British Film & High-End Television

Written evidence submitted by Jon Altham

BRITISH FILM & HIGH-END TELEVISION

The Culture, Media and Sport Committee is to examine the current challenges faced by the British film and high-end television industry. The new inquiry will investigate what needs to be done to maintain and enhance the UK as a global destination for production and how the independent film production sector can best be supported. It will examine issues around skills and retention in the industry and what needs to be done to ensure the sector can adapt to challenges such as the rise of artificial intelligence. The Committee will also be looking at the challenges for British cinemas, following the recent Cineworld restructure and the collapse of the Empire chain.

About The Author: This report considers the experience of Jon Altham who has worked within the Entertainment Sector for 8 years. To date, he has experienced first-hand the many challenges and opportunities facing the sector. His background includes his roles as an Artist Manager (2 Years), Film Composer, Songwriter and Score/Record Producer, to then Executive Film Producing roles as well as owning a Film Music Production Business within the film sector since 2018. During this time, he has also been involved in investor relations, film financing and risk analysis, and is trusted to oversee business formation, risk mitigation and investor relations for film budgets up to £135MM.

Introduction: In recent years there has been a particular buzz and focus towards improving incentive schemes, however this is vastly overshadowed by the major sector issue of the current industry’s revenue streams. Without a clear solution to fix this aspect of the sector, the sector will not grow or continue to innovate. This is highlighted by the talent and crew demanding higher upfront costs and reducing their reliance on residual backend payments. Given the direction of the market this does make sense. However, from an investor’s perspective who like to see “skin in the game” – this does not show this, it appears more like a short term money grab due to financial instability. Moreover, with a lack of alternative revenue streams and no independent reviews conducted on their current viability, contribution or competition in the sector it only increases the lack of confidence further. Currently there is a low chance of return for productions. Current data suggests that only 5% of independent Films make a profit. This doesn’t fill any investor with sufficient confidence, especially when compared against other asset classes. The problem that exists therefore is significant, and the solution required to fix this is multifaceted. Whilst incentive schemes are helpful, they are not the realistic long term solution. Equally, without reviewing and innovating the revenue streams available, talent and crew will continue to request a higher upfront fee for their services instead of asking for a residual backend share. As a result, budget line items will continue to be overinflated, particularly the above-the-line. With cost of living increases, inflation and other extraneous variable that are a normal part of society, things will inevitably always get more expensive. However, rising costs are not the problem – instead this issue is that we are yet to figure out a solution for de-risking investors at a proportional rate to budgetary increases. In short, the long term survival for the sector will be governed on the sector’s ability to develop additional revenue streams or improve those that are currently in place, to have consistent and open dialogues between industry professionals and government departments on its future direction, as well as the UK’s own ability to set the highest standards for industry best practices.

How attractive is the UK as a global destination of film and high-end television?

1.1 The UK remains a leading destination for film and high-end television which it achieves through its world leading production facilities, diversity in filming locations, highly skilled workforce and the support offered through the UK Government’s Incentive Schemes.

1.2 The UK’s attractiveness as a global destination for film and TV production is supported by a number of data sources. For example, the British Film Institute (BFI) reports that the UK film and high-end television (HETV) production industry generated a record £6.27 billion in spending in 2022. This was the highest level of spending ever recorded, and it represents a significant increase from the £1.2 billion spent in 2017. The BFI also reports that inward investment in UK film and HETV production accounted for 86% of total spending in 2022. This suggests that overseas producers are increasingly choosing to film their projects in the UK.

What are the barriers to maintaining and increasing overseas investment in the sector?

1.3 It’s important to note that rising costs are not a barrier towards industry sector investment. There is surplus and abundant supply of capital globally that requires allocation. Equally it should be recognised, as with all industries, that costs will not remain static and will fluctuate in line with economic trends. However, a problem occurs when investors are no longer able to be de-risked at a proportional rate to economic fluctuations, especially when compared to other asset classes that provide more sustainable and predictable returns on investment. The current industry models that surround distribution and alternative revenue streams are not sufficient. Neither is the transparency and availability of industry data surrounding marketing and audience retention/attention. It should be recognised that attention is the “new oil” and more innovation in the sector is required to understand how to build and maintain the attention of global audiences to therefore drive more direct, user-specific content and in turn building micro-communities around film content, especially in the independent film space. With that in mind, it is only at that point where we could then expect to see a greater allocation of capital allocated towards film investment.

What are the benefits and challenges of overseas investment for the UK’s film-making capacity?

1.4 Benefits include: Promotes British Culture; Promotes British Culture; Boosts British Economy; Skills and Knowledge Transfer.

Overseas investment into UK TV and film contributed a record £5.37 billion to the UK economy in 2022, according to the British Film Commission (BFC). This represents a 6% increase on 2021 figures and is the highest level of inward investment into the UK’s screen industries on record. Overseas investment into UK TV and film has a significant impact on the UK economy, supporting jobs, businesses, and communities across the country. In 2022, the UK’s TV and film industry supported over 700,000 jobs and generated £12.6 billion in economic activity.

Opportunity to transfer industry standards and best practices to overseas crew as well as learn additional skills and expand knowledge base from them. Therefore allowing for greater professional development opportunities for UK industry professionals.

1.5 Challenges: Displacement of Content; Creative Control.

We could see a greater influx in the production of higher budget productions compared to independent content, therefore shifting the content available to audiences. Furthermore, overseas investment may also come with additional caveats for it to also be accessible to overseas audiences, therefore potentially diluting or influencing the creative control of the production.

What are the current challenges facing the UK’s independent film production sector?

2.1 The challenges facing the film sector within the UK are multi-faceted. These include: Investment Confidence; Distribution & Revenue Streams; Business & Investor Relations Skill Base; Technology Considerations; Legal Considerations.

Investment Confidence: Reduced investor confidence (equity positions), ongoing catch-22 between talent attachment and investors committing funds (from both parties).

Distribution & Revenue Streams: Poor transparency around marketing costs when releasing a film both nationally and globally, unsustainable distribution models (both theatrically and through video-on-demand services), unethical accounting on investment returns and residuals.

Business & Investor Relations Skill Base: Limited expertise and skill base on business formation, corporate structures, intellectual property / asset management, investor relations and business planning.

Technology Considerations: Unethical exploitation of artificial intelligence, as well as unethical exploitation of name, image and likeness rights.

Legal Considerations: Lack of understanding on the future challenges around copyright cases against artificially generated works that are derivates of copyrighted material.

What is the demand for and capacity for production of films with a clear British identity?

2.2 It is expected that there will be a 4% growth rate of the UK film industry between 2022 and 2026 (Social Films, n.d.). In contrast the global movies and entertainment market is expected to expand at a compound annual growth rate (CAGR) of 7.2% from 2022 to 2023 (Grand View Research, n.d.). Whilst this focused on industry growth, we should monitor this closely to remain competitive. Additionally, the data suggests that the UK film industry revenue would recover to that of pre-pandemic levels by 2025. Moreover, it is reassuring to see a variety of investment groups choosing the UK to build new studios. With that in mind, this trend suggests that demand will continue to increase over time (Social Films, n.d.). It should be noted however that there is a significant challenge when looking at the data available, and this is more biased towards the box office trends of British Films and their share in global markets and does not consider streaming data.

Are the nations and regions of the UK adequately represented and supported in the production British films?

2.3 No, there is more that can be done to support both national and international productions especially in more remote areas of the UK. The Scottish Highlands and Outer Hebrides are a good example of this. These areas are attractive to filmmakers due to their stunning scenery, however access to film studio lots is limited, particularly towards independent filmmakers who may have more restrictive budgets.

What more can be done to incentivise film and high-end television production in the UK?

Are the current funding routes, tax credits and governance for the industry fit for purpose?

3.1 In the case of increasing the UK’s economy and soft power, the data does support the fact that incentive schemes are beneficial in order to help incentive international productions to work in the UK (Social Films, n.d.). That being said, we should recognise that whilst having competitive incentives can be beneficial, we could end up in a never ending losing spiral. Much like a business reducing their pricing in order to attract customers, when this becomes unsustainable the prices then rise to a sensible norm. In turn, brand loyalty suffers, and customers are therefore lost.

3.2 Recommendations: Focus towards developing UK talent and the quality of UK production standards. Therefore, placing the UK in position where it is chosen by international productions as a place of economic stability, high production quality and high-end talent rather than competing on global stage when it comes to tax incentives. With this in mind, if we value quality, the UK should equally consider the type of productions and talent that would meet specific production standards in order to be eligible to work within the UK market.

In the event that the UK was to develop a more lucrative incentive scheme, it should consider providing bonus incentives but only for those producers or production companies that continue to return to the UK regularly for their production needs, much like a loyalty scheme. To my knowledge, there is no such scheme in place across the global film sector. It could be an innovative way to ensure the UK remains competitive whilst ensuring it is not exploited on the global stage by productions simply only coming to the UK because its “cheaper” than elsewhere. This would be the wrong message in my opinion.

What are the issues facing the UK’s film exhibition sector?

4.1 The UK’s exhibition sector is facing a variety of issues; however it appears that many factors influencing this can be simplified into inadequate business mitigation strategies as well their now outdated revenue model. Again, whilst rising costs are influential factors for all industries this will continue to be a natural and ongoing occurrence. It shouldn’t however be the cause for businesses to collapse if business models are robust and stress tested appropriately.

4.2 It’s important to recognise that viewership across all audience demographics has fundamentally changed. Both an audiences’ expectations towards the “movie-going” experience and how content is consumed is very different. In part, the COVID-19 pandemic could be recognised as accelerating this process, however this was likely inevitable in the long run due to technological advances. A clear trend for exhibitors to recognise is that audience viewership has shifted, particularly towards consumer convenience as well as its affordability unless the “movie-going” experience is innovated in a way that justifies a premium cost.

4.3 Audience viewership towards streaming platforms, terrestrial TV and movie theatres in the UK from 2018 to 2022: 2018 — Streaming Platforms 32%, Terrestrial TV 45%, Box Office 23%. 2019 — Streaming Platforms 37%, Terrestrial TV 43%, Box Office 20%. 2020 — Streaming Platforms 45%, Terrestrial TV 37%, Box Office 18%. 2021 — Streaming Platforms 52%, Terrestrial TV 32%, Box Office 16%. 2022 — Streaming Platforms 58%, Terrestrial TV 26%, Box Office 16%.

Data sources: Ofcom (2022). Media Nations 2022. Ofcom. BARB (2022). Annual TV Report 2022. BARB. BFI (2022). Statistical Yearbook 2022. BFI.

4.4 In order to thrive in this fast-changing industry, exhibitors will need to internally review their business models and how they will make the movie-going experience unique for audiences. They may also need to re-adjust how capital is allocated to improve viewership such as investing in leading technology (IMAX, Dolby Atmos). Additional attention may also be required on a local level on how exhibitors can become part of local communities and propel engagement by spearheading the formation of micro-communities.

Note: The Picturehouse Cinemas offer a variety of special events such as Q&As with filmmakers and live performances. Furthermore, the Everyman Cinemas offer a more luxurious experience with reclining seats, private screenings and better food/drink options.

What more can be done to protect and promote the UK’s screen heritage?

5.1 Education is an important factor to consider highlighting the UK’s screen heritage both nationally and globally. Education could be approached through school programs, panel events and exhibitions to showcase the important role it plays in our culture and society.

5.2 Accessibility is also important by making it available through streaming services, community screenings and film festivals.

Note: The British Film Institute (BFI) found in a 2022 report that only 1 in 5 people in the UK are familiar with the term “screen heritage”.

What can the industry and Government do to ensure British film and high-end television can adapt for the future?

6.1 It is encouraging to see the Government actively involved in understanding more about this sector. The best way to ensure British Film and High-End Television can continually adapt is by encouraging open communication across a diverse array of industry professionals, as well as considering an annual panel review into the sector. Not only would this enable knowledge to be shared but it would also provide a show of confidence and support towards the sector by the Government.

What should be prioritised to ensure a strong skills pipeline and retention in the film and high-end TV industry?

6.2 It would be beneficial to see greater emphasis towards both upskilling and training opportunities, especially apprenticeship programs across the UK. These could be structured in a rotational way, whereby trainees could also experience aspects of production through England, Scotland, Wales and Northern Island. This not only provides a more well-rounded skill base but also increases future work opportunities for emerging talent through networking.

What are the risks and benefits of artificial intelligence to the sector?

6.3 Artificial Intelligence, as with all technological advances has its risks and benefits. However, the resulting impact on either side of this spectrum will be governed by how it is being used. Artificial Intelligence should be used as a tool (much like a calculator or an internet search engine), it should not be used unethically as a way to exploit pre-existing creative works or exploit an individual’s name, image or likeness without their consent, or a licence being agreed.

6.4 When using this technology, we should however recognise that artificial intelligence is only as intelligent as the material it is trained on and the code that it operates within. Therefore, the over-exploitation of this technology may reduce the skill level of workforces due to overreliance and de-skilling. With this in mind, if the technology no longer becomes as effective or reliable over the long term (which did occur with Chat-GPT), we could end up with a de-skilled workforce that is less competitive in the global marketplace. Moreover, we may also see that the originality of content reduces overtime.

6.5 In order to mitigate these risks, both regulatory and legal frameworks will need to be both robust and regularly reviewed to prevent both its over-exploitation and unethical usage. If used correctly, artificial intelligence can be a useful tool to improve efficiencies and reduce overheads across the entire production life, which in turn reduces investor risk.

REFERENCES:

BARB. 2022. “Annual TV Report 2022.” British Film Commission. “UK Inward Investment Film and High-End TV Production Spend Reaches Record Figure of £5.37 Billion in 2022.” 2023. British Film Institute. 2022. “Screen Heritage: Public Awareness and Attitudes.” British Film Institute. 2022. “Statistical Yearbook 2022.” British Film Institute. 2023. “BFI Film Audience Network.” British Film Institute. 2023. “BFI Film Forever.” British Film Institute. 2023. “Skills Review.” Cinema Association. 2023. “About the Cinema Association.” Creative Artists Agency. 2022. “AI and the Film Industry: A Report on the Current State and Future of AI in Filmmaking.” Economic Review of UK Independent Film. British Film Institute, 2023. Film and TV Heritage UK (FTH UK). 2023. “About FTH UK.” National Film and Television Archive (NFTSA). 2023. “About the NFTSA.” Ofcom. 2022. “Media Nations 2022.” PwC. 2023. “The Future of Film and Television: How Artificial Intelligence Is Changing the Industry.” Screen Daily. 2023. “Screen comment: UK indie producers are in crisis and need urgent support.” The Impact of AI on the Film and Television Industry. British Film Institute, 2023.