fcomarison And The State of the UK Independent Film Sector A Study for Pact by Olsberg•SPI 7 28th April, 2017 The State of the UK Independent Film Sector CONTENTS 1. Executive Summary ................................................................................................................... 5 1.1. About the Study ................................................................................................................. 5 1.2. Key Findings ....................................................................................................................... 5 1.2.1. Overview ................................................................................................................... 5 1.2.2. Production .............................................................................................................. 10 1.2.3. 2016 Perspective ..................................................................................................... 14 1.2.4. Finance Sources and Models .................................................................................... 14 1.2.5. The Decline in International Value ........................................................................... 15 1.2.6. Budgets ................................................................................................................... 17 1.3. Impacts on the UK Independent Film Sector ..................................................................... 19 1.4. Cyclical and Structural Changes ........................................................................................ 23 1.5. The Importance of the UK Independent Film Sector ......................................................... 23 2. Overview of UK Production ..................................................................................................... 26 2.1. Context for the Study ....................................................................................................... 26 2.2. 2007 – Opportunity and Disruption ................................................................................... 26 2.3. Identifying Trends in Finance Sources and Models ............................................................ 28 2.4. The Importance of a Healthy UK Independent Film Sector ............................................... 29 2.4.1. Economic Impact ..................................................................................................... 29 2.4.2. Cultural and Audience Impact .................................................................................. 29 2.4.3. Impact as a Driver of the Creative Industries ............................................................ 32 3. Volume and Types of UK Independent Film Productions ......................................................... 33 3.1. Overview .......................................................................................................................... 33 3.2. Volume of UK Independent Films Produced ..................................................................... 33 3.3. Types of UK Independent Films – Domestic, Inward Investment and Co-Productions ....... 33 3.4. Country of Origin .............................................................................................................. 34 3.5. Genre of Projects .............................................................................................................. 37 4. Sources of Finance for UK Independent Films .......................................................................... 39 4.1. Overview .......................................................................................................................... 39 4.2. Complex, Multi-Party Financing and the Impacts on Producers ........................................ 39 4.2.1. Closing Finance ....................................................................................................... 40 4.3. Financing Costs ................................................................................................................ 41 4.4. Impact of High Production Levels on Crews, Talent and Facilities ..................................... 42 5. Public Funding ......................................................................................................................... 44 5.1. The British Film Institute .................................................................................................. 46 5.2. BBC Films ......................................................................................................................... 48 5.3. Film4 ................................................................................................................................ 49 © Olsberg•SPI 28th April 2017 ii The State of the UK Independent Film Sector 5.4. Film Tax Relief .................................................................................................................. 51 5.5. UK Nations ....................................................................................................................... 52 6. Tax-Based and Other Private Equity ........................................................................................ 55 6.1. Tax-Driven Schemes and the Private Equity Landscape .................................................... 55 6.2. EIS and SEIS Schemes ...................................................................................................... 56 7. Sources of Trade Finance ........................................................................................................ 57 7.1. Broadcaster Equity and Licence Fee ................................................................................. 57 7.2. International Sales and Presales ....................................................................................... 57 7.3. Gap Finance ..................................................................................................................... 58 7.4. Post Production Providers ................................................................................................ 59 7.5. Sales Company Advances ................................................................................................. 59 7.6. UK Distribution ................................................................................................................ 61 7.7. VoD Services .................................................................................................................... 61 8. Bank Finance ........................................................................................................................... 62 8.1. Types of Bank Finance ...................................................................................................... 62 9. International Co-Production Finance ....................................................................................... 63 9.1. EU Co-producers .............................................................................................................. 63 9.2. Other International Co-producers ..................................................................................... 64 10. Producer Equity Corridor and Producer Equity Entitlement ..................................................... 65 10.1. Overview .......................................................................................................................... 65 10.2. Measuring Success ........................................................................................................... 66 11. Budget Band Analysis .............................................................................................................. 69 11.1. Overview .......................................................................................................................... 69 11.2. Budgets Trends ................................................................................................................ 69 11.3. The Growth of Micr0-Budget Production and its Impact on the Sector ............................. 69 11.4. £0.5 million-£2 million ...................................................................................................... 70 11.4.1. Analysis of Finance Model and Changes Since 2007 ................................................. 70 11.4.2. Volume and Type of Projects ................................................................................... 71 11.4.3. Countries ................................................................................................................. 72 11.4.4. Genre ...................................................................................................................... 73 11.5. £2 million-£5 million ......................................................................................................... 74 11.5.1. Analysis of Finance Model and Changes Since 2007 ................................................. 74 11.5.2. Volume and Type of Projects ................................................................................... 76 11.5.3. Countries ................................................................................................................. 77 11.5.4. Genre ...................................................................................................................... 78 11.6. £5 million-£10 million ....................................................................................................... 79 11.6.1. Analysis of Finance Model and Changes