Explore the funding issues faced by the media industry you have studied

UK and the USA - In the practice of Hollywood and other forms of industrial cinema, the phases of production, distribution and exhibition operate most effectively when 'vertically integrated', where the three stages are seen as part of the same larger process, under the control of one company. In the UK, distribution is very much focused on marketing and sustaining a global product in local markets.
British cinema had a considerable advantage over European cinema in that the American market is huge and English is the national language. Many people across the world speak English, so the potential audience for British film is huge.

However, there is a downside: American cinema has the same advantage and on top of this, American studios have enormous capital at their disposal. They produce more films, both of the expensive, mass-appeal kind, as well as the more risky films with an independent feel. One success will pay for approximately nine failures at the box office. While British cinema does experience boom years when our films and film-makers ate feted throughout the world, we are generally consuming an increasingly large diet of American films, from the excellent to the awful and everything in between. On top of this, because of the popularity of American films in the UK, the distribution of British films into our cinemas and of British DVDs into shops is dominated by US companies, who are obviously going to put their resources into pushing their own products.

Distribution 50% of money spent on a film often goes on promotion. Film is a business like any other; it doesn’t rely on waiting and listening to audience response before delivering the product; it relies on knowing which part of the world and the media need its products and will pay for them. Does market forces competition give the consumer more power and choice and, therefore, influence, what’s made OR does it convince us that what we want is being made for us? Do millions go to see The Dark Knight when it opens because it’s a great film or because it’s been well-marketed? Or both?

Film distribution = everything that happens between the film being made and it being exhibited, whether in a cinema, on DVD, TV, the internet or anywhere else. Promotion involves above the line advertising, such as posters, trailers, billboards and spin-offs and promotional partners. It also involves related merchandising and below the line publicity which is not paid for but generates mutual interest. For example, an interview with a star in a newspaper or reviews in a magazine. Not all films are treated equally. Bigger companies have more financial muscle to promote their product and the big companies who control much of the industry, control not only the distribution of their own products, but that of others.

Five major companies dominate the UK film industry: United International Pictures, Warner Brothers, Buena Vista, Twentieth Century Fox and Sony. Nine out of every ten films shown in the UK are viewed as a result of these distributors and in most cases are linked to the Hollywood production companies who make the films. They deal with exhibitors who are no longer owned by the same Hollywood companies but, to make a profit, prioritise Hollywood films over others. Blockbuster films are often distributed via blanket release, so even if a small independent UK company gets its product into cinemas, it’s facing stiff, well-marketed competition from films that often take on the status of an event. Half the films released in Britain do not get shown around the whole country.

In the independent film sector, vertical integration does not operate so commonly. Producers tend not to have long-term economic links with distributors, who likewise have no formal connections with exhibitors. Here, as the pig-in-the-middle, distribution is necessarily a collaborative process, requiring the materials and rights of the producer and the cooperation of the exhibitor to promote and show the film in the best way possible. In this sector, distribution can be divided into three stages - licensing, marketing and logistics.

Although British film industry is doing relatively well and profits from British films worldwide are up 50% from 10 years ago, funding remains a perennial problem.

Small companies like Amber Film and Photography Collective have smaller budgets – shooting costs and their expectations of distribution are low and their working methods are necessarily low key (e.g. using digital video cameras and a non-professional cast) . They don’t work on a project basis. For Shooting Magpies (2005), there was a £17,000 development grant from Channel 4 and £40,000 from Northern Film & Media. Some of the work was supported by taking on a commercial project for Tyne & Wear Museums and some of the revenue money from Northern Rock Foundation into it (say £40,000 of £100,000). Over a three year period, they raised/spent maybe £100,000 to £120,000 on the film. At the same time, there were the Coalfield Stories photography projects, which, while they all delivered their own exhibitions/videos etc, contributed significantly to the research for the film. Amber raised around £170,000 for Coalfield Stories between 1999 and 2005.

Other companies like Working Title look for a global/wider distribution and exhibition – have found success in using an American actor and establishing its own stars like High Grant; now co-owned by Unversal/Vivendi, so they have American/European money behind their productions which can help promote them. Check your notes on the company or Google it!

Funding Slumdog Millionaire (2008): Film 4, the Channel Four film unit has only 11 staff and a budget of £10m; Tessa Ross had to find partners to help fund Slumdog. Key decision – took the film to head of Celador Films (an independent production company formed in 1983. It has produced a number of popular light entertainment shows but is probably best known for Who Wants to Be a Millionaire?) – Christian Coulson. Experienced producer with several important credits e.g. Dirty Pretty Things (2002), and The Descent (2005). More than that, Celador International owned the rights to Who Wants To Be A Millionaire. Though Swarup (author of Q&A) had been inspired by the cheating scandal in millionaire, he had used a fictional quiz in the book. Ross wanted the rights to use Millionaire – the film would be an advert for the quiz worldwide – excellent example of cross promotion and synergy – people who are familiar with the quiz (and it is known worldwide) may be more likely to se the film; people who see the film may be more likely to watch the quiz. Once Celador produce the film there will be no payments to an external agency for the rights of Millionaire. Celador International was breaking up but Coulson ensured Film 4 would get the rights. The deal put in a small amount in equity and a TV rights payment. Celador Films then added £8m for the production budget with the assistance of a UK tax credit.

British films can apply for tax credit if they pass the UK Film Council’s definition of ‘British’. This has fairly strict criteria, based on cultural content, cultural contribution, cultural hubs and cultural practitioners and films have to score at least 16 points out of a possible 31 to pass. On cultural content it may get 5 or 6 – the subject matter has some British cultural connection and the dialogue is mainly in English; cultural contribution – it uses British creativity; cultural hubs – although it was filmed abroad there was post-production work in the UK , cultural practitioners – most cast and crew are Indian, but key figures are British. Be lucky if you could award it 12 or 13 points. However, it is believed it passed on the strength of a letter of support written by Christian Coulson, in which he argued the film was a meaningful contribution to British culture. Film4 came in with the UK TV licence and a small equity position, the UK government provided a tax credit ('I wrote an essay to the Film Council on why it was a meaningful contribution to British culture,' he says with a smile), while Celador would majority finance the £8m production using its own funding capability.
Still small budget – average Hollywood film costs about £30m. A blockbuster can cost much more; the new Star Trek movie cost $150 million!

Coulson, as producer started preparing the film even without any overseas distribution deals in place. Six months later, March 2007 – Celador and Film 4 offered the film to Danny Boyle who read the script and accepted it. The presence of Boyle (Trainspotting (1996), The Beach (2000), 28 Days Later (2002), Sunshine (2007)) and writer Simon Beaufoy (scripter of the most successful UK movie up to that point (The Full Monty) would be a pull factor for distributors.

At the point where the casting was complete, the movie was greenlit and Colson went with the script to distributors, asking for the entire budget on a negative pickup basis for worldwide rights. The major US studios generally have their own distribution offices in all the major territories. By contrast, independent producers have to sell their films to different distributors in each territory. Eventually Celador decided to pre-sell North America separately from an international deal. In the end the Warner Independent Pictures (WIP)/Pathe International combination put down minimum guarantees that justified making the film for the price they wanted.

Financing the film with Celador/Film4 equity, Colson believes, enabled Boyle to make the film that is so beloved today. 'The price would have been forced down if we'd made it for a studio,' he says, 'so we had the right amount of time to shoot it. We were also in a creative protective bubble, if you like. The script read tough - there were torture scenes and children having their eyes poked out. I am sure we would have been asked to tone that stuff down significantly.'

The film wasn't cheap for WIP and Pathe.It was budgeted at around $13m and the Warner slice alone was $5m. One issue that delayed the WIP contract was the Hindi dialogue. If the film ended up containing a certain amount of foreign dialogue, it would fail to meet criteria for the studio's TV output deals. It has been claimed that in order to secure financial aid from Warners, the film-makers claimed the amount of Hindi dialogue was significantly less than the actual amount of close to a third!

The film was shot from November 5 2007 through to February 12 2008, by which time Pathe International had already started preselling rights at Berlin. Based on what Colson says was a 'fantastic promo reel', Pathe sold 'loads more' territories in Cannes.

But just before Cannes, the call came through to the production that Warner Bros was preparing to shut down Warner Independent Pictures. Scheduling issues made it 'impossible' for Warner Bros to handle the release that calendar year. However, they went into partnership with Fox Searchlight, which handled marketing and distribution of the film in North America.

There was a real danger the film would only be released on DVD in the USA – which would have been disastrous to its commercial aims. The choice to show the film to Fox Searchlight was no surprise to anyone. Boyle had a long history with the Fox specialised label and its president Peter Rice had even overseen his big Fox production The Beach not to mention distributing 28 Days Later and Sunshine. Fortunately for Boyle and Colson, Searchlight didn't have an awards hopeful for late 2008 and Slumdog came at the perfect time.

Fox Searchlight stumped up $2.5m for the US distribution rights to the film and Warner Bros remained a financial partner. 'Warner Bros did the right thing by this film,' says Colson. 'But it came just in the nick of time. We had invitations from Telluride and Toronto [film festivals] and we closed the deal with Fox a day before Toronto started.'

Ironically, despite the worldwide success of Slumdog, Channel 4, on which Film4 depends for its funding, recently admitted it was facing a £150m shortfall. There are hopes that a strong showing at the Oscars will send a message to the British government that Film4 is worth protecting as a world-class part of the channel's public service broadcasting remit. On the face of it, times couldn't be better for British film - with Slumdog Millionaire's awards success so far adding to a huge growth in audiences. Cinema admissions are bucking the downturn trend- the UK box office had the strongest January performance for five years with takings of £100m, while total admissions rose 7.7% year on year.

At least three major Hollywood productions start shooting in the UK this year - Gulliver's Travels, Nottingham, and Harry Potter and the Deathly Hallows - as well as Film4's post-Slumdog projects such as Peter Jackson's and DreamWorks's film of The Lovely Bones and Sam Taylor Wood's Lennon biopic, Nowhere Boy.

Behind the scenes, however, there are problems - TV and DVD revenues have fallen, the credit crunch has stopped British banks lending to indie producers, and the consequent delays are threatening to wipe out indie productions before they've even started. There are those who fear a more fundamental threat in 2009 - that a possible merger between Channel 4 and BBC Worldwide could permanently damage both BBC Films and Film4. If it does, Slumdog, In Bruges and Revolutionary Road could be the last of their kind.

Tessa Ross, head of Film 4 has a relatively limited budget of £8-£10m a year for Film4's entire output. Typically, independent producers looking to make £4-5m movies will use public money to develop projects, then take the script and proposal to film festivals in the US, Cannes and Berlin to secure distribution agreements. Each distribution contract acts as collateral in securing bank loans to start production. Adam Kulick, a partner at Goldcrest, warns that the credit crunch means those loans have dried up. "Producers are having real trouble starting productions and they survive on production fees - which means some may go out of business in the downturn," Kulick explains. "At the same time, those distribution agreements they can secure are worth less this year as overseas markets struggle with their own recessions.”

Only a few companies, with Working Title the biggest, operate like commercial studios – and they are backed – and part-owned by Universal/Vivendi. Kulick, however, does praise the film-financing tax break that the government launched two years ago. Her Majesty’s Revenue and Customs has got a very good reputation in the industry - here and abroad - what money we do have tends to end up in the best films.

The other plus for UK film is that the fall in the value of sterling is making the UK a very attractive place for Hollywood studios to film. "The UK's talent and creative base is very strong," says David Kosse, president of Universal Pictures International, who is preparing to release Richard Curtis's new Working Title movie The Boat That Rocked, in April. "Couple that with the weakness of the pound and that's attracting strong inward investment from the US. Some of last year's biggest pictures - such as The Dark Knight and Mamma Mia! - were shot in the UK so Pinewood and Shepperton [studios] are feeling pretty optimistic after a difficult few years. However, he added, "You can't have actors, craftspeople and camera crews who only work on a couple of big pictures a year - they need to be working all the time to make sure the creative base remains strong."

Which brings the argument back to Film4. Sadly, Oscar recognition is unlikely to secure much more cash for the unit. Slumdog is highly profitable - having returned four times its initial costs - but only a small proportion of this profit will return to C4. For Ross, however, the profit isn't the main point.