With Sandy George determined to explore Emile Sherman`s financial and policy brain, the MIFF 37degrees South session traversed some of the joys and frustrations of the current funding system.
With Emile Sherman and Iain Canning run See-Saw, which is based in both Sydney and London. Sherman`s slate ranges across the world, often now with no formal Australian elements at all. Indeed, The King’s Speech was never by an official measure an Australian film, even though it has Geoffrey Rush, and the Australian identity of his character is crucial.
He has a precise line on identity. “We need to engage meaningfully as international producers, we are not Australian producers. We are based here and can do whatever we want”, he said.
He sees himself as “a producer based in Australia, rather than an Australian making Australian content movies. The Australian nature of it comes because I am an Australian and I like working with Australian writers and directors.”
He is very happy with the Significant Australian Content test, administered holistically by Screen Australia, because it focuses on the elements which are generated from Australia, and the production company’s ownership and contribution. It discourages the service company mentality. “We are empowered,” he said, “when we are offered a project from an overseas company that wants to set it up as Australian. We can say we can do that, but we need to be really meaningful partners in that.”
In the right mix, producers can use an overseas writer or director, or bring in overseas elements, or shoot overseas. But he sees the Media Entertainment and Arts Alliance position as an impediment.
“I totally get where they are coming from but at the same time I think it comes from the pie is one size, and they want to get the biggest slice of the pie. There’s no sense that the pie will grow.”
His access to overseas actors is very limited if he wants to shoot in Australia, but he can use as many as he likes if he shoots outside the country – and still claim the taxation benefits of an Australian film.
He acknowledged he is simplifying a complex situation, because there are a number of factors in play – he wants the authenticity of actors from a particular culture, films are located overseas, and he may want key actors who are not native to the story because of their sheer quality. Disgrace, for instance, is shot in its country of origin, South Africa, and stars John Malkovich. On Dead Europe, he figures he could not have brought a single overseas actor to work on a shoot in Australia.
“We have a few films that are set overseas, that are Australian movies, generated by Australian directors with Australian HODS (heads of department), and casts or some cast, and we would really like to shoot them in Australia…. But we are not going to, probably, because we can’t bring in the actors we need.
“So we are in the paradoxical situation where the MEAA rules are preventing us from using Australian actors. And I don’t think that is their intention. If we are going to grow as an industry, we have to be empowered to grow as an industry.”
“I think there are other negative impacts of the tightness of the rules. You end up paying more for Australian actors than you need to, because the agents here know that if you need a name, and you’ve got X named as an Australian actor and you can’t get anyone from overseas, you are pretty well stuck with them. And that is not really helping the general acting community in Australia. We would be better to pay the real market rate for an actor from overseas, and pay the other actors more.”
Sandy encouraged Emile to reflect on Fulcrum Media Finances, established in 2008 by Emile Sherman and Iain Canning’s See-Saw Films together with Sharon Menzies and Barry Sechos. It was pumped up in 2010 by a deal with Media Super, which Emile admitted took some eighteen months to negotiate, with the Global Financial Crisis disrupting the process.
Sherman emphasised that the two businesses are very separate. While See-Saw uses Fulcrum`s financial services in significant ways, other companies may be a better fit for a particular project. And Emile joked about Media Super`s aversion to conflict of interest. It is, after all, the industry`s superannuation fund.
“It is small business but a nice business,” he said, “and I feel really pleased with its contribution to the industry. It has financed forty Australian films over the last four or five years.”
“A lot of what Fulcrum does is helping producers on the ground, and our funds are relatively inexpensive.” It offers more than money – managing director Sharon Menzies is helping producers navigate the peculiarities of the Australian system, which has effectively introduced gap finance to the industry vocabulary.
He painted a fairly brutal picture of the dwindling market for low or mid level Australian drama unless they are edgy or controversial enough to compel major festival attention. “In the old days you used to get twenty percent from a sales agent, because they knew they could sell that amount, but now it doesn`t work like that – on a $4m film you are not necessarily guaranteed a million dollars of sales by any means. If you get a million dollars of sales, usually that film has really cut through and has been bought as a theatrical proposition around the world.”
“It`s a tough moment for films because you either have to have something substantive to say and be in that festival world, the must-have theatrical world, maybe you`ve got to be in Australia with a comedy, which is very much Australian based and you`ve got to really understand that, or just be that five to fifteen or ten to twenty million dollar film that`s just got enough of a hook, or a big enough cast and director to fly internationally.”
Emile is making a broad distinction between what he calls “the execution dependent movie” which have limited market place attachments and rely on sales after completion, and “substantive movies”, which are financed on presales. The distinction is obvious – the risks is spread, budgets are higher, investors are close to returns after completion.
“It is a wonderful feeling to have a film presold on the basis of the elements”, he said. The psychology of running a company on presold pictures is much more attractive. It is pretty obvious to outsiders that companies move from one to the other, as their slate proves their judgement, they learn the marketplace, and develop the long term relationships.
In Emile’s case, it has clearly led to a policy of working with directors who are known to be excellent, and writers with a lot of experience, on properties with obvious potential. At the same time, that philosophy flows into the budget, which he is still having to triage around arthouse, wider release or cross-over.
With the SAG rules and the Producer Offset, Emile can advance films that “qualify as Australian films, and still have international elements. With that, there is a real opportunity to make be making eight to twenty million dollar moves, which is what I am focused on.”
“They are a different sort of movies that have hooks to them, that have substantive cast, and substantive directors. And we need to be able to retain our directors. “The Offset enables them to sustain relationships that enable them to buy important underlying works, and defeat studios with more cash, on the grounds that they are credible, and will deliver a better film. “We have already got forty percent of the money,” he said. “We are legitimate here.”
“The Offset has been brilliant as a watershed change moment in the industry. For the first time we are thinking much more entrepeneurially, we have a lot more equity and recoupment in the film, we’ve got a solid basis from which to build a finance plan, we are much more attractive to overseas producers who want to do co-productions with Australia, you get a real seat at the table there because you are meaningful co-production partner, and its been a total game changer for the industry.”
At the same time, he claims that the Offset is failing in one very important way. It has now allowed more commercial films to be financed without Screen Australia investment. As we all know, that means that a cash-strapped government agency becomes a major brake on growth.
Sherman’s solution is to rejig the tax levels – after all, we have marginal rates of tax, so why can’t we have variable levels of offset? He reckons that a 50/40/30 system could be devised that supported lower budget production, took a small amount off the top end, and would not cost Treasury any more. The levels would be 50% for the first $15m, then 40% for the next $15m, and 35% above that. This is not an uncommon idea, by the way; it has been quietly circulating as an option in industry policy circles.
While Emile acknowledged the value of the Offset in co-production discussions, it turns out that he is not a fan of co-pros at all. “I think there is an assumption that a coproduction will bring in money,” he said. “It’s not true.”
For early projects like The Night We Called it a Day, Oyster Farm, and Opal Dreaming, Sherman was able to take advantage of English finance through a sale-and-leaseback arrangement which was ultimately abandoned. But with some English elements, it was possible to create profitable co-productions.
“ But to be honest now, with Dead Europe, we looked at it as a co-production and went, we will end up bringing in more money if its Australian, keep it more and more Australian, because the system here is so much better than anywhere else.”
Sandy George dug into the decision by See-Saw to move into television, though Emile was implying it was almost accidental. They became involved with Top of the Lake because they are doing a film project with director Jane Campion, and she stepped sideways to do the televisions series. They had an opportunity to go with her.
As a company, they were in the backwash of The King’s Speech. “We were offered a few quite substantive big movies that were financed, with big actors and everything,” said Emile. “For better or worse Iain and I just looked at each other and went, I don’t know what this film is saying. It’s a nice story but I don’t want to spend my time on this. I would prefer to be doing really good television than that sort of a movie. That was our impetus to go into it.”
He is relishing the way in which television projects are so much more writer driven, and their relationship with the BBC and BBC Worldwide is now sweetened by first look and overhead deals. Ironically, he notices that co-productions are less common in television drama, which is a useful layer of experience they bring to the table.
Despite the siren call of television, See-Saw remains firmly committed to the feature space. As Emile pointed out, “Most of the films nominated for Academy awards are not studio movies… we can make movies that sit in that zone that studios almost used to sit in.”
“We`ve got to embrace the independent world because we are in a very exciting time for independent film.”
by: David Tiley
Screen Hub
Wednesday 8 August, 2012