Australian film producers are battling to win back disillusioned investors, writes Andrew Trounson

The Australian
Andrew Trounson
January 20, 2007

WHEN film producer and scriptwriter Robert Galinsky preaches that the Australian film industry needs to become more commercial, his American accent doesn't do him any favours. The land that spawned blockbuster movies and multiplex cinemas is often characterised as the enemy of a struggling Australian film industry.

Some high-profile Australian film flops have prompted private investors to turn their backs on the industry, and producers are having a tough time winning them back.

"Being successful doesn't mean having to be American, it just means a lot of people (need to like the film)," says Galinsky, pointing to such past Australian commercial successes as Priscilla, Muriel's Wedding and Crocodile Dundee.

For Galinsky, one of the scriptwriters on the 1990 Hollywood film Flatliners and now a naturalised Australian, being commercial does not mean just producing mass-appeal blockbusters, but simply finding a big enough audience to turn a profit.

Today the lack of commerciality in the industry is the big gripe of private investors.

"The major comment I hear back from investors is that they don't like Australian films," says Richard Keddie, producer of Little Fish and now managing director of Film Licensed Investment Company, which is seeking to raise $10 million from investors for Australian film projects.

The box office share of Australian films plummeted to just 1.3 per cent in 2004 and 2.8 per cent 2005, compared with a 10-year average of 4.8 per cent. US films made up 85 per cent.

Frustrated by Australian film's "cottage industry" status, producers like Galinsky and Keddie are pinning their hopes for developing a sustainable industry on pushing new funding models to bring in private investors. And their first pitch is about being commercial and putting "bums on seats."

Key for the industry will be the Government's long-awaited shake-up of film funding structures in Australia, where current tax breaks have often only succeeded in attracting short-term capital.

Some also question whether relying too much on subsidies has allowed film-makers to ignore the desires of their audiences.

"The way it is structured now you can fund a film without having to find an audience," says Keddie.

The final report is expected to land on Arts Minister Rod Kemp's desk soon, and the Government is expected to announce changes by the May budget, if not before. In the meantime the uncertainty is adding to the private investment pause.

There is no doubting the allure of film investment, which offers the chance to have your name on the credits and attend the red carpet premieres. And then there are the big success stories that keep punters interested. Just look at the success of Clayton Jacobson's Kenny, the story of a portable toilet plumber. Made for about $700,000, the film has so far taken over $7 million. But returns to its makers and the portable toilet company that financed it will largely depend on DVD sales and how it fares overseas.

Investing in films is high-risk. Not even the experts have a surefire way of picking a blockbuster from a flop. Few would have been inclined to back Kenny, which starred the director, his brother, father and son.

Despite a few high-profile successes and the lauding of some Australian films at Cannes, it is the flops that have put investors off.

For investors the unattractiveness of the industry was most obviously exemplified by the failure of Macquarie Bank to extend its hitherto golden touch into film-making.

After raising just over $16 million in 2000 it proceeded to invest in a string of duds such as Dirty Deeds, with only Crackerjack proving moderately successful. By the time the venture fell into the hands of liquidators investors had reportedly only got back 10c in the dollar.

"It is high-risk and it has been tarnished for investors who haven't been as informed as they should be, and that has left a base taste in the mouth at the moment," says Brian Rosen, head of the Federal Film Corporation, the federal government film funding agency.

"Film investing is a very tricky thing. It is highly speculative and one of the hardest things to make a judgment on what will work." Rosen notes that US hedge fund Dune, which has a $US350 million ($444 million) investment in a suite of films at 20th Century Fox, has calculated that to make a 20 per cent return it needed to spread its risk over at least 28 films.

The Macquarie model of raising private capital and then seeking film projects, the so-called blind fund approach, has now been widely discredited in the eyes of punters.

Even with a team boasting film luminaries Fred Schepisi, Noni Hazlehurst, Hugo Weaving and Lord of the Rings producer Barry Osborne, Keddie's Film Licensed Investment Company last year couldn't get investors across the line without having the film projects locked in, which is now his focus.

Macquarie's financing rival Babcock & Brown successfully raised about $13 million to fund Jindabyne by first teaming with producers April Films. After an encouraging reception in Australia for the film, returns for Jindabyne investors will now depend on its doing well from US and UK releases sometime after March.

Galinsky's Top Cat Films is currently out drumming up $US2 million in private investment to provide what is essentially working capital in the company which has a slate of 17 film projects that would have a total production budget of about $US80 million.