The past few years represent a watershed for the Australian entertainment industry. The country’s commercial tv industry collapsed, and while a recovery is now slowly getting underway, things will never be the same again.
The television debacle has impacted all strata of Oz entertainment. Miniseries production – once the backbone of the industry – and other top range drama have plunged. License fees have been cut up to 50%. Margins on ongoing series and serials are now extremely tight.
The commercial networks are relying on renegotiated output deals for product. As a result, buying from the indie sector froze and is only just starting to thaw.
Prices have been slashed so theatrical distributors are paying less for product and smaller tv distribs are inclined to take what they can get. Not surprisingly there’s very much a feeling among producers and distributors that they’re now paying for the network owners’ mistakes.
And there’s the banks. With two webs in receivership and their banks poised to convert debt into equity, one could be cynical and say they now run much of the Australian media.
Bank on it
And while industryites balk at banks having direct control, it can’t be denied they and their appointed receiver/managers are now a crucial part of the webs’ decision-making process. Says one distributor/producer: “The industry has changed from being driven by creative decisions to being driven by money decisions.”
Arguably the industry was due for a realignment and contraction after the boom days of tax-driven production and well-off webs. But the recession has made the industry’s readjustment that much harder.
Indeed, Australia is hurting badly. Unemployment is at its highest level in almost a decade; all industries have reported lower profits and weakened trading in the year’s first quarter, according to recent surveys; and few companies will be increasing investment levels over the next year. In addition, hefty interest charges (a prime rate of 16%) are still at work.
Major players like Hoyts (whoses public companies are burdened by a combined debt of $A321 million) are waging war against high expenditure levels via restructuring and sales of non-core assets to ensure long-term survival. Such damage control can only have side effects.
Ray of hope
But there is hope. Entertainment companies with fundamentally sound businesses are slowly gaining strength. The Australian Broadcasting Corp. has come into its own as the major underwriter of drama production and the Seven web has maintained a solid, if adjusted, commitment. Webs, after all, still need local production to underwrite their success.
Aussie producers more than ever before have been forced to seek international partners; if nothing else, the trials of the last two years have bred a wilier breed of producer. Says Kim Williams, chief exec of major house Southern Star: “The Australian industry is always on the top of a tidal wave, but I think we’ve got some pretty good board riders now.”
And recent production indicates there are cheaper alternatives (such as all-video minis and a move into telepix) to cope with reduced local presales. In addition, a new window of production will arguably open up when the Australian government finally takes off its blindfold and allows pay-tv.
Film production is maintaining a slow but steady pace of approximately 18 to 20 films a year – not what it used to be but sufficient to maintain a basic infrastructure. It is almost entirely dependent on government backing via the Australian Film Finance Corp. but then it has always relied on some government mechanism.
And while there have been a fair share of duds, there have been some high-profile successes, notably “Green Card” abroad and “The Big Steal” locally. Forth-coming “Spotswood,” nabbed by Miramax for the U.S. also promises good things. “For the first time in the last 20 years I can see a generally commercially based and creatively exciting industry. It’s slowly but surely building,” says FFC chief exec John Morris.
A long-term problem will be the possible end of government backing when the Film Finance Corp.’s four-year term comes up for renewal in two years. Its future will be both a political and cultural decision.
The reality is, of course, that of its final year’s $A35 million funding, there isn’t enough to go around. Says Morris, “It’s inadequate to support a healthy-sized industry. Although I think the industry has made huge strides since 10BA (tax) days, it needs longer than four years to establish itself on a continuing commercial basis.”
But again that signals the importance of international perspective. “One had better look to one’s international associations and the quality of one’s rapport with the international film and tv community,” says Williams.
Exhibition and distribution continue to grow. An ongoing but now slowing multiplex development program by the major circuits has seen b.o. revenues increase almost $A100 million and admissions by 10 million since their first introduction in 1986.
Homevideo remains static. And with VCR penetration already at 70% – one of the highest in the world – growth is elusive. But compared with declines in other markets the penetration is considered positive, especially as strong growth in sell-through is helping to sweeten profits. This year, however, distribs increasingly will be targetting consumers directly to boost biz. Theatrical and homevid distribs both are having to change the ways they do business.
Commercial legit is bouyant, but attracting the cost-conscious consumer doesn’t leave much room for new and daring work, and increasingly producers have to rely on joint ventures to defray risk. Subsidized theater is relatively healthy and continues to air new work, but is becoming increasingly risk-conscious as funding and sponsorship, more than ever, become luxury items in a recessionary climate.
And for the record industry, 1990 marks the near death of the LP. The CD’s ascendancy has seen the industry grow to a now relatively static level. Still, with CD penetration only at 20%, there’s room to move.
And for now? Says Helen Watts of Film Finances’ Oz operation, echoing many others: “It’s time to tighten your belt, hold your breath, and see if you can get through it.”