TUESDAY 10 JUNE 2003

MR FRANÇOIS IVERNEL, MR CAMERON MCCRACKEN, MR CHRIS AUTY, MR ALLON REICH AND MR ANDREW MACDONALD

  Chairman: Gentlemen, thank you very much for coming to see us today. Mr Alan Keen will open the questioning.

  Q373  Alan Keen: Good afternoon. A very simple question: what have you done with all the money—I understand £92 million?

  Mr Macdonald: Starting at this end, I represent DNA Films, along with Allon Reich, and we were awarded £29 million from the Arts Council. We spent just over £12 million and made six films, and have £16 million remaining.

  Q374  Alan Keen: Do you think the taxpayer has had value for money so far? What are the differences between if you had not had the money and the fact that you had the money?

  Mr Macdonald: The main difference is we are trying to build a sustainable company rather than just make one production after another. We have had a few hiccups along the way but I believe we are well on the way to doing that. That is the main difference.

  Q375  Alan Keen: How many individual staff have been involved in that, and what training comes from that?

  Mr Macdonald: The core staff of the company is 10 here based in London, but we have made films in London, two in Scotland, one in the North East and one in Manchester, and when a film is made there are between 100 and 300 people that are employed. The level of films that we make is quite small and I am a great believer in using as many local people as possible and bringing them on. You tend to make them in cities that have some kind of infrastructure in media and broadcasting, Glasgow, Manchester, Liverpool—those are the places we have chosen outside.

  Q376  Alan Keen: By the way, the question is not an antagonistic one.

  Mr Macdonald: I am not trying to be defensive.

  Q377  Alan Keen: You do not need to be defensive. We support the British film industry, so we are not asking questions as if we think you have wasted the money, we just need to know how it has been used, what the future holds and what advantages have come from it. Can I hear from other people?

  Mr Auty: We have so far made or committed to or in the process of completing the twenty second film. We have leverage to approximately £24-25 million of production investment from the Lottery so far with approximately—almost exactly in fact—£75 million of non-Lottery finance, a great deal of which is non-UK finance as well. We have been quite rigorous about the training policy on all the films; there have been large numbers of young people who want placements and we are a regular contributor to training at the National Film School and in other places. Our particular case among the three franchises is perhaps slightly different from the other two in that the Film Consortium was a completely new-start company which we have leveraged (I do not know whether this was the best thing we did or the worst thing we did) into a publicly quoted company, with a view to attracting further capital from the capital markets. We have had some success in that area. As to the outturns of the films, which is really where I think you are going with that question, the fact of the matter is that of the last ten films eight have so far been distributed in North America—with two films in the top 15 British films at the US box office last year. The market itself for film worldwide—and Britain only represents about 8% of that market—has been very depressed in the last two years, but I suppose the one thing I would emphasise, rather self-servingly, here is that we have actually leveraged the Lottery cash to build infrastructure, because the group we have created, of which the Film Consortium is a very major part, is also now a significant licensing company called The Works, which is also a wholly-owned part of the same group. So I hope that gives you some indication of our activity.

  Q378  Alan Keen: In relation to the first answer, they have got money left still from those grants. Does the same apply in your case?

  Mr Auty: Indeed. We are actually on the current spending target for the original business plan. There is approximately £4.5 million of production investment still to occur. Those are actually project submissions which are in course at the moment but they are not within the figure that I have just outlined for you.

  Q379  Alan Keen: How closely monitored has the expenditure been from the Arts Council?

  Mr Auty: I would say that once the Film Council took over the management of the Lottery funding there has been a pretty thorough on-going monitoring of funds deployed. If I may go a little further with that question, I think the other thing I would say is this: the requirements that the Film Council brought to the table were quite significant in enhancing outturn performance, because unlike the Arts Council they required pre-commitments from distributors in certain key territories to indicate that there was genuine commercial appetite for the properties. On a month-by-month basis they are absolutely on top of all of the numbers. So I think the answer is that in the last two-and-a-half years, certainly, very thoroughly. We have two accountants for whom half of their job—so you might say a full-time accountant's job—is all the compliance and monitoring aspects and feeding that information through.