Australian producers are facing a triple whammy when it comes to financing and releasing their films in Australian cinemas, with no relief in sight while digital revenues remain modest.

The average advances from local distributors and international sales agents are 50 per cent- 70 per cent lower than 10 years ago.

The dominance of the US majors, which collectively accounted for 88 per cent of the national B.O. last year, continues to squeeze out independent films.

And virtually no film released on fewer than 20 screens is earning significant revenues in cinemas.

Those are among the findings of a Screen Australia report, Issues in Feature Film Distribution, unveiled by CEO Graeme Mason on Thursday.

“At the cinema the viewing experience is becoming more a special event/occasion where the shelf space is crowded and smaller films – including most Australian films – are finding difficulty reaching their potential,” the report says.

"As content becomes easier to access overall, viewers are getting steadily more impatient waiting for films to be released at the cinema or move down the distribution chain, resulting in a high level of piracy and a significant loss of revenue to content producers and rights holders.

“Other than for the cinema, where there’s a sense that they’re paying for the whole experience, not just the film, audiences expect content on demand and, unfortunately for revenue streams, at little or no cost.

“This is perhaps the greatest challenge for distribution – finding ways for Australian feature films to reach an audience willing to pay.”

Launching the report at the 37°South Market, Mason said: “Local independent films are facing an increasingly tough, and crowded, marketplace. Audience expectation of where and how they see these films is changing rapidly. The benchmark for specialist film box office has been drastically lowered. We are not alone here, these trends are international.”

“Long-heralded transformations wrought by digital disruption are well and truly upon us. Blockbusters dominate an increasingly crowded theatrical environment while the traditional DVD market is in sharp decline. Newer ancillaries, like VOD platforms, are yet to deliver back recoupment dollars into the ecosystem. It is becoming harder for independent films to find their audiences amidst an avalanche of content, and it is harder for them to attract marketplace finance.”

The report shows the average budget for Australian films, excluding co-productions and those financed by the majors, rose marginally from $4.7 million in 2003-05 to $5.1 million in 2013-15.

But over that period the local marketplace attachments nearly halved, from $625,000 (13 per cent of the budget) to $320,000 (6 per cent).

Among the films which received advances from international sales agents, four with average budgets of $7.6 million got an average contribution of $1.8 million in 2003-05 (24 per cent) versus nine films budgeted at $5.4 million which each got $650,000 (12 per cent).

The funding models changed due to the introduction of the producer offset, the abolition of 10BA tax incentives and reductions in direct government funding.

According to the MPDAA, the majors including Roadshow/Warner Bros. commanded 88 per cent of the B.O. last year, with 163 titles that collectively grossed $973.1 million.

Roadshow /WB had the biggest market share with 27 per cent followed by Fox (23 per cent), Walt Disney (14 per cent), Paramount (9 per cent), Universal (8 per cent) and Sony (7 per cent).

The independents released 472 titles which raked in $133.8 million.

The share of the B.O. from films released on 100+ screens rose from 89 per cent to 92 per cent over the past decade.

“It’s difficult if not impossible for a film released on fewer than 20 screens (as the majority of Australian films are) to achieve a significant box office result when faced with competition from films released on 200 to 400 or more screens,” the report says.

Since 2012, only four Australian films that opened on fewer than 100 screens have grossed more than $1 million: Wish You Were Here (37 screens), Return to Nim’s Island (77) and The Turning and That Sugar Film with nationwide event screenings.

TV license fees for Australian films have plummeted as most are now programmed late at night or on the multi-channels. Of the 20 Australian films that had their first free-to-air screening in 2014, 10 were broadcast on a multi-channel.

The report observes that the rise of digital distribution has radically disrupted established business models and the revenue streams that underpinned the film sector, without replacing them with viable alternatives.

The VOD and SVOD sectors are still at a nascent stage and, at least in the short term, are unlikely to generate rivers of gold.

As the report concludes: Analogue dollars are being traded for digital cents.

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