CEO Speech: The Producer Offset 10 Years On

Speaking at the Screen Forever conference in Melbourne, Screen Australia CEO Graeme Mason launched the Skin in the Game report.

Hello everyone. It is good to be here once again at the Screen Producers Australia conference with so many of our businesses here together to listen, learn and share.

My guess is that most of you have heard that there’s been a YES Vote for marriage equality. My guess is also that a big proportion of you are happy about that – the creative industries being a pretty inclusive bunch who on the whole try to stay in touch with what people want and think about things.

We’re pretty happy too about the results of another survey that has been conducted in recent months.

It’s had considerably less fanfare: it didn’t grip the nation quite as much and we didn’t quite get the same participation rate: 67% of the 133 companies we went to replied, whereas I understand that near 80% of all eligible Australians voted on marriage equality.

We did beat the turnout for last year’s US presidential election though.

Our survey wasn’t quite as simple as asking a “yes” or “no” question: and luckily for the industry, the Producer Offset legislation is already in place so doesn’t potentially have more minefields to navigate.

Our survey roughly coincides with the 10-year anniversary of the introduction of the Producer Offset and the results form part of a report that goes up online today.

This report steps back and gives a sense of how the financial incentive is performing.

• It includes data on how much film and television has used the offset and how production levels compared before and after its introduction

• It also digs into user sentiment; the users being producers as well as broadcasters and other platforms. This was done both via the survey and in face to face interviews.

On both fronts the results show the Producer Offset has been a game changer.

Going to the data first, it’s just a little too soon to give you a decade worth of specific figures but in the nine and a half years up to June 30 this year, indications are that the Producer Offset has been or will be claimed on:

• 291 feature films
• 309 television dramas and that includes animation
• and 582 documentaries

These figures are the number of final certificates issued and we were able to glean what those certificates represented in terms of total rebates:

• for the nearly 300 features it is nearly $1 billion
• for the 300+ television drama projects it’s about $400 million
• and the rebates on all 580 or so documentaries totalled nearly $140 million.

All up that’s $1.5 billion worth of rebates on 1,182 projects because of the Producer Offset.

If you want it in per year terms, on average that’s $100 million for close to 120 projects.

These results show just how embedded the Producer Offset is in Australia’s financing landscape – and how critical it has become to the businesses of a lot of you in this room.

This slide shows what the rebate is as a percentage of total budgets in the three categories and also in total: 32% in the case of features; 18% in the case of television drama and documentary; and 25% overall.

The next slide shows how the numbers of features going into production and the budgets on those features have grown from the five years before the offset was introduced to the five years after and to the most recent five years.

And this last slide is for drama for television and streaming services. Note that with the trend towards producing shorter run series and with per hour costs rising, the number of television hours has been reduced however.

I can’t definitively say the Producer Offset should get all the credit for this growth but there’s no doubt in my mind it has greatly contributed.

In my view we all need to take a minute to give thanks to the Federal Government (s) for their suite of support mechanisms – including this one. And thanks actually or especially to the Australian taxpayers too because without sounding of any particular political bent please remember it’s their money not ours (and by “ours” I mean all of us in the sector).

Thanks to them a lot of great content has been made; content worth its weight in gold to audiences. And repeating something I have said before it is all about the content and the audience for it.

Think about how you feel when you see something on screen that absolutely nails what it’s like to live in Australia or be an Australian. And there’s so many landmark projects that don’t just reflect our culture but also change it, sometimes in a slight way, sometimes in an important and very serious way.

We are not a society that goes in for self-congratulation but this content is worth celebrating.

Of course the Producer Offset doesn’t magically finance projects; that starts with a fresh and original concept, compelling scripts and a great package that interests the market.

But if those things are in place and the eligibility criteria are met, the Producer Offset provides an incredible head start; it’s the first money in and it’s guaranteed by the Australian Government. In other words it’s not discretionary money like Screen Australia’s.

But why producers especially need to give thanks to the architects of the Producer Offset goes to the heart of its unique nature – and the heart of why it’s such a game changer.

The Producer Offset is not soft money; it’s the producers’ equity. You are taking this money to the negotiating table. It gives the Producer a recoupment position in the waterfall, a share of receipts from all of the exploitation of the content, whether or not the project goes into profit.

It’s this that has helped build a more sustainable industry in the face of the constraints imposed by Australia’s limited population and in the face of the fiercely competitive international ecosystem that our industry operates within.

The user sentiment section in the report confirms this:

• 92% of respondents said the Producer Offset had enabled them to increase their equity stake in projects, with 61% saying it has significantly increased their equity stake.
• Many talked about how it had allowed them to retain in-house staff and to enhance the scale and ambition of projects – pretty important in the current environment.
• It is no wonder that 91% of respondents said the producer offset was critically important to the operation of their businesses. (I wonder about the other 9%, I didn’t know we had so many independently wealthy Producers)

Successful producers understand what a useful and potentially lucrative tool they have at their disposal. For every dollar spent on eligible production, they’re getting up to 20 cents back for television, and up to 40 cents back on features. After commissions and so on, for every $100 of revenue going into the pot, they can be getting $20 or $40 back. This can be / should be on every deal and every bit of revenue, I am not talking about the mythical net profits share.

Or they can use this in trades and deals to secure partners or talent or investors etc.

It’s in features that the Producer Offset really packs a punch. There are now a number of feature film producers that have repeat investors. Seek those producers out, steal their secrets.

• 37% of our respondents working in features said they had traded some of their equity – usually they retained at least half – and it was most commonly traded to Australian private investors
• it’s different in television: 98% of those producers said they had retained their equity
• 55% of respondents indicated they had retained the margin all or most of the time.

This is an industry in which one success has a flow-on effect to all. It’s incumbent on all of us to put our heads together and further evolve the offset – and I don’t just mean asking for more of it. We need: to leverage it more, to change business practices with it in mind, to use it to ramp up activity – 87% of respondents indicated that the offset had contributed to their ability to consistently produce content.

It’s been a game changer; we can make it more so.

For the health of the sector, Australia needs to work more internationally, through co-productions and joint ventures. We need external investment and revenue to grow the industry – now more than ever it is vital to remember we are in a global business. Luckily, interest in us from abroad is definitely growing.

Last month my colleague Michele Mcdonald and I went to LA for AusFilm Week. We spent a lot of time explaining how the Producer Offset works. And yes 10 years on most people we speak to don’t really understand it, or more specifically don’t grasp the difference with our scheme to tax credits in places such as Canada and the UK.

We found, however, the level of interest among American production companies and studios pretty high. Australians and the Australian production community have a great reputation there and, for projects at both ends of the scale it is a major opportunity for us to better explore.

Of particular note were meetings with agents and managers with Australian clients. Many of them are keen to work with the edgy indie material, which many of you have on your slate, and some of them are able to call shots on high-end big material. In both instances the fact that we have offsets, which means revenues and rights, can sit with you and their clients and not just with the Hollywood companies is of real interest and something we all need to advance.

I cannot stress enough that in this rapidly shifting world of double the content being made but so many more choices for the consumer and changes in income streams to traditional players we have to look at new and different ways to fund our content. We here at home have a massive advantage beyond our skills and talent and propensity for hard work – the offsets are a step beyond what others have, it is up to us all to make the most of it.

Here’s to many more successful projects and to the part the Producer Offset has played and is playing in getting them more.