SKY MOVES INTO MOVIES

Is Sky TV, owner of the U.K.’s three satellite-delivered pay movie webs, edging toward a more active role in the British film industry? It’s a move most British producers regard as long overdue, given the ever-growing cash pile Sky is earning from its film channels.

David Elstein, Sky’s programming chief, has offered to invest $2.35 million, around half the budget, in Nik Powell and Steve Woolley’s upcoming Angela Pope project, “The Hollow Reed,” in return for all U.K. TV rights and an equity position. It would be the first time Sky has invested in a movie, as opposed to simply licensing the pay TV rights, although its predecessor, BSB, did back a few films.

Yet Elstein says it is a step he is loath to take. He doesn’t believe it’s the job of a TV company to get so involved in movies. He’s fiercely critical of terrestrial rival Channel 4 for its film investments, which he argues have a negative influence, creatively and financially, on the British film industry.

But it’s the feud with C4 that is forcing Elstein to reconsider. C4 refuses, as a matter of policy, to allow a pay TV window for the films in which it invests. According to C4 chief exec Michael Grade, that is to preserve the unique branding of the web’s flagship Film on Four slot, which has nurtured some of the most successful British films ever, including “The Crying Game,” “Four Weddings and a Funeral” and “The Madness of King George.”

But problems arise when C4 co-finances movies with British Screen, the semi-public funding body that last year incurred Grade’s wrath by striking a pay TV output deal with Sky for every film it backs. Grade secured a preemption clause that said if C4 put up 50% of the budget of a British Screen project, the film would not go to pay TV. Under those circumstances, the only way Sky can guarantee itself access to a project is to top C4’s offer. That is what Elstein has done, for the first time, with “The Hollow Reed.”

Elstein argues that Grade’s hostility to Rupert Murdoch-owned Sky (which he claims is politically motivated) deprives British producers of their right to get full value from their pay TV rights. He estimates that, under the terms of the Sky-British Screen deal, U.K. pay TV rights alone to “Four Weddings” would have been worth $1.6 million, whereas C4 paid just $640,000 for all U.K. TV rights (plus another $640,000 as an equity investment).

In response, C4 can claim that without its willingness to invest in development and production, such films would never get made in the first place.

Nonetheless, Elstein seems to be attempting to improve Sky’s reputation in the local film community.

He has started publicly pointing out that, with an expenditure of $20 million a year on British films, Sky is now the largest single TV contributor to the British film industry. C4 averages about $16 million a year.

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