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Foreign cash keeps UK independent producers stable

Written by Chris Andrews

Meanwhile, tax incentives result in production exodus from Hollywood

Some good news came out this week for independent TV producers, as new figures from trade body Pact show that the sector has remained flat over the past year at £2.2bn.

'Flat' would not normally be great news, but the primary source of revenue for independent producers in the UK, that being UK commissions, has declined by more than £100 million over the past year. A 7.5% reduction in primary revenue makes flat seem pretty good indeed. Pact said that increased international revenue helped to offset the decline, while cost cutting had also helped to keep those figures up.

Chief executive for Pact, John McVay said: "In the midst of a recession it is an achievement in itself for any sector to maintain revenues, particularly in television where programming budgets have been so widely cut. As a result, indies have injected £200m into programming budgets to ensure the quality of UK television remains high. This is clear evidence of the entrepreneurial spirit of the sector."

In terms of those international figures, Pact reports a 12.4% increase in international sales of UK finished programmes and a 32.2% increase in 'other' international income. This, it said, was revenue from companies' overseas operations and any primary commissions received from non-UK broadcasters.

What is worrying news is that the majority of independent producers believe that primary prices, commissions from networks and profit margins will all decline over the next three years. This, said Pact, will make those international revenues even more important.

While UK producers are having to peddle their wares abroad, with traditional sources drying up, California is having the opposite problem. It seems the state is having a rough time of it, with TV and film productions abandoning it in droves.

Since 1997, California has lost some 10,600 entertainment industry jobs, more than 25,500 related jobs, $2.4 billion in wages and $4.2 billion in total economic output. This is because film and TV production has moved to other states and other countries, which have been aggressively courting the lucrative film industry with extensive tax and wage incentives.

According to the Milken Institute think tank, states including New York, New Mexico and Michigan, as well as countries such as Canada and Germany, have all been hacking away at that Hollywood pie. Indeed, the number of movies either wholly or partially filmed in California has fallen sharply, from 272 in 2000 to 160 in 2008.

"There's no doubt that incentives have been drawing jobs and wages away from California," said Kevin Klowden, Director of the Milken Institute California Center. "And while California's incentive package, passed in February 2009, appears to be working, we have a lot of catch up to do just to get back the share of production we had in 1997."

In July 2009, California implemented a tax credit for projects filmed in state with budgets of $75 million or less. Since its inception, 75 projects have been approved to receive credits, with these spending more than $1 billion in the state and generating $500 million of wages for below-the-line staff. These tax credits are set to expire in 2014 and are more attractive to independent films and television series than to big-budget studio productions, because of that $75 million cap.

The Milken Institute is recommending a two-tiered film incentive program, with one set of benefits to engage big-budget studio films that are not covered under the current incentive program and another set to attract smaller independent production. It also wants a new digital-media tax credit to attract and retain developers of digital animation, visual effects, and video games, and that these incentive programmes should be permanent.

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