Opinion: Mark Sarfaty
Mark Sarfaty, the CEO of the Independent Cinemas Association of Australia (ICAA) and co-chair of the Australian Cinema Exhibitors Coalition (ACEC), takes a look at the difference between the theatrical and distribution sectors' outlook on digital transition.
God bless Lord Puttnam’s cotton socks.
In one and a half weeks as a guest of SPAA and APSA last month, the venerated producer of Chariots of Fire and former boss of Sony studios managed to keep the importance of digital cinema transition at the front of mind for anyone who works in, works beside or simply cares about the Australian film and TV business.
In Putnam’s view, the change to a digital screening environment brings with it an opportunity to transform the film industry in Australia, to bring it into closer alignment with its counterparts in the US and the UK and become an “engine of jobs and future wealth creation”.
Which begs the question why we needed someone like Puttnam to spell this out for us when it’s been well known around the globe for many years now?
Part of the answer lies in the dramatic difference in vision between the business cycle of theatrical exhibition and major distribution (read Hollywood distribution) who are driving digital transition, and the business cycle of most of the stakeholders who rely on the public funding of the film industry.
For even the smallest cinema operator, the underlying business investment cycle is somewhere between seven and 10 years because that’s how long the average term of a cinema lease is.
Like the exhibition sector, the massive capital investment by Hollywood in their tent pole pictures means trying to predict and shape outcomes that are also more than five years into the future (the production planning for Avatar being a classic example).
The only other part of the film industry cycle that also has to work on an ‘industrial’ business cycle is the post-production sector.
The larger post houses are “bricks and mortar” enterprises investing in premises, plant and equipment with liabilities, financing and depreciation management that also require five to seven year business plans.
By way of contrast, the recipients of most of our public industry funding and arguably the constituency that most influences public policy for the film industry – independent distributors and producers – operate on a significantly smaller planning cycle.
Some of our smaller local distributors are entirely reliant on the cashflow generated by their next release which puts their business cycle at somewhere between three and six months.
For our bigger independents this might stretch out to 12 or 18 months but you can see the difference between an event horizon measured in months and one that is measured in decades.
Producers of course, sometimes work on a slightly longer cycle with the journey from full financing to finished product taking up to a year with the cashflow drip feed to (hopefully) recoupment taking even longer.
It remains true however that in the low to mid-budget range, distributors and individual producers are working virtually hand-to-mouth or public funding-cycle to public funding-cycle.
Happily, there is growing recognition that any industry relies on disciplined commercial outcomes which simply cannot be achieved in a purely reactive one to two year cycle.
For instance, the recent support by Screen Australia for multi-film ‘release slates’ presents an opportunity for some producers to move beyond a hand-to-mouth subsistence and hopefully the opportunity to adopt a more rigorously commercial discipline to their work.
Nonetheless, it is a flickering and nascent recognition which still requires an alignment between agencies, production, post, distribution and exhibition as to what a sustainable industry looks like.
We need to be smart enough and brave enough and tough enough to have an integrated five to 10 year business plan for the whole of the Australian industry that puts aside short term self-interest and partisan sector politics.
The problem, of course, is that when you’re deep in the trees it becomes hard to discern the forest which is perhaps why we did need Lord Putnam to spell it out for us – that a sustainable industry relies entirely on long term commercial planning and strategy and the confidence and determination to put it into place.
Disclaimer – The views expressed in this column are Mark Sarfaty’s personal views only and do not reflect the views, position or policy of ICAA ACEC or any other entity that he is affiliated with.