discuss

the Report in the House.

Again, during 1963 and 1964 a Melbourne group assembled and

screened a programme of Australian shorts under the title EMBRYO

and this had a further effect on the climate of opinion. In 1965

Albie Thorns produced REVUE OF THE ABSURD at Sydney University

and featured, as its climax, a short film made by both Thorns

and Bruce Beresford, IT DROPPETH AS THE GENTLE RAIN. This

screening was interrupted by the police who instructed the producers

to close the revue under the law against obscene and indecent public performances. This incident led on to the formation of UBU Films

by Thorns, Mr. Aggy Read and Mr. David Perry. The group favoured

independent, experimental productions and they built up a small but

solid audience for this sort of fare.

Another major move by filrnrnakers occurred on April 12, 1966 when

a group of Sydney filrnrnakers combined to exhibit a programme of

their films at the Union Theatre and the Sydney Filmrnakers Co-op

was borne. These people were all sick of the talk about the

14. J. Shirley & B. Adams, Australian Cinema~ The First Eighty Years, Angus & Robertson & Currency Press, Sydney, 1983, p.223 Page 16.

Australian film situation and began by financing their own small

·films and helping each other to make them. Aware of the foreign control of distribution and exhibition they decided to screen the films themselves making up a progrannne of short films and sharing in the profits of such screenings. As previously pointed out the majority of films screened in Australia have been from overseas sources and, therefore, the distributor has been virtually nothing more than an agent for the foreign producers. It was through the production of 16mm experimental short films begun in the universities by such people as Thoms, Beresford and Richard

Brennan that made audiences realise for the first time in many, many years that there were other sorts of films beside the foreign, imported product. This new interest was due, in no small way, to the intellectual establishment who took up the banner of a national film industry in much the same way that it fought for freedom from censorship and the abortion reform issues. Between all these groups and those working within Australian television the attention of the Government was slowly brought to bear on the situation of the almost non-existent film industry in Australia. So five years after the Vincent Report Government action began to be taken and in 1967 it was decided a body called the Australia Council

for the Arts should be formed. This body catered mainly to

the performing arts, such as opera and ballet, but had a small

amount of funds available to help people with special projects -

it was into this area that Film found itself, and from this

beginning the future film industry grew. Page 17.

In 1968 the Liberal Prime Minister, Mr. Harold Holt, reassessed the Vincent Report and invited the newly appointed Chairman of the Australia Council for the Arts, Dr. 'Nugget' Coombs, to convene a meeting of filmmakers to discuss ways and means of improving the feature film industry. It was during this meeting that

Dr. Coombs decreed $500000 be set aside for films by the

Australia Council for the Arts but added the proviso that

'only scripted films, partly capitalised with distribution guarantees from the American or English monopolies controlling

Australia cinema, would qualify for subsidies from the

Governrnent.• 15 · But this wasn't good enough and those now involved in the film industry wanted their own division, a division solely devoted to film. After much agitation and not a little drama the Australian Film Development Corporation was established by statute in 1970. This was the result of recommendations to the Commonwealth Government in 1969 by the Film Committee of the Australia Council for the Arts, such recommendations being backed-up by all interested parties. The Australian Film

Development Corporation received Royal assent on 17th June, 1970, and appointed five members on 17th August, 1970 :

1. John Darling Managing Director of Colonial Sugar Refinery

2. Talbot Duckrnanton General Manager of Australian Broadcasting Commission.

3. Barry Jones Member of Parliament (ex Pick-A-Box champion)

4. R.S. Elliot Businessman

5. D.E. Brown

And the first meeting was held on 23rd October of that year.

15. A. Thorns, Polemics for a New Cinema, ibid, p.361 Page 18.

The Corporation was placed under the portfolio of the Minister for the Environment, Aborigines and the Arts (an odd assortment of titles completely lacking in taste and sensitivity towards our aboriginal Australians), and according to its objects the new Corporation was to:

"encourage the making of Australian cinernatograph and television films and the distribution of such films within and outside Australia. The Corporation is required to exercise its functions with a view to the achievement of high technical and artistic 16. standards in Australian film."

The Chairman, Mr. Darling, pointed out in this report that the

Corporation's major consideration was distribution, i.e. quotas, in the case of television distribution and the percentage of ticket sales going to Australian producers, in the case of film.

Taxation apsects were also high on the list of priorities, as was tariff protection in the case of cinema production. All things considered these were fine sentiments and those interested in a modern Australian film industry were relieved to see some

Government action towards this end.

So it was that in 1972 the first AFDC financed 35mm feature film was released theatrically. The film SUNSTRUCK is described by

David Stratton as being a 'comedy rehash of WAKE IN FRIGHT'S concept' and as such received scant publicity and minimal release, disappearing into the film archives.17· In this same year the Department of the Media was created and its Minister was given responsibility for the AFDC plus the following :

16. 1970/71 Australian Film Development Corporation Annual Report, p.4

17. David Stratton, The Last Wave ; .. The Australian Film Revival, Angus & Robertson, Aust., 1980, pp.12/13 Page 19.

1. The Australia Council for the Arts

2. The Australian Broadcasting Commission

3. The Australian Broadcasting Control Board

4. Film Australia (formerly the Commonwealth Film Unit - the Government's own filmmaking arm)

Also during this year the Interim Australian Film and Television

School handed over to the Australia Council for the Arts both: a) The Experimental Film Fund and b) The Television Development Fund

Thus the Australia Council for the Arts was given the non-commercial

Experimental Film Fund plus the Television Development Fund, both ing being considered as involved in further/the creative abilities of those with so~e, or no, experience in the filrnmaking process but, they stressed, it would be someone that the Council felt possessed possibilities. So, although both the AFDC and the

Australia Council for the Arts were both under the same

Minister they operated as separate entities, just as the Australian

Film Commission and Australia Council (their present titles) do today.

The Australian feature film industry was beginning to feel its way but this was was constricted by the foreign ownership and domination of distribution/exhibition outlets. In 1973 a

Tariff Board reported on the motion picture and television industry and recommended fundamental structural changes, largely patterned on the Paramount decree in the United States in 1952. Page 20.

In particular, it recommended divorcement and divestiture to structure the vertical integration of distribution and

exhibition and it suggested limitations to the extent of control

of exhibition outlets by major chains. It was during this 1973

hearing by the Tariff Board that the Australian Motion Picture

Studio Association and the Australian Film Producers Association

united to form the Film Producers Association of Australia (FPM).

The group then demanded from the Government that -

"Government assistance for filmmaking be available in the form of tax incentives for risk capital, quotas for Australian films, investment in production by distributors and revokement of restrictive cinema 18. licensing laws."

The FPM President of the time, John Bushelle, spoke out in

Film Weekly saying that Austalian film production, given reasonable

access, on reasonable terms, to the Australian box office could

earn a profit from the making of Australian films. A list of

Australian-made box office successes such as PICNIC AT HANGING

ROCK, SUNDAY TOO FAR AWAY, MAD MAX 1 and MAD MAX 2, MY BRILLIANT

CAREER, THE MAN FROM SNOWY RIVER and PHAR LAP proves undoubtedly

that Australians have indeed enjoyed their homegrown style of movies.

It was clear to all with any involvement in feature film production

that Australian filrnmakers were not getting a fair deal and

there were definitely anomalies in the Government's policy of

supporting films through the AFDC while making no effort whatsoever

to get the films before a wide audience. So it was necessary for

Australia's 'big business interests' to come out and publicly

declare, as Mr. Bushelle did, making strong comments in order to

draw even a small response from the Government regarding the

18. A. Thorns, Polemics for a New Cinema, ibid, p.377 Page 21.

foreign dominated distribution/exhibition oligopoly. One such response occurred during a visit to Australia in 1973 by Mr. Jack

Valenti, Head of the powerful Motion Picture Producers Association of America (MPPAA) when this long held resentment towards foreign distributors was expressed to Mr. Valenti by Senator McLelland, then Head of the Labour Government's Department of the Media. He announced that if such foreign distributors did not voluntarily invest in a certain number of Australian films the Government would force them to do so. The estimated $50 million that leaves Australia each year in the form of film distribution profits might seem small in terms of international import/exports but in terms of the

Australian film industry a percentage of even the lowest estimate of such profits would amount to a healthy support of local production.

Unfortunately, not much happened in this direction and David Stratton suggested that nothing did happen until 1979 when Fox-Columbia

Distributors invested in BARNEY and United Artists invested in

THE IAST WAVE, both indigenous Australian films. 19• Yet the battle continuedto be waged against these foreign combines until we got the situation that exists today where few of the Australian viewing public would question that Australian films can be, and are, shown in the entertainment complexes of our cities. But this situation did not come easily and because the private sector still continuedto resist investment in feature filmmaking the

Australian Film Development Corporation continued throughout its life in the seventies to be the prime investment agency available to the Australian producers.

19. David Stratton, The Last Wave, ibid, p.14 Page 22.

Also during the 1973 Tariff Board's Report suggestions were made relating to the structure of the AFDC and the Australian Film

Authority was formed to consider the restructuring of the

Corporation. Finally, the following policies were implemented

from the Authorities proposals :

1. That the Corporation become a Commission known as the Australian Film Commission.

2. That a Projects Branch be established

3. That a Film Distribution Branch be incorporated and then taken over by Film Australia.

4. That an Export Agency be set up to handle Australian films.

and

5. That subsidised exhibition outlets be established.

After a two year period considering the Authority's suggested proposals the AFDC was renamed the Australian Film Commission and

ratified by the Australian Film Commission Act 1975. In May

of the same year Mr. Gough Whitlam, Labour's Prime Minister, took

control of the Arts from the Minister for the Media and the

following members were appointed to the Australian Film Commission

on a part-time or full-time basis Tenure K.Watt (Chairman) F/T 5 years Former ABC Asst. Manager T.V.

J.McQuaid F/T 5 years Former Federal Sec. A.T.A. & E. A.

P.Martin F/T 5 years Former Advisor to the Minister for the Media G.Burke P/T 4 years Managing Director,, Roadshow F.Gardiner P/T 4 years Lawyer, Chairman of Airdome Page 23.

A.Buckley P/T 2 years Producer (CADDIE, THE IRISHMAN) J.Robb P/T 2 years Former Marketing Manager, South Aust. Film Corporation

It is interesting to note that the new line-up of Film Commission me~ers was now largely made up of people currently, or previously·, involved in film production and not of businessmen from other spheres of interest. There had always been some argument as to whether the film industry should be run by people from without the industry itself and one suspects that the people making the decisions for Colonial

Sugar Refinery are more likely to be people with an interest and knowledge of the sugar industry as opposed to filmmakers.

Again, the newly named Australian Film Commission had barely time to organise itself in its new structure before the change of

Government to a Liberal/Country Party coalition under Mr. Malcolm

Fraser, caused a further alteration. In 1976 the Australian Film &

T.V. Board, incorporating

1. General Production Grants 2. Experimental Film Grants and 3. Script Development was taken from Australian Council (formerly the Australia Council for the Arts) and was given to the AFC. Then in 1977 the final major change to the structure of the Australian Film Commission resolved itself with the establishment of the Creative Development

Branch within the AFC incorporating the film activities of the old

Film, Radio and Television Board. In 1984 the Creative Development

Fund now handles : Page 24.

1. The Production finance for creative filmmakers

2. The No Frills Film Fund - for low budget films

3. The Women's Film Fund - Development of scripts and production of films by, for and/or about women.

4. Marketing loans for distribution of the above three categories of films and 5. Financing of cultural activities, i.e. exhibitions festivals.

The Australian Film & T.V. Board's responsibility for the furthering of experimental, and not necessarily commercial, films of artistic merit created a fear among filrnmakers that such a move would eventually lead to the demise of the Experimental Film Fund which had offered enormous support to filmmakers over the years but they were assured by Mr. Fraser that this would not be so :

"The Government is determined that creative filmrnaking will continue and that there will be no diminution in this effort." 20 •

However, the paper 'Role and Policies of the Australian Film

Commission' put out after 1976 appeared to hold another point of view and clearly did not hold out much hope that the sort of support given by the Experimental Film Fund would be continued -

"Experimental film work in developing films as an art form probably flourishes best outside a commercially oriented atmosphere and the Commission clearly sees its first priority as the development of quality film as an industry rather than an art form." 21.

The latter comments proved ultimately to be correct and by 1978 the Experimental Film Fund was dropped from the funding system

20. Malcolm Fraser, Hansard, Govt .. Printing Office, 3 June, 1976, p.

21. Role and Policies of the Australian Film Commission, obtainable in 1977 but undated, p.3 Page 25.

of the Creative Development Branch and this, of course, was a great loss to Australian filmmakers since this body was unique

in the world in terms of its expansiveness and liberality. It

financed films which, under other circumstances, may never have been made and it encouraged film novices it very many way~ to explore the medium of film. Their resultant film activities changed the attitudes of many Australians towards filmmaking.

No further major structural changes occurred at the Film

Commission between 1978 and 1984. 22· But it can be clearly

see that these early days at the AFC were ones of constant flux

(attached Appendix A sets out a breakdown of these changes)and

it was sometimes extremely difficult for filmmakers to understand exactly what was happening. However, on one thing there was no doubt and that was that the AFC, in its many guises, was extremely powerful in deciding the production of features as well as short

and documentary films, in so far as production money was concerned.

It is still true that the AFC holds considerable power over the

filmmaking process but today that power is directed to the

area of development and not production. Between 1970 and 1979

the AFC, through its main arm the Project Development division, provided approximately half of all finance for the feature film

industry. This division has always adopted a concern with commercial propositions and the money it has given is in the form of a loan

with a minimum amount being available and a maximum amount open to

negotiation and the final amount is dependent on the expected promise

of the project and the profit the Commission's assessors believe

22. Ina Bertrand/Diane Collins, Government and Film in Australia, Currency Press, Sydney, 1981, p.170 Page 26.

the project can realise. The AFC is then able to plough back monies returned as a result of investments and during the first five years of its operations it received approximately 38% of its investment money. Of the feature films it supported during this period 16% showed a profit and returned money, 49% were complete write-offs representing total losses and the remainder, wh 1. 1 e not pro f.1ta bl e, returne d some o f the1r . investment.. 2 3 · T h 1s· would not appear to be an exceptional track record in film production but considering what has been said previously re film profits' very uncertain performance, it would appear to be almost normal.

The Project Development loan and/or investment fund available to the professional producer has, in the past, usually consisted of about 50% of the total production budget, with the remaining

50% being raised by the producer from other sources. During the seventies these were mainly industry sources such as State

Film Corporations like the South Australian Film Corporation

(established in 1973) and the New South Wales Film Corporation

(established in 1977) followed by every other State by the end of the seventies, and therefore, often two or three funding bodies would be involved in financing the same film. The share of private investment finance obtained from outside sources remained at a relatively minor level. During this period, prior to the tax incentives for private investors, only the fool-hardy or very generous film buff became involved in film investment, even with

Commission and/or Corporation backing.

23. David Stratton, The Last Wave, ibid, p.16 Page 27.

The Australian Film Commission's requirements for consideration of Project Development funding would appear to be minimal, and it should be noted that these requirements remain extant today. They are listed as follows in an AFC paper simply titled 'Brief' :

1. Provide the Commission with a script treatment, of say, 20 pages outlining a story idea and/or a concept of how the proposed production is to be made, or even a first or second draft script.

2. Some budgetary estimates are usually expected

3. Indication of cast and crew

4. Kind of audience aimed at 24. 5. Ways the finished product may be marketed.

After supplying the above information to the Commission's Project

Officer the information is then passed on to three assessors and their anonymous comments returned to the Project Officer and the written comments are passed on to the producer. The assessors do not meet with the producer to discuss the project, nor have they ever done so in the past. On this type of application the Commission allocates its funding. It would seem, therefore, that the presentation is all and it could be thought that the proposal and not the script dominates the Australian film industry. Little wonder that would-be feature producers find the going very difficult the first, and even the second, time around. As a point of interest, the Creative Development Fund allows the filmmaker to meet with, and discuss the project with, the allocated assessors. One would expect that this would also be the case when discussing projects worth, on average today, around $1.8 million.

24. Australian Film Commission, Brief, undated, p.7 Page 28.

In 1984 the Australian Film Commission holds in its power l. Film Development and

2. Film Australia

Film Australia handles the production, marketing, promoting and distribution of programmes that deal with matters of initial interest to Australia and that illustrate and interpret aspects of

Australian life and the activities of the people, plus programmes commissioned by Departments and Authorities of the Commonwealth territories.

Film Development controls -

1. The Projects Division

2. Creative Development and 3. Marketing

A major restructuring of the administrative section of the AFC occurred in 1984 because of a review of the Commission's structure made in February, 1982 when three conclusions were reached

1. That the Australian Film Commission was now more of a development agency than a funding body and this should be reflected in its management structure.

2. That the AFC should give more priority to research and policy development. and

3. That Film Australia should be given more organisational 25 _ weight within the AFC.

The Public Service Board approved the restructuring and the

Commission began implementing the plans this year.

25. 1983 Australian Film Commission Annual Report, p.viii Page 29.

The administrative structure now comprises a Chief Executive at the head, two General Managers (one for the AFC's industry and cultural support activities and one for Film Australia) and the

Secretary who now form the Executive Council. A new section, the Research and Policy Unit, will be implemented within th~·AFC from this year (1984) onwards. (See Appendix B for breakdown of the structure).

The advantages of Commission funding have been many to those actively involved in the modern Australian film industry, and nowhere has it been more advantageous than to the producer with its generous considerations in respect of loan repayments. Film investment entitles the AFC to equity returns from the profits while the loan money attracts interest of, usually, better than bank rates. But, most importantly, the Commission J,d. not (prior to •°\91) receive its return out of the gross profits until all other investors have received theirs. As Mario Puzo (authur of THE

GODFATHER) points out in his classic article describing gross and net profit on films - producers almost never make a profit - it is unheard of, especially in Hollywood. 26 · Therefore, the

AFC is in an almost no-win situation which would go some way to explaining the 84% loss on films that David Stratton points out as b eing' t h e going. rate on AFC investment.. 27 •

Understandably, from 1974 until today, Governments (both

Liberal/NCP and Labour) have been trying to extricate themselves

from the responsibility of being an investment source, the major

26. M.Puzo, When Hollywood Moves in How Can Israel Win?, The National Times, October 25, 1976, pp.52-54

27. D. Stratton, The Last Wave, ibid, p.16. Page 30.

one at that, of Australian feature films. The partial success so far of its gradual withdrawal has been due to changes in the

Taxation law as it affects film financing and investment.

Prior to 1977 the only benefit available to the private investor was that the entire amount of the feature film production investment could be written-off over 25 years. Compared with oil research and mining exploration benefits of this type aroused no interest whatsoever from the business community. Therefore, in 1974-75 the Labour

Government attempted to offset some its problems of film financing by introducing a two year write-off plan to replace the old plan then in existence. However, the Labour Party had hardly time to implement any of their ideas because that same year they were rudely ousted by Mr. Fraser's Liberal/NCP coalition. With takeover by a capitalistically inclined party the Australian Film

Commission was now regarded as being actively involved in an industry - 'the film industry' - and industries in Liberal Party terms make money, or at least are seen to be attempting to turn over a profit. But the problems of the past still existed.

By 1976, some three years after the 1973 Tariff Board Report, the demands by Mr. Bushelle of the FPAA, the visit by Mr. Valenti and the ultimatum of the Head of the Department of Media, money was slowly corning from distribution companies to finance

Australian film productions. With distributor money such as

GUO Film Distributors (PICNIC AT HANGING ROCK -1975, MAN FROM Page 31.

HONG KONG-1975, MY BRILLIANT CAREER-1979) and Roadshow Distribution tcADDIE-1976, NEWSFRONT-1978, ODD ANGRY SHOT-1979 and THE JOURNALIST-

1979), involved in the filmrnaking process the exhibition outlets automatically opened up for those Australian feature films with which they were financially linked. The exhibition chains also made money available for the necessary promotion of such films and since box office appeal is usually generated by massive doses of publicity it is to the advantage of the exhibitor to publicise the product - especially when its own company has investment in the product.

However, private enterprise is profit oriented and since private investment was fast becoming vitally necessary to the Australian feature film industry the demand for some very definite tax incentives was heard again from various interested sources. The Liberal Government then moved in August, 1977 to make films a much more attractive investment package to private enterprise by re-affirming the tax benefits introduced by the Labour Party which allowed a private investor to claim a tax write-off over a two year period on any investment made to:

1. Secure the rights and/or

2. Provide the finance for the production of a film.

But Liberal Government offered an additional incentive : +ne11,T 50'\. o <; "tnc. 1"o1'°Q.' ~1'" '°"-.._ cv-. ca.Uo14o..l:)\e ~ecl-,c.Ti°"' ,.., 'ttl.e. TiM.t -two "'\eo,r-s. i ... lo;)~lc.~ n..e. f;,-.,+ -rw0 '1ea.rs. ;..._ w"-,c."'- 11,.,c, C-,\""' wca..$ u~ec,\ r:or 't\.c. pc-odoc."'l'io"' o~ o,.S'!.e~c:\.ble i ... c.o .... c..

New interest ran through the film business and financing groups Page 32.

New interest ran through the film business and financing groups negan to include film in their prospectii, while overseas producers started looking at Australia with a far greater interest than ever before. The film industry looked as though it was about to take a massive surge forward.

The new tax laws were enormously beneficial to the business sector of the community, making film investment almost as safe as real estate. The Liberal/NCP coalition were, no doubt, relieved to be seen to be furthering the endeavours of the elite upper income groups by capitalistic methods rather than by what could be construed as 'socialised art'. In the same way as the Labour

Party in 1984 is pleased not to be seen appearing to support the same upper economic group with tax concessions at the expense of the middle and lower income group of voters. Although in 1977, and today, there exists concern with the film community that the new tax laws should not favour large money groups because this could open the way to a more total control of the indigenous film industry than has already been in operation for the past fifty years.

Over the next two years, 1978 and 1979, there was a flurry of film production activity and many people deserted their permanent positions in various types of production companies to freelance in the quickly expanding feature film industry. In Variety,

Mr. R. Gelfman, a former President of the Australian Film Office Page 33.

in Los Angeles, commented on these years as an attainment of one of the Australian industry's legitimate aims, i.e. the development of a local production industry which he believed was at last moving towards film product worthy of international marketing. 28 ·

It was at this point that we saw a move by the owners of Australia's traditional media outlets into the modern fe.ature film industry.

In May, 1980 it was announced that Rupert Murdoch's NeWSGroup and

Robert Stigwood's organisation had formed a company (R & R Productions) which would invest, initially, some $10 million in producing three films a year, all of which would have a guaranteed distribution on the international market. Mr. Murdoch said he had been considering the potential of Australian films and had made a detailed study of the industry in 1979. It is pertinent that although Mr. Murdoch

"guarantees distribution on the international market", he points out that the Murdoch-Stigwood group expected to 'assess projects and administer funds but not involve itself in distribution of ·1m ,29. f 1 s.

Also, early 1980 Mr. Kerry Packer of Consolidated Press Holdings and Philip Adams, a producer, advertising executive, writer and now, from 1984, the Chief Executive of the Australian Film

Commission, joined together under the name Adams-Packer Film

Productions to work on several feature film projects with a plan for 'five features over the next two years, including the

Jewish migrant ship drama DUNERA BOYS and an April, 1981 start date for WE OF THE NEVER NEVER.• 30·

28. R. Gelfman, Variety, April :30, 1980, pp.SO & 90

29. National Bank Monthly Summary, August 1980, pp.10-13

30. Terry Burke, Local Production, Australian Motion Picture Year Book, 1981/82, Hong Kong, p.19 Page 34.

But the economic face of Australia was undergoing a sharp change at the end of the seventies and by the beginning of the eighties tax avoidance schemes were a major issue with the Taxation Department which felt that the tax amendments, as they related to the film industry, left the way open for individuals to take horrendous liberties. Film industry people themselves began to denounce fellow producers with one person declaring, 'that at least five features were produced as throwaway investments by one producer and his company ... and cases of financiers gearing their tax claims as high as eight and nine times the original investment were not isolated. 131 • The Government, in its wisdom, decided to put a stop to this real, or unreal, abuse of the system.

Production, and morale, within the casts and crews, cliMl~;~~e..cl

1 •"" ' 1t'-"' .._h~, .... IJ ~c.er t o.•· ,,... 1'1

IOA.be.l.

The Liberal Government reassessed its incentive scheme and details of the new tax regulations were released on 15 October,

1980 in a joint statement by the Treasurer, Mr. John Howard, and the then Minister for Home Affairs, Mr. Bob Ellicott. The legislation was planned for introduction in Parliament before

May, 1981 but it was not passed until June 24, 1981. As can be imagined, this delay between the announcement and the actual introduction of the new legislation caused a large degree of uncertainty within the private investment sector and many films were cancelled because of withdrawal of investor

31. Promises Fail to Woo Private Cash to Films, National Ti.mes, Nov.30-Dec.6, 1980, p.15 Page 35.

finance, in turning causing loss of work. There was a feeling of panic within the industry. Of course, the investor was perfectly within his rights to withdraw his money during this time of flux since he could not be sure if there would be any incentive at all if he did invest in feature filmmaking.

Finally, the new legislation was introduced and in broad terms the investments incentives now provided for

1. 150 per cent of capital expenditure on eligible films to be allowed as a deduction against income in the year the expenditure was incurred, (i.e. deposited in a production account pursuant to a production agreement).

2. An exemption from taxation of all receipts from the film up to an amount equal to 50 percent of an 32. investor's original capital expenditure.

However, this time the Government laid down a number of qualifications which had to be met in order for the investment to be suitable for acceptance by the Taxation Department under the Taxation Act's

Division lOBA a) The investor must be owner, or part owner, of the copyright of the film at completion of negative. b) The film must be completed and released and the investment spent within 12 months of the financial year when production money was deposited by the investor. c) The film must be made for the purpose of accruing assessable income. d) The film must be intended for theatrical or television release. Television series (other than mini-series), light entertainment, commercials and films of public events (e.g. sports) will not qualify for deduction.

32. Andrew Martin, Tax Provisions for Films, Australian Motion Picture Year Book, ibid, p.439 Page 36.

e) The film must be certified by the Minister for Home Affairs as being an eligible film with significant Australian content.

One of the major stumbling blocks within these new guidelines was that the film must be completed and released, and investment spent, within 12 months of the financial year when production money was deposited by investors. To complete a film, from development through to distribution, in a period of 12 months is extremely difficult and forces all areas of filmmaking into stress situations. The rush on actors and technical people, the equipment hire companies and technical studio and laboratory facilities was enormous when producers were confronted with the need for the film to be finished in the Government stipulated time to comply with the Tax laws and satisfy investors. More importantly the placing of a time limit on the creative processes of filmmaking was not necessarily an advantageous factor in the making of a good movie.

Producers then found that the need to finish a film within the financial year that the first investment was made worked as a contributing force against raising finance for small budget movies, and most Australian movies fall into this category.

Film investment and completion bond guarantors were loath to take chances with their investment finance on virtually unknown producers and directors when a product had to be finished ' in sich a finely specified time. Accordingly the next financial year 1981/82 was an extremely difficult year for film production Page 37.

planning, and with the first six months of 1981 being a

·period of not knowing exactly when the new tax legislation would be implemented, the Project Branch of the AFC was called on to support a number of projects much more heavily than would otherwise have been necess~ry. The initial response to the previous year's tax incentives dampened as a result of subsequent delays in the introduction of the legislation and this added support by the Commission was totally required in order to prevent a number of projects faltering in the uncertain cond itions. . prevai·1· ing. 33.

It was also during this period that the Australian Film Commission saw its position within the structure of the indigenous film industry begin to change. The Commission decided that it would not compete with the private sector investment where a film was eligible for tax incentives. Whereas in the past the Commission would invest up to 60% of total budgets it now expected the private sector to provide a significantly higher level of

support. Even in the uncertain investment climate of the time the AFC's policies were gradually being brought into a line of

strong emphasis on development support. In the Commission's

1981 Annual Report we see the beginnings of this new stream when

it is pointed out that the Commission 'strongly supported

investment ·in script development since, with minor exceptions,

there is not a firm trend in the private sector to take on

t h e ris. k sof t h'is activity.. . • 34 •

33. 1981 Australian Film Commission Annual Report, p.12

34. 1981 Au~tralian Film Commission Annual Report, p.12 Page 38.

The same Report informs us that the AFC funded advanced development

'of GALLIPOLI (R & R Productions first feature) to assist the

producers with scripting, budgeting, investment packaging and

all areas of the filrnrnaking process that occur prior to pre-production.

It is in those areas that occur prior to investment, and, in

fact, the showcase of the project in order that it can appeal to

the investor that the Tax laws do not allow as a legitimate tax

deduction. This is the major reason why the Commission is moving

towards Development funding. The development of projects is an

expensive, and at times lengthy process, as can be seen from the

example of SILVER CITY where producer Joan Long has been quoted

as saying the project took 10 years to come to fruition. Since

development is not allowed under the new Taxation legislation of

tax relief on film production it becomes totally necessary for

the independent producer to gain AFC backing in the area of

script and project development if he is to have any chance at

all of selling the project to private investors.

Again the FTPA*lobbied the Government to gain some relief in

the problem areas mentioned above. This relief was an imperative

of survival for the unattached freelance producers. But;in

March, 1983 the Liberal/NCP coalition lost to the present

Labour Party and almost immediately the new Government announced

even more modifications to the Taxation Act as it related to

Division lOBA. It still allowed deductions on the terms,set out

previously but now the film could be completed within 2 financial

* The Film & Television Producers Association - formed in 1979 when it absorbed the FPAA Page 39.

years from the end of the year in which the investment is made.

However, the proviso was added that the situation would be reassessed in 1985. This, of course, creates yet another period of unsureness for investors - what will happen in 1985? Will the tax incentives be recalled? The main thing that filmmakers wanted was a stable situation in the investment arena. Only when this is so can investors feel secure and the producer raise his finance.

Then in June, 1983, came still another announcement this time to allow for an underwriting agreement to be entered into by the producer with an approved underwriter to allow a film to be fully funded, to ensure intending investors were not disadvantaged if a film project did not proceed. Cash investment had to be a minimum of 50% of total production expenditure, and the underwriting amendment allowed an investor who subsequently

'took over' the underwritten portion of a production budget to obtain a tax deduction when his investment was made, even in a later financial year. 35 •

But this was not to be the end, yet another Division lOBA amendment was made as a result of the 1983/84 Budget when it was decided that as from 23 August, 1983 the deduction of 150% for production expenditure was reduced to 133% and the exemption of up to 50% of income was to be reduced to 33%.

35. R. Rhueben, The Current Situation Regarding Taxation and Documentation for Investment in the Australian Film Industry, Lecture paper, April 16, 1984, pp.3-6 Page 40.

The introduction of the two year allowance in which to complete

'the film has helped enormously in relieving the 'bunching' of productions which occurred in the period when the films had to be completed ardearning revenue within 12 months before investors could claim deductions. The added bonus of this extra year was that it alleviated hardships to filmmakers, and saved film quality and safety standards. As the Film Commission points out,in its 1983

Annual Report there are, understandably, always difficulties caused by the Federal elections given the climate of uncertainty that inevitably follows changes of Government. However, the further changes to the Income Tax Assessment Act and their regul;atory codes had a considerable destablising influence on the film industry in. particu . l ar. 36.

In the middle eighties, after fifteen years of almost constant change, the industry's greatest need is for stability in its regulatory environment. The fact that the Commission says that

it draws great comfort from recent undertakings by the Federal

Government that the present incentives will stand for at least

into 1985 is not really the feeling of the vast majority of those working within the industry itself. Today there is doubt that

the present tax incentives will last past that date and the

Minister for Home Affairs, Mr. Barry Cohen, indicated on July 8

of this year that the present film incentive 'scheme' was

scheduled to expire in August next year and pre-sales were being

closely watched to see that they did not eliminate the risk of

film investment. He further added that Australian content pro-

36. 1983 Australian Film Commission Annual Report, p.l Page 41.

visions might be tightened to reduce the allowable level of overseas elements and video distributors should be careful not to

be too 'hasty' in their release patterns or risk government intervention.

Any or all of these moves by the Federal Government could dampen much

of the enthusiasm associated with a strong-end-of-financial-year

f 1nanc1ng. . e ff art. 37. Those whose livelihood relies almost completely

on the making of feature films would very much like a situation where

they could foresee a more definite future and those who invest in

the film industry would like a climate that was far less changeable

in relation to tax legislation and their invesment. Private

investment in film relies entirely on tax incentives and to date

the large sources of private investment have been individual tax­ payers rather than long term investments from the corporate sector.

But with the instability of the industry corporations are unlikely

to invest in long term situations when there is, and has never been,

a cohesive tax policy. This lack of confidence in the industry

is further highlighted by the fact quite a few of the films that

have been initially funded publicly through the lOBA Division of

the Taxation Act have run foul of the Taxation Department and

their Australian investors have been refused their tax benefits.

A good example of this situation is CAPTAIN INVINCIBLE which

was refused its final certification when the film, although

completed in Australia, was re-cut in the United States. The

film's producer, Andrew Gaty defended his situation by saying

that re-editing was done so as to enhance the film's marketability

in the United States which he substantiated with a distribution

37. After $130m ..• Cohen Dampens Producer Spirit, Encore, W.R.Bright & Co., Sydney, July 19-Aug. 1, 1984, p.l Paga 42.

deal after the re-editing. Mr. Gaty pointed out that such changes

'at the request of U.S. distributors were common and he received written support from the FTPAA as evidence of this. 38 • The failure

to grant final certification was fought through the Australian

courts by Mr. Gaty and CAPTAIN INVINCIBLE has only recently been

granted its certification. This certification was finally given

at a cost to the Australian taxpayer of approximately $1 million

in various court costs on a film that only cost $5 million to make.

At this point in time it is imperative that a film be given

Final Certification by the Department of Home Affairs and

Environment, otherwise the investors do not receive their tax benefits and, as has been stated earlier, since very few Australian

films actually run into profit, without the Final Certification,

there is very little likelihood that the investor will see a return on his investment. Film investment is seen more in the light of a tax write-off rather than a profit motivated business.

In 1984 it is a very necessary part of the film production process

that a producer receive Film Commission funding since in these

days of private investment and tax write-offs film development

must be shouldered by the producer. The cost of the script, of

course, is allowed in the budget then repayable to the producer

when investment money is raised but until that time the

producer must find the finance to bring a script in to pre-

production readiness .. Therefore, the Projects Division of

the Australian Film Commission, the section that deals with the

38. Gaty Takes the Govt. to Court over Certification, The Australian Film Review, March 3-6, 1983, W.R. Bright & Sons, Sydney, p.20 Page 43.

large budget, money oriented, commercial projects, is most eagerly sought by the Australian producer and it is often a most difficult section from which to receive funding if you are an independent, new or little-known producer. Examples of producers who have not received acceptance from the AFC in their early careers are Richard Franklin (PATRICK, BLUE

LAGOON, PYSCHO 2) and Byron Kennedy (MAD MAX 1, MAD MAX 2,

THE DISMISSAL). Surprisingly, Kennedy was refused funding on

MAD MAD 1, a film that was Australia's first to make its money back from an overseas sale to Japan alone.

The importance of development cannot be stressed too strongly.

It is as vital to the filrnmaking process as pre-production, production, post-production, marketing, distribution and exhibition. Therefore, it is completely understandable that most producers turn initially to the AFC because if development funding ~an be obtained from the Commission then the other areas of financing fall more easily into place. But it is this difficulty of finding development finance that faces the majority of producers. The fact that the cost of script is not included as an allowable expenditure even though it is a condition of certification that copyright be held by the investors puts enormous pressure on the one-off film producer, i.e. the producer not linked to a large production house but who operates on a one to one movie basis. As Kirsten Schou points out, 'the majority of production companies in Australia's film industry are small enterprises ••• (there being) relatively Page 44.

few large established production companies. The production industry is thus one of low concentration of market power.

That is no individual firm or small group of companies is in a position to dominate the market by controlling a very large ,39. share of the total industry output. To carry out the terms required by the Government in allowing the producer to gain tax clearance requires a financial back-up not easily available to the average producer, and in 1984 this circumstance is further distancing such producers from accessibility to yet another mass media outlet in Australia. But large companies such as R.& R.

Productions Pty. Ltd. and Adams Packer Film Productions Pty. Ltd. are able to cope far more easily with the vagaries of the taxation system simply because they do have the finance available to cover those early stages of script and project development. They also have production houses already set up in the form, for example, of TCN Channel 9 and TEN Channel 10, both of which are involved in on-going productions of various kinds and varying dimensions and through these companies they are able to take advantage of such Government 'safeguards and controls' provided to prevent abuse of incentives by the 'less responsible' individual.

Consider the statement by the Taxation Department that 'although

the amount of deductions can be carried forward to the next year of income if not recouped, such deductions cannot be used to

seek a variation of provisional tax unless the investor is

corranitted to further investment.• 40• Production companies such

as those controlled by News Limited and Consolidated Press Holdings

39. K. Schou, The Structure and Operation of the Film Industry in Australia, ibid, p.4

40. Andrew Martin, Tax Provisions for Films, ibid, pp.439-440 Page 45.

have the wherewithal! to commit their investors' monies to

further investment through their on-going film and television

production companies. Money can be re-channelled into the

further products of these companies thus allowing the investor

and the producer to continue their tax write-offs quite

legitimately. Of course, to be able to do this requires a production set-up of the type not owned by the individual producer.

In the past it has been the practice for producers to establish

a separate company for each new project, and Australia's modern

film industry grew from this non-concentrated structure of a large

number of relatively small companies. But the single producer, with his small production company, is finding it increasingly more difficult to operate under the conditions prevailing today where it is to the advantage of the producer to have a large

on-going production house operating to ensure that the investors' money is legitimately re-invested into further productions (if

this is deemed necessary) and thus allowing a large percentage

of the development costs to become legitimate claims of the working production company's on-going tax process.

Without doubt, the Tax Assessment Amendment Bill 1981, and its subsequent changes, has opened up a new era in the modern

Australian film industry. The producer of the seventies has had to reassess his position as such financing methods are definitely not to his advantage. This is not to imply that those most determined will be stopped in their endeavours. Those Page 46.

that want 'success' usually succeed if they are hungry enough.

What it does mean though is that it will, and has become, increasingly more difficult for the individual producer to survive and achieve his aim of independent feature film production. The desire by the Government to protect the system from any abuse can in many ways be seen as the support of a new group of film controllers - no longer foreign film production companies but now Australian television producers.

In 1982, just prior to his retirement from his post as General

Manager of the Australian Film Commission, Mr. Joe Skryzynski commented that the Government saw its funding body, the Australian

Film Commission, withdrawing from its past position as the prime film investor ..• (but) for the industry to emerge from the

Go vernmen t h ot h ouse, as i. t were, the t ax incentives. . were nee d e.d 4 1.

This is true. Private investment can only be regarded as a forward step for the film industry. However, after only three years of operation it is still too early to see the total effect of the

Income Tax Assessment Act's Division lOBA but it is possible to perceive trends that are occurring and the most important one of these seems to be the move into filmmaking by the traditional

Australian media owners. As previously stated, these media owners showed very little interest in past years in the financing, distributing and exhibiting of product from the independent

Australian producers. Now-with the tax benefits available to feature films, tele-movies, documentaries and television mini-

41. Richard McGregor, How The Sydney Film Festival will help ex-Taxpayers, The Sydney Morning Herald, Sat. April 17, 1982, p.44 Page 47.

series there can be observed a considerable change of interest on their part in film investment.

R & R. Productions, after their motion picture epic GALLIPOLI failed to become the financial success that was expected, did not follow up with the promised 'three feature films a year' but instead involved themselves in SARA DANE a television mini­ series which entitled the producer and the investor to the same tax incentives as those available for feature films but with one added advantage - the mini-series could be immediately screened on all

Channel 10 and Murdoch owned outlets. Thus, because the series is screened commercially and in the qualifying period of time, the investor is guaranteed his tax write-off plus the added incentive of sale to a television channel which promises a return on investment monies since, in this case, the producer owns the means of distribution and exhibition.

In 1981 Adams Packer Film Productions completed two feature films as producer, WE OF THE NEVER NEVER and LONELY HEARTS, both of which experienced difficulty in securing a commercial release in order to qualify for the tax benefit which required that the films be earning money in the financial year that they were made. Both films did eventually gain a city release, but not in the year required by the Taxation Department's ruling. They earned their investors' tax benefit with a single public screening during the 1982 Sydney

Film Festival. Page 48.

With Mr. Skryzynski's retirement from the Film Commission in 1983,

.Mr. Phillip Adams retired publicly from his production partnership

of Adams Packer Film Productions and took up the position of

Chairman of the Australian Film Commission.

In April, 1984 we see that Mr. Packer's production company, PBL

produ~tions (Publishing and Broadcasting Limited) plans to shoot $12.3 million worth of film and television projects in the next

12 months making it one of Australia's largest production companies. 42 •

The films five 'major' tele-features and mini-series form the

largest film finance package handled in the country, according to

Mr. Taylor the Chairman of PBL Productions. The 1983 Australian

Film Commission Annual Report states that it recognises the

difficulties of 'distributing one-off tele-movies and to assist

filmmakers to explore tele-movies more effectively a joint venture

was formed with PBL to develop and produce a series of tele-movies

which could' be marketed as a package.' 43 • The Report goes on

to say that this joint venture will be responsible for the development

of projects and once developed and pre-sold to a network the package

will be offered for priivate investment, and the Commission sees this

as a major new initiative emphasising promotion of new talent in

writing and direction. The AFC is now seen to be supporting a

major production company with definite links to distribution/

exhibition outlets.

'Presale' is a very important word in the AFC's report, and

indeed it has always been of the utmost importance. At the

1968 meeting of filmmakers, held to discuss ways to improve the

42. Tim Allerton, Packer Makes $12.3m Film Deal, The Australian April 12, 1984, p.4

43. 1983 Australian Film Commission Annual Report, p.13 Page 49.

industry, Dr. Coombs said that only films with distribution

'guarantees would qualify for subsidies from the Government.

Albie Thorns, in an article written in 1976, states that only scripts with distribution guarantees from the cartels controlling

Australian cinema chains gain Film Commission funding and now in 1983 the Film Commission, itself, emphasises 'presale' to an

Australian-owned combine controlling production/distribution/ exhibition in order to obtain finance from the Commission and private investors. PBL Productions is able to offer investors a package they would, no doubt, find extremely attractive - a presale agreement guaranteeing 35 per cent of the budget from the Packer Channel Nine television network, plus development costs offset by Government funding. Presale is now officially imperative in order to raise investment in today's film industry.

On November 20th, Martin Cooper, a film investment lawyer, previously a Chief of R. & R. Productions, told an independent producer of low budget films that without a presale from one of the Australian television stations (or in the case of a high budget movie - a cinema chain), there was almost no likelihood of raising private investment. Mr. Taylor (Chairman, PBL Productions) confirms this in his statement made to the National Times, 'Without presale agreements in Australia and a prospect of rnaketing the film overseas, producers are in real trouble. My feeling is· that anyone in the market hoping for something to come along is bound to be disappointed. You can't simply put out a prospectus and hope.• 44 •

44. Robert Millikin, Australian Films FAce New Upheaval as Investors Favour Television, The National Times, June 8-14, 1984 pp.8-9 Page 50.

Mr. Greg Bright, p':)blisher of The Australian Film Review (now called

Encore) cites 1982-83 as the most difficult period since 1978 in which to raise funds for filmmaking. He believes that 'one of the major side effects of the increasing reliance on private enterprise· investment is that the one person, independent film producer will become an exception within an industry now dominated by little production houses. 45 · Again, Robert Millikin points out in his article on the plight of the independent producer that interest in such projects as, for example, Hilary Linstead's THE EL UTION

OF BENJAMIN FRANKLIN and OUT OF TUNE is extremely slow. Ms Linstead, producer of HEATWAVE (dir. Phil Noyce) and partner of M & L Casting

Consultants is unable to finalise investment arrangements for either of these projects. Of course, this could be due in part to the sort of topics that both cover. There could be little interest in the market place for films about homosexual elocution teachers of autistic children who become piano tuners, even given that they have been written by an acclaimed writer such as Steve Spears and even though ANNIE's COMING HOME won Best Film at the 1984

Australian Film Institute Awards for its portrayal of treatment of, so-called, mentally retarded people. Here Greg Bright comments that a constant criticism of Australian films is that they have subjects which are too sophisticated, or too complex, for the mass market and they are, therefore, relegated to the art house cinemas overseas. This is to a large extent a very true comment and, therefore, since the art house market allows little chance of income producing this has had the effect of deterring private investors in 1984. Ms Linstead believes

45. Greg Bright, Investing in Film, The Chartered Accountant in Australia, August, 1983, pp.16-18 Page 51.

however, that we are seeing the death knell of the independent

producer who wants to make a high-quality product and this also

appears to be an accurate statement. There is, indeed, only so

long that you can go on trying to raise finance and not everyone

has the staying power of Ms Long viz a viz her fight to product

SILVER CITY.

In conclusion, it should be pointed out that this appraisal of the modern feature film industry of Australia has dealt with the producers' relationship with distribution and exhibition because, 4he. as explained in the beginning this isAmajor involvement in the making of films. Without doubt there are many, many facets of

the filrnrnaking process that have not been covered in this paper and which are, of course, vital to the finished film but none are

as necessary as the producer -·without whom there would be no

film at all.

The Australian Film Commission has played the major role in the birth of the modern Australian feature film industry because without the AFC there is little likelihood that a feature film

industry would have become the professional product producer that

it has become. The producer would have taken so much longer to out come to terms with investment with/the Government involvement through

the Commission. In 1984 we are coming to another turning point -

the development of private enterprise and at this point in time

it seems that the modern Australian feature film industry is

poised on the threshhold of another phase of its growth. Page 52.

The industry has undergone great changes since its rennaissance

1n 1970 and in the middle eighties we are in a position to consider the last decade. One thing- that is clear is that we are now seeing a strong forward thrust by the existing traditional media owners into production, distribution and exhibition and,

I believe, we will continue to see an even stronger move in this direction. Perhaps it is as Richard Tanner of Roach Tilly Grice said in a 1984 interview - Cohen (Minister for Home Affairs) is turning the Australian film industry into a television industry - and a Government sponsored commercial television industry at that. SCHOU, KIRSTEN The Structure and Operation of the Film Industry in Australia .. A Resources/Research and Survey Unit Publication, April, 1982.

1982 Australian Film Commission Annual Report

TULLOCH, JOHN Australian Cinema - Industry Narrative and Meaning, George Allen & Unwin, Aust., 1982

WILSON, MALCOLM U.S. Owners Sell Hoyts for $40m, The Sydney Morning Herald, 30th June, 1982

HYAMS, J. Director Ken Cameron: Moving in a Different Direction, Rolling Stone, No. 375, May, 1984

Finance Action, The Battles Over!, The Sun, 15 January, 1982

BUCKLEY, TONY You Know Where We've Been But •.• , Cinema Papers, Melbourne, March/April, 1975

WESTON, J.S. Australian Mass Media : Controllers, Consumers, Producers, The Australian Institute of Political Science, 1975, No. 9

THOMS, ALBIE Polemics for a New Cinema, Wild & Woolley, Glebe, 1978

RICKETSON, JAMES Letters, Cinema Papers, Melbourne, March/April, 1975

SHIRLEY, J. & ADAMS, B. Australian Cinema - The First Eighty Years, Angus & Robertson & Currency Press, Sydney, 1983

1970/1971 Australian Film Development Corporation Annual Report.

STRATTON, DAVID The Last Wave .• The Australian Film Revival, Angus & Robertson, Aust., 1980

Hansard, Government Printing Office, June, 1976

Role and Policies of the Australian Film Commission, undated.

BERTRANT INA/COLLINS DIANE Government and Film in Australia, Currency Press, Sydney, 1981

Brief, Australian Film Commission, undated.

1983 Australian Film Commission Annual Report

PUZO, MARIO When Hollywood Moves in How Can Israel Win? The National Times, October 25, 1976

GELFMAN, R. Variety, Hollywood, u.s.A., April 30, 1980

National Bank Monthly Summary, August, 1980

BURKE, TERRY Local Production, Australian Motion Picture Year Book - 1981/82, Hong Kong. Promises Fail to Woo Private Cash to Films, National Times, Nov. 30 - Dec.6, 1980

MARTIN, ANDREW Tax Provisions for Films, Australian Motion Picture Year Book - 1981/82, Hong Kong.

1981 Australian Film Commission Annual Report

RHUEBEN, RONALD The Current Situation Regarding Taxation and Documentation for Investment in the Australian Film Industry, April 16, 1984

After $130m .. Cohen Dampens Producer Spirit, Encore, W.R. Bright & Co., Sydney, July 19 - Aug. 1, 1984

Gaty Takes the Government to Court over Certification, The Australian Film Review, W.R. Bright & Sons, Sydney, March 3-6, 1983

McGREGOR, RICHARD How The Sydney Film Festival Will Help Ex-Taxpayers, The Sydney Morning Herald, April, 17, 1982

ALLERTON, TIM Packer Makes $12.3m Film Deal, The Australian, April 12, 1984.

MILLIKIN, ROBERT Australian Films Face New Upheaval as Investors Favour Television, The National Times, June 8-14, 1984

BRIGHT, GREG Investing in Film, The Chartered Accountant in Australia, August, 1983 APPENDIX A ••• BREAKDOWN OF AUSTRALIAN FILM COMMISSION STRUCTURE BETWEEN 1970 and 1984

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