Legal Perspective: Australia and U.S. Film Markets – To Subsidize or Not?

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Jose Landivar, Arther Law’s Industry Insider Blog

Quick, someone tell me how the Australian film industry works and what involvement the government has in funding films and subsidizing its burgeoning film industry? Any takers? Good, then this article is for you.

australia

Unlike the United States, which has (traditionally) been regarded as fairly hands off in regards to the funding of film and television projects, Australia has devised a system involving a blend of government support with private investment. This model has a created a form in which, government policies have been directly involved in shaping and forming film financing.

Estimates place government funding for Australian films at 25-30% for local feature films and co-productions. Australia has a government entity, now known as Screen Australia, which was created after a three-way merger between the Film Finance Corporation, the Australian Film Commission, and Film Australia.

In 2007, the Australia Government supplemented and amended this model with the introduction of the Australia Screen Production Incentive, which was intended to encourage private investment in Australian produced films, TV shows and documentaries.

So, why this sudden interest in the funding of the Australian film industry?

Well, for starters Australia is a cool place with fabulous weather on much of the continent, making it a great place to surf, parasail, and film movies. For another, the Australian film industry has grown over the past five years in spite of a generally more difficult economic environment in the country partly based on its strong currency.[1] And for another, the Australian model is increasingly being echoed by many states and federal subsidies here in the U.S. as both the state governments and the federal government work to incentivize local film production through hefty tax incentives and direct subsidies.[2]

Nonetheless, the Australian film financing model has its share of critics. And critical comments made this past week highlight frustration with Australia’s heavily subsidized film industry, calling out instead for new approaches. Speaking to the Screen Producers of Australia at the Hector Crawford lecture at the ‘Screen Forever’ annual, Kim Williams, former chairman of the Australian Film Commission and a founding chairman of Screen Australia (formerly the Film Finance Corporation) went so far as to compare Australia’s film financing model to subsidies for farmers and automakers, criticizing the Australian government for its inability to spark innovation and to respond to emerging trends in the film industry.

‘It has been a long time since there was a meaningful wholesale review of the policy and commercial settings [of] the film and television landscape,” he said. “Financial assistance is still very much based on a notion of delivered subsidy. It is centered on the inevitably of loss rather than tackling new approaches.”[3]

“Let’s start by putting consumer front and center. Demand side policy orientation will usually produce better outcomes than supply support for its own sake.”

Nonetheless, Mr. Williams advocated for continued government assistance to non-commercial projects, like documentaries, which he said, “is highly unlikely ever to recover any real financial rewards, but it is for me the most precious area of filmmaking…It is subsidized for very good reasons. With comedies that aren’t funny, it’s difficult to have as generous a view.”[4]

Kim Williams, founding chairman of Screen Australia speaking to the Screen Producers of Australia.

Kim Williams, founding chairman of Screen Australia speaking to the Screen Producers of Australia.

 

In the U.S. of course, we offer similar subsidies for documentary works such as those broadcast on PBS shows like Frontline and Independent Lens. The military has also ventured into filmmaking by (in)directly financing last year’s Act of Valor. For commercial films and television shows, many states have been aggressively competing to offer large tax deductions and tax credits, which in essence provide direct payouts vi the tax code to attract filmmakers. New York and Louisiana are two states that have been the most aggressive in accommodating filmmakers.

Although such support is on the rise and is increasingly becoming a staple of the burgeoning film industry, many question the true economic benefits gained by the forfeited tax dollars and the seemingly perpetual “race to the bottom” brought about by competing states to use the film industry to increase employment and spark local economies. While the exact economic benefits to be gained paint a mixed picture, the subsidies persist much to the agreement of Hollywood film studios and local filmmakers who are taking advantage while the coffers are open.

While government subsidies can be truly beneficial for filmmaking, the question arises whether these subsidies will ultimately continue, whether major studios are simply exploiting these subsidies at the expense of the taxpayer, or whether a more direct financing model such as the one offered in Australia should be developed and employed here in the U.S. to provide for more challenging works or to meet such noble ends as providing filmmakers with gainful employment and advancing the American character. Thus, the question falls into the eternal debate over whether government should continue assuming an role in financing films, whether free markets should ultimately prevail alone, or whether these subsidies provide for both government involvement and so-called “free market” activity benefitting (in no particular order) major studios, their conglomerate parents, and the little guy documentarian among others.

The answer- readers, is up to you.

 

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About joselandivarartherlaw

Law student living in New York City. Fall externship at the Arther Firm.

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