TUESDAY 13 MAY 2003

MR TIM BEVAN, MR ERIC FELLNER AND MS DEBRA HAYWARD

  Chairman: Lady and gentlemen, thank you very much indeed for coming to us this afternoon. I am sorry we were a little bit late, but we had some private business which ran over. Derek Wyatt.

  Q165  Derek Wyatt: Good afternoon. What would your recommendations be to this Committee as to how we could improve a British film industry funded by Britain rather than America?

  Mr Bevan: Basically we are a company that is funded by Europe and the United States.

  Q166  Derek Wyatt: We understand that.

  Mr Bevan: We believe that if you are going to be competitive in the motion picture business, not only within your own market but within a worldwide context, there is one thing that you have to tap and that is distribution. The distribution business, like many other businesses, for the film business is run out of America by the majors and that has been the case for the last 50 or 60 years. If you cannot harness that distribution, then you do not really stand a chance and that is because, at the end of the day, we are lucky enough, since 1992, to have worked with an international distribution structure—originally it was Polygram, now it is Universal—where you have an international distribution structure like that, you have a pyramid and at the top of the pyramid you have one person who says "I want this film to work round the world" and the distribution falls into line. So for us it is not really a concern where the film is actually paid for, it is the distribution that is important.

  Q167  Derek Wyatt: So are you saying it is an irrelevance then? I am asking you as Brits, as well as the fact that you are sponsored by outsiders, as it were. Is it important in the cultural milieu of British society that we have a film industry and if it is, then should we have some compulsion about distribution? Should we follow a French system or a Spanish system or not?

  Mr Fellner: I think as Brits and as human beings it is essential that we support our culture, but the problem with the film business is that those two words "film business"—

  Q168  Chairman: Could I interrupt, Mr Fellner? I see that my very good friend, Mr Alexander Walker, does not look as though he is hearing very well. So could you speak more loudly?

  Mr Fellner: He may be hearing, he may just not be liking what he is hearing. He knows what we have to say. But the film business, I am sure a number of the other people that you have chatted with have said this; those two words sit uncomfortably with one another because on the one hand you have the cultural aspect of film, the creative nature of it, and on the other side you have the imperatives of business and putting those two things together is tough. And coming back to your question; yes, it is essential that we support the cultural notion of Britain and everything that that stands for, but at the same time we also have to support the business aspects of what we do, which means that we have to sell films and make films that will work on a global scale. What we try and do is a little bit of both and I think that the problems that the industry sometimes has is when it has a confusion about what it is doing; whether it is trying to make a cultural film for a global audience or a global film for a local audience. You have got to decide and budget accordingly and go from there.

  Mr Bevan: I would argue that in terms of what we do culturally, the most important thing is to get a movie to as big an audience as possible and that you have to harness whatever distribution machine you can in order to do that. For instance, we made a picture a few years ago called Billy Elliot which had the benefit of being distributed by Universal and the machinery of Universal and, indeed, before that we made a film called Four Weddings and a Funeral which had the benefit of being distributed, at that point, by Polygram, a worldwide distribution outfit. Both of those films were small British films which, because of the cultural representation of this country, were seen by very large audiences around the world because of the distribution machines. The same movies could have been made and been distributed independently and they would not have reached as big an audience.

  Q169  Derek Wyatt: Could you just unwind a bit of what you have just said there because we talked last week to the Bend it Like Beckham director and writer who said that she had to give away 75p in the pound to every British distribution company in order to get it seen here. So she lost a million pounds actually on Bend it Like Beckham and it was only until she took it abroad and luckily got buy-ins that she actually covered her costs. So are you saying that, in fact, your costs are covered from day one because the distribution buys in immediately at the cost level? Is that the key?

  Mr Bevan: The key is that if you are a part of a worldwide distribution organisation and it has a film like Bend it Like Beckham to distribute, it knows that it is going to be a very difficult film and, let us say, plucking territories. Germany and France are difficult, but in the UK you stand a chance. But they are balancing that equation in their mind all the way through. And also, if you are part of a big worldwide distribution organisation, because they have got muscle, they tend to have television deals and ancillary video and DVD deals which do make it less risk prone.

  Mr Fellner: Also, it is one organisation distributing around the world. I imagine what she was referring to was that the only area that they truly controlled was the UK and the rest of the territories are being sold to different companies that all had their own agendas in terms of how they were going to release the film, when they were going to release it, whether it was a priority to them or not, whether they thought that they could make money from it or not.

  Q170  Derek Wyatt: What I am hearing from you though is that we cannot do it, we do not have the muscle in the distribution. But should the Government legislate or should the planning laws say any film in Britain should have a local screening?

  Mr Bevan: No.

  Q171  Derek Wyatt: Or are you totally against the concept of actually trying to protect or help the British film industry?

  Mr Bevan: We are integral to the British film industry in that we make British films here. It is about choosing which pictures—you try and decide—we make films that cost from a million dollars to $70 million and we always say that if you have a million dollar movie it needs to find a million dollar audience around the world and a $70 million movie you had better find a $70 million audience around the world. And by the way, either sum is huge and it is very unlikely that with a million dollar movie that you are going to find your audience to support that movie just in this country. It is an international business.

  Mr Fellner: I do not think that we would ever say that we should not, or the Government should not, try and support British film because, of course, there are areas where it needs support. But I think to enforce legislation on to a creative business in terms of it having to have a release, that is tricky because then you get into a scenario where a film—not because of faults that the film makers have made, just because that is the way the business works—is not a very good film suddenly having to be forced into getting a screen release in the UK just because it is British. If it is no good, then—

  Mr Bevan: One thing that has certainly happened in the 20 years since I have been working in this industry is that the British movie-going audiences have become much more supportive of films. When we first started with films like Launderette and Wish You Were Here and Sid and Nancy a £3 million gross was a huge thing and now our films are regularly doing £15 to £20 million at the UK box office.

  Mr Fellner: Yes, the audiences are looking for them and when they find a good British film they support it.

  Q172  John Thurso: I am very interested in the comment that you made that really the industry has to work out whether it is in the business of producing art, culture or whether it is in the business of being in a business and people need to be clear in their minds what they are doing. And I suppose, when one asks what should be the British film industry, one should make that division as well. In other words, is it about the industry, which are the people in it and making money, or is it about the art and the culture and the two, to a certain extent, from what you are saying, must be divided to be intellectually pure in your approach? But what I would really like to understand is the sort of business aspects of it. It has always struck me that we are a country that is extremely bad at venture capital and the City is pretty bad at raising venture capital and that the film business is a business, from the evidence that I have heard, which is very much about venture financing on a one time basis every time. Can you explain to me how one goes about the business of raising the funds to put a film on and where the money comes from and how you best go about getting it, as much as you can?

  Mr Bevan: I will speak for us, Working Title, to start with and then Mr Fellner will speak for the others. We are fortunate in that we have evolved a relationship with a Hollywood major over the years. So what happens is that Universal Pictures, along with Canal Plus, which is a French television company, they finance Working Title, which means that they finance our overhead, we employ 30 odd people here in the UK and five in Los Angeles. They finance our project development, which is the critical part of the whole food chain in film production, which is developing a screenplay, be it from an original idea, be it from a book, be it from an article or whatever, which is several million dollars a year for us. And they also finance our production. Now, when they finance our production, they look to lay the risk off as much as they can and one of the reasons that we are able to make our big movies here in the UK at the moment is that there is some lease back which is a critical factor in making bigger movies like Bridget Jones or Richard Curtis' Love Actually or currently Thunderbirds here in the UK, because they are always looking for the cheapest place to make those movies. So for us it is a big corporation who have the distribution in our films who are funding us entirely. Eric will speak for everybody else.

  Mr Fellner: Well, I mean I can speak as best I can, but I imagine there are other people you have seen and will be seeing, Jeremy Thomas and Steve Wooley and other independent producers, who you have chatted to. But the way they structure their finance is more on a pre-sale basis, a small amount of equity, an element of Film Council money and an element of bank debt and they just piece it together that way. Coming to your point about venture capital, I do not think there has been much venture capital in the British film business for quite a while. Because it generates so many headlines, people are quite scared of the film business because most of the headlines generated are about disaster, they are not about success. And I think since Goldcrest there has not been any sizeable equity in a sustainable slate of movies out of the City. There has been European money, there has been American money, but I do not think there has been much City investment.

  Q173  John Thurso: Is there room, as there is in the theatre, for people who regularly invest in productions?

  Mr Fellner: There is room for that. I mean, there are small independent movies that get pieced together with £10,000 increment, investments from 1,000 people or a 100 people and you do hear about them. But it does not create a sustainable model. I mean you saw Michael Kuhn last week and he was talking about the fact that it is a hit-driven business and unless you have a slate of movies which allows you to get the hit, you can never create a continuous industry. You can create a film here and film there and one will be lucky and one will be unlucky, but to create an industry you need to get a substantial flow of films on a regular basis so that you can get that percentage break of the occasional hit that pays for the failures and turns out a profit and then keep rolling, keep rolling, keep rolling.

  Mr Bevan: We believe that our model is a good one; it is that we are harnessing one of the giants in the movie business that we get money from them to make our movies because we have creative autonomy because we have got a bit of experience in this business as we tend to make films—at least half our slate is British content—and that we are putting our cultural message out there that way. There are five other studios and we think that harnessing those, the giant distribution machines, is the way to do it. I always liken it to the motor industry actually; Aston Martin is a great British label, but it is owned by Ford; Bentley is a great British label, but it is owned by Volkswagen; Rolls Royce by BMW. The label is fantastic, it is all British, but it needs the distribution and financing of a multi-national in this day and age.

  Q174  John Thurso: Is there a difference therefore between a British film industry, which is basically about production work, the actual making of the films, the studios, the technical side of the film business, where effectively you make them here because they are cheaper to make here, it is more cost effective? And what you are really saying is that that is the kind of USP that we can give, is our ability to deliver that quality of technical skill and that for the rest really we have to use the American system and work with it rather than try and compete with it?

  Mr Fellner: We can do both. I think we use the American system and use the USP of British crews, British actors and British ideas and I think that Tim is absolutely right in terms of how to create an industry, but we must not forget that on top of that industry there is also the point that Derek was making earlier about the cultural side, where there is also room for films that do not necessarily fit into the industry model and that is where Government support, Film Council support, Lottery support is absolutely essential because you need to be able to get the occasional film, a few films, a handful of films made that otherwise would not stand a chance and can break out.

  Mr Bevan: And the senior creative side of that industry—writing, producing, directing—is a very difficult industry to get in to because of the capital required and that is where you have to help. You know, we can sustain in terms of making big films here, yes, in crews and all the people who technically work on films, that is what keeps the food chain moving, but in terms of cultural originality, you have to invest in our future there, which is the writers and the directors and the producers.

  Q175  John Thurso: So the best thing that the Government can do is to concentrate on that area which is the most under-supported area to keep the creative talent going and leave the guys who know how to run the business to do the business side?

  Mr Bevan: Training, yes.

  Q176  Chairman: Before I call on Chris Bryant, could I ask you this; the Rank Organisation in its day was a British film company. It was based in Britain and it made films which, while not always made in Britain, were clearly and definably British films. You are based here, you are British. Nevertheless, your scope is very, very much wider. You make films in this country, you make films about this country, you make films like Fargo which would not claim to be or could not conceivably be described to be as a British film, wonderful though it was. How would you define yourselves?

  Mr Bevan: I think we define ourselves now as film producers basically. I keep on coming back to the studios, but each of the six main studios have deals with a number of people who supply films to them and each of the main studios has two or three main producing deals, names such as Joel Silver, Scott Rudin and people like that. We would consider ourselves to be one of those people supplying films to the studio. And in doing so, in supplying one or two big films to the studio each year, which is part of their main international worldwide slate, we buy ourselves the freedom to make smaller films as well.

  Mr Fellner: British producers working on a global and international level trying to export our product. Working Title have been asked many times by all the majors to basically set up in LA, move to LA, work out of LA. We have refused for the last 20 years to do that because we are proud of the fact that we work out of the UK and we can make films that we really want to make.

  Q177  Chairman: Obviously you are strong and powerful enough not to work to order, as it were. You have explained to John Thurso the various ways in which you raise your money, but I would assume that none of the organisations and institutions that provide you with money either seeks to—or if it did seek to, does not succeed in imposing any wishes on the content of the film?

  Mr Bevan: It is creative collaboration, I believe is the word. And what we have learned along the line, because unfortunately film production is extremely expensive and the more expensive it gets, the more nervous people get and I talked about the script a little bit earlier and I think it is a very important part of it. Debra works specifically in that area and I think at some point it would be great if she could speak to that because we believe that a decent script, if we get that right, and of the 40 people who work for us round the world probably 20 of them work on script development, is if we get that right then most of the rest of the process will fall into line. But if we do not get that right, then the film down the end does not stand a chance. And because we are lucky enough to have a great depth of development because we have been working together as a team for such a long time is that we probably have as good a development slate as any producer in the world and within the film business those that pay recognise that and they will give us the freedom because of that.

  Q178  Mr Bryant: You referred to the growth of a British audience for British films and a growing appreciation over the last 10 or 20 years, I guess. And that seems to have been matched on television as well in that of the top 100 television audiences of all time I think only one American movie makes it into the top 100 whereas several British movies have. Have the broadcasters, in your view, in Britain played a strong enough role in ensuring we have a strong film industry?

  Mr Fellner: Well, Tim and I would not be here if it was not for the broadcasters in the 80s were forced, I think—I do not know if you remember the regulations in the 80s—they were forced to spend a certain amount of money on investment in feature films and we were both beneficiaries of that. They no longer do that. You can pre-sell your film to the BBC or to ITV—I mean I am talking as an independent, our deals with the broadcasters are very different, but an independent can pre-sell their film but they are not getting nearly as much money as they should get to help them get the film made, given that the broadcasters will benefit enormously by your top 100 list. You can tell that—

  Mr Bevan: The short answer is no. They do not do enough.

  Q179  Mr Bryant: And for satellite broadcasting, apart from sport, it is their major driver.

  Mr Fellner: Correct. They buy finished films but in terms of investing in British films, I think the only satellite company around closed their film business about six to nine months ago.