An opportunity now exists to build upon support extended by Government to create a sustainable and profitable British film industry.

  In addition to creating a regular flow of British productions this new opportunity would attract large-scale inward investment and would generate significant revenues flowing back to the UK from world-wide exploitation of British films.

  The opportunity arises because of the changed circumstances of the major film companies which dominate the industry. Over recent years. Disney Fox, Paramount, Columbia, Universal and Warners have all become units of large conglomerates. Within those conglomerates exists fierce competition for working capital. As a result there is increasing reliance on co-financing of motion pictures.

  Co-financing is most often achieved by dividing exploitation rights between North America and the rest of the world. This method spreads risk, but carries with it the commercial disadvantage of selling off distribution rights, often to a competitor.

  A new UK Production Fund could be established to co-finance British films in partnership with one or more of the major studios. The Fund would be an attractive partner to the studios in that it would no require relinquishing distribution rights. On the contrary, the concept would take advantage of the fact that the major film studios are the only organisations which can guarantee world-wide distribution. and marketing.

  In return, the studio partner would provide distribution and marketing services for substantially lower fees than are traditional within the industry. As a result, revenues from successful films would flow back to the UK on a much enhanced basis.

  Creation of the new Fund is dependent upon keeping in place and extending current production incentives created by Government.

  To put that request into context: the production and marketing of films is subject to risk. Within the industry, that risk is hedged by adopting a portfolio approach. In other words, risk is spread over a number of films of different genres and budgets. The major studios do this by each. making 20-30 films a year.

  That approach is not appropriate to the UK. There does not exist at this point in time a sufficient reservoir of resources, Therefore, the new Fund would operate within a business plan which called for the production of five films each year in partnership with one or more major studios.

  Thus, in order for both the fund and its partners to achieve the portfolio approach utilised by the industry, it would have to be in a position to take at least a five-year view.

  I am confident that capital for the Fund can be raised under the circumstances described above. In doing so it would be enormously helpful if the existing fifteen million pound cap on tax relief could be removed so that the Fund and its partners would be enabled to attract inward investments in respect of mainstream productions. Within that context, it may be worth noting that the cost of the average studio film this year will be in the 55 to 60 million dollar range.

  If there exists the possibility that incentives cease to be in place within a five-year time frame, then the portfolio aspect of the business plan ceases to be effective and investment in the Fund from UK and studio sources is rendered unlikely.

  I appreciate that elections, among other considerations, render difficult legislation which can be guaranteed to remain in place for the period suggested. And certainly, I am not equipped to address the political issues. Therefore, my contribution to the debate must rest upon drawing to the attention of the Committee the current opportunity which exists to help create a sustainable and profitable British film industry. My hope is that the knowledge and skills of the Committee members may be able to create the means to take advantage of that opportunity.

  My credentials include serving as Chairman and CEO of EMI Film and Theatre Corporation, then Europe's largest entertainment group with a permanent workforce of 4,000; Chairman of both Shepperton and Elstree Studios; Academy Award-winner for Best Picture at producer of The Deerhunter.

June 2003