Two “massive moveables” – that is, COVID-19 and the delay in legislative changes to the offsets – mean Screen Australia has been scenario planning.
CEO Graeme Mason sat down with Screen Producers Australia CEO Matthew Deaner for a broad-ranging chat on Facebook Live this week, where the topic of the reform package loomed large.
As it stands, the Treasury Laws Amendment (2021 Measures No. 5) Bill 2021 – which would, inter alia, lift the Producer Offset for non-feature length content from 20 to 30 per cent – has yet to pass the Senate.
This is of concern to both SPA and Screen Australia. As the legislation is supposed to apply retroactively to July 1, many TV projects have already gone into production on the assumption of a 30 per cent offset.
If the Bill does not pass the Senate before the end of the sitting year – which ends next week – it will be knocked back to 2022. If an election is then called, the Bill will lapse.
SPA has reported this uncertainty is causing substantial risk, including financiers declining to release cash flow, and some lenders signaling they will call in securities. Impacted productions are said to include the third season of Five Bedrooms, Heartbreak High, Rock Island Mysteries (Taylor’s Island), Barons and The PM’s Daughter.
SPA estimates that upwards of $400 million production value is impacted, which means a gap of $40 million needs to be covered.
If the Bill does not pass before an election, Mason said it would be “really problematic.”
“The number of projects and the quantum of money is quite large. It isn’t like I could suddenly say ‘Oh, I can fill it.’ There will be issues,” he said.
“There might be ways to find the money. But if we weren’t given an additional sum of money [by the government to address this], if it was coming out of our resources – even if it was only a cash issue – it would totally impact what we could possibly fund in this six months coming.”
The $30 million question
When the government announced last September that it would grant Screen Australia an additional $30 million over two years, there was a hope or assumption that some of this money would help plug gaps created by the proposed changes to the Producer Offset.
For instance, that Screen Australia would use direct funding to assist feature documentaries left with a shortfall as the QAPE threshold rose from $500,000 to $1 million and the Gallipoli clause was scrapped.
Assuming the Bill passes unaltered, Screen Australia is indeed leaving aside money to assist projects impacted by the changes.
However, Mason said this will have to be on case-by-case basis, given Screen Australia funding is discretionary – unlike the offset. Projects will be viewed through a creative and cultural lens, as well as to how the project lifts the capability of creatives involves.
“What I’d hope people would see is that we have tried, with less resources than we used to have and more applications than ever, to still stay across things. But there will be some bleeding,” he said.
“The extra money we got is for two years. It’s not a replacement. So if we’re going to have any shot of getting that additional sum replenished or retained, we’ll have to show the value. And that doesn’t mean just bums on seats, everyone. That does just mean: did your show make an impact?”
Some of the $30 million has also already had to go towards to assisting productions with COVID-19 costs, something Mason hadn’t expected when it was initially announced. The agency has seen, for instance, testing costs blow out to $250,000.
While the executive was unable to give the exact number the agency has had to spend in this regard so far, it is in the millions.
More broadly, Mason intends to use the $30 million to bolster the coffers of Screen Australia’s First Nations and online departments, and to help projects in distribution and finding their audience, particularly in the theatrical space.
Screen Australia also wants to work with SPA’s export council, and on ways to attract inbound investment.
Applications that are “not logical”
With regards to the Producer Offset more broadly, Mason notes processing has been slow – not only because of the delay in the legislation – but also because there was an influx of production after COVID-19 shutdown.
Also holding up the process are applications that are “not at a level… to be logical”, leading to a lot of liaison work. Mason flagged that Screen Australia will seek to work with SPA in the new year to address this.
“Our number one goal here is the sanctity of the scheme. The integrity of the scheme is more important than one business, or Screen Australia… It’s not a right, it’s a privilege. We all need to recognise that. It underpins the sector more than anything else,” he said.
With an eye to the fact the Producer Offset was established to grow independent production businesses, Mason also wants the industry to start a conversation about all rights deals, which leave no ancillary windows for producers to exploit.
“There’s also another challenge: What does that mean for any one equity investor?Screen Australia, but also if you’ve found private equity… If there’s no other potential revenue, you all are going to be working for your fees and overhead only.”
He gave the example of a $10 million film, which might receive $3.7 million via the offset, $2 million in direct Screen Australia funding, and $500,000-$600,000 from a state agency. “All of that’s taxpayer money, which is meant to be coming back or building [a producer’s] business.”
While a 40 per cent Producer Offset for theatrical feature film has been retained, the question remains over what will be regarded as a ‘commercial’ theatrical release under the new legislation – particularly in a radically changing theatrical landscape.
Screen Australia is currently drafting guidelines that it will bring to the sector as soon as the Bill is passed.
However, Mason alluded that to be eligible, your project should be clearly be designed for a theatrical window.
“If your project is just going to get a couple of screenings at a great festival and that’s it – that’s probably not going to necessarily be enough.”
To that end, Mason urged producers to consider if their project was a cinematic film, noting that feature-length content for streaming platforms can now – Bill pending – be able to access a 30 per cent offset.
“Is it really for cinemas? Just because you want it to be isn’t enough.”
The renewal of the Temporary Interruption Fund
The government’s $50 million Temporary Interruption Fund (TIF), which protects projects in case those in key roles contract COVID-19, is due to end December 31.
The contingency fund, established mid-2020, was set up as the virus was excluded from insurance cover, contributing to production shutdown.
Screen Australia administers the fund, and Mason noted it has generated approximately $.5 billion worth of production and there have been no claims on it so far.
However, SPA CEO Matthew Deaner noted there is some anxiousness that the fund will not be renewed by government. This is particularly as COVID is now in the community, meaning there is perhaps a greater need than ever to call on the fund.
While it is working to show the value of the TIF scheme, Screen Australia has also has begun conversations with lenders and insurance companies in case it is not renewed.
“We’ve had really great conversations with a lot of the lenders, because no one wants production to stop.
“Realistically for Screen Australia and other entities like us… we would take on more risk. That doesn’t mean we’re going to be able to fill financial holes. It just might be moving our money around.”