SYDNEY — Faced with rising production budgets and shrinking returns on its investments, the Film Finance Corp. will radically change the way it funnels coin into Australian movies.
The funding agency will switch its focus from equity investment to putting up distribution guarantees against Oz and worldwide rights or, for a few high-profile films, P&A money to trigger North American release.
New business model will boost the FFC’s returns, which in turn will enable it to bankroll more films, according to Brian Rosen, who signed on as chief exec last March.
By providing distrib guarantees of up to 60% of budgets, the FFC is counting on producers’ ability to raise coin from private investors using the seldom-tapped division 10BA tax break, which gives a 100% writeoff over two years.
For films costing $2.4 million or less, producers will be required to secure Oz distrib guarantees equal to 5% of the budget. For pics budgeted above $6 million, producers will need to line up pre-sales for three or four territories worth 15%-25% of budgets.
Until now, the FFC has made equity investments of up to 50% of budgets but has been badly placed to recoup its coin behind foreign sales agents.
Under the new strategy, “Our money will be last in and first out, meaning our returns are far greater,” Rosen said, “and the industry will be less reliant on direct government funding.”
The FFC recouped just $8.5 million from its investments in films, miniseries, telepics and docus in the 2001-02 fiscal year, and Rosen said that’s likely to fall to $4.2 million in the current year and next.
“If we had continued (purely as an equity investor), we could do six, seven films a year. Now we should be able to 10, 12 films a year,” Rosen said. He foresees putting up the P&A for North America for films with name casts like “Lantana,” which in turn would enable producers to secure sizable pre-sales in Europe.
He hopes the agency’s ramped-up funding will remove the need for state film agencies to invest small sums in pictures and instead pour more money into development to raise the standard of screenwriting. “Lack of development is a problem which impacts the quality of our films,” he said.
The FFC board approved Rosen’s game plan last week and the new funding regime is due to start in July, after consultation with the industry. The plan is to channel 40% of its funds for films in distrib guarantees in the first year.
Financiers said producers stand a good chance of raising coin under 10BA with a guaranteed return of up to 60%, as that eliminates the risks for those in the top tax bracket.
Screen Producers Assn. of Australia exec director Geoff Brown welcomes the FFC’s initiatives. “We are happy with the totality of Brian’s approach,” he said. “He’s giving us the opportunity to overhaul the business model, and we have to run with it.”