Opinion: Mark Sarfaty

31 May, 2010 by IF

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 performance of films at the box office. This column appears in the June issue of INSIDEFILM magazine.

Early in my accidental transition from production to exhibition and distribution I was fortunate to meet John Politzer.


A Yoda-like figure to many filmmakers because of his unerring eye for a good script and his perennially encouraging words to anyone nurturing a film through development and production, John is equally well known and respected in the serious business circles of the industry for the years he spent at the top levels of Australian exhibition and distribution as head of programming for Greater Union.

In stumbling through my early days as an exhibitor, it was John who pointed out to me that there are two languages used to talk about film and, to be successful in the film business, you need to be bi-lingual.

The first language is the language of emotion, of ‘like’ and ‘dislike’. It’s a language which wraps film in subjective terms like ‘entertainment’, ‘creativity’ and ‘cultural value’. In Australia this is virtually the only language used to talk about film by journalists, reviewers, bloggers, tweeters and industry pundits.

The second language is an international language used when producers, distributors and exhibitors talk to each other and it’s all about numbers. The number language is not just about box office dollars. The number language can encompass every aspect of a film’s journey from development to screen and tells us many meaningful things about how a film can be assessed and valued.

Numbers are used in every area of the industry; from production cost to audience response at rough cut, through the prints and advertising (P&A) spend, the tracking of how people feel about a film before its release, the number of locations versus the number of prints, the screen average (important to exhibitors) versus the global box office (GBO – important to distributors).

There is virtually no part of a film that can’t be spoken about with the relevant numbers and, with fluency in the language, comes a far greater ability to understand how well or how badly a film performs.

In the US the language of numbers is so well understood in the public domain that the hugely popular virtual market of the Hollywood Stock Exchange – where the public can buy and sell virtual film futures – last month received approval from the US Senate to become an actual contracts market.

In a statement to the US Senate sub-committee, the vice chair of mini-major studio Lionsgate said the exchange could increase “the number and breadth of financing sources available to the motion picture industry…”. In short, potentially more film finance because fluency in numbers is part of the industry dialogue.

Meanwhile, in Australia, apart from distributors, exhibitors and a few knowledgeable filmmakers, the language of film continues to be about emotion and subjectivity. When numbers are mentioned, it’s merely a cursory look at GBO couched in breathless terms that are completely disconnected from the reality of the cost of making films.

We joyfully celebrate an Australian film making one, two or even $4 million in GBO as if the filmmakers had won Lotto, but in a simple numbers conversation, the reality is more sobering.

Let’s imagine a film which cost $ 4million to make, is released on 60 – 80 prints nationally with a P&A spend of $500,000 and makes $4 million GBO in five weeks.

The return to the distributor is approximately $1.6 million of which they keep the P&A, their distribution guarantee and distribution percentage of say, 30 per cent.

Using numbers language we’d conclude that the producer has approximately $750,000 left to distribute to public and private investors who are owed $4 million. Not much of a return.

Maybe our imaginary film can recoup on ancillary revenue of DVD, pay TV, free-to-air and airline but, without starting a new numbers conversation, let’s just say there’s generally not enough money in Australian ancillary for the producer and director to think about paying their mortgage.

In mute recognition of this ‘numbers’ problem we’ve seen the rise of what producer Rob Connolly has called a “fee based” film making culture – if you can’t take your money out of the back end of the film’s release you better take it on the way through; in ‘development fees’, ‘producer fees’, ‘consultant fees’, pretty much every fee you can think of.

The problem with the ‘fee’ culture is that when we’re already running on the smell of an oily rag, it distorts the true cost of production and the true value of our screen industry.

Down at the Centre for Screen Business in Melbourne (part of AFTRS) David Court and his associates are exploring whether or not there is a different set of numbers that can be used to value domestic film production in a way that private investors and taxpayers can understand.

Speaking as a taxpayer, I don’t mind spending some of my tax dollars on developing a national film culture with production development, talent development and craft development even if I know I probably won’t get it back. But I do want to be told the truth up front.

Whether it is GBO, return on investment, net present value or some other metric, one thing is certain: until every producer, filmocrat (film bureaucrat) journalist, blogger and tweeter in the Australian film business can become bi-lingual, the politicians, tax payers and the film going public are going to keep asking us why the number of dollars spent in support of the Australian film industry don’t add up.

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.