March 2, 2024

Industry players treading the floors of Le Meridien Delfina, the American Film Market’s new venue, will be besieged by aggressive funding offers and fliers tubthumping diverse landscapes and state-of-the-art facilities from all around the world — marketing tools promoting incentives and driving the heated battle for productions across the globe.

The incentive wars have been raging for decades, with several U.S. states and leading producing nations — such as Canada, the U.K., France, Spain, Australia, New Zealand and Germany — battling over a $177 billion worldwide production pot being spent on film, scripted TV and docs in 2019 alone, according to consultants OlsbergSPI.

Given the inherent link between total production spend and automatic funding systems as a crude percentage, that indicates that some $20 billion-$30 billion of tax credits, production rebates and other automatic mechanisms are underpinning worldwide production.

But just as the industry at large is reeling from strike actions, the impact of streamers and talk of a “great spend re-correction,” all is not well in the land of automatic funding incentives. A quick headline scroll shows how disrupted the incentive landscape is today: Germany is pivoting to an almost exclusively automatic system; France has introduced a non-cultural 30% incentive known as TRIP in direct response to the fact that the U.K. is attracting more than 50% of Europe’s offshore traffic; Denmark has shunned rebates entirely; Romania’s was gone by 2022 amid a flurry of lawsuits; Australia’s New South Wales Made in NSW incentive was slashed in September to instant uproar; and the U.S. is viewed as often uneven and frustrating on a state-by-state basis despite California’s blockbuster-backing efforts to halt runaway productions.

According to Scandinavian film fund Film i Väst’s second Public Film Funding at a Crossroads report, authored by Tomas Eskilsson and released at the Venice Film Festival, the “tide may be turning” on automatic systems. On the plus side, “Politicians continue to strongly believe that incentives can deliver economic value [i.e., tax revenue] that exceeds the cost of implementing them. This is despite the obvious risk that incentives mainly result in enhanced inflation largely due to capacity problems.”

The report also stresses the FOMO factor: “The second main argument in favor of incentives is the risk of losing turnover if the production of film and drama series production moves abroad. The economy, infrastructure and know-how of the sector are better off if the territory participates in the incentive competition than if it withdraws.”

Reflecting on the report’s findings after consulting more than 300 practitioners, Eskilsson warned that volume doesn’t necessarily capture the intended value: “On the one hand, politicians like the economic indicators, but they are starting to worry about the lack of local audiences for local content and whether the economic impact is really as strong as often claimed.”

Incentives can backfire. “Take a look at Iceland, where the very generous incentive system has threatened independent production by making it so profitable to service third-party productions that talent has stopped making local content, while crew levels and capacity are being squeezed,” notes Eskilsson.

A major bone of contention is with the scope of access to different incentives. In many territory’s systems, it is not essential that a company applying for the incentive is an IP rights-holder. Applicants can be a production service company so long as that company pays tax, a door that was opened long before the arrival of the streamers. Evaluation is typically a box-checking exercise, and many territories have no fully calibrated cultural test, or implement super-soft assessments that effectively wash productions through the system.

The intention in many territories and regions is that the qualifying elements are strictly objective. However, while that may seem fair and transparent in theory, across Europe the issue is now becoming highly sensitive as a practice and is proving problematic, especially in territories when there is no cultural priority or specially designed tier to cater for local producers, with the notable exception of Ireland and Austria, where external producers are directed to work through co-producers on the ground. Specifically, applications for the Irish S481 incentive must be submitted and delivered by a national co-producer, which has a critical and beneficial leveraging effect in the eyes of both policymakers and producers, while Austria insists on a local service producer rather than allowing streamers and studios to produce all but in name.

“The streamers absolutely hate the S481 rules [in Ireland] and they mean that SAG payments to any cast don’t count towards qualifying spend, unlike in the U.K.,” explains one of Ireland’s leading producers who spoke to Variety on the condition of anonymity.

The headline arguments in favor of tax credits, trumpeted in the British Film Institute’s 2021 Screen Business Report, stressed that content production is a “powerful economic driver” boosted by treasury tax reliefs. Indeed, Blighty’s inward investment drum has been beating long and loudly with a focus on studios and streamers, who drove a majority of the U.K.’s near £5 billion ($6 billion) of qualifying film and High End TV productions in 2022.

The U.K. system is based on the “used or consumed” concept, so the key is the location of the use of provision of service, not nationality. The tax credit — which has no overall set budget limit — offers up to 25% cash rebate, capped at 80% of qualifying spend, and a minimum spend set at 10% of qualifying production expenditure. One result of the 80% expenditure cap is that many productions chose to outsource certain elements of production (in particular VFX, to that sector’s frustration) over to other countries, whose own incentive schemes can be used to increase a production’s total credit.

A new Organization for Economic Cooperation (OECD)-compliant system is being introduced across the U.K.’s film, TV and games sectors in January that will run parallel to the existing system until it is superseded by it in April 2025. The different accounting system has been much misunderstood in the press with wild stories of 35%-plus new tax credits, but in fact, it will result in a similar overall benefit level.

But the real thorn in the system is the state of the U.K.’s independent film sector. Total film production across the U.K. last year was worth a record $2.4 billion, but when broken down, inward investment counted for $2.1 billion, while there was a real drop of 31% in the spend on indie films.

Adrian Wootton, the British Film Commissioner and CEO of Film London, confirmed that there is a submission pending from the U.K. producer trade body PACT that is seeking a 40% credit for films budgeted at the £5 million ($6 million) to £20 million ($24 million) levels. “These films are proving very hard to finance, and indeed, the overall indie UK production landscape is clearly structurally challenged notwithstanding our talent being massively in demand.”

Wootton adds: “The key about credits and rebates is that once you drill down, there are very few incentives that end up delivering the actual headline, PR rate. The context of each territory’s offer is critical, and I believe the U.K.’s is the best in the world. You have to work out the actual cost benefit, and what the specific environment and skills depth is on offer.”

Not all are convinced that the UK’s “huge gamble” on inward investment, infrastructure build and efforts to expand capacity are going to reap the rewards intended. Michael Gubbins at SampoMedia consultancy said: “Global content players – Studios and Streamers – have been driving the market, and incentive systems have helped territories grab a share of the boom. But they are taking a risky bet on continued stellar growth to allow them to build a sustainable future.”

Industry analysts are also concerned about overproduction and an element of inflation creep around heightened crew, equipment and facility demands. However, as Gubbins points out, “there’s never been an overproduction of original and exciting content – what there has been and remains is overproduction of mediocre films and TV shows. It’s deeply ironic that this summer’s box office was driven by ‘Barbie’ and ‘Oppenheimer,’ both in many senses classic auteur driven cinema.”

Producers, who after all should be valued as the key lynchpins in this complex mix, typically share an integrity standpoint on incentives and their role in the production process. Amplify Pictures’ founder and CEO Joe Lewis and CCO Rachel Eggebeen, former Amazon and Netflix executives, producers of HBO’s Emmy winning documentary series 100 Foot Wave, are in the strong position of being able to finance and cash-flow their productions. Nevertheless, Eggebeen stresses, “We’re really careful to put what works for the production creatively first, and then see what fits in terms of incentives and financing.”

Others stress that the net benefit for systems such as the U.K., Ireland and the U.S. state tax credits, need breaking down very carefully rather than relying on the headline figure. First, there is the cost of cash flowing the tax credit or rebate and taking care of milestone payments if applicable. Interest from a bank might typically be at 1% per month over a year, meaning an overall cost of $120,000 on a $1 million credit loan. Then there is the arrangement fee, which can often be charged at 2%-3% of the value of the credit, and the legal fees at around $20,000. Hence, what nets down on $1 million credit in reality looks more like $820,000 to $30,000 to the bottom line. Applying that discounting to the U.K. credit, and the cash benefit often nets down to around 17%, while the Irish, which starts at 32%, nets down to around 25%-27%.

“Part of the problem is that standard U.S. and U.K. contracts run at 70 pages or more, with around 50 or more conditions precedent to be met before draw down,” explains Samson’s David Collins, whose Irish company delivered seven projects last year. “We’ve recently closed a deal in Finland and the contract was less than 10 pages. Often, it’s about an enabling attitude and knowing exactly where you stand.”
Simon Perry, coordinator of ACE Producers’ Best Practice Exchange (BPX) — a decade-old body that brings public funders around the world together in a bid to share knowledge and discuss strategy — stresses that “the key to policy and practice around automatic systems is that economic initiatives should have a cultural dimension, and hence be more aligned. There’s a real danger in the U.K. that the emphasis on attracting huge inward investment will reduce the production sector to a service industry.”
Perry has also observed that overheating is a problem in smaller territories across Europe. “Wages and facility costs are rising, while crews can become quickly uninterested and unavailable for independent film projects. So, the argument that automatic systems have not been at least in part inflationary is incorrect.”

It’s instructive to take note of how financiers see this uneven landscape, as the majority of incentives require banks and second-tier lenders to cash-flow. Most financiers don’t start below $500,000 in terms of the collateral being lent, and those spoken to for this article, including Banc of California, Great Point, Head Gear, Creativity Capital and Hinterland, all stressed the importance of bottom-up due diligence, the producer’s track record and relationship with the competent authorities, and sometimes a direct relationship with the government institution supplying the incentive themselves.

“Trust and track record is everything when we work with producers,” confirms Banc of California’s Adrian Ward, who has just cash-flowed their first South African High End TV series “Catch Me a Killer,” which has been a good experience to date. “We worry when there’s been some producer abuse in the U.S., where they decide to throw everything into the budget to see what sticks, and see what gets caught, which is frustrating. And there’s been some shifts in repayment schedules, where what was a 90-120 day repayment term can suddenly be bumped to the next year, with New York being an example. You can’t have a tax credit predicated on a multi-year turnaround.”

Head Gear’s Phil Hunt is likewise concerned about security and speed of payments. “There are tons of issues out there. Hungary ran out of cash and didn’t pay for a period; Greece had a slowdown and hit problems. Everywhere has slowed down including the U.S. and Canada. And if a U.S. state shoves you to next year, you’ve got an expensive timing problem.”

Headline numbers like Spain’s Basque region’s extraordinary 70% headline rebate doesn’t always go down well with financiers. “When an aggressive territory is offering hugely inflated percentages of spend on paper, it’s often too good to be true,” warns Creativity Capital’s CEO Patrick Fischer. “The culture and way each territory does business needs calibrating.”

One route through the miasma that has won admiration is the reworked New Zealand incentive system. “The domestic Screen Production Rebate (SPR) is a pretty good example of one that works well for the local industry but is not predominantly benefitting the streamers,” explains Richard Fletcher, CEO of Wellington-based Libertine Pictures.

Hinterland, Sharon Menzies’ new financing operation backed by Bank of Montreal, is currently financing the third series of Libertine’s “Under the Vines.” “The 20 points and cultural test rules for the 40% rebate are really clear, objective and well administered by the New Zealand Film Commission, which they are not at all in Australia,” confirms Menzies. While capped at NZ6m, it’s possible to go back for more but the cultural test gets tougher, which means “we don’t have streamers streaming in like they have
in Australia.”

Meanwhile the recent introduction of an interim payment, which is released once a qualifying production has spent more than 50% of its qualifying spend, typically ties in with the end of principal photography. That has saved nearly 40% of the interest costs on a recent Hinterland-backed production. “It’s remarkable what the NZFC has achieved by ensuring that the automatic system is supportive of the local industry,” says Menzies

On the near horizon is the looming spectre of AI and its impact not just on the creative process and talent, but also across economic and fiscal matters. “The whole logic of cash rebates driving big productions as part of national film policy will become totally irrelevant as the capacity of virtual production develops,” stated Sten-Kristian Saluveer, CEO of Estonia-based Storytek Innovation and Venture Studio, in the Nostradamus Report 2023: Everything Changing All At Once.

“Are you thinking about what the copyright models should be for your physical locations to be used in virtual production? Nobody will care about the 20%-30% cash rebate tied to a shooting on location,“ Saluveer warns. ”For the film financing ecosystem in the independent sector, the question is, are you ready for the change?”

pull the pin mod apk v0 138 1 unlimited coins playmods
evony apk mod unlimited gems 2022 ios and android twitter
pdf free dice dreams rolls generator update 2023 vi7q
project makeover game hacks tiktok search
download beach buggy racing mod apk 2021 premium
Free TikTok Coins: Where to Find Them
Où trouver des pièces gratuites sur TikTok : Votre guide
How to Legally and Quickly Get Free Spins in Coin Master
Unlocking Free Avacoins in Avakin Life: A Comprehensive Guide
Free Credits in Bingo Blitz: Insider Secrets
Earn Free Spins in Coin Master Like a Pro
genshin impact codes guide get free primogems and mora
How to Get ZEPETO Zems Legally and Quickly
match masters free coins archives crazyashwin
Free TikTok Coins: The Holy Grail of Success
Free Gems in Brawl Stars: The Future of Brawl Gaming
new cheats dragon city free gems mod generator freemind
free family island hack cheats unlimited rubies and energy
hay day hack generator s profile hackaday io
litmatch mod apk 2022 free vip mod unlimited diamond
myths of moonrise by starfortune apps games appgrooves
pdf portable generator buffalo tools
mcqlm evony the kings return hack new 2022 updated
dice dreams v1 53 2 10316 mod apk unlimited rolls coins spin
project makeover unlimited coins cheat ios android 100 working
beach buggy racing mod apk 2023 01 11 free purchase
How to Earn TikTok Coins: Step-by-Step Tutorial
Sicherheit geht Vor: Schützen Sie Ihr Konto beim Verdienen von Münzen
Mastering the Art of Earning Free Spins in Coin Master
Avakin Life Avacoins Hack: Expert Recommendations

Leave a Reply

Your email address will not be published. Required fields are marked *