There has been a tectonic shift in the $200 billion global film industry and it is not being talked about.
Digitisation has created three waves of transformational change for the film industry:
- The cost of filmmaking and editing has fallen dramatically.\
- The cost of distributing content has collapsed.
- It has led to the emergence of the colossal online streaming market.
The demand for content is immense. Let’s look at the numbers:
- In 2007 Netflix began its Video on Demand (VOD) streaming service. That year at the cinema, world-wide box office revenue was US$22 billion.
- In 2018 the global streaming service market generated revenues of US$139bn. That’s from a standing start only 11 years before.
More importantly, this trend is only set to continue. A report from Future Market Insights this year states that the global video streaming market will grow to a revenue base of US$591 billion by 2028.
Australia, given our educational institutions, pool of talent and first-rate reputation worldwide should be poised to take advantage of this enormous growth opportunity. We should be investing in innovative production and financing methods designed to make our film industry a major global player.
So, what’s stopping us? It begins with financing. Not only production, but development financing.
Development is the seed, or venture capital, of filmmaking. It is essential to support the passage of stories into screenplays and productions.
Australia has a checkered history of financing film development but needless to say it has fallen to government grants in various forms since the Whitlam era.
Australia must advance financing for the seed stage of film development that is sourced from private capital markets.
For this to happen films must be a strong chance of making money. For this they must be made for the growing global online streaming market and be able to entertain audiences in any country. Our current system of film grants and incentives are not directed at such as outcome.
The government’s ‘Producer Offset’ currently rebates 40 per cent of expenses incurred on production of Australian films, and 20 per cent of expenses for TV and online-distributed content.
To access the offset, projects have a strict criterion to meet including having Significant Australian Content, as determined by Screen Australia.
This leaves the majority of independent film makers in our nation not making films for the myriad online platforms who can pay good money for content but rather for domestic government employees tasked to meet a cultural policy objective, not necessarily promote a project’s viability.
At our production company, we are testing the idea that our greatest stakeholders – our audience – can become our shareholders.
We are raising equity finance from everyday Australians to use as development financing for a slate of six low-budget films we will take to the content-hungry streaming market.
We wish to solidify a new business model for filmmaking that can contribute to a shift in thinking in Australia about how films are financed, made and sold.
We believe this industry has the potential to be a powerhouse in our economy driving investment, employment and exports. We just need more attention paid to the global forces driving us to streaming and how we can make the most this new paradigm.
Government can make a single Producer Offset that applies to all content regardless of its distribution platform, increase the Refundable Film Tax Offset for films shot here from 16.5 per cent to 30 per cent plus, in line with many US locales, and can relax the rules around Significant Australian Content.
These steps would be the first in ensuring private capital can come into the industry initially as co-funding and eventually as key providers of the development capital needed to grow the industry.
Jay Grant is a co-partner in Reel House Productions. Reel House Productions will host its equity crowdfunding raise through Birchal.com with investors able to own part of the company for as little as $200 and up to $10,000 for retail investors. To receive a copy of Reel House Productions’ full Offer Document detailing the specifics of this raise and the company business model, please click here.