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Welcome Address for SPAA Conference 2009

Antony I. Ginnane
SPAA President

Wednesday November 18, 2009: The Honorable Virginia Judge, members of SPAA Council, Geoff Brown (SPAA Executive Director), fellow SPAA members, other producers and distinguished guests -  good morning and welcome to the 2009 SPAA conference.

My name is Tony Ginnane.

12 months ago, at last year’s conference, having just assumed the SPAA presidency, I delivered an address in which I expressed cautious optimism about our collective future in the light of the introduction of the Tax Offset for film and television and the merger of the 3 peak screen agencies into Screen Australia.

I described the offset as a magnificent opportunity for us and, at the time, so it seemed to be.  However, in retrospect, it is clear that I, and many other commentators, underestimated the effect the global financial crisis would have on our industry.

Indeed that crisis has led to a number of problems for the feature film industry that are almost unprecedented.  These problems have included:

1. The collapse of the international pre-sales model.
2. The abrupt withdrawal from entertainment financing of bank lenders who might otherwise have worked with  the offset.
3. Widespread global piracy of intellectual property.
4. The very slow transition from a hard goods based DVD landscape to an electronic one.
5. A progressive reduction in funding for Screen Australia, which has severely curtailed the scope and size of their ability to co-invest with the rebate.
6. The strong appreciation of the Australian dollar against the U.S. dollar.
7. The substantial disappearance from the US acquisition landscape of many of the so-called specialty distribution companies who we anticipated to be US buyers of offset created productions.  The final evisceration of Miramax by Disney 2 weeks ago closed the door on the 1980s and 1990s phenomenon of US majors’ flirtation with what we called ‘smarthouse’ product.

Collectively they have severely impacted our members’ ability to utilize the new arrangements and maximize the equity and ownership positions that were intended to flow from it.

Fortunately they have had much less of an effect on adult TV drama and children’s television.

Even though the adult TV drama offset is only 20%, the ratings success of shows like “Underbelly” and “Packed to the Rafters” on free TV and “Satisfaction” and “Tangle” on pay TV has encouraged Australian networks to program and finance Australian content aggressively in prime time and Australian producers have worked as partners with the networks both commercially and creatively.  The combination of the offset, State body investment and Screen Australia investment has enabled some TV producers to use the offset to increase budgets and production values, thus expanding foreign sales on product that is already seen by international networks as high quality, high rating entertainment.

The presence, inter alia, of international multi territory conglomerates like Freemantle, Endemol, Granada and Shine and their engagement with local producers, is testament to the skills of our market savvy TV members.

Of course there is an Australian content obligation on free TV and an Australian spend obligation on pay TV but the success of Australian TV is driven by ratings, not by quotas.

On the other hand the feature film industry is in a very different state.

In 1988 Australian films took 18% of the box office.  The figure hasn’t been above 10% since and lately has been floundering between 3% and 4%.

When I focused on this in my address last year, warning that continued government support for the industry at around $100 million per year could not be simply assumed as a given if we failed to raise our game, some called me a ‘Cassandra’; but as classical scholars know, Cassandra accurately foretold the real purpose of the wooden horse the Greeks left behind outside the walls of Troy.  No one believed her until it was too late and Troy fell.

How can the feature film industry change?  How can we emulate the success of our TV colleagues?

The first question is, “Do we want to change”?

Hitchcock once said:  “Film is life with the boring bits cut out”.

But, unfortunately, our feature film industry (significantly writer-director led) revels in the boring bits.

Writers talk about truth, but truth is for television.  Truth is for documentary.  Cinema is about magic, dreams, imagination and artifice.  It draws on itself and has no reality beyond its own language; immediately understood by all who love it.

We have spent over $1 billion on our film industry since the 1970s but we have never stood together and said “This is an industry.  This is a business.  It’s not about art.  It’s not for dilettantes”.

In most other business, government intervenes in the marketplace via subsidy to correct an imbalance.  It’s cheaper to make cars in Korea – so government intervenes in the automobile industry to enable Australian autos to sell.  But the intervention is to help a car that conforms to marketplace needs get sold - not to force a 3-wheeled pink variant into the market.

In the film industry, government intervention has been consistently used to assist in the creation of product the market does not want and the market tells us that year in, year out by rejecting it en masse.  But we don’t listen and we don’t want government to notice.

We purport to clamber for commercial success but when it eludes us (not surprisingly given the content of much of our output) we fall back on the circular and incestuous praise of a troika of critics, film festivals and cultural commissars for our justification.  We confuse Americanism with internationalism and then chant the “Australian voices” mantra like some warped reverse playback of the Red Flag.

No wonder we struggle to get to 5% of the Gross Box Office, let alone the 10% we should easily be obtaining to justify the continued subsidy support.

We need to resolve once and for all the 40 year push/pull between art and commerce.  Industry and government need to accept that this is a business, not a culture fest.

Of course there is a place and a role for government to fund culture (including cinema) but it should be separate from and funded and judged quite differently to the sustainable commercial industry we need to create.

We have forgotten that, at heart, we are program suppliers and we only exist to make broadcasters and distributors more profitable.

But many of us resist, with a passion, any attempt to integrate distribution with production; forgetting the glory days of Cinesound & Union Theatres and Hexagon & Village.

With vision and that $1 billion we should have had half-a-dozen Luc Besson’s and a world wide industry – or at least 2 or 3 Peter Jackson’s.  Of course we have George Miller and, from a different perspective, Baz Luhrmann – but apart from George and Baz, as an industry, we could have achieved so much more and performed so much better without the straight jacket of cultural protectionism we enveloped ourselves in.

Are we frightened?  Is that the answer?  We’re not frightened in sport, or music and our exhibitors like Village and, to a lesser extent, Hoyts and GUO, blazed world wide trails.  But the feature film production industry, with a couple of exceptions, hasn’t.  

“We can’t compete”.  “They have bigger budgets”.  But CSI’s budget is many times that of “Underbelly”.  The budget for “30 Rock” is many times that of “Packed to the Rafters”.  This budget thing is, frankly, a cop out.

Perhaps collectively our ability to read the marketplace and audience appetite has been so dulled by the subsidy drug that we have completely forgotten what audiences want.

There is no formula for what works; but we know what doesn’t work.  Our job is to feed the food chain of distribution and to develop and produce what buyers want; take local concepts and develop them for a global market.  Genre is key and it’s bizarre to me that when literally hundreds of social realist Australian films fail, we keep making them; and when a few horror thrillers fail after “Wolf Creek”, its time to shut that genre down again.

That’s very sad.  But, fortunately, it’s not all doom and gloom.

SPAA was in the forefront of a number of initiatives this year that will assist all our members.

We were successful in supporting the lobbying for increased funding from government for ABC-TV in the triennial funding application.

With the ABC pre-committed to a Channel 4 model of production out-sourcing, the extra $100 million secured will be used for production funding and pre-buying of new Australian film and TV content produced by the independent community.  This injection of new dollars in a period of downsizing and decreased ad revenue for the commercial sector will be a significant stimulus over the next 3 years.

At the same time, with the strong support of Screen Australia, SPAA’s lobbying government and the ATO over the acquittal of the offset issue to eliminate the potential of June 30th bunching, arbitrary post production schedules and lender uncertainty, has produced a solution.  Liquidation of the production special purpose vehicle upon conclusion of post production and filing of the QAPE audit will allow for payout of the net benefit of the offset to the producer or offset lender, shortly thereafter.

I have already congratulated our TV adult drama producers but our children’s TV members, like Ewan Burnett and Jonathan Shiff are also worthy of praise.  Australian children’s TV is the gold standard overseas at MIP-TV and MIPCOM with broadcasters.

And our documentarians continue to surprise and excel.  900,000 people watched “Skippy”.  Congratulations Andrew.  Ongoing series such as “Who Do You Think You Are”, feature documentaries such as “Bastardy”, and programs from the History Initiative such as “Rogue Nation” are testaments to the depth and breadth of our resourceful and creative documentary sector.  The Offset hasn’t been kind to documentarians, and SPAA has been working hard to ensure that they get a fair go.  

In 2010 we will have a Federal Election and at the same time, and prior to the election, a major review and inquiry into support for the industry.  This will be an opportunity for SPAA to update government and the opposition on our needs.

Despite my earlier remarks about the feature film sector, there are changes in attitude abroad.  It may be generational.  It may be the new digital reality.  Questions are being asked finally about marketing, distribution and exhibition.  And we have a distinguished former distributor/exhibitor on Screen Australia’s Board.

Producers are struggling to get to know their audience; the market value of their projects and, thus, pricing strategies.  “Samson & Delilah” was a success given its realistic budget and “The Boys Are Back” (having grossed, up to the end of the opening weekend AUD $564,314) and “Bright Star” provide entertainment values audiences should embrace.  “Mao’s Last Dancer” with a fantastic Australian gross of AUD $13,975,651 to date, like “Australia”, proves that melodrama, not social realism, is the genre our would-be screenwriters should be studying.

This year’s 20 DigiSPAA entrants, all shot without government production assistance, are an exciting and commercially minded group and I’m pleased to see that the successful Enterprise Program applicants included 2 feature film groupings aligned with distribution and foreign sales entities.

But it is incontestable that the offset has not yet worked for the feature film sector and it is, as indicated earlier, largely not our fault.  I understand Screen Australia’s need to spin the latest National Production Survey results to put a happy face to government on offset results, but the reality is that of the 17 features that utilized the Offset that Screen Australia cites, the majority needed additional Screen Australia discretionary investment to close their finance plans.  There has been minimal private investment take up of the Offset.  So, as Screen Australia’s funding continues to decrease, there will be blood.

SPAA will be putting the case strongly to government that a stimulus package is necessary; perhaps a 3 year ‘top up’ (partly based on the under utilization of the offset due to adverse market conditions and the savings from the reduction of funding at Screen Australia).  We see this stimulus funding as a separate and distinct initiative from the offset, exclusively driven by a marketplace model and outside of Screen Australia’s now exclusively evaluative and significantly culturally underpinned approach.

The former Film Finance Corporation marketplace door was shut down by Screen Australia without any publicly disclosed research, analysis or statistics provided as to whether films financed under it were more, or less, successful than those financed via evaluation.

SPAA believes in diversity and multiple doors and sees a stimulus fund structured like the Commercial Television Production Fund in the 1990s as an opportunity to encourage an aggressively commercial approach to the feature film sector, in partnership with Australia’s theatrical distributors.  

Screen Australia now has less dollars but says it needs more.  One way to get more is to improve its return on investment.  One way to do that is to selectively invest larger dollars in 2 or 3 titles per year that have mainstream multiplex potential with worldwide distribution in place on gross recoupment terms; take 2 or 3 $100 million return ‘blue sky’ shots per year.

Finally SPAA applauds the continued success of our service sector via the location and PDV offsets, including Deluxe Australia, Omnilab, Animal Logic, FSM and others.   The rising Australian dollar calls for some upward ’tweaking’ of these incentives, but this segment continues to kick major goals.

This year, back in Sydney, the Conference (now 24 years old) is bigger then ever and its practical and theoretical value to SPAA members and other attendees is unequaled and unchallenged.

Gaylee Butler, SPAA’s Conference Director, and her team, deserve major kudos and appreciation.

I welcome you to SPAA 24.  We’re here to learn, listen and have fun.  We have the opportunity to forge new connections and reaffirm existing relationships. I wish us all success and good luck over the next 12 months.