Screen Australia: the 2010 Roadshow
by: Mark Poole
published in Screen Hub
Thursday 4 March, 2010
Ruth Harley and her team are on the road, seeking input about the issues we believe are important for the future of the industry, no less.
Dr Harley and company have already been to Adelaide and Brisbane, and this is a report of the Melbourne show. They are in Hobart today, and next week will do Sydney. WA and NT don’t currently figure on the Screen Australia map, but it’s quite possible that Robyn Kershaw will bring the roadshow to Broome as a musical.
Fiona Cameron co-presented the session, and Ross Mathews, Martha Coleman, Alex Sangston, Chris Oliver, Mike Cowap, Claire Jager, Matthew Deaner. Jo Rose and Charlotte Seymour were present also.
The session was billed thusly on Screen Australia’s website:
"2010 sees a major government policy review into the effectiveness of Federal Government support measures for the independent screen production industry, including the Producer Offset. Screen Australia values your input and is keen to learn what issues you believe are important for the future of our industry.
CEO Ruth Harley invites you to a series of industry forums to discuss the issues which may be canvassed in the Federal Government's upcoming review. We're also keen to talk about co-productions as part of Screen Australia’s review of the Official Co-production Program.
Ruth introduced the session by explaining it’s about what Screen Australia is thinking about the policy discussions that are taking place around the country. She said that Screen Australia will be making a submission to the above-mentioned industry review, but this submission will contain the agency’s views, not those of the industry. However other views may be attached as an appendix.
Fiona Cameron then began a presentation with slides about the review. She said the context was that the government made an election commitment in 2007 to review the film sector three years after the funding package was announced, which was on budget night 2007. Hence it is time to review the entire package, but especially the new Screen Australia and the operation of the producer offset, and in particular whether it had had a negative effect.
The 2007 film package included abolishing 10BA, 10B and FLIC, introducing the producer, location and PDV offsets, creating a merged Screen Australia and reducing government appropriation to offset the offset, if you get my drift.
Accordingly, this is an opportunity to take stock, especially how the Producer Offset is working. Fiona said that arguably the commencement of the offset could not have been taken place at a worse time, with the Global Financial Crisis severely reducing the amount of private investment available to the sector.
OFFSET POLICY INTENT:
Looking back, the intention of the Offset Policy, said Fiona, was to provide equity to filmmakers and to assist in the creation of sustainable businesses which had ongoing production slates rather than one-offs.
It is clear that the offset is working, and can bring foreign finance to Australia. An example is the feature film Daybreakers, which had a budget of around $20 million. However the intention of the offset was to allow such films to be developed and produced without the assistance of Screen Australia, and the difficulty at present is that the agency has to be involved to top up the offset, even on such big budget films.
As well, the offset was designed to bring back overseas Australian key creatives, and allow the industry to form the critical mass that could sustain itself over time, as well as engage audiences.
In a sense, added Cameron, the offset was designed to replace the former FFC’s ‘market’ door.
IMPACT OF PRODUCER OFFSET:
So what has been the impact of the producer offset? Fiona presented a number of slides. Essentially the spend across the board is up, although with documentaries there was a spike after the closure of the former agencies as they emptied their coffers before shutting their doors.
Screen Australia believes the overall average government spend via the offset mechanism will level out to around $100 million a year, which is about what the government expected, they understand.
There was discussion of provisional and final certificates, saying that 80% of provisional certificates convert to final certificates with documentaries, whereas for features only 45% of provisionals become final, due to the more speculative nature of that beast. Fiona also raised the length of time it takes to get a certificate, stating that 90% of final certificates are completed within the 10 week turnaround adopted as an agency benchmark, but only 54% of provisionals are completed within the 3 week benchmark – it’s more realistic to assume a turnaround of 6 weeks for these.
The statistics show that the offset works well for low and high budget feature films, but not for the mid range $10 million to $30 million.
Currently there is a lack of domestic private investment, possibly due to the GFC, and also distributors are reluctant to provide presales at present.
Jim Shomos, Victorian writer/producer and Victorian head of SPAA, said that one issue that hadn’t been raised was private investment. The offset was designed to attract private investment, but that hasn’t worked. That missing link relates to whether 10BA should have been cut at all. Is there any possibility of bringing 10BA back, he wondered?
Fiona replied that in the dying days of 10BA it wasn’t doing a lot, in fact very little. Ruth added that she wasn’t sure that part of the political intent in 2007 was to increase private investment, and if so, it’s currently absent.
Producer Shana Levine said that a mid level feature has to appeal to overseas audiences in order to recoup its budget, yet it had to pass the SAC test for Australianness. Is that a problem? Alex Sangston replied that the government had deliberately removed as many copyright and finance restrictions as it could.
DOCUMENTARY:
Fiona said that one off documentaries continue to need direct Screen Australia funding in order to get made. For filmmakers the requirement to put in two separate applications for the offset and for Screen Australia takes a lot of work, and is expensive and complex. And the agency has discovered that because of the Tax Act it’s not possible to share information gathered for the Offset purposes with the development and production wing.
Thinking about this, Fiona flagged some potential changes. The offset threshold could be increased from $250k to $500k per hour. Or the rules could be changed the other way, so that producers didn’t access the offset but went to Screen Australia for a grant for the money they would have previously got under the Offset.
However the industry has said that the equity created by the offset was enormously important to producers.
Lucy Mclaren, producer from Renegade commented that applying for a final certificate for a documentary was more work than anything else.
Alex Sangston replied that they know how much work it is. “We understand that applying for a final certificate is a lot of work.”
Lucy – So you’re suggesting that you go through Screen Australia for a grant instead.
Fiona – It’s a tradeoff - investment vs equity.
Ruth – Even if the government gave us $3 million to pay for the increased investment that such a change would require, that amount would erode over time, compared to the offset system which remains uncapped.
Julie Marlow, from SPAA, said that licence fees from broadcasters for documentaries have been static over time, and SPAA is going to be lobbying for an increase.
Stuart Menzies, Head of Documentary at ABC, replied that in the last 5 years the ABC’s licence fees to producers have gone up around 10 or 15 %. But with the funding for documentaries remaining static within the broadcaster itself, it’s a zero sum game, and so if licence fees increase then the remaining pool of money for new documentaries will reduce.
TIMING:
Fiona commented on another pressure point, which was one of timing, when you could apply to the Tax Department for the offset.
The current situation is that if you create an SPV or special purpose vehicle for your production, you can liquidate it at the conclusion of the project and apply for the offset at that time, instead of having to wait until June 30.
Screen Australia has explored the possibility of making a change to the legislation to overcome the timing problem, but it’s not as simple as may be assumed.
At present, the good thing about the offset is that it’s uncapped, and so if SPV’s can be made to work that would be a good outcome, but it has to be monitored as to how it’s working in practice.
CERTAINTY:
According to Fiona, at present the SAC test is not so much a test as a holistic approach. “We’ve had some high profile criticisms recently about how SA determines the SAC test,” she said.
People say they need certainty and that’s not how the current legislation works, as there is some flexibility. Again, there’s good and bad about that, Fiona said. It’s a holistic approach versus a Black letter law approach. Black letter law makes everything very clear, and that’s good for certainty but bad for flexibility, in a nutshell. “We do have our hands tied because of the tax act, we can’t talk about specific projects because of the tax act,” she added.
The issue of the definition of documentary, and where docs end and reality TV begins, is a current one. However they acknowledge that the definition of what is a documentary has to evolve and change over time.
The issue of theatrical release, for both feature docs and feature film dramas, is another issue. At present the agency has to be convinced that there is an intent for a theatrical release. This means that Screen Australia has to see the deal that’s in place.
Daniel Scharf, Feature Film Councillor on SPAA, commented that he was interested in the theatrical release issue for features, and his personal view is that the threshold for the offset should be reduced to zero. He also suggested that the holistic approach to the SAC test meant that in effect Screen Australia could fund whatever it liked.
Ruth – I agree with everything you say so I don’t have a final view of where the threshold should be but I do have arguments for and against. The point is at a time when a certificate is issued there is an intent to release the film. It’s not just a broad or loose intention, there has to be a deal in place.
“The board absolutely certainly makes decisions on production investment,” she added.
Alex Prior, Managing Director of Screen Hub, suggested that regarding the SAC test, since there was a huge amount of certainty in the 10BA days through past practice, perhaps Screen Australia could create an artificial precedent by providing examples of what would 100% pass the test, what would be a bit iffy, and discuss the grey areas.
Alex Sangston – The ones that would obviously pass would have no argument about it. The same goes for projects that obviously wouldn’t pass. The problem is the ones in the middle. That’s where the uncertainty lies.
Andy Buck, producer of The Jammed, said that the same standards not applied between offset and SA. The Offset arm is much more lenient. If you have intent they’re not making judgements on liking the release proposal, but Screen Australia are. “Regarding distribution and cinema release, innovation is one place that can make a difference and any attempt to be innovative means you can’t be passed up to the board. The board doesn’t always make a decision as some projects never make it to the board.”
Ruth – “Decisions are made at letter of interest stage by SA on the creative merits of the application. We are making decisions about all aspects of the project including distribution.”
LOW BUDGET FEATURES:
Fiona Cameron said there was a push to lower the budget threshold for the offset for feature films to $500k. “The issue for us is theatrical release.”
Screen Australia’s thinking is that projects at that budget range will find it hard to get distribution deals before production is complete, and yet the offset requires an intent to distribute the film in cinemas. Screen Australia can’t guarantee that the project is a feature film, as opposed to television, without a distribution deal.
“Without SA approving distribution requirements, no lender will cashflow a full 40% offset as the fear is that it will only get 20%,” she added. So the film will be difficult to finance.
David Redman, producer from Instinct: “One of the major issues is theatrical release. This is going to change radically over next 3 years. Windows are collapsing, worldwide mutliple platforms are emerging, so the old fashioned model of theatrical release and then DVD sales is going to change. Unless Screen Australia and the offset are at the forefront of this change, the industry will be left behind.”
Ruth Harley agreed but she said that have to move on all fronts at the same time. “We don’t want to give up the opportunity for a big cinema release for our films either.”
David Redman added: “The offset has to adapt along with changes to film distribution. It has to be more adaptive to where the industry is going. Distributors don’t prebuy films any more, and we’re going to end up with a blockage in the system.:
Ruth – The test at the moment doesn’t include prebuy but an intention for cinema release.
David Taft, producer Harvey Taft said “I know it’s out of your hands but the issue is raising finance for a film on the uncertainty of getting 20% as opposed to 40%. A lateral solution would be to make the offset for everything at 40%.”
In other discussion, Steve Kearney said that many US States offered offset schemes for feature films with no cap, no cultural test and that puts Australia at a disadvantage. Jim Shomos pointed out that Screen Australia seemed to be saying that the SAC test is getting easier, but the voices from the trenches was that it was getting harder. Alex said that Screen Australia had rejected very few features on the basis of the SAC test. Lucy Maclaren said that when you add in the problems with bringing in cast from overseas, that increases the issue.
Doron Kippen from Music and Effects commented that people in the post production sector were being asked to work for nothing consistently. “The relationship of Screen Australia with the post sector needs to be improved. Here we get a good hearing from Film Vic. They are responsive to our position.”
“We’re being asked to do a feature film as a TV production and paid at cost or below for feature film requirements and we collect nothing at the other end. We need a mechanism to be flexible the way we work. We know the 500k feature is coming on. We need a way that the post sector can recoup money for work done while being flexible.”
Ruth – “Budgets haven’t gone down for post production, so taking your report on board means that budgets haven’t been spent. One of the differences between Australia and NZ is that you can’t go into post without a third of your contingency there. Here’s it different and I want to take that up.”
Fiona concluded that the timeline for the review was that the discussion paper from the Minister’s office would be issued around March/April, then submissions would be called for, and then the department will report to Minister by the end of 2010. The election may affect that, however, in unpredictable ways.
Mark Poole
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