SYDNEY — Film funding changes introduced in the May budget are set to splinter the Australian screen industry into distinct sectors.
Microbudget moviemakers and those with a line to Hollywood coin are set for a windfall following the government’s introduction of a 40% rebate on film and 20% rebate on television production budgets.
It’s filmmakers of midbudget Australian films such as “The Adventures of Priscilla, Queen of the Desert” or “Shine,” which cost about A$10 million ($8.5 million) or less, who will be struggling to find their niche in this brave new world.
These filmmakers have traditionally relied (in part) on investors enticed by a 100% tax break, but the government’s decision to scrap the so-called “10BA” is generating deep concern. Producers doubt they will be able to attract financing without the tax carrot, irrespective of the fact that last year, less than $7 million (or 7% of expenditure on all Australian films) was raised through 10BA.
Entertainment lawyer Martin Cooper urged producers to re-think how they sell film and television to a finance industry awash with cash. He argues there are numerous upsides in the changes effective July 1.
“The key is producers have to become managers of a cash flow rather than raisers of equity,” Cooper says. “We’re moving to a loan model.”
Investors looking to participate in the industry should seek a risk analysis of the film, which they can weigh against the value of securities including presales, private guaranteed finance and direct government subsidy through the Australian Screen Authority or its predecessor the Film Finance Corp.
Cooper predicts that within two years, only 20% of Aussie film budgets will be equity; the remainder will be made up of loans.
Producers fear the cost of gap financing will inflate their budgets, but Cooper argues instead of investors waiting for a return over a two-year tax cycle, the new system will deliver returns in less than a year.
“We’ll move from people writing checks on June 29 for equity in the film to a situation where a producer will have various forms of security,” he says.
Financial consultant Sam Gullotta is confident some of the biggest Aussie production companies will be able to tap coin from hedge funds and private equity funds, which he says, “are interested in investing in profitable films wherever they come from.”