Project Gaullywood: Project Book Phase I: Market Intelligence and Sector Competitiveness 27 th July 2007.

Project Gaullywood: Project Book

Phase I: Market Intelligence and Sector Competitiveness

27th July 2007

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Contents

Objectives

Background to Project Gaullywood

Project Framework

Setting the Scene

Key Project Findings

High-Level Strategic Recommendations

Appendices

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The objectives of the project were to conduct strategic research on the local and international audio-visual markets for the Gauteng Film Commission (GFC)

• Review the GFC’s existing market intelligence and establish gaps.

• Conduct local and international audio-visual (AV) industry research:

Comprehensive analysis of the South African AV industry,

Comprehensive analysis of the Gauteng AV industry,

Review of global trends, best practices and industry benchmarks.

• Assess the competitiveness of the Gauteng audio-visual industry:

SWOT Analysis,

Critical Success Factors.

• Make high-level Strategic Recommendations:

Optimum positioning of the Gauteng audio-visual film industry,

Optimal role of the GFC.

• Consolidate findings and outcomes for submission to GFC Board.

Objectives:

Background to the Project

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The Gauteng Film Commission (GFC) is a provincial government agency, tasked with the development and promotion of the audio-visual industry in Gauteng

GFC Mandate:

• To promote Gauteng as a preferred film destination,

• To facilitate transformation of the film industry,

• To regulate and co-ordinate inter-government communication of permit issuance, code of conducts, municipal by-laws and risk management factors through the development and implementation of provincial film policy,

• To facilitate, support and promote new investment in film production within Gauteng thereby contribute to economic growth and sustainable job creation,

• To create and manage a repository of statistical and industry related information,

• To monitor and support local industry developments,

• With the approval of the MEC and Board, to provide finance for any projects which will develop filming in the Province,

• To develop strategic and business partnership and other co-operative activities with the filming and television industry both locally and internationally,

• To support greater access to and participation in the film and television industry by Previously Disadvantaged Individuals (PDI).

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• The South African audio-visual industry as a whole is facing a number of challenges:

Structural constraints i.e. high volatility, general unprofitability, and monopolised international distribution networks,

Prohibitive film production costs and decreasing levels of private production financing,

Lack of competitiveness relative to competitor countries,

Large volumes of imported material,

Increasing reliance on government funds as a means to protect local content development.

• Rapidly changing consumer tastes and behaviour, with the emergence of new, interactive media platforms and technologies

• The GFC’s main challenge is that it lacks access to quantitative and qualitative industry data. This has inhibited its capacity to:

Adequately respond to the challenges facing the industry,

Maximise the competitive advantage offered by this industry.

The Gauteng Film Commission (GFC) lacks sufficient market intelligence to adequately fulfil its mandate …

Problem Statement:

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… and so subsequently requires comprehensive industry intelligence to inform its short-to-medium term strategic objectives

Project Gaullywood Objectives:• A comprehensive contextual and situational analysis of the Gauteng audio-visual

market, • Reporting on current international and national best practice as regards the activities

of Film Commissions/ Offices.

Project Scope:

Project Gaullywood Output:• Key research and analysis findings, including:

Global trends, best practices and industry benchmarks, Overview of the Gauteng and SA audio-visual markets.

• Sector competitiveness assessment: Key challenges and potential opportunities (SWOT analysis), Critical success factors (CSF’s).

• High-level strategic recommendations:Optimum positioning of the Gauteng audio-visual film industry,Optimal role of the GFC.

The resulting market intelligence will form the backbone for the development of a strategic 5–year Sector Development Plan for the GFC.

Project Framework

• Project Plan

• Project Charter and Timeline

• Project Methodology

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INDUSTRY MAPPING (As-Is Analysis)

8-12 wks

EVALUATION OF FINDINGS

2-4 wks

COMPILATION OF REPORT

1-2 wks

PROJECT PLANNING & KICK-OFF

2-4 wks

• Project Administration • Project Planning:

• Clarify project scope • Validate project plan and charters• Identify key GFC stakeholders

• Review existing GFC documentation and other available data

• Establish key areas of research focus and identify any gaps in available data

PROJECT MANAGEMENT•Bottom-up solution generation•Day-to-day project management•Client Relationship Management

PROJECT MANAGEMENT•Bottom-up solution generation•Day-to-day project management•Client Relationship Management

SA AUDIO-VISUAL MARKET ANALYSIS• Operating landscape (regional bodies, activities,

facilities, market share, initiatives etc)• Regulatory environment • Financing (incentives and access to funds)

GAUTENG AUDIO-VISUAL MARKET ANALYSIS• Market activity; demand and supply • Competitive positioning • Skills and resources • Key challenges and potential opportunities• Review of the GFC

• TRENDS AND BEST PRACTISE REVIEW • Global trends • Best practice and industry benchmarks

• Develop detailed SWOT analysis

• Prioritise and validate key issues and potential opportunities

• Identify critical success factors

• Consolidate findings and outcomes for submission to GFC board

• Consolidate findings and outcomes for submission to GFC board

We defined a high-level project plan that detailed the key activities needed to deliver on the project’s objectives

Project Plan:

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We started by reviewing the GFC’s existing documentation, to establish any gaps in market data

PROJECT PLANNING & KICK-OFF (2-4 wks)

Project Planning & Kick-off:

Project Planning• Clarify:

• Project parameters (scope) • GFC expectations and

requirements• Finalise project team

structure and members• Meet GFC Management• Develop and validate (sign-

off): • Detailed project plan and

charter• Detailed project timeline, with

key milestones and updates• Identify key GFC

stakeholders

Documentation Review• Review existing

documentation: • GFC documentation e.g.

business plans, annual reports, legislation etc

• Benchmarking and best practice data (trends, case studies etc)

• Other background information and databases

• Identify gaps in available data

Project Administration [Internal]

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We then mapped both the Gauteng and SA audio visual markets, in addition to reviewing industry best practices …

Industry Mapping:

SA audio-visual market:•Operating landscape:

• Market activity (complementary and competitive) and facilities resident in other regions in SA; demand and supply

• Market share and positioning• Existence and effectiveness of

regional bodies with mandates similar to the GFC

• Regional development plans and initiatives

•Regulatory environment:• Impact on industry (+ and -)

•Incentive schemes:• Government initiatives (current

and future) • Impact of current initiatives

•Funding:• Accessibility of funding for projects• Sophistication and responsiveness

of financial markets to fund applications

• Market understanding of industry mechanics; evaluation of risk vs. reward etc

Gauteng audio-visual market: • Market activity and facilities• Market demand and supply

(products and services); market share

• Competitive Positioning (location, infrastructure, funding etc)

• Skills and resource availability: • Demographics vs. skills set

• Local industry expectations and requirements

• Key challenges and opportunities (SWOT)

• Overview of the GFC: • Mandate and role• Structure • Operations and activities • Strategic objectives• Value proposition (natural

scenery, expertise, infrastructure etc)

• Key challenges and opportunities

Trends and Best Practice:• Trends in the global audio-

visual industry• Global best practices – other

Film Commissions / Offices: • Role, mandate, statutory

composition, value chain positioning, institutional and revenue models etc

• Competitor destinations and countries:

• Regulatory framework• Funding and Incentives • Product and service offering• Locations and Infrastructure• Value proposition (destination

of choice)• Identify critical success factors

for: • Film Commissions / Offices• The audio-visual industry

INDUSTRY MAPPING (8-12 wks)

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… having chosen to review the Gauteng audio-visual market in relation to both the national and international AV landscapes

Stream Interface:

Understand the global operating landscape - What trends are shaping it? What are the best in the business doing and what can be learnt from them? What’s driving or hindering growth?

Understand the NATIONAL operating landscape – What’s the current state of industry? What’s driving or hindering growth, relative to the rest of the world? What trends / factors unique to South Africa are shaping the industry?

Understand the PROVINCIAL operating landscape – What’s the current state of industry? What’s driving or hindering growth, relative to the rest of the country?

Global Trends and Best Practice Review

SA Market Review

Gauteng MarketReview

Define the STRATEGIC implications of the above - Where do the opportunties for growth / improvement lie? How can this be effected? What is the role of the GFC in this?

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Finally, we evaluated our findings to identify potential opportunities for the GFC and Gauteng as a whole

Evaluation of Findings:

•Collate and synthesise all research and data •Develop a detailed SWOT analysis of both the Gauteng and SA audio-visual industries:

• Identify key strategic issues, potential opportunities and critical success factors for the Gauteng market •Engage Steercom and key stakeholders:

• Validate research and analysis findings • Prioritise and validate issues and opportunities• Build consensus and secure buy-in

•Make high-level strategic recommendations• Optimum positioning of the Gauteng audio-visual film industry• Optimal role of the GFC

EVALUATION OF FINDINGS(2-4 wks)

Our high-level strategic recommendations will feed in to the second phase of the project.

Our high-level strategic recommendations will feed in to the second phase of the project.

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We mapped out a project timeline, with key milestones to measure progress

Timeline and Milestones:

Documentation Review

SA Market Analysis

Best Practice Review

Evaluation of Findings

Project Planning & Administration

Gauteng Market Analysis

TASKTASK Wk. 1 - 4Wk. 1 - 4 Wk. 5 - 8Wk. 5 - 8 Wk. 9 - 12Wk. 9 - 12 Wk. 13 - 16Wk. 13 - 16 Wk. 17 - 20Wk. 17 - 20

Preparation of Report

• Framework validation• Charter sign-off

Final Submission

Stakeholder Validation

Initial InsightsFirst-cut SWOT Analysis

19/2 16/3 13/4 11/5 8/6 29/6

• Gap analysis

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The project was structured into defined streams of work, with subject matter expertise and research support

Project Director Project

Director

Project ManagerProject Manager

SA Market Analysis

SA Market Analysis





Subject Matter Experts (SME’s)

Project Team Structure:

Global Research Centre (GRC)

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We employed an issue-driven research approach to source and analyse our primary data …

• Develop relevant (issue-based) hypotheses

• Establish key trends and growth drivers

• Validate key issues, threats and gaps

• Identify potential opportunities

• Develop client-specific solutions

Acti

vit

y

• Provide structure and direction to the research

• Source factual and meaningful data

• Gain a clear understanding of the factors influencing the client, and industry or market at large

• Assist the client to achieve sustainable growth or recovery

Ob

jecti

ve

Develop

Hypotheses Analyse

Findings Conduct Research

Identify Opportunities

Research Methodology:

• Carry out desktop research and analysis

• Perform an analysis of the client organisation

• Commission secondary research by GRC & BICS

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… and sourced reliable and comprehensive secondary research data from the Deloitte Global Research Centre

The Global Research Centre (GRC):

Industry Expertise

Professional Research

Specialists

Tailored Research

Access to SME’s globally

Vast portfolio of Databases

The Deloitte Global Research Centre

(GRC)

Data Analysis and Synthesis

Setting the Scene

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The audio-visual (AV) industry is large and complex, with a myriad of role players and sub-sectors

The audio-visual industry:

Source: Deloitte Research; GFC Business Plan 2007-2010

• The term “audio-visual” is a broad one, covering, amongst others - film, documentaries, video, broadcasting (television and radio), commercials, stills photography, music and multimedia.

• This content is delivered through numerous channels, such as cinema, television, radio, internet portals, video, DVD, hand-held devices (cellphones, PDA’s) etc.

• For the purposes of this project, we will primarily be focusing on film, television and commercials.

• The audio-visual industry provides a platform for the provision of a wide range of specialist services and functions, ranging from script development and film direction to post-production, financing, deal making, distribution, exhibition and broadcasting.

• The industry structure is thus fairly complex, with a large and diverse number of role players operating across the value chain.

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The AV industry value chain contains value enhancing activities and role players that stimulate growth

Value Chain:

Source: Deloitte Best Practice Research

Pre-Production Production Post Production Distribution

•Concept Development and Screenplay

•Rights Acquisition•Development•Financing•Location Scouting•Talent Packaging

– Casting Agents – Crewing Agents

•Concept Development and Screenplay

•Rights Acquisition•Development•Financing•Location Scouting•Talent Packaging

– Casting Agents – Crewing Agents

•Actors•Costumes and Make up•Location Management•Lighting and Sound•Grips•Set Construction•Special Effects•Transport and

Accommodation•Photography•Camera Crews•Studio Facilities

•Actors•Costumes and Make up•Location Management•Lighting and Sound•Grips•Set Construction•Special Effects•Transport and

Accommodation•Photography•Camera Crews•Studio Facilities

•Film Editing and Projection

•Video Post-production•Computer Effects and

Graphics•Music and Sound•Titles•Distribution deals

•Film Editing and Projection

•Video Post-production•Computer Effects and

Graphics•Music and Sound•Titles•Distribution deals

•Licensed merchandise•Theatrical release•DVD and Video•Television

– Pay TV– Public Broadcaster

•Internet

•Licensed merchandise•Theatrical release•DVD and Video•Television

– Pay TV– Public Broadcaster

•Internet

Government and Regulators

Industry Associations

Cost Consumption Revenue Generation

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Film Commissions tend to be established at a national or regional level, with a strategic mandate

Film Commission Film Office

• A Film Commission is usually a government agency, operating at national or regional level.

• A Film Office is usually a local level office of a Film Commission:

Could be a stand alone office that performs a role similar to a Film Commission but at a more operational level.

• It typically plays a strategic role i.e. facilitation or lobbying on issues such as marketing, funding and incentives, policy development, skills development etc.

• It plays a more operational role i.e. that of logistics support e.g. assistance with location selection, obtaining of permits, procuring of film resources, community relationship management etc.

For the purpose of this study, we will look at both type of institutions as the GFC is currently a hybrid of the two.

For the purpose of this study, we will look at both type of institutions as the GFC is currently a hybrid of the two.


Film Commission vs. Film Office:

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We selected 6 diverse comparator countries that would provide appropriate benchmarks for South Africa and the GFC

Comparator countries:

Australia • A sophisticated and capable domestic industry,

• Tax and investment incentives,

• Good marketing and promotion of the AV industry,

• Studio and infrastructure development,

• Comprehensive government support from agencies ranging from film commissions to finance houses and training organisations,

• Good country-to-country relationship with the US.

United Kingdom (UK)

• Long established industry,

• Well-established institutional arrangements,

• Incentives (tax breaks),

• Co-productions with the US,

• Investments by international film makers,

• Concerted skills development drive.

United States (US)

• Well established industry,

• Large pool of companies, leading to high job creation,

• Production houses with financing ability,

• Growth of private funding,

• Skills availability,

• Both financial and non-financial incentives e.g. free parking,

• Growth of private funding.

Source: Key GFC Stakeholders and Industry Experts

Country Audio-visual Industry Characteristics

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We selected 6 diverse comparator countries that would provide appropriate benchmarks for South Africa and the GFC (cont.)

Comparator countries:

As an aspiring location of choice, Gauteng can learn a lot from both established and emerging countries.

As an aspiring location of choice, Gauteng can learn a lot from both established and emerging countries.

Ireland • Considered as one of the top 6 preferred locations for film production,

• Building expertise and knowledge at every level,

• Exemplary tax incentive scheme,

• Government support,

• The industry has grown rapidly over the last decade; there was an 11% increase in annual average expenditure by the Irish Film industry between 1989 and 1994.

Mexico • Strong national film industry,

• Tax breaks for companies that invest in Mexican cinema,

• No VAT payments required for film productions,

• Emerging economy similar to South Africa.

Spain • Growth in public funding,

• Growth in high-quality animation,

• Large talent pool,

• Exposure to international projects.


Country Audio-visual Industry Characteristics

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We used a number of different sources to establish the extent of audiovisual production in South Africa

Production Data Sources:

• Film: Data on all major films made in South Africa between 2000 and 2006 was sourced from IMDBPro, EU data sources and major SA production /post-production facilities. This includes locally-produced and foreign films,

• Commercials: CPA Commercial Producers Industry Survey 2006,

• TV: Information was sourced from industry executives,

• The above information was cross-checked with industry experts, DTI rebate data and other relevant studies:

The data is presented as collected, with no assumptions made regarding unmeasured activity.

• For Gauteng market data, as far as possible only activity that took place in the province was measured:

E.g. for film expenditure, we used only the proportion of expenditure that was spent in the province,

This highlights the fact that production does not always occur exclusively in one province; different stages may take place in different provinces.

Key Findings

• Global Trends and Industry Benchmarks

• South African AV Industry Overview

• Gauteng AV Industry Overview

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We conducted a review of the GFC’s available market documentation to gain an understanding of any data gaps

Documentation Review:

We found there to be insufficient market data that was both exhaustive and up-to-date.

We found there to be insufficient market data that was both exhaustive and up-to-date.

Review

Gap Analysis

• Review of available GFC documentation: Familiarisation with content thereof

• Evaluation of GFC documentation to establish the quality of the available data, i.e.

Age, scope, source, history, numerical data etcRelevance of data vs. workstream requirements

• Subsequent identification of any gaps in the available documentation:

Provide direction to workstreams around data requirements going forward

Evaluation

Global Trends and Industry Benchmarks

• Global Industry Trends

• Key Growth Drivers

• Film Commission Best Practice





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Global growth estimates for the film and television industries in 2003 were 9.4% and 6.3% respectively

Global Growth Projections:

The United States is the leader in the exportation of filmed content

Africa imports 70% of its filmed content from the US and 15% from Europe

In 2003, the global content industry was valued at US$1.2 trillion.In 2003, the global content industry was valued at US$1.2 trillion.


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Traditional industry revenue streams are on the decline worldwide, due to technology convergence, among other factors

Summary of Global Industry Trends:


• Declining box office attendance,• Digitisation of film production, distribution and

exhibition,• Growth of digital animation, • Shrinking theater-to-DVD windows,• New technology enabling higher quality content and

both faster and cheaper distribution,• Globalisation of entertainment,• Production of high budget movies and changing

financing models,• Increased threat of Piracy,• Changing business models.

• Declining box office attendance,• Digitisation of film production, distribution and

exhibition,• Growth of digital animation, • Shrinking theater-to-DVD windows,• New technology enabling higher quality content and

both faster and cheaper distribution,• Globalisation of entertainment,• Production of high budget movies and changing

financing models,• Increased threat of Piracy,• Changing business models.

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Casting and crewing agents, actors,

camera crews etc.

Industry Competitors

National and provincial

government, public funds, film

commissions etc.

Internet portals, DVD,

cell phones etc.

Suppliers have a low bargaining power, as they are fragmented and small in size and they benefit from the multiplier effect of productions.

Numerous players exist offering similar products and services ensures that rivalry among firms is high. Businesses operate in a highly competitive, consumer-driven, and rapidly changing industry. To differentiate themselves, these businesses must develop content; manage talent; and acquire, develop, and adopt new and existing technologies.

Threat of new entrants is low, primarily due to the huge capital and distribution (traditional and digital) requirements of the business. New entrants face stiff competition from strong global studio brands.

Threat of substitutes is increasing with the proliferation of user-generated content, the internet, and intense competition for consumers’ attention in a fragmenting media world. Businesses compete with each other and all other sources of news, information and entertainment: broadcast television, live events, radio broadcasts, print media and the internet.

The impact of continuing customer fragmentation and buying power is high. The combination of increased competition and technologically advanced platforms increases the number of choices available to consumers. This overall change in the industry requires companies to become more responsive to consumer needs.

Audiences

The industry is being driven by the increasing buying power of audiences and competition between producers of content...

Emerging producers, independent

producers, new distributors

•Governments are committed to promoting copyright protection and other intellectual property protection.•Public funding and incentives are available to grow local industries and attract foreign productions. •Skills development and development of technical infrastructure are high priorities.•Audience development is key.

…This makes it imperative that producers focus on the quality and respond to audience needs in an increasingly multi-channel and competitive environment.

…This makes it imperative that producers focus on the quality and respond to audience needs in an increasingly multi-channel and competitive environment.

Five Forces Analysis:


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The global film industry is in a state of flux, as movie theatre attendance stagnates and content delivery channels proliferate

Industry Snapshot:


As part of its efforts to diversify its revenue streams, NBC Universal unveiled plans for an office and residential project on part of its Universal Studio lot, amounting to $3bn (2005)

A wave of overbuilding has lead to bankruptcies in the movie theatre business in the US (2005)

The world’s most popular search engine, Google, bought out the world’s most popular video sharing portal, You Tube, for $1.65bn (2006)

In 2005, the global movie theatre industry’s revenue growth was flat due to declining movie admissions, lacklustre box-office receipts and increased home video spending (2005)

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Box office attendance is on the decline globally, primarily due to rising ticket prices

Trend: Box Office Attendance

Trend Detail

Declining Box-Office Attendance

Why?• Rising ticket prices, a shrinking theater-to-home video release window, competition from Internet

video games, and “weak” films are the primary reasons for the drop in admissions.• The overall home video market is expected to grow at GAGR of 5.4% to $33.1BN in 2010 versus,

$25.4bn in 2005.

Implications:• In 2005, box-office spending fell 5.7% and admissions fell 8.7%, to their lowest amounts since 1999.• Exhibitors (theater owners) now have weaker pricing power in the industry.• However, the number of movies released has grown steadily grown by 11% from 2005 to 2006. High

definition DVDs and increasing availability of TV shows on DVDs are set to boost the sell-through market.

• Mitigations:• Studios can leverage the shrinking theatre-to-DVD window to benefit from the publicity buzz that

accompanies a movie release. Releasing fewer films to ensure that each title is marketed effectively.

Reasons for the Decline in Box-Office Attendance


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In emerging economies however e.g. Mexico, Egypt and Thailand, attendance is on the

rise.

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In the UK, digital media distribution and an increase in personal movie watching has driven down box office sales

Declining Box Office Attendance: UK


Year

Reven

ue U

K £

M

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The high risk nature of big budget films has led to changes in production funding approaches …

Trend Detail

Shift in production funding models, in part due to an increase in big-budget productions

• In the US, the number of big-budget productions is on the rise because they tend to perform well in international markets, and, there is an increased demand for animated feature films, which are traditionally big-budget.

Why?• Big-budget films carry a higher risk, which studios have sought to minimize by entering into co-

production deals with other studios or by pre-selling the rights for international distribution. • A significant development in film financing in 2005 was that private equity funding gained

importance. Private funds generally invest relatively small amounts in a large number of films, so diversifying their risk. Private financiers also have become involved in the industry due to:

The emergence of different content delivery channels, which have increased the market for films.

Emerging methods of advertising films such as working with TV networks to show promotional clips of new movies.

Opportunities for the private equity holders to reduce costs in studios and thus increase profits.

• Film production budgets are constantly rising, driven by the cost of changing technologies and high-profile casts. It is expensive for most content creators to self-finance high-end content.

• Public funding of production is significant in most countries. For instance in Australia, in of the 28 Australian and co-produced films shoot in 2005/06, 17 were from government sources, 6 from substantially private sources, 3 from foreign sources and 1 from other sources.

Implications:• Private funding lessens a studio’s need to pre-sell rights or enter into co- production

arrangements, increasing its potential back-end revenues. • Whether private equity financiers will receive significant returns is however to early too

determine as their involvement in the industry is a recent phenomenon.

Trend: Production Funding Models


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… which has forced changes in traditional business models

Trend: Changing Business Models

Trend Detail

Changing Business Models

Why?• Movies are not always able to cover their production costs e.g. “ The

Adventures of Pluto Nash” which cost over $100M to produce but earned less than $5M in U.S. theaters.

• Subsequently, studios and distributors hedge their bets by releasing a slate of movies each year. The most promising projects ('tent pole' or 'event' movies) receive the most attention. These movies often receive the highest production and marketing budgets, critical to a successful theater release.

• Multi-channel distribution e.g. theaters, DVD, pay-TV, Video on Demand, Internet etc has also changed traditional distribution models.

Implications:• Studios are changing their talent compensation practices by signing

compensation deals which form some percentage of gross profit from the movie e.g. Tom Cruise’s profit sharing arrangement for “Mission Impossible II”, which yielded over $70M.

• Production of movie sequels can often, but not always, lead to box-office success. Of the top 50 US domestic box-office hits released between 2000 and July 2006, 21 were sequels. Furthermore, adaptation of novels and remakes of earlier releases can also result in blockbusters.


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In the United Kingdom, the film business model has traditionally been driven by box office sales …

Changing Business Models: UK


United Kingdom Traditional Business Model

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… however new distribution channels such as online portals are expected to change this

Changing Business Models: UK


United Kingdom Emerging Business Model

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The digitisation of film content has led to an increase in piracy …

Trend: Increased Piracy


Trend Detail

Increased Piracy Threat

• Piracy is currently the biggest threat to the motion picture industry. • Piracy rates are highest in China (90%), followed by Russia (79%) and Thailand (79%);

the piracy rate in the U.S. is 7%. • In South Africa, movie sales account for 60% of the country’s DVD market, costing the

industry an annual R500-million.• The worldwide motion picture industry (including foreign and domestic producers,

distributors, theaters, video stores, and pay-per-view operators) lost $18.2B to piracy in 2005.

• Of the total $6.1B lost by MPA member companies in 2005, 62% was from the piracy of hard goods such as DVDs, while 38% was from Internet piracy.

Why?• There are numerous cheap and easily available illegitimate sources of “freeware” (e.g.

P2P services), which enable copying of videos, music and books.• The Internet greatly increases the threat of piracy, as illegal copies of digital content

can easily be made and distributed.

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… that has in turn led to a shortening of the window period between movie theatre and DVD release

Trend Detail

Shrinking Theater-to-DVD Window

Why?• Companies attempt to extract the maximum value from their content by exploiting it over

a series of sequential release windows. These windows are particularly well-defined for films (theatrical, DVD, and eventually, TV).

• TV broadcasters who invest in a film’s production also have an incentive to show the film on their networks.

• There is a greater risk from piracy if DVD release is delayed.

Implications:• The decline in box-office revenues has worsened due to the shortening of the theatre-to-

DVD window, which reduced by 20% from 2002 – 2005.• Studios are rethinking feature release strategies and product life cycle management.• Future value chain of films:

Trend: Shrinking Theatre-to-DVD Window


To mitigate the threat of piracy, the audio-visual industry is also providing easier forms of alternative licence access.

To mitigate the threat of piracy, the audio-visual industry is also providing easier forms of alternative licence access.

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The digitisation of film production, distribution and exhibition is bringing greater efficiencies to the industry

Trend Detail

Digitisation – Production, Distribution, and Exhibition

Why?• Digitisation minimizes physical distribution costs.• The use of digital cameras and the growth in the bandwidth available to transmit

video instantaneously is making it easier for directors, editors and their collaborators to work together from distant locations.

• Digital broadcasting, HDTV, Internet protocol television (IPTV), video-on-demand and the distribution of content to mobile devices will increasingly impact the TV network market.

Implications:• Advances in digital graphics are turning computers into virtual studios that allow

digital artists and editors to create entire scenes and characters, such as those in “The 300”, reducing the need to film live actors on location or in studio.

• The development of digital projection capabilities means that printing and distributing physical copies of the film will soon become unnecessary. Instead, the movies will be digitally transmitted to theatres, television stations, or even individual computers via satellites, cable, or broadband phone lines.

• Digitisation allows films targeted at different audiences to be shown at different times of the day, which provides an alternative to the current model in which a single film occupies a screen for a given period.

Trend: Digitisation


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Digitisation has facilitated the growth of the animation industry

Trend Detail

Digitisation – Growth of Animation

Why?• The global digital animation industry was estimated to have grown to a significant

$70bn in 2005, up from $25m in 2001.• The big US animation studios have made large profits from animation e.g. “Happy

Feet” grossed $150m in December 2006.• The use of digital technology to produce visual effects is now used in most movies.

Movies such as “Independence Day”, “Starship Troopers” and “Titanic” featured data sets in terabytes, a huge increase from previous years.

• A few years ago, single companies would provide most or all of the visual effects for a film; today, up to 12 suppliers could be involved.

• Asian animation studios, especially those in India, are playing an increasing role in the global film industry. The Indian animation industry is pegged at $550m and is expected to reach $15bn by 2008. India is currently the destination of choice for outsourcing assignments from global studios such as Walt Disney Pictures and Cartoon Network.

• Japanese animation has been acclaimed worldwide for its original Japan-based culture and content, to the extent that it is called “Japanimation”.

• Japanese animation is in the spotlight not only in Japan but internationally as well, with many American and Asian animators reportedly wanting to work on Japanese animation productions.

Trend: Digitisation


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Digitisation has facilitated the growth of the animation industry (cont.)

Trend Detail

Digitisation – Growth of Animation

Implications:• Due to the rapid growth of animation, it is expected that there will soon be a shortage of

professionals skilled in using animation and multimedia software such as Maya, 3D Studio Max, Tictactoon, Flash, Giff Animator, Ulead and Adobe After Effects.

• Huge investments in skills development and animation studios are subsequently required.• Animation is a potential growth area for employment as it offers career opportunities in a

variety of technology-based jobs such as scanning, compositing, digital ink and paint, game designing, visual effects, 3D modelling and character animation.

• In Japan, production systems have been set up to meet demand however, weaknesses in domestic/overseas distribution and rights such as licensing and international business expertise exist.

• The industry in Japan is grappling with attracting talent as a career in animation does not have a high social standing.

• In New Mexico, the industry growth is expected to increase rapidly due to the investment by major studios in local production facilities. The Albuquerque Studios will be a full-service venue for movies, TV, music videos, commercials and digital media. The Mesa del Sol studio will have eight soundstages, back-lot space, set-construction facilities and offices.

Trend: Digitisation


7

44

In South Africa, animation is seen as the possible next big break for the industry however challenges exist

• Animation in South Africa is in its infancy and it is fragmented, localised and lacks the availability of cash.• The industry has been characterised by short-form animation for TV commercials, corporate videos and the

Internet. • Short-form animation constitutes the biggest part of the animation industry.• Long-form for TV series and film is underdeveloped.• It costs between R35,000 and R80,000/minute to produce an animated series and a full-length series could cost

between R24M and R45M.• The SABC only pays between R7000 and R10000/minute for a highly rated filmed production.• Broadcasters need to collaborate with each other to afford the cost of animation production.• IDC has shown an interest in investing in animation. It has invested in a series by Red Pepper Pictures and

assisted an empowerment group to buy a stake in the Refinery Group, which owns Video Lab.• The IDC has indicated that it wants to invest in animation production of international studios and in the

development of ideas by South Africans.• Building talent and the ability to raise funds offshore are important for South Africa.• The Animation Production Training Initiative has been developed to address specific challenges in the animation

industry.• The objectives of the Animation Production Training Initiative are to:

• “Provide high quality African animation programmes (13X3 minute short animated films),• Develop computer-assisted animation as a way to support development activities,• Introduce quality programmes which will provide culturally relevant entertainment for the youth.• Act as a catalyst for the development of a self-sustaining African animation industry with the aim of

producing quality animation products for the local and international markets.• Help build a critical skills and capacity base and address the shortage of black and female representation in

South African animation by serving as a bridge between schools and the industry.• Create a platform for the experimentation of African imagery in animation.”

Trend: Digitisation


45

The digitisation of film production, distribution and exhibition is bringing greater choice to TV audiences

Trend Detail

Digitisation – the Future of TV Commercials

Why?

•The introduction of digital video recorders, such as TiVo and the Digital Video Recorder and services like Sky Plus, which allow the recording of television programmes onto a hard disk also allow the viewer to essentially skip advertisements.

Implications:•It is possible that television advertisements will eventually disappear, replaced by advertising in TV shows themselves. For example, Sears, Kenmore and Home Depot are advertised within the “Extreme Makeover: Home Addition”

Trend: Digitisation


8

46

Digitisation has enabled the production of higher quality content that can be distributed faster and cheaper

Trend Detail

Quality content and Efficient distribution

Why?• Computer Generated Imagery (CGI) makes it possible to produce impressive

visual effects.• The introduction of digital cinemas – In August 2005, the major US studios

agreed on technical standards for digital films and equipment.• Digital prints do not wear out, scratch, or deteriorate, a problem encountered by

theatres after a film has been replayed several times.

Implications:• New technology ensures higher quality, but not always at lower costs. CGI-

enhanced films have proven expensive to make. • Devices such as digital video cameras can significantly reduce the production

costs of audio-visual content. Marginal physical distribution costs will likely diminish in the digital age (via digital distribution, on-demand services etc).

Trend: Digitisation


9

47

In a bid to increase market share and boost revenue, national film industries are now targeting global audiences

Trend: Global Entertainment

Trend Detail

Globalisation of Entertainment

Why?• Increasing market coverage and therefore potential for increased revenue.• Technological advancements that have led to greater access to global viewers.• Globalisation, which has helped break down cultural barriers, helping to create a

universal market for films.

Implications:• Wider customer base due to worldwide accessibility. Recently, "Pirates of the

Caribbean: Dead Man's Chest” grossed $1B (Sept 2006), of which $415M came from domestic box-office and $587M came from international markets.

Outlook:• The media and entertainment industry is expected to become even more global in

its outlook in the near future, due to:

An increase in the ability of media giants to reach and engage global audiences, as TV networks proliferate and broadband internet penetration rises.

An expected decline in trade barriers for media and entertainment products and services in many countries. China is an exception, as it currently only allows 20 foreign films to be screened in a year.


10

48

As a result of technology convergence, online revenue streams are gaining importance

Trend Detail

Ad-supported and Subscription Internet Downloads

Why?• Media companies are exploring new platforms for content distribution, to help

increase revenue streams. • Certain websites also allow users to freely upload, view, and share content e.g.

You Tube, which has emerged as a popular free video sharing website. It allows users to post movie and TV clips, and music videos, as well as setting up video-blogs.

Implications:• Media companies are now entering into agreements with such websites. • Going forward, it is likely media companies will make their content available for

online streaming and download on these websites for a share in advertising revenues generated through search platforms like Google’s Ad words and Adsense.

Trend: Online Revenue Streams


11

49

Low budget, high volume films are the driving force behind the success of Nigeria’s film industry

Low Budget/High Volume Films: Nigeria

• 1992 is seen as the year that Nollywood began, when Kenneth Nnebue shot a film called “Living Bondage” and sold 750,000 video copies.

• It has sales of $200M to $300M a year. Most of Nollywood films are viewed from videos or DVDs.• Films cost between $15,000 to $100,000 to make. The financing of the films is mainly from the market and

reinvestment by producers from earnings from other films. • Filmmakers prefer to finance their films, owning their own copyrights and “renting” their distribution.• There are four main distributors in Nigeria and they are becoming involved in the financing of films.• Nollywood makes over 2,000 low-budget films a year, which is more than Hollywood and Bollywood. • Approximately 1 million people are employed in the industry in Nigeria and it is divided equally between

production and distribution, including spin-off jobs. • after agriculture. • Nollywood’s film industry is watched all over Africa. MultiChoice in South Africa has a channel that shows

Nollywood films. Zenithfilms, a British company intends to launch a new channel, called Nollywood Movies on BSkyB.

• Piracy is a constant problem since the films originate and are distributed on video and DVDs. Measures to reduce piracy include shrink-wrapping cassettes to prove it is an original copy and putting raffle tickets inside the boxes to encourage people to buy the original cassette.

• The industry has grown with little government intervention. The Nigerian government has indicated that it wants to establish mechanisms to help the industry grow further.

• There are plans, which are supported by government (using financial incentives) to show Nollywood films in new cinemas that are being built in Nigeria.

• Expatriate Nigerians have established the Nollywood Foundation in Los Angeles so that links with Hollywood are formed.






51

Accessibility and suitability of setting are both industry growth drivers and they play a role in the choice of a location

•Multiplicity of locations within close radius•Time zones and distance from the US•Climate•Ease of access to locations

•Multiplicity of locations within close radius•Time zones and distance from the US•Climate•Ease of access to locations

•Adequate public infrastructure•High-tech equipment and state-of-the-art facilities

•Adequate public infrastructure•High-tech equipment and state-of-the-art facilities

•Availability of finance•Availability of incentives to lower production costs

•Availability of finance•Availability of incentives to lower production costs

•Efficient and flexible bureaucracy •Support from government institutions and infrastructure

•Efficient and flexible bureaucracy •Support from government institutions and infrastructure

•‘Country-of-the-moment’ status•Dependent on the script (scenery) •Business environment perceptions (crime, political stability etc)

•‘Country-of-the-moment’ status•Dependent on the script (scenery) •Business environment perceptions (crime, political stability etc)

Physical LocationPhysical Location

InfrastructureInfrastructure

Funding and Incentives


GovernmentSupport

GovernmentSupport

OtherOther

Growth Drivers Influencing Choice of Location:


52

In addition, the decision involves a balance between a set of complex economic factors and production requirements

Growth Drivers Influencing Choice of Location :


Production

LocationDecision

Economic Factors

Production Requirements

AnticipatedRevenue

Production Cost

ProductionCapability

Talent/CreativeConsiderations

Above theline

Below the line

ResidualsExchange

RatesGovt.

Rebates

Work Rules

Rates Crew CostFacilities

&Equipment

Other

Work Rules

Rates

Director/Actor

Requirements

ScriptRequirements

Ability to Control

FinanceVehicles

InfrastructureCrewDepth

Crew Quality

53

Mexico’s technical infrastructure and conducive regulatory environment have helped make it an attractive location

Case Study: Mexico

Destination of Choice:

Mexico

Destination of Choice:

Mexico

Economic:• Modest tax incentives• Low Peso exchange rate against the US$• Low cost of labour and materials

Economic:• Modest tax incentives• Low Peso exchange rate against the US$• Low cost of labour and materials

• Major film studio complex which has hosted major international productions e.g. “Dune” and “License to Kill”

• At least 7 studios and post production houses, where films such as “Titanic” have been made

• Major film studio complex which has hosted major international productions e.g. “Dune” and “License to Kill”

• At least 7 studios and post production houses, where films such as “Titanic” have been made • Free permit for street shots in Mexico

City• Interior shots do not require permits,

only notification to officials• One permit for all Mexico City boroughs

• Free permit for street shots in Mexico City

• Interior shots do not require permits, only notification to officials

• One permit for all Mexico City boroughs

Physical location: •Warm and sunny•Variety in terrain•Historical architecture •Proximity to the US

Physical location: •Warm and sunny•Variety in terrain•Historical architecture •Proximity to the US


• Temporary work permit, which allows actors and technicians to enter and leave Mexico without the need for additional permits

• Temporary work permit, which allows actors and technicians to enter and leave Mexico without the need for additional permits

54

The “Made in New York Incentive program” is a good example of the benefits of creating a film-friendly environment

• 5% city tax rebate over and above the 10% state tax credit for film and TV shows that are produced at least 75% in New York,

• Qualifying productions receive promotions on city bus shelters and the city’s TV channel,

• Discounts on services provided by local vendors,

• Free parking and police services,• Waivering of fees for film and TV

shoots,• Facilitating the development of large-

scale sound stages e.g. Steiner Studios,

• Reduction of red tape/bureacracy,• “Made in New York” branding.

Made in New York Incentive program

• 35% increase in location shooting days in 2005,

• 20% increase in screen actors guild jobs in 2004,

• 6000 jobs created for local residents in 2004,

• 6.7% job growth in motion picture and video production,

• 9.2% job growth in radio and TV broadcasting,

• $600 million work of new production business to the city.

Results

Case Study: New York

Made in New York Incentive program

The creation of a similar film friendly environment in Gauteng would be key to growing the local industry; the GFC has an important role to play in facilitating

this.

The creation of a similar film friendly environment in Gauteng would be key to growing the local industry; the GFC has an important role to play in facilitating

this.


55

There are a range of both financial and non-financial incentives that are typically used to attract productions

Tax rebates Loan guarantees

Free / subsidised government services e.g.

• Free permits

• Free parking

• Free use of traffic police

• Reduced bureaucracy

• Production promotions

Tax write offs Loans with low interest

Tax offsets Co-production arrangements

Tax concessions Marketing funding

• Ease of access to work permits

• Multiple entry visas

• Long-term temporary work permits

Cast and crew tax rebatesDiscounts on local vendor fees

Tax credits Subsidies

Exemptions from sales taxLocation attraction grants

Tax exemptions for individualsProduction and post-production grants, including digital production

…

Types of Incentives:


Tax Incentives Other Financial Incentives Non-Financial Incentives

56

Incentives are a popular instrument employed by countries to attract productions

Incentive Offerings:

• Tax rebate - has attracted big-budget productions e.g. “World Trade Centre”,

• Visa incentive - provides an efficient immigration process for the film industry,

• Official co-production arrangements between governments e.g. UK, Ireland, Canada. Can apply for benefits or programs of assistance in both countries e.g. tax deductions, refundable tax offsets and investments,

• International co-production program established to facilitate cultural and creative exchange between co-production countries. Allows countries to share the risk and cost of productions and increase the output of high-quality productions.

New Jersey • Offers a tax credit which is

equivalent to 20% of qualifying production expenses,

• Exemption from 6% of sales tax,• Loan guarantees for up to 30%

of financing or $1.5 million.New Mexico • Offers a 25% tax rebate on all

production expenditures, including local labour costs,

• Has a loan for up to $15 million per project, if the film production cost is ≥ $2 million,

• Waives sales tax for film production.

New York• “Made in New York” incentive

program, which includes a 5% city tax rebate over and above a 10% state tax credit,

• Discounts on services provided by local NY vendors,

• Waives permit fees for film and TV shoots and extends free parking and police services.

• Ireland’s tax incentive is attractive due to its quick turnaround times for decision-making and rebate payments,

• The most important benefit of the tax incentive is the net benefit offered to producers i.e. 20% of the total production budget,

• The benefit is based on the cost of EU cast and crew working in Ireland, and goods and services purchased in Ireland, up to a maximum value of 80% of the global budget,

• The ceiling for qualifying expenditure of a film is €35 million.


Australia

USA Ireland

• Ireland’s tax incentive is attractive due to its quick turnaround times for decision-making and rebate payments,

• The most important benefit of the tax incentive is the net benefit offered to producers i.e. 20% of the total production budget,

• The benefit is based on the cost of EU cast and crew working in Ireland, and goods and services purchased in Ireland, up to a maximum value of 80% of the global budget,

• The ceiling for qualifying expenditure of a film is €35 million.

Ireland

57

Incentives are a popular instrument employed by countries to attract productions (cont.)

Incentive Offerings:

• Advance subsidies for full-length feature productions (new filmmakers); cannot exceed cost of production, up to 50 m Pesetas per film,

• Subsidies for short features; cannot exceed the cost of the film up to 10 m Pesetas per film,

• 15-25% subsidies for box office earnings for first 2 years,

• Incentives for the marketing and exhibition of community films,

• Protective measures e.g. screen and distribution quotas; designed to restrict the absolute monopoly of the US audio-visual industry.

• Funds are the single most influential incentive used for the development of the UK film industry,

• £49.30m of funding available to promote the UK film industry,

• €70m funds shared equally between production, post-production, distribution, talent development and new technology,

• A tax credit set at a rate of 30% is available for qualifying UK expenditure.

• VAT refund as long as at least 6 Mexican film industry services are hired,

• Incentives are available for co-productions with Mexican companies; $7 m per year in financing available,

• 10% income tax deduction for investments made in the domestic industry,

• Article 226 - designed to attract corporate financing by offering companies income tax exemptions equal to investments in domestic productions.


Spain

UK Mexico

58

In Ireland, a wide range of financial incentives are offered to help create opportunities for foreign and local involvement in the industry

AV-specific Incentives: Ireland

• The Section 481 Tax Incentive for film and television made in Ireland. It applies to Feature Films, Creative Documentaries, Television Drama and Animation. The incentive does not apply to Commercials, Reality TV, Game Shows and Soaps.

• Projects can derive a benefit, net of all fees, of up to 20% of their qualifying expenditure. This benefit is based on the cost of EU cast and crew working in Ireland, and goods and services purchased in Ireland, up to a maximum value of 80% of the global budget. The ceiling on qualifying expenditure for any one film is €35 million.

• An incentive framework is also available for co-productions between foreign producers and local Irish producers.


59

The general business environment in Ireland is also supportive of the audio-visual industry

•Corporation Tax: Ireland enjoys an EU approved Corporation Tax rate of 12.5% which is the lowest in Europe. This applies to all corporate trading profits. This rate has been the focus of Ireland’s strategy to attract inward investment, creating a favorable economic and fiscal environment which supports industry.

•Tax Exemptions For Individuals: Individuals may locate in Ireland and enjoy tax-free income for their works under this scheme, known as ‘artist's exemption’. It can apply to writers (including scriptwriters), visual artists and composers. Where individuals become resident in Ireland, they are entitled, on making a claim, to have earnings arising from the publication, production or sale of books, screenplays, plays and musical compositions, disregarded for tax purposes where the work or works involved are original, creative and have cultural or artistic merit.

•Research and Development Tax Credit: In 2004, the Irish Government introduced a research and development tax credit. It is aimed primarily at research undertaken to acquire new scientific and technical knowledge. It is also aimed at achieving technological advancement directed at new or improving existing materials, products, devices, and systems. In order to qualify it is necessary to achieve scientific or technical advancement and involve the resolution of scientific or technological uncertainty. As the film industry converges with emerging technologies, this may be used by companies advancing research and development in the industry.

•Zero Rated Value Added Tax: VAT (Sales Tax) is normally charged on the supply of goods and services within Ireland. Foreign film and TV productions carried out in Ireland, can avail of zero rating under section 13a of the VAT act, when the master negative is being exported i.e. visiting filmmakers are exempt from 21% VAT. Foreign producers can work with Irish co-producers, who will arrange the VAT exemption.

General Incentives: Ireland


60

Government financial incentives in New Mexico have helped film productions grow tenfold

Incentives: New Mexico

• New Mexico offers a 50% reimbursement of wages for on-the-job training to local residents.

• The jobs should be advanced below-the-line crew positions.

Film Crew Advancement Program (FCAP)

• The New Mexico Film Office and state government provides incentives and an assistance program that are comparable to the best in the U.S. Some of the highlights include tax incentives and film loans.

• While assisting the film production industry, the New Mexico Film Office strategy is to train local resources in film industry production techniques.

• New Mexico markets the region by emphasising its film-friendly government initiatives and available skilled human resources. Due to such initiatives, production in the New Mexico region has grown 10 times in the last two years, reaching $428 million in FY 2006.

• In 2007 alone, four new soundstages were constructed for operation in New Mexico. Sony pictures is also planning to move some L.A City jobs to Culver City in New Mexico.

Government Initiatives


New Mexico is testament to the impact targeted Government support can have on the AV industry.

New Mexico is testament to the impact targeted Government support can have on the AV industry.

61

In the UK, public funding is available for a wide range of AV growth initiatives and capacity building

Sources of Funding: UK


Funding Goals Available Funds/Year

British Film Institute To champion the UK film industry. Reach and increase audiences.

£16,000,000

Distribution and Exhibition Fund

To offer more diverse range of films. Reach a wider audience in the UK.

£8000,000

Premier Fund To assist in the production of British or European feature films.

£8,000,000

Regional Investment Funds for England

Co-ordinate film policy and assist during strategy formulation across England.

£7,500,000

Film Skills Fund To ensure the industry has adequate labour and skills. £6,500,000

New Cinema Fund To support new idea, creativity and the latest filmmaking techniques.

£5,000,000

Development Fund To promote filmmaking, new concepts etc. £4,000,000

First Light To grow a new generation of filmmakers. £1,100,000

Sponsorships To promote targeted showcase events. £600,000

Nations To co-ordinate film policy and strategy across the UK. £505,000

Publications Fund To provide quality information and research to the public.

£100,000

62

Both public and private sector funds are available to meet the needs of the AV industry in Spain

Sources of Funding: Spain


Private Sector

• There are a couple of private sector initiatives ranging from the financing of film productions to discount TV contracts, and distribution advances against bank loans.

• A 5-30% equity initiative is available for co-productions.

Public Sector

• Instituto de la Cinematografia y de las Artes audio-visuales (ICAA):

Production, distribution and commercial exhibition.

• ICAA Mutual Protection Fund:Provides guarantees for access to bank loans for SMME’s in production, distribution, exhibition and technical sectors.

• Regional Government Funds (grants and subsidies):

Development of audio-visual production; international co-productions; script development; new directors; innovative works.

63

Funding should ideally be spread across the different segments of the value chain, with a focus on areas of greatest need

Funding Distribution: Australia


64

Revenue generation guarantee requirements are the largest barrier to access to funding in South Africa

Due to the high risk nature of the industry, it is difficult for producers to guarantee income and thus meet the requirements of financial institutions.

Broadcaster monopolies on IP ownership limits the income that producers can make from their content.

Alternative sources of funding such as the National Lottery are not available due to legal restrictions on the money going to private companies.

The combination of the high cost of making films and uncontrollable variables such as audience tastes are a major barrier to accessing funds, by the industry.

Barriers to Funding in South Africa:

The GFC should lobby for the implementation of Enterprise Business Development support for the industry, so that the industry-inherent financial

risks can be mitigated.

The GFC should lobby for the implementation of Enterprise Business Development support for the industry, so that the industry-inherent financial

risks can be mitigated.

Source: Focus Interviews with Key GFC Stakeholders and Industry Experts

65

In South Africa, funds from the National Lottery cannot be allocated to private companies in the industry however…

• Requirements for the Allocation of Funds for Arts, Culture and National Heritage in terms of Section 30 of the Act

• Application for a grant can be by:•A body established to promote the arts, culture or the national historical, natural, cultural or architectural heritage•An organisation that does not distribute its income and property to its members, employees, managers, except as reasonable compensation for services rendered

Lottery, Act 1997, Regulations Relating to the Allocation of Funds

… in terms of the regulations, as a government agency, the Gauteng Film Commission would be able to apply for funds for use in supporting the film

industry.

… in terms of the regulations, as a government agency, the Gauteng Film Commission would be able to apply for funds for use in supporting the film

industry.

66

The audio-visual industry can have a proven positive economic impact on the economy of a region or country

Economic Impact: Australia

National Economic Multiplier for the Cultural sector in Australia

Gross Value Added Multiplier

(effect on GDP)

Employment Multiplier

(FTE employment by $million of investment spend)*

1997

($)

2005/06

($)

Film and video production and distribution

1.80 37.0 30.7

Motion picture exhibition

1.3 19 15.8


Growth in the Australian industry has been driven by foreign productions (increased from A$78m in 2000 to A$249m in 2004) and its tax incentives,

which have helped attract productions.

Growth in the Australian industry has been driven by foreign productions (increased from A$78m in 2000 to A$249m in 2004) and its tax incentives,

which have helped attract productions.

N.B. The Australian Bureau of Statistics sets the output multiplier for screen production at 2.67

67

The audio-visual industry can have a proven positive economic impact on the economy of a region or country

Economic Impact: States in Australia

The Economic Contribution of a Film Project

Output Multiplier Gross Value Added Multiplier

FTE Employment Multiplier (FTEs per $ million – adjusted 2005/06)

New South Wales – Motion picture services sector - 2000/01

Not published 1.025 9.3

Victoria Film and TV –

1996/97

2.88 1.27 12.3

Queensland – Motion picture, radio and TV services – 1996/97

Not published 1.06 15.1

Queensland – Film, TV and entertainment software –

2005

2.64 1.34 Not published

68

The audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.)

Multiplier Direct Direct and Indirect

Direct and Indirect and Induced

Direct + Indirect + Induced + Government

GNP 0.5064 0.7354 0.9284 1.2558

Employment 24.01 35.60 41.96 56.91

Economic Impact: Ireland

Growth in the Irish industry has been driven by relatively low labour rates and its efficiently managed tax incentive for feature films.

Growth in the Irish industry has been driven by relatively low labour rates and its efficiently managed tax incentive for feature films.


69

Job creation is often the single largest economic outcome of the audio-visual industry

Economic Impact: UKThe UK film industry: • Directly supported 31,000 people in 2004, while direct and indirect jobs created stood at 97,500 during the same

period.

• Contributed (including multiplier effect) £3.1 billion to UK GDP in 2004. During the same period, it contributed £850 million to the exchequer. Total inward investment to UK film industry stood at £2.0 billion.

• Has a highly talented workforce - 46% of the production workforce are university educated, while 31% have graduate level education. Nearly 10-15% of the production work force is from outside U.K.

• Has undertaken nearly £710 million fixed capital investment in infrastructure and implementation of new technology over the last decade (1990-2000).

• Has an average salary that is almost double the average national salary (£373,00 vs. £186,500).

Pre-production

Production

Post-production

Distribution/Exhibition

Indirect

•Suppliers: TV and other broadcasting

•Manufacturing: Equipment, computer/electronics

•Business Service: Publicity, legal, accountancy

Catalytic Effects

• Induced impacts• Skills and labour

supply• Tourism• Merchandising• Cultural exchanges• Promotion and trade

UK Film Industry and Economic Impact


70

The GFC can better demonstrate the economic impact of the audio-visual industry, so as to lobby government for more resources

Economic Impact:

Creation of jobs

Spend on

ancillary services Contributi

on to GDP

Spin-off for the tourism industry

Skills developmen

t

Multiplier in

South Africa is

2.5


71

The broader economic competitiveness of a location has an effect on investor perceptions of its attractiveness

• Exchange rate considerations:

• Australia has benefited from a lower exchange rate against the US $; it has

lowered the cost of production relative to the US,

• The US has however began to benefit from a weaker $ and is attracting back production.

• Inflation rate / price levels,

• Economic and political stability,

• Government commitment to support the industry e.g. the

establishment of funds for production, tax incentives, flexible immigration rules etc,

• Public spending on public infrastructure that is supportive of the AV industry e.g. Information, Communication and Technology (ICT) infrastructure.


Factors Influencing Perceptions:

72

The availability of skilled resources, and the flexibility of the labour market, has helped attract productions to competitor countries

Technical Expertise:

The GFC can play a role in addressing the issue of insufficient skilled resources by facilitating training and funding of development programs.

The GFC can play a role in addressing the issue of insufficient skilled resources by facilitating training and funding of development programs.

Country Talent

Ireland • Ireland’s film crew and creative talent are widely regarded as world class.

• The flexibility and stability of labour relations are subject to regular consultative review.

• The labour rates in Ireland are lower that in the US, making it a more competitive destination.

Australia • The high quality of Australian crews, technicians and actors is a factor contributing to the recent increase in the number of foreign films and television shot in Australia.

United States • Availability of highly skilled labour is a key driver for film production in both traditional and ‘new-age’ digital film making in the US.

• The film industry in the US is also heavily unionised, which helps to protect local labour from exploitation but can also discourage producers from filming in the US.


73

Productions are more likely to be shot in locations with readily available state-of-the art facilities and high-tech equipment

Technical Infrastructure:

Facilitating and lobbying for the development of technologically advanced facilities and equipment could be a key role for the GFC going forward.

Facilitating and lobbying for the development of technologically advanced facilities and equipment could be a key role for the GFC going forward.


• Australia has a comprehensive range of sound stages, the larger complexes being Central City Studios in Melbourne, Fox Studios in Sydney and Warner Road show Studios on the Gold Coast. Each studio facility offers state-of-the-art sound stages, production offices, editing rooms, construction workshops and water tanks. Also, all are centrally located in the region and near international airports.

• Australia has a talented and award-winning AV industry (visual effects, post and digital production, music and sound design). Producers are choosing to bring their work to Australia independent of whether they are shooting in Australia or not.

• Australia’s world-class infrastructure has supported big-budget films such as “Superman Returns”, “Ghost Rider” and “Charlotte’s Web”. High-profile international titles that brought some of their post-production to Australia during 2005/06 include the features “Harry Potter and the Goblet of Fire”, Oliver Stone’s “World Trade Centre”, Merchant Ivory’s production “White Countess” , Chen Kaige’s “The Promise”, Zhang Yimou’s “Riding Alone for Thousands of Miles” and Fred Schepisi’s mini-series “Empire Falls”.

Australia

Ireland

• Ireland is seen as an attractive location because it has extensive infrastructure, with film studios in the North, East and West of the country. There about 50 facility companies in Ireland, providing a full range of services to the industry.

• The main studios in Ireland are located closely to city centres and airports, with well trained and experienced crew bases.





75

Roles of Film Commissions:

The role of a Film Commission typically ranges from facilitating the approval of permits to dealing with trade and investment policy related matters


All the Film Commissions we reviewed provide support for funding and are focused on promoting their locations.

All the Film Commissions we reviewed provide support for funding and are focused on promoting their locations.

Roles of Film Commissions

Technology• Promotion of use of digital

platforms• Facilitation of government

investment in technical infrastructure

Logistics Support• Liaison with communities and

government departments for permit approvals

• Information sharing• Locations assistance

Training and Development• Support for training initiatives• Labour relations assistance• Facilitation of the development of

digitisation and animation skills

Funding and Incentives• Funding and incentive support• Support for the acquisition of

resources

Lobbying• Facilitation of an enabling policy

and regulatory environment• Lobbying for the development and

implementation of attractive funding and incentives

Development of a Film Culture

• Supporting the development of a screen culture

Policy Development and Industry Partnerships

• Input into policy formulation • Partnering with other

organisations for marketing and distribution initiatives

Marketing• Promotion of the audio-visual

industry • Location marketing• Attendance of festivals • Lobbying co-production markets

Monitoring and Evaluation

• Market intelligence• Impact studies

76

Certain areas of commonality were identified amongst the Film Commissions / Film Offices that were reviewed

Areas of Commonality:

Role Value Chain and Value Proposition

Funding of Film Commissions

Financial support. Funding assistance is mostly for the production sector but some also support script development.

All operate within the production sector.

The major source of revenue of film commissions is government funding.

Logistics support including, locations and permits assistance.

Few Film Commissions operate consistently in every segment of the AV value chain.

Initiatives are being implemented to reduce the dependency on government. However the other revenue sources are a small proportion of total revenue.

Training and development assistance.

The most optimal value proposition of a Film Commission is creating an environment that is conducive for the growth of the industry.

Private sector funding is usually directed towards specific initiatives rather than funding of a Film Commission itself.

Marketing of locations.

77

Certain areas of commonality were identified amongst the Film Commissions / Film Offices that were reviewed

Areas of Commonality:

Role Institutional Arrangements

Marketing

Information sharing. Most countries have a national body that coordinates Film Commission/ film agencies programmes.

Film Commissions tend to use many marketing platforms to position their AV industries.

Advice on filming within their areas. There are a number of organisations and agencies that work in support of Film Commissions and the industry.

National and regional Film Commissions employ similar marketing strategies. However regional Film Commissions also promote their regions to the domestic industry.

National and regional Film Commissions often share the same roles. However the national body has a national and coordinating focus whereas the provincial one has a regional ambit.

Public-private partnerships are implemented on a project basis.

Strategic industry partnerships are used to attain coordinated marketing efforts.

Liaison with communities and logistics often occurs at the local film office level.

Fragmentation is reduced by clearly defined institutional frameworks for Film Commissions and supplementary agencies.

78

Some differences were identified amongst the Film Commissions / Film Offices that were reviewed

Differences:

Role Institutional Arrangements

Funding

Film Commissions in more advanced industries actively get involved in the development of AV-related government policies.

Film Commissions in the United States do not operate under a national coordinating body.

In the United States, some film offices are established with limited government involvement or public funding.

79

The role of a Film Commission is based on its ability to grow the local industry and create an environment that attracts foreign productions

Role of a Film Commission:

Role of a Regional Film Commission

Activities

Policy Development• Develop and lobby for policies that are AV industry friendly.

• Advocate for the establishment of national coordinating structures or mechanisms.

Industry Partnerships• Establish platforms for regular communication between industry and the Film Commission

and other government structures.

• Jointly develop strategies to build on identified strengths and opportunities within a region.


• Advocate for competitive incentive and funding structures.

• Develop regional incentives and funding mechanisms.

• Promote the development of producers and other role players in the value chain by using targeted funding or incentives.

• Facilitate the improvement of access to private and institutional finance houses.

Technology• Facilitate the development of technical infrastructure and expertise in line with new

technologies.

80

The role of a Film Commission is based on its ability to grow the local industry and create an environment that attracts foreign productions (cont.)

Role of a Film Commission:

Role of a Regional Film Commission

Activities

Monitoring and Evaluation

• Develop regional specific research and analysis and build up the reliability and validity of data.

• Establish agreements with international Film Commissions for regular information sharing on global developments in the industry.

• Conduct market intelligence and impact studies.

• Distribute findings to stakeholders.

Training and Development

•Develop a coordinated professional training and skills development strategy.

•Provide funding for training and development initiatives.

Logistics Support

• Develop mechanisms for ease of access to government-owned locations and those owned by private business.

• Lobby for free or low-cost government services.

• Provide assistance for permitting and locations selection.

• Provide guidelines on filming in the region.


•Sponsorships of film festivals.

•Lobbying for the establishment of movie theatres in underserviced areas.

Marketing

•Develop a brand identity and marketing strategy that increases domestic knowledge of the region and attracts foreign productions.

•Participate in national marketing initiatives.

•Attend festivals and co-production markets

81

Film Commissions have a diverse range of stakeholders within the audio-visual industry …

Key Stakeholders:


General Business

Community

Other Government agencies

Companies in the industry

Key Stakeholders

MunicipalitiesNational and Provincial Government

Film Producers and Industry Associations

Community Media

Funders/Financiers

82

… to whom they need to provide different products and services

Services Provided to

Stakeholders

Facilitation

Information Dissemination

Market Intelligence

Advisory

Logistics Support e.g. permits

Skills Development Support

Alignment with Govt. initiatives

Funding Assistance

Marketing

Lobbying

Services Provided:

The GFC focuses primarily on marketing and logistics support.The GFC focuses primarily on marketing and logistics support.


83

Few Film Commissions focus their efforts consistently within every segment of the audio-visual industry value chain

Value Chain:

Pre-production Production Post-production Distribution


To meet the needs of the growing SA audio-visual industry, the GFC may need to

play in each sector of the value chain.To meet the needs of the growing SA audio-visual industry, the GFC may need to

play in each sector of the value chain.

Australia Film Commission

United KingdomFilm Council

United States (various)

Conafilm (Mexico)Film Commission

Spain Film Commission

Irish Film Board

Gauteng FilmCommission

84

Ideally, Film Commissions add value by creating an environment that is conducive for the growth of the industry

Value Proposition:

“Film Commissions should develop and grow the film

economy of a region”

“Film Commissions should prioritise location

marketing and lobby for multiple ownership of

rights”“Film Commissions should be the one-stop shop for

companies operating along the value chain”

“Film Commissions should focus on creating an environment that is

conducive for filming and lobby Government on behalf of the industry”

“Film Commissions should focus on basic

requirements for film productions e.g. permits

and information provision”

Stakeholder Views

“Film Commissions should use innovative means to attract

productions, funding and investments to their regions”

“Film Commissions should mould themselves

according to the needs of the region they operate

in”


85

The Gauteng Film Commission (GFC) is a provincial government agency, tasked with the development and promotion of the audio-visual industry in Gauteng

The GFC’s Mandate:

• To promote Gauteng as a preferred film destination

• To facilitate transformation of the film industry

• To regulate and co-ordinate inter-government communication of permit issuance, code of conducts, municipal by-laws and risk management factors through the development and implementation of provincial film policy

• To facilitate, support and promote new investment in film production within Gauteng thereby contribute to economic growth and sustainable job creation

• To create and manage a repository of statistical and industry related information

• To monitor and support local industry developments

• With the approval of the MEC and Board, to provide finance for any projects which will develop filming in the Province

• To develop strategic and business partnership and other co-operative activities with the filming and television industry both locally and internationally


86

The GFC’s stated core functions are not divergent from industry expectations

The GFC’s Core Functions:

• Marketing Gauteng as a location of choice;• Acting as a centralized industry intelligence hub and resource; • Working with, and providing advice to, industry, government agencies and

other key stakeholders to support the development and growth of a sustainable audio-visual industry;

• Promoting and celebrating an active screen culture across the Province;• Supporting the transformation of the sector into a world-class industry

and that is reflective of South Africa in its entirety.

• Marketing Gauteng as a location of choice;• Acting as a centralized industry intelligence hub and resource; • Working with, and providing advice to, industry, government agencies and

other key stakeholders to support the development and growth of a sustainable audio-visual industry;

• Promoting and celebrating an active screen culture across the Province;• Supporting the transformation of the sector into a world-class industry

and that is reflective of South Africa in its entirety.

The challenge however is how to adequately meet these expectations. The challenge however is how to adequately meet these expectations.

Source: GFC Business Plan 2007 – 2010

87

The value proposition of a Film Commission is dynamic i.e. it evolves as the industry evolves

Value Proposition Evolution:

Film Commission leads the development of an environment that enables ease of access to permissions, locations, financial incentives and funding.

Emergent IndustryEmergent Industry

Film Commission engages and develops policies related to the industry such as skills development, investment, exports, research and development.

Mature IndustryMature Industry


88

Full public or full private funding are the two extremes of the continuum of revenue models for Film Commissions

100%

Public funding

100%

Public funding

100%

Private funding

100%

Private funding

Hybrid funding models


Revenue generation could include:• Membership fees,• Referral fees,• Charges for location services,• Staff charge-outs,• Levies on movie ticket, DVDs etc,• Institutional funding e.g. IDC.

The type of revenue model depends on the structure of a Film Commission i.e. non-profit making, profit making or a public benefit organisation with tax

exemptions.

The type of revenue model depends on the structure of a Film Commission i.e. non-profit making, profit making or a public benefit organisation with tax

exemptions.

Funding Models:

The GFC is 99% government

funded

89

The major source of revenue for Film Commissions is usually government funding

Revenue Model : Australian Film Commission (AFC)

48.6 52

5.6 5.5

54.2 57.5

0

10

20

30

40

50

60

70

2004/05 2005/06

Year

Reven

ue

A$

M

Revenue fromGovernment

Other revenue

Total revenue

In order to reduce government dependency and to be financially self-sustainable, the AFC is expected to:


•Foster relationships with organizations and individuals who may be in a position to donate to the national film collection.

•Forge partnerships with the private sector in key program areas, with a view to securing revenue from industry sources e.g. the Broadband Production Initiative, where the Government’s initial investment was doubled through industry partnerships.

90

The UK Film Council’s main source sources of revenue are:

The bulk source of revenue for Film Commissions is usually government funding (cont.)

Revenue Model: UK Film Council


• Grant-in-aid,

• Proceeds from the National lottery.

A small proportion of funding comes from other sources:

• NLDF investment income,

• Funds from other tie-ups / strategic partnerships,

• International marketing,

• Sale of research and statistics.

91

In the US, some Film Offices have been established with limited government involvement or public funding

Revenue Model: Film LA

Film LA’s primary revenue comes from permit assistance, assistance with field services and property management.

Film LA Revenue Model

2.9

1.6 2.0

5.3

7.1

0.01.02.03.04.05.06.07.08.0

2002 2003 2004 2005 2006

Year

Reven

ue in

US

$ M


92

Film festivals are just one of the many marketing platforms for Film Commissions

Marketing Strategies employed by Film Commissions

Develop marketing strategies in

collaboration with stakeholders

Target international co-production

markets

Direct marketing to foreign companies

Collective marketing of country vs. region

Establish interactive websites that

facilitate logistics

Highlight incentives that

support the industry

Advertise in key magazines e.g.

Hollywood Reporter

Marketing Approach:


Attend and hold Film Festivals

93

Although National and Regional Film Commissions employ similar marketing strategies, Regional Film Commissions also have a domestic focus

• Attract foreign productions to the country

• Information on tax incentives, financing packages and funds

• Management of a website

National Film Commission

• Promote their regions to foreign and local producers

• Promote their regions to the domestic industry

• Location liasion• Management of a website

Regional Film Commission

National and Regional Marketing Strategies

The objective at both levels is to develop a domestic screen culture, grow the ability to service foreign productions and increase the export of domestic film to the

international market.

The objective at both levels is to develop a domestic screen culture, grow the ability to service foreign productions and increase the export of domestic film to the

international market.

94

The AFC utilises different types of marketing initiatives to raise the profile of its industry

Marketing Initiatives: AFC

Travel Grants

E.g. Support for Australian practitioners to attend international festivals, international markets for finance and key international pitching forums

International Market Representation

E.g. AFC Participation in International Film Festivals

MarketingInitiatives

National Events and SeminarsE.g. Holding feature finance markets and distribution forums


Dissemination of Information

E.g. via the AFC website

95

The Irish Film Board aims to maximise the participation of its industry in the international and national marketplace

Marketing Initiatives: Irish Film Board


A multi-pronged marketing approach by the GFC would be a boost for the industry.

A multi-pronged marketing approach by the GFC would be a boost for the industry.

Participation in domestic and

international film festivals

Co-production treaties with

various countries

Setting up an office in Los Angeles to

promote Ireland in the US

User-friendly website to attract

visitors and provide information on the

Irish industry

InformationDissemination

Marketing Initiatives

96

Strategic industry partnerships often lead to better coordinated marketing efforts

Industry Partnerships: Australia

Ausfilm:

• Ausfilm is a screen industry-government partnership, comprising some 40 private sector companies, Australia's State and Territory film agencies, and the Australian Government through the Department of Communications, IT and the Arts.

• Ausfilm works together with the AFC when required.

• Ausfilm markets Australia internationally as the world's best destination for screen production, providing up-to-date, clear and effective advice on all aspects of working in film in Australia, including facilities, crew, locations and government regulation.

• On its website, Ausfilm provides location photos, a database of films and television shot in Australia, testimonials from a variety of the world's best directors and producers, and an ever-changing show reel of television commercials.

The GFC needs to identify and engage tourism, investment and other role players that it can partner with for marketing, funding and ICT projects, to support the industry.

The GFC needs to identify and engage tourism, investment and other role players that it can partner with for marketing, funding and ICT projects, to support the industry.


97

Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC

Institutional Arrangements: Australia

New South Wales Film and Television OfficeNew South Wales Film and Television Office22

Screen ActScreen Act33

Film Finance Corporation AustraliaFilm Finance Corporation Australia44

Australian Children’s Television FoundationAustralian Children’s Television Foundation55

Australian Film, Television and Radio SchoolAustralian Film, Television and Radio School66

Film AustraliaFilm Australia77

Film VictoriaFilm Victoria11


These organisations have roles and mandates that are complementary to each other.

These organisations have roles and mandates that are complementary to each other.

98

In Spain, various government-related and privately funded agencies support the audio-visual industry

Institutional Arrangements: Spain

Film and Audio-visual Arts Institute

Spain Film Commission

Santiago de Compestela Film

Commission

Madrid Film Commission

Galicia Film Commission

Tenerife Film Commission

Andalusia Film Commission

Jerez Film Commission

Barcelona Plató Film Commission

Nati

on

al

Reg

ion

al

Loca

l

A clearly defined institutional framework for Film Commissions and complementary organisations is important to reduce fragmentation and duplication; it results in better

information sharing and aligned strategies.

A clearly defined institutional framework for Film Commissions and complementary organisations is important to reduce fragmentation and duplication; it results in better

information sharing and aligned strategies.


South African AV Industry Overview

• Institutional Landscape

• Key Trends

• Industry Growth Drivers



• Key Trends


101

The South African audio-visual industry dates back to the ‘birth’ of film, circa 1895

South Africa AV Industry Brief Timeline:

State supportFor Afrikaans films

Films shown in Witwatersrand

Afrikaans based private capital financing Afrikaans films

Creation of ‘black’ films by predominantly white producers

Some films produced that depicted urban black culture

Tax concessions boost production of US imitated films

Collapse of tax shelter scheme

New democraticdispensation. Cultural industries established as a priority sector by government

1895 1956 1962

1950s 1970s

Mid-1980s Late-1980s

Segregation of cinemas

Post-1994

Since 1994, the local feature film industry has experienced a rebirth and foreign productions have increased; however skills development and other challenges remain.

Since 1994, the local feature film industry has experienced a rebirth and foreign productions have increased; however skills development and other challenges remain.

1950s

Source: Deloitte SA Market Research

102

The South African audio-visual industry has two segments - the servicing of foreign productions and production of local contentSouth Africa AV Industry Snapshot:

• The South African audio-visual industry encompasses a range of creative production activities including film, TV and documentary production, commercials, stills photography and multimedia.

• The two main streams of the South African industry are:• The facilitation and provision of logistical and technical

services for foreign productions,• The local production of South African commercials, TV,

documentaries and feature films.• South Africa’s film and TV is industry is located around the two

major cities of Johannesburg in Gauteng Province and Cape Town in the Western Cape. There is limited activity in other provinces.

• The South African audio-visual industry encompasses a range of creative production activities including film, TV and documentary production, commercials, stills photography and multimedia.

• The two main streams of the South African industry are:• The facilitation and provision of logistical and technical

services for foreign productions,• The local production of South African commercials, TV,

documentaries and feature films.• South Africa’s film and TV is industry is located around the two

major cities of Johannesburg in Gauteng Province and Cape Town in the Western Cape. There is limited activity in other provinces.


103

South Africa has established audio-visual hubs in Gauteng, the Western Cape and Kwazulu Natal

There are similar or equivalent bodies to the GFC in South

Africa, the major bodies being:

1. Cape Film Commission

2. Durban Film Office

NB: For the purposes of this project, an audio-visual hub

is defined as the centre or focal point for film

related matters within a Film Commission.

Film Commissions and Offices can play an important role in driving growth through industry promotions and marketing.

Film Commissions and Offices can play an important role in driving growth through industry promotions and marketing.

Audio-visual Hubs:


104

The Cape Film Commission is mandated to promote Cape Town and the Western Cape region to the entertainment industry, as a world class production destination

Strategic ObjectivesStrategic

Objectives

Keys ActivitiesKeys Activities

• The Cape Film Commission was launched in 2001 by the City of Cape Town and the Provincial Government of the Western Cape.EstablishmentEstablishment

• Position Cape Town as a globally competitive film city, thereby boosting tourism, job creation and the development of core skills,

• Increase the Cape's global film making share.

• Facilitate and coordinate on-location filming in both the City and the Province,

• Assemble and manage all information that affects and influences film making in the region - visas, immigration and crew rates, permits and permit management etc,

• Communicate regularly with neighbourhood and business organisations so as to mitigate any negative impacts associated with filming,

• Promote the absorption of large numbers of professionals from disadvantaged backgrounds into the film industry,

• Increase access to the industry for all “Capetonians”,• Provide information on funding opportunities for training and film projects.

Cape Film Commission:


105

Similarly, the Durban Film Office has a mandate to promote KZN as a world class production destination and attain 3% of the global film making share by 2008

Strategic ObjectivesStrategic

Objectives

Keys ActivitiesKeys Activities

• The Durban Film Office was launched in 2003 by Ethekwini Municipality.EstablishmentEstablishment

• Position Durban as a globally competitive film city, thereby boosting tourism, job creation and the development of core skills and SMME’s,

• Increase Durban’s global film making share from 0% currently to about 3% by 2008.

• Facilitate and coordinate on-location filming in both the city and province.• Assemble and manage all information that affects and influences film,

making in the region – visas, immigration, crew rates, permits and permit management etc,

• Communicate regularly with neighbourhood and business organizations so as to mitigate any negative impacts associated with filming,

• Promote the absorption of large numbers of professionals from disadvantaged backgrounds into the film industry,

• Provide information on funding opportunities for training and film projects.

Durban Film Office Overview:


106

There are also several other emerging hubs in South Africa, evidence of the growth potential of the local audio-visual industry


Mpumalanga

The Mpumalanga Province is in the process of setting up a

Film Office / Commission through its Arts and Culture

department. A detailed research and strategic plan has

been developed, with implementation to commence once

funding has been secured.

The Eastern Cape province has completed a study to set

up a film office under the Arts and Culture Department.

Each of the 7 districts in the province will have a film

service centre at municipal level, which will report into the

provincial film office.

Eastern Cape

Emerging Hubs:

107

The primary value proposition of local Film Offices and Commissions is to market their regions as locations of choice

Line Item Cape Film Commission Durban Film Office Gauteng Film Commission

Governance & Structure

S21 Company with Independent Board

Mayor’s Office & City Department – Economic Development

– S21 Company with Independent Board

– In the process as registering as a Public Entity

Budget R 4.15 Million R1.5 Million operational, plus infrastructural Support +/- R4.5m. Additional Funding dependent on approved Projects.

R14.1 Million (2006)

R18.5 Million (2007)

Value Chain Positioning

Active in all areas of the value chain

- Concentrates on marketing the region as a location of choice for production.

- Limited involvement in other areas of the value chain due to budget constraints.

- Focus currently on the production segment of the value chain.

Source of Funding - CoCT: Economic Development

- PGWC: Economic Development

- Ethekwini Municipality

- KwaZulu-Natal Provincial Government (Projects)

DED: Gauteng Provincial Government

Jurisdiction Cape Town &

Western Cape

Ethekwini Municipality Province of Gauteng


The bodies are seen to be complimentary in promoting the South African audio-visual industry.

The bodies are seen to be complimentary in promoting the South African audio-visual industry.

Comparative Overview:

108

In South Africa, various government-related and privately funded agencies support the audio-visual industry

Institutional Arrangements: South Africa

Nati

on

al

Reg

ion

al

Local

There is a perception within the industry that there is a lack of coordination between key institutions and programmes.

There is a perception within the industry that there is a lack of coordination between key institutions and programmes.

• NFVF

• Departments in Municipalities

• Gauteng Film Commission• Cape Film Commission• Durban Film Office (covers entire KZN)• Eastern Cape - Arts and Culture• Mpumalanga - Arts and Culture

E.g.•Department of

Arts and Culture•Department of

Trade and Industry

•SARS•MAPPPSETA•National Arts

Council of SA•SA Scriptwriters

Association•Independent

Producers Organisation

•Commercial Producers Association

•The Producers Alliance etc.

Supporting Institutions


109

There are a number of initiatives being undertaken at provincial government level to promote the audio-visual industry …


Festivals to showcase films:• Sithengi – November, Cape Town, • Encounters Documentary Festival –

July/August, Johannesburg/Cape Town,

• Durban International Film Festival,• Loerie Awards – July, different venues

in South Africa,• Attendance of international film

festivals e.g. Cannes, Montréal, Toronto etc.

Other initiatives include:• Industry workshops held by Film

Commissions/Offices,• City of Johannesburg - has identified

film as part of its Creative Industries Strategy and has a plan to establish a Film Incubator in Newtown,

• Ekhuruleni has shown interest in promoting locations. No initiatives have been implemented to date however.

Regional Initiatives:

The impact of these regional and other initiatives is difficult to measure as limited data is available.

The impact of these regional and other initiatives is difficult to measure as limited data is available.

110

… with the GFC engaging in a range of AV activities within Gauteng

Permit Applications by category 122

Gauteng Festivals Applications Received 11

Gauteng Festivals Supported 4

GFC Advertising Placement and Circulation Figures

- Total Adverts 31

- Total Circulation reach 922,061

GFC on-line Directory Usage

- No of Hits (Jan-Sep ‘07) 217,818

- Number of Visitors (Jan-Sep ‘07) 10,640

6-month Snapshot of GFC Activity:

Source: GFC 6-month Production and Marketing Activity Report (Apr – Sept 2007)

111

The last 5 years have seen a renewed focus on strategies to grow the national and provincial audio-visual industries


National Growth/Development Plans:

The GFC’s key priority areas match the focus areas of other complementary industry strategies.

The GFC’s key priority areas match the focus areas of other complementary industry strategies.

Key ChallengesKey Challenges

• Skills development.• Audience development.• Access to finance.• Improving coordination between

key institutions.• Obtaining critical industry

information.• Transformation.

• Skills development.• Audience development.• Access to finance.• Improving coordination between

key institutions.• Obtaining critical industry

information.• Transformation.

Some Key StrategiesSome Key Strategies

• DAC Cultural Industries Growth Strategy, 1998.

• Industrial Development Corporation Report, 2000.

• NFVF National Value Charter.• Strategy for the Development of

the Content Industries, 2003.• Film and Electronic Media Sector

Skills Plan, 2004.• Western Cape Province Micro

Economic Development Strategy: Film Sector, 2005.

• The DTI Draft Sector Development Strategy: Film and Television, 2005.

• 2007-2008 Sector Development Skills Plan

• DAC Cultural Industries Growth Strategy, 1998.

• Industrial Development Corporation Report, 2000.

• NFVF National Value Charter.• Strategy for the Development of

the Content Industries, 2003.• Film and Electronic Media Sector

Skills Plan, 2004.• Western Cape Province Micro

Economic Development Strategy: Film Sector, 2005.

• The DTI Draft Sector Development Strategy: Film and Television, 2005.

• 2007-2008 Sector Development Skills Plan

Focus AreasFocus Areas

• Sustainable national industry growth and development.

• Enhancement of economic growth and development.

• Accessibility to financing.• Development of content for

broadcasting and multimedia.• Development of skills in the

industry.• Increased competitiveness,

exports and investment • Transformation of the industry.

• Sustainable national industry growth and development.

• Enhancement of economic growth and development.

• Accessibility to financing.• Development of content for

broadcasting and multimedia.• Development of skills in the

industry.• Increased competitiveness,

exports and investment • Transformation of the industry.



• Key Trends


113

Local Operating Environment:

The South African AV industry operates is an environment that is rapidly and continuously changing

• The South African Broadcasting Corporation has:• 3 national channels and an Africa channel.• 2 licenses for regional channels that will broadcast in

indigenous languages.• There are two M-Net channels and over 40 DSTV channels.• One free-to-air channel i.e. E.TV.

• The South African Broadcasting Corporation has:• 3 national channels and an Africa channel.• 2 licenses for regional channels that will broadcast in

indigenous languages.• There are two M-Net channels and over 40 DSTV channels.• One free-to-air channel i.e. E.TV.

Broadcast TelevisionBroadcast Television

• The Commercials sector is very competitive, with over 50 companies that specialise in TV commercials.

• It is an industry driven by production costs relative to the purchase of airtime.

• The sector is characterised by high quality output.

• The Commercials sector is very competitive, with over 50 companies that specialise in TV commercials.

• It is an industry driven by production costs relative to the purchase of airtime.

• The sector is characterised by high quality output.

CommercialsCommercials

• The making of corporate videos boomed in the 1980’s, when cheap, simple and high quality video cassettes came onto the market.

• Estimates are that corporate video makes up a quarter of production turnover in South Africa.

• The making of corporate videos boomed in the 1980’s, when cheap, simple and high quality video cassettes came onto the market.

• Estimates are that corporate video makes up a quarter of production turnover in South Africa.

Corporate VideoCorporate Video

• South Africa has diverse and attractive locations that are sought after by film and commercials producers worldwide.

• The Rand / US $ exchange rate has enabled relatively competitive costs for air travel, accommodation etc.

• Local equipment, facilities, services and crew are rated amongst the best in the world.

• SA has about 50 successful local facilitating producers in.

• South Africa has diverse and attractive locations that are sought after by film and commercials producers worldwide.

• The Rand / US $ exchange rate has enabled relatively competitive costs for air travel, accommodation etc.

• Local equipment, facilities, services and crew are rated amongst the best in the world.

• SA has about 50 successful local facilitating producers in.

FacilitationFacilitation

• The economic multiplier effect of the industry is estimated to be between 2 - 2.5.

• International experience has shown that the industry has a positive economic impact. In Australia, the output multiplier is 2.67.

• Industries that benefit from the industry include tourism, hospitality, insurance, marketing, tax and legal advisory etc.

• The economic multiplier effect of the industry is estimated to be between 2 - 2.5.

• International experience has shown that the industry has a positive economic impact. In Australia, the output multiplier is 2.67.

• Industries that benefit from the industry include tourism, hospitality, insurance, marketing, tax and legal advisory etc.

Ancillary ServicesAncillary Services

• New technologies such as digitization have enabled new content delivery channels such as DVDs and online portals.

• Digitisation has lead to an increase in small independent companies that can produce for TV due to reduced costs of production and distribution, once the initial expensive capital cost has been incurred.

• New technologies such as digitization have enabled new content delivery channels such as DVDs and online portals.

• Digitisation has lead to an increase in small independent companies that can produce for TV due to reduced costs of production and distribution, once the initial expensive capital cost has been incurred.

Distribution and ExhibitionDistribution and Exhibition

The impact of new technologies on content production and distribution mirrors global trends.

The impact of new technologies on content production and distribution mirrors global trends.


114

In 2006, almost R3 billion revenue was generated in the South African audiovisual production industry

South African AV Industry Revenue:

Nationally, audiovisual industry production is almost equally made up of film, commercials and TV

Nationally, audiovisual industry production is almost equally made up of film, commercials and TV

* This is an estimate of the value of AV industry production and includes only revenue generated in the “cost consumption” phase of the value chain. It thus excludes the revenue of the broader media and entertainment industry e.g. box office revenue, advertising agencies revenue, DVD sales etc.

Source: Deloitte South African Market Research

Audiovisual industry production*

Film R 1 040 M

Commercials R 802 M

TV R 1 000 M

Multimedia R 20 M

R 0

R 250

R 500

R 750

R 1 000

R 1 250

R 1 500

R 1 750

R 2 000

R 2 250

R 2 500

R 2 750

R 3 000

R 3 250

2006

Year

Reven

ue (

Rm

)

MultimediaTVCommercialsFilm

115

Over a 3 year period, the bulk of commercials produced nationally were concentrated in Gauteng and the Western Cape

0 50 100 150 200 250 300 350

Western Cape

Gauteng

KZN

Elsewhere in SA

Outside of SA

2005/62004/5

* From Commerical Producers Association (CPA) member dataSource: Deloitte South African Market Research

Annual Commercials Production Data*:

No. of Commercials

Locati

on

116

With very few exceptions, the local box office is dominated by foreign films …

Sample Local Box Office Earnings:


South African Gross Box Office Earnings (25 Nov 2005 - 20 Jan 2006)

05

101520253035

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117

… with ‘slapstick’ the most successful of local movie genre’s

Top 15 Local Films:


All Time Top 15 South African Gross Box Office Earnings

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118

South African audiences perceive local films as being either ‘slapstick’ or socio-political; there is little variety of genre

• South African youth are keen to watch local films that are relevant to them.

• Socio-political films perform better on the arthouse circuit.

• International recognition of socio-political films e.g. Tsotsi and Yesterday:

The international success of these films have raised the profile and perceptions of local films.

• Low budget films can be successful e.g. ‘Whale Rider’ from New Zealand and “High School Musical’ from the US.

Positives

• Local films fall into two categories: socio-political or ‘slapstick’.

• Lack of variety of content.• South African youth find TV soaps

more relevant than local films as they deal with current issues.

Local films are perceived to be focused on the past.

• Perceived poor quality, editing and lack of special effects.

• Poor acting and use of the “same faces”.

• Insufficient marketing of local films.

Negatives

South African Audience Tastes:


There exists strong potential demand from local audiences for local content if it is of greater variety, quality and relevance.

There exists strong potential demand from local audiences for local content if it is of greater variety, quality and relevance.

119

In South Africa, cinema attendance is characterised by areas of growth, stagnation or decline

Cinema Attendance:

• The international experience is that cinema admissions are on the decrease:

In the US, cinema admissions fell from a high of $1.64bn in 2002 to $1.4bn in 2005.

• In South Africa, overall attendance is on the rise:

A 4.5% increase in 2002/3, and a 5% increase in 2005/6.

It is anticipated however that with technological convergence, local cinema attendance trends will mirror global trends in the future.

• However, there are two phenomena locally:

1.Cinema attendance is growing in previously under-serviced markets. This is because cinemas have become more accessible due to:

Competitive pricing,

An expanding spatial footprint, primarily in urban areas.

2.In better serviced markets however, the trend is towards stagnation:

• Ster-Kinekor has seen a slowdown in the traditionally lucrative LSM 9 - 10 markets.

• Peri-urban and rural areas however still require focused audience development initiatives to grow cinema audiences.


120

Countrywide, new content delivery channels are booming due to falling prices of DVDs, computers and cell phones

Local movie theatres may face growing competition from alternative content delivery channels, especially if ticket prices continue to rise.

Local movie theatres may face growing competition from alternative content delivery channels, especially if ticket prices continue to rise.

National Penetration of Content Channels

9

33.5

19

6

41.6

31

6.4

49.4

0

20

40

60

% with DVD player % accessed internet % with cellphone

Channel Type

% o

f P

opu

lati

on

200420052006

Content Delivery Channels:


121

South Africa faces impediments to increasing its market share as a globally competitive film-making destination

Global Market Share:

• It is estimated that South Africa has 0.5% of the market share of the global film, TV and commercials industry1.

• The reasons for the country’s relatively low market share are:• “Structural constraints i.e. high volatility, general unprofitability,

and monopolised international distribution networks,• Prohibitive film production costs and decreasing levels of private

production financing,• Lack of competitiveness relative to competitor countries,• Large volumes of imported material,• Increasing reliance on government funds as a means to protect

local content development.”

• South Africa’s main regional competitors in the market for African and Middle Eastern content are currently Iran, Egypt, Israel and Nigeria.

• It is estimated that South Africa has 0.5% of the market share of the global film, TV and commercials industry1.

• The reasons for the country’s relatively low market share are:• “Structural constraints i.e. high volatility, general unprofitability,

and monopolised international distribution networks,• Prohibitive film production costs and decreasing levels of private

production financing,• Lack of competitiveness relative to competitor countries,• Large volumes of imported material,• Increasing reliance on government funds as a means to protect

local content development.”

• South Africa’s main regional competitors in the market for African and Middle Eastern content are currently Iran, Egypt, Israel and Nigeria.

Source: 1. GFC Business Plan (MEFS) 2007 – 2010; Deloitte SA Market Research

122

The AV industry has had a positive economic effect on the local economy


Economic Activity:

• The audio-visual industry in South Africa is estimated to generate over R5.5 billion in economic activity annually.

• The multiplier effect for the local industry is estimated to be between 2 and 2.5, with spin-offs for the toursim industry e.g. the promotion of filming locations as tourist attractions.

• South Africa’s cost advantage in the industry relative to the US and the Europe could continue if the rand continues to be weaker than major world currencies.

It is difficult to monitor and evaluate the social and economic impact of the industry due to data limitations.

It is difficult to monitor and evaluate the social and economic impact of the industry due to data limitations.



• Key Trends


124

Destination of Choice


Physical Environment

Infrastructure–Technical–Public

Regulatory Environment

There are several factors influencing the growth of the national audio-visual industry

Growth Drivers:

Business Environment andCost Advantage

Human Resources Capacity

Audience Development


125

One of the main impediments to growing the local industry has been poor audience development

Audience Development:

• Due to previous social, spatial and economic planning inequalities, the overwhelming majority of the population is located in townships with no exhibition outlets.

• Geographical distance from movie theatres and ticket pricing has precluded growth in previously disadvantaged groups.

• Many South African films are perceived as being too socio-political and do not appeal to the tastes of 16 – 35 year old audiences who want films that reflect their current realities and more variety of content.

• Due to previous social, spatial and economic planning inequalities, the overwhelming majority of the population is located in townships with no exhibition outlets.

• Geographical distance from movie theatres and ticket pricing has precluded growth in previously disadvantaged groups.

• Many South African films are perceived as being too socio-political and do not appeal to the tastes of 16 – 35 year old audiences who want films that reflect their current realities and more variety of content.

BackgroundBackground

• The Film Resource Unit (FRU) has partnered with the Department of Arts and Culture, the Humanist Institute for Development Cooperation, the GFC and the Government Communication and Information System to establish community based audio-visual facilities to promote development, communication and active citizen participation. N.B. There was announcement on 20 June 2007 by the Board of Directors of the FRU that it might close down due to financial problems. However discussions were being held with the DAC to resolve the matter.

• Movie theatres owners are opening new complexes in previously under-serviced areas, such as the new eight cinema complex in Soweto’s Maponya Mall.

• CineMARK is using a mobile unit to take movies to rural areas.

• Movie houses are lowering ticket prices as a strategy to attract new movie goers.

• Use of digital technology to show 3D films and so attract tech-savvy audiences.

• Use of DVDs and other content delivery channels.

• The Film Resource Unit (FRU) has partnered with the Department of Arts and Culture, the Humanist Institute for Development Cooperation, the GFC and the Government Communication and Information System to establish community based audio-visual facilities to promote development, communication and active citizen participation. N.B. There was announcement on 20 June 2007 by the Board of Directors of the FRU that it might close down due to financial problems. However discussions were being held with the DAC to resolve the matter.

• Movie theatres owners are opening new complexes in previously under-serviced areas, such as the new eight cinema complex in Soweto’s Maponya Mall.

• CineMARK is using a mobile unit to take movies to rural areas.

• Movie houses are lowering ticket prices as a strategy to attract new movie goers.

• Use of digital technology to show 3D films and so attract tech-savvy audiences.

• Use of DVDs and other content delivery channels.

Audience Development Initiatives

Audience Development Initiatives


126

South Africa has an internationally recognised comprehensive and progressive legal framework

However there are perceptions that legislation is too rigid and there is limited institutional capacity to implement it.

However there are perceptions that legislation is too rigid and there is limited institutional capacity to implement it.

South African Legislation:

Independent Communications Authority of South Africa Act - in particular, deals with local content quotas, which are viewed as key to developing the local industry.

The Skills Development Act - provides an institutional framework for national, sector and workplace strategies to develop and improve the skills.

The Labour Relations Act - due to the proliferation of small firms and unorganised ‘freelance’ labour, the effects of this Act are smaller than in other sectors.

Basic Conditions of Employment Act - to provide for fair labour practices in the workplace.

The Films and Publications Act - distribution of any prohibited film or publication is a criminal offence in terms of the legislation.

The Immigration Act – regulates the entry of foreigners to South Africa and the issue of work and residence permits.

The Lotteries Act - provides for payment of lottery money for projects that promote the arts, culture and national historical or cultural heritage.

The Income Tax Act – provides a legal framework for tax related matters.

The Employment Equity Act - aimed at achieving a diverse workforce that is broadly representative of the South African population.

TRIPS Agreement - South Africa, as a member of the World Trade Organisation (WTO) is bound by the Agreement which affords scriptwriters and creators a high standard of copyright protection.


The Intellectual Property Laws Amendment Act – provides for the protection of rights of local and foreign companies.

Counterfeit Goods Act – provides for the protection against trading in falsifications of merchandise and products.

The Intellectual Property Laws Amendment Act – provides for the protection of rights of local and foreign companies.

Counterfeit Goods Act – provides for the protection against trading in falsifications of merchandise and products.

127

There have been a few initiatives to reduce bureaucracy and inconsistent application of rules

Home Affairs issues a Visitors Visa with

concessions for actors and crew. The Visitors Visa must be issued in the country of origin and

specifically endorsed with the purpose of entry.

Home Affairs issues a Visitors Visa with

concessions for actors and crew. The Visitors Visa must be issued in the country of origin and

specifically endorsed with the purpose of entry.

Concessions:


The City of Cape Town has

abolished film location tariffs

on publicly owned Council

land.

The City of Cape Town has

abolished film location tariffs

on publicly owned Council

land.

SARS is considering allowing employees in the film industry to apply for a single

annual tax directive.

SARS is considering allowing employees in the film industry to apply for a single

annual tax directive.

.

128

There have been a few initiatives to reduce bureaucracy and inconsistent application of rules (contd.)

Concessions:


• The South African regulatory environment is perceived as onerous for SMMEs.

• An 2003 international survey found that 46% of South African respondents said that bureaucracy was a significant constraint on business growth; the global average is 35%.

• Uncertainty around the SARS definition of employees and independent contractors is an concern.

• Currently the industry defines freelancers as employees; this however has labour law and tax implications.

• As employees, freelancers cannot claim for expenses and have to work within legislated hours. However given the nature of the industry, hours worked are often in excess of the prescribed 45 hour week and 9 hours a day. This is in contravention of the BCEA.

129

IDC – 31 Movies worth R0.5bn funded in 6

years through equity

investments and commercial

and venture loans.

There are a number of commercial and government organisations offering film production financing in South Africa

Funding is potentially a major growth driver as it helps attract industry players to the market.

Funding is potentially a major growth driver as it helps attract industry players to the market.

Key Funding Channels:

NFVF Fund – education and

training development, production,

marketing and distribution.

Commercial banks – e.g. Rand Merchant Bank

provides funding capped at 30% of

a production budget.

Private funding e.g. individual

private investors.

Government grants- skills

training initiatives,

sponsorships etc.


Other funds that are being investigated for establishment include the SABC

Film Fund.

130

Revenue generation guarantee requirements are the largest barrier to access to funding in South Africa

Producers often struggle to meet the stringent revenue generation guarantee requirements of financial institutions.

Broadcaster monopolies on IP ownership limit the income that producers can make from their content.

Alternative sources of funding such as the National Lottery are not available due to legal restrictions on funding of private ventures.

The combination of high production costs and uncontrollable variables mean financial success is not often guaranteed.

Barriers to Funding in South Africa:

Use of guarantees, pre-selling of rights and other measures to mitigate risk are required locally. Benchmark countries address the issue of risk through the use of public funding

bodies at national and local level.

Use of guarantees, pre-selling of rights and other measures to mitigate risk are required locally. Benchmark countries address the issue of risk through the use of public funding

bodies at national and local level.


Local banks consider the industry to be high-risk, with few mitigation strategies in place.

131

The Large Budget Film and TV Production Rebate is the prime investment incentive available to both foreign and local big budget producers

Key Incentives:

International best practice suggests that a variety of film specific incentives are required at national and regional levels and for smaller local productions. A

business environment that provides general incentives to encourage business, such as in Ireland, is also beneficial.

International best practice suggests that a variety of film specific incentives are required at national and regional levels and for smaller local productions. A

business environment that provides general incentives to encourage business, such as in Ireland, is also beneficial.

• Eligible applicant rebated a sum totalling 15% for foreign productions or 25% for qualifying South African productions, including official co-productions of the qualifying South African production expenditure that an applicant has spent on an eligible film production. The maximum rebate for a project is R10 million.

• The rebate scheme tends to be inaccessible to most local producers as minimum spend production expenditure is R25 million. There are however proposals to lower the rebate threshold to accommodate lower budget productions (<R10m).

• Eligible applicant rebated a sum totalling 15% for foreign productions or 25% for qualifying South African productions, including official co-productions of the qualifying South African production expenditure that an applicant has spent on an eligible film production. The maximum rebate for a project is R10 million.

• The rebate scheme tends to be inaccessible to most local producers as minimum spend production expenditure is R25 million. There are however proposals to lower the rebate threshold to accommodate lower budget productions (<R10m).

Large Budget Film and TV Production Rebate Scheme

Large Budget Film and TV Production Rebate Scheme

• Enables any activity in the development of a film project to be tax deferrable so as to attract investment.

• Enables any activity in the development of a film project to be tax deferrable so as to attract investment.Section 24F of

the Income Tax Act

Section 24F of the Income Tax Act

• Provides South Africa manufacturers, including filmmakers, with funds to travel globally to attract funding for projects.

• Provides South Africa manufacturers, including filmmakers, with funds to travel globally to attract funding for projects.DTI rebates /

subsidies for international travel

DTI rebates / subsidies for international travel


132

Other incentives are available to support the industry in South Africa

Other Incentives:

Benchmark countries tend to link incentives to initiatives to build capacity in local industries e.g. skills transfer programs. For instance, rebate schemes could have matching

labour grants.

Benchmark countries tend to link incentives to initiatives to build capacity in local industries e.g. skills transfer programs. For instance, rebate schemes could have matching

labour grants.

• Employers can claim back the Skills Development Levy if they provide training that is MAPPP-SETA accredited. Skills

Development Fund

Skills Development Fund

• Enables productions from participating countries to apply for benefits or programmes of assistance from both countries.Co-production

TreatiesCo-production Treaties


133

As at 24 April 2007, R124 million had been paid from the Large Budget Film and TV Production Rebate Scheme

Efficiency of the Rebate Scheme:

There appear to be constraints in the payment of rebates to approved applicants, which need to be investigated further.

There appear to be constraints in the payment of rebates to approved applicants, which need to be investigated further.


0

5

10

15

20

25

30

South African Co-prod Foreign

Number of Applicationsreceived

Number of Applicationsapproved

Number of Applicationspaid

Num

ber

134

The cost of production in South Africa is relatively cheap compared to developed countries, such as in the European Union

• South Africa has a shrinking but still tangible cost advantage over developed countries mainly due to the current relatively weak rand exchange rate. This cost advantage is spread across the value chain:

A weak rand makes South Africa more attractive to foreign productions due to lower production costs

A strong rand, whereas unfavourable for foreign productions, may lower the cost of importing skills, equipment, content etc for the local industry.

• It is estimated that production costs in South Africa are 60% of USA costs. A 2002 study shows that South African crew rates are 16.9% of that of American crews.

• Prices in ancillary industries e.g. hotels, restaurants, domestic flights and car rental are generally competitive. However these have been known to be inflated on occasion for foreigners:

The high cost of travel from the Americas and Europe to Africa is an issue for some international producers.


Cost Advantage:

135

South Africa has a vibrant service industry catering to all aspects of the audio-visual industry …

Service Providers


Original Production

Art Direction

Film Processing

Post-production

Financial Services

Insurance Services

Exhibition

Distribution

Equipment Provision

Production Facilitation

Service Providers

136

… and a variety of small to medium-sized fully equipped studio spaces

• The studio facilities available in South Africa have technical infrastructure and

equipment that is ideal for commercials and low budget films.

• A number of technically advanced studios are required in a country so as to attract

international productions e.g. both Ireland and Australia have state-of-the art technical

infrastructure, which is used to attract big-budget productions. To compete with these

countries, South Africa would need to invest in such infrastructure e.g. the

Dreamworld Film Complex:

The Cape Town Dreamworld Film Complex is expected to open in 2008. The complex will include

four soundstages, four backlots and premises for production, post-production and supply

companies. The Dreamworld project should open up opportunities for both local and

international filmmakers as it meets international standards for studios.

• For post-production projects, security and access to facilities is a big issue due to

piracy. Shortening the theatre to DVD window in the country would be a key measure

to mitigate the threat of piracy.


Technical Infrastructure:

137

South Africa has well-developed public infrastructure with modern facilities and services available in all major centres

• South Africa has a relatively advanced telecommunication industry with one fixed line operator, three cellular network operators and international links fed via submarine cable and satellite networks:

There is conflicting data available on the global competitiveness of Telkom’s rates

• Upgrading of national broadcasting infrastructure from analogue to digital at an estimated cost of R2bn will eventually lead to greater efficiencies in the sector and enhance new content delivery channels.

• Transportation compares favourable with first world countries – excellent road, rail, sea and air travel services.

South Africa has 3 international airports linking it to more than 59 cities around the world.

• Major public and private hospitals have outpatient and casualty facilities for all health care.


Public Infrastructure:

138

South Africa’s diverse physical environment makes it an attractive location


South Africa has become a favoured location for filmmakers keen to capitalise on its natural beauty.

South Africa has become a favoured location for filmmakers keen to capitalise on its natural beauty.

Physical Environment:

• 14 hours of sunlight during summer months.• Weather and seasons that alternate with

Europe and North America.

• 14 hours of sunlight during summer months.• Weather and seasons that alternate with

Europe and North America.

• Same time zone as most of Europe.

• Same time zone as most of Europe.

• Gauteng offers high density urban infrastructure and architecture and is in close proximity to a variety of natural scenery.

• Cape Town offers a variety of coastal scenery and period architecture.

• Durban is ideal for tropical settings.• Mpumalanga has numerous nature

reserves.

• Gauteng offers high density urban infrastructure and architecture and is in close proximity to a variety of natural scenery.

• Cape Town offers a variety of coastal scenery and period architecture.

• Durban is ideal for tropical settings.• Mpumalanga has numerous nature

reserves.

139

Limited skills data on the South African AV market has restricted our evaluation of the skills set within the industry

Current data on the audio-visual industry skillset is not readily available. However the following points were noted from a 2004 MAPPP SETA study:

• Technological developments mean that skills need to be continuously upgraded.

• Significant skills gaps persist in the business, creative and technical fields across all occupations and sub-sectors.

• The sector faces the challenge of improving its equity profile, particularly in relation to race and gender in large and medium enterprises.


Human Resource Capacity:

According to MAPPP SETA, there are seven priority areas for future skills development in the industry. They are:

• Asset exploitation and management.

• Risk management.• Project management.• Partnership development.• Investor relations.• Marketing and promotion.• Technical expertise.

The largest employment concentrations are found in clerical (16%), technicians and associate professionals (15%), plant and machine operators(15%) and elementary occupations (15%).

Temporary staff constitute an important component of the AV workforce at 13%.Temporary staff constitute an important component of the AV workforce at 13%.

140

Employment figures in the Commercials sector show a a general decline in overall numbers …

Employment Figures - Freelance*

0

10000

20000

30000

40000

50000

2005 2006 2007

Year

No. of

Em

plo

yees

Employment Figures - Part time

0

10

20

30

40

50

2005 2006 2007

Year

No. of

Em

plo

yees

Source: Commerical Producers Association (CPA) member data* Approximate figures

Employment Data:

Employment Figures - Full time

300

320

340

360

380

400

420

2005 2006 2007

Year

No. of

Em

plo

yees

141

A comparison of two locally produced movies shows a high degree of employee transformation, with most employees working as freelancers

...... Small, independently funded (local) movie: • Employee no’s: 40 crew, 20 cast, Total = 60.• Employee profile:

• 30% women,• 50% black (ACI).

• The entire production team consisted of freelance resources. • Budget estimate: ~ R5m

• 50% of budget spent on employee salaries,• 25% of budget spent on auxiliary services (car hire, accommodation,

security, transport, insurance, equipment hire etc).

Small, independently funded (local) movie: • Employee no’s: 40 crew, 20 cast, Total = 60.• Employee profile:


• The entire production team consisted of freelance resources. • Budget estimate: ~ R5m

• 50% of budget spent on employee salaries,• 25% of budget spent on auxiliary services (car hire, accommodation,

security, transport, insurance, equipment hire etc).

...... Large, foreign-funded move: • Employee no’s: 431 crew, 99 cast, Total = 530.• Employee profile:


• Only 3 permanent staff (from production company); remainder freelancers.• Only 12 international recruits; remainder local. • Budget estimate: ~ R90m

• SA costs ~ 55% of budget, non-SA costs ~ 45%.

Large, foreign-funded move: • Employee no’s: 431 crew, 99 cast, Total = 530.• Employee profile:


• Only 3 permanent staff (from production company); remainder freelancers.• Only 12 international recruits; remainder local. • Budget estimate: ~ R90m

• SA costs ~ 55% of budget, non-SA costs ~ 45%.


Case Studies:

142

There are also skills gaps that have been identified by stakeholders as needing urgent redress to ensure the continued growth of the local industry


Skills Gaps:

Lack of business

entrepreneurial capacity

Lack of coordination, promotion and

monitoring of skills-transfer from

international and co-productions.

Low quality of scriptwriting that does not

meet audience needs

Limited access to training

opportunities for new

entrants to the industry

Rapid and continual technological changes that

require ongoing skills development

143

Several public and private sector organisations are providing training programmes to help address identified skills gaps


Skills Development Initiatives:

• Responsible for administering skills development in the industry using the Skills Development Levy.

• Coordination of learnerships and mentorship programmes.

• Responsible for administering skills development in the industry using the Skills Development Levy.

• Coordination of learnerships and mentorship programmes.MAPPP SETAMAPPP SETA

Public – Private Partnerships Public – Private Partnerships

NFVFNFVF

• E.g. the MultiChoice and Department of Labour Film Skills Development Programme that provides internships for a hundred trainees.

• E.g. the MultiChoice and Department of Labour Film Skills Development Programme that provides internships for a hundred trainees.

• Offers bursaries for study at training institutions.• Development of Unit Standards• Financial support for training projects.• Investigating the possibility of establishing a National Film School.

• Offers bursaries for study at training institutions.• Development of Unit Standards• Financial support for training projects.• Investigating the possibility of establishing a National Film School.

Private InitiativesPrivate Initiatives• E.g. the Audiovisual Entrepreneurs of Africa, which is a development

programme for producers in Southern Africa.• M-Net’s New Directions Scriptwriter and Director Development Programme.

• E.g. the Audiovisual Entrepreneurs of Africa, which is a development programme for producers in Southern Africa.

• M-Net’s New Directions Scriptwriter and Director Development Programme.

There is however an industry perception that skills development in the sector needs to be better managed by the key responsible bodies.

There is however an industry perception that skills development in the sector needs to be better managed by the key responsible bodies.

144

Tertiary institutions are also playing a key role in developing the skills required by the AV industry

Tertiary Institutions:

• A number of tertiary institutions nationally offer professional qualifications (Certificates, Higher Certificates, Diplomas, Degrees, Doctorates) in the AV field,

• These courses cover, among others:

Journalism / Photojournalism, Advertising, Production, Media (Operations,

Management, Law, Finance etc) Communication Creative Thinking Public Relations Multimedia Technology Scriptwriting

• These courses cover, among others (cont.):

Directing Editing Location hunting etc

• Some of these institutions include:

Boston Media House: – Registers +-1500 students

annually Tshwane University of

Technology – Pretoria Film School:

– Registers +-40 students annually South African School of Motion

Picture Medium and Live Performance:

– Registers +- 300 students annually

145

From a global perspective, the business environment in South Africa is generally perceived to be supportive of businesses and is conducive for growth

Business Environment:


Locally, perceptions are that the business environment is not conducive for the growth of SMMEs.

Locally, perceptions are that the business environment is not conducive for the growth of SMMEs.

Hospitality• South Africa has a vibrant hospitality industry with many businesses catering

exclusively to the film industry.Business Services• Most major global financial institutions are represented in South Africa e.g. Barclays

Bank, Standard Bank, HSBC.• Competitive insurance services are available e.g. Lloyds, Hollard, AIG, Lion of Africa

etc.• Corporate governance is strengthened through the implementation of King II

recommendations and other governance initiatives e.g. PFMA.• South Africa’s business efficiency has climbed up two places from a ranking of 40 in

2005 to 38 in 2006. This means that the country is improving its innovation, profitability and accountability levels.

• The government has made improving safety and security a key focus area:• Official data for the financial years 2004/05 - 2005/06 shows a 9% overall reduction in 21

types of serious crime.• However, there were concerning increases in car hijackings (3%) and car theft and cash in

transit heists (74%).

Gauteng AV Industry Overview

• Key Trends


• SWOT Analysis


• Key Trends


• SWOT Analysis

148

Gauteng is the growth engine of the country. Gauteng is the growth engine of the country.

Source: Deloitte Gauteng Market Research

Strong economic growth is driving booming demand for entertainment in Gauteng …

Economic Growth:

Economic growth

0

1

2

3

4

5

6

2001 2002 2003 2004 2005

Year

y-o

-y c

han

ge

South Africa

Gauteng

149


… as is the Province’s relatively rich and growing population

Income Distribution:

• Gauteng is home to the wealthiest population.

• Population growth of 20% between 1996 and 2001.

• By 2010 or earlier, Gauteng will be the largest province by population.

• In 2001 500,000 people earned more than R300 000 a year.

Income distribution (2001)

0

100 000200 000

300 000400 000

500 000

600 000700 000

800 000900 000

1 000 000

upto

R4

800

R 9 6

00

R 19

200

R 38

400

R 76

800

R 153

600

R 307

200

R 614

400

R 1 2

28 8

00

R 2 4

57 6

00

R2 45

7 601+

Annual Income (R) (Excludes respondents reporting zero income)

No.

of

People

Gauteng

KZN

Western Cape

150

Gauteng has the largest cinema audiences nationally, reflecting its strong movie-going culture …

Average Cinema Attendance:

Established cinema infrastructure, particularly in wealthy areas, is a key strength of the province.

Established cinema infrastructure, particularly in wealthy areas, is a key strength of the province.


Ster-Kinekor average Weekly Cinema Attendance (2006)

62 391

44 762

34 043

14 032

7 289 5 803

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

Gauteng KZN WesternCape

EasternCape

Free State Limpopo

Nu

mb

er

of

seats

sold

151

… but cinema facilities are concentrated in the wealthier northern suburbs of Johannesburg and Tshwane

Cinema locations in Gauteng:

There is a shift to the inner cities, making them excellent places to invest in cinema facilities.

There is a shift to the inner cities, making them excellent places to invest in cinema facilities.

Source: GFC Spatial analysis

Carlton Centre and Sterland doing well (Sterland Junction has experienced rapid growth)

152

The Gauteng audiovisual production industry achieved revenue of approximately R1,1 billion in 2006 …

Gauteng AV Industry Revenue:

Film is relatively small compared to the rest of the AV industry, but is growing quickly.

Film is relatively small compared to the rest of the AV industry, but is growing quickly.

* This is an estimate of the value of AV industry production and includes only revenue generated in the “cost consumption” phase of the value chain. It thus excludes the revenue of the broader media and entertainment industry e.g. box office revenue, advertising agencies revenue, DVD sales etc.

Audiovisual Industry Production*

R 50m R 99m

R 290mR 310m

R 650m

R 710m

R 15m

R 20m

0

250

500

750

1 000

1 250

2005 2006

Year

Reven

ue (

R m

)

MultimediaTVCommercialsFilm


153

… and is generating a total of over R2 billion a year in economic activity due to multiplier effects

Estimates of Economic Activity:

Contribution to GDP is still relatively small but with ancillary industries could be larger.

Contribution to GDP is still relatively small but with ancillary industries could be larger.

• Total GDPR Gauteng in 2005 = R519 billion

• Industry = R1,1 billion

• Assuming a multiplier of between 2 - 2,5 the industry generates in excess of R 2 billion worth of economic activity and accounts for 0,4 percent of the provincial economy


154

Gauteng’s audiovisual industry is dominated by television series production

• Gauteng is home to approximately 70% of all South African TV productions.

• The total Gauteng TV industry was worth approximately R700m in 2006.

• Most popular South African series are set and produced in Gauteng, such as Generations, Egoli, 7de Laan, Hard Copy etc.

• Major television series can have larger budgets than some films: The Lab cost an estimated R7 500 000, and Jozi H created an estimated 500 jobs.

• Viewership is large: SABC TV: 19m; DSTV/MNet 1,5 m.

Source: Focus interviews and Deloitte Gauteng Market Research

As it is the home of the major broadcasters, Gauteng is the centre of the television industry.

As it is the home of the major broadcasters, Gauteng is the centre of the television industry.

155

Most popular South African TV shows are Gauteng-based

7 out of the top 10 SA TV shows are Gauteng-based

Local content is consistently the most popular content on TV.Local content is consistently the most popular content on TV.

TV Series Viewership

9.3

10.2

13.6

5

10

11.612

1922

0 10 20 30Egoli

Survivor: Panama

Live Lotto drawDays of our Lives Muvhango7de Laan

International SmackdownIzozo ConnectionGenerations

TV

sh

ow

AMPS Viewership

Gauteng-basedOther SA/International


156

Commercials production in Gauteng is dominated by local production

80.0%

7.5%

12.5%

0%

25%

50%

75%

100%

2006

% o

f re

venue

SA/International

Servicing of foreign productions

Locally produced

% of Commercials produced in Gauteng

Breakdown of Commercials Produced in Gauteng:


• 353 commercials were produced in Gauteng compared to 545 elsewhere in the country.

• The average commercial has 46 freelance crew.

• On average, locally produced commercials cost R13.4m, compared to R13,1m for servicing of foreign commercials.

157

Gauteng accounts for the bulk of locally produced films

• Gauteng accounted for approximately 85% of all local film productions in 2006:

The Province is strong in the initial stages of the value chain (pre-production, production and post-production),

In other Provinces, particularly the Western Cape, Eastern Cape and KZN, servicing of international film productions is dominant.

• Gauteng does however provide post-production services for international film productions:

E.g. Blood Diamond, Catch a Fire, The Interpreter, The Flyer etc.

• Access to distribution channels remains a constraint for local filmmakers:

Alternate distribution channels for locally-produced content e.g. DVDs and cellphones, could address this issue in the future.

Film-related activity in Gauteng:

“It’s no use making shoes and then not having a shop to sell them in” - Producer



• Key Trends


• SWOT Analysis

159

Gauteng is perceived as having strong technical skills, with easy access to both the wider South African and international skill pools

Human Resources:

Skills are key to the long-term survival of the industry thus skills development is crucial.

Skills are key to the long-term survival of the industry thus skills development is crucial.

Lack of clarity on the role of MAPPP-SETA

Gaps exist and industry has yet to

conduct a comprehensive

skills audit

Film schools are helping

producing more of the skills

needed

There is a need for experienced staff in senior

positions

Skills in the TV and commercials

sectors are world-class

Source: Focus Interviews

160

Gauteng is strong in technical infrastructure, particularly in the Auckland Park-Randburg corridor

Distribution of Technical Infrastructure:

Source: GFC Spatial Analysis

• The provincial industry is centred around the hubs created by SABC and MultiChoice,

• ICASA has recently issued additional commercial satellite-based subscription broadcasting,

• This is bound to put additional pressure on existing technical infrastructure, both at a provincial and national level.

161

Gauteng’s public infrastructure is excellent, but rapid economic growth is putting pressure on the system

Strong film-specific and public infrastructure is one of Gauteng’s greatest strengths.

Strong film-specific and public infrastructure is one of Gauteng’s greatest strengths.

OR Tambo International handled 16m

passengers last year

Sandton City / Nelson Mandela

Square is the largest retail space

in the southern Hemisphere

The N1 carries 14,000 cars an hour during morning rush

60% of all research and development takes place in the

province

Gautrain will link airport to Sandton,

Rosebank and Tshwane

Johannesburg alone has 9000km

of road

Public Infrastructure:


162

Gauteng has a business environment that is conducive to the AV industry

Key Statistics:

The province is the heart of South African business and industry.The province is the heart of South African business and industry.

• Office and industrial space still amongst the cheapest in the world:

• In 2005, office rentals in London were R8500/m2, compared to Johannesburg rates of R780/m2.

• 78% of SA corporates are based in Johannesburg,

• Good logistics support - permits, accommodation, transportation, insurance, banking services etc,

• Johannesburg is the 8th cheapest city to live in:

• 136th out of 143 global cities.


163

Safety and security however, have emerged as a key concern for the industry

Safety and Security:


• Safety and security have emerged as a key constraint for the provincial AV industry,

• There are two aspects to this issue, both of which impact the competitiveness of the industry:

Perception – There is the perception, both among local and international industry players, that Gauteng is particularly dangerous relative to the rest of the country. This has negatively affected local companies servicing international productions, who continue to lose out to perceived “safer” destinations such at Cape Town.

Reality – That crime is problematic in South Africa, and Gauteng, is well documented. This has directly affected the local provincial AV industry, from a cost and productivity point of view e.g. need for security personnel, increased risk to staff, inaccessibility of certain locations due to crime concerns, higher insurance premiums etc.

• Gauteng then is especially vulnerable to negative publicity around crime, which could dilute international marketing efforts to promote the province as a destination of choice.

• Going forward, particularly in run up to the 2010 World Cup, the GFC will need to develop strategies to mitigate the effect of crime in the province on the industry e.g. provision of accurate, objective safety information.

164

Film budgets in the province rely heavily on subsidies, incentives and soft loans

Funding:

Access to financing is a key constraint, both nationally and in Gauteng.Access to financing is a key constraint, both nationally and in Gauteng.

• From the Deloitte online survey, Gauteng rates relatively poorly with regards to funding and incentives,

• Lack of easy access to finance and incentives is a key constraint to doing business,

• The Province has gaps in funding, but can leverage off national funding mechanisms,

• No Provincial financial incentives.


165

Other incentives are available, such as in the Jhb urban development zone

Thinking beyond ‘traditional’ film incentives:

The GFC has a key role in assisting industry in taking advantage of these incentives by raising awareness of them.

The GFC has a key role in assisting industry in taking advantage of these incentives by raising awareness of them.


166

Title

But filming is only a small part of the film-making processBut filming is only a small part of the film-making process

Gauteng has a good physical environment, not only for shooting of films but for post production as well

Advantages:

- Wide variety of scenery, from gritty urban locations to wide open spaces,

- Particularly strong for New York-type locations,

- Generally dry all year round, clear and sunny, which is good for filming and post-production.

Disadvantages:

- Summer days are shorter than Cape Town,

- Sometimes too dry (dust and static).

Physical Environment:


167

Sound infrastructure and a conducive business environment rate as the most important factors for the local industry

Lack of incentives and access to funding are highlighted as key weaknesses for the province.

Lack of incentives and access to funding are highlighted as key weaknesses for the province.

Industry Perception Survey Output:

Source: Focus Interviews and Online Survey output

Responses to perception survey

2 36 10 9 11

2023 25

30 30 26 22 22 1912 8 7

05

101520253035

Tech

nica

l (fa

ciliti

es &

...

Busines

s en

viro

nmen

t

Human

reso

urce

s

Phys

ical e

nviro

nmen

t

Cost o

f pro

duct

ion

Publ

ic in

frastru

ctur

e

Fund

ing

Safet

y an

d se

curit

y

Ince

ntives

Industry aspect

Nu

mber

of

resp

on

den

ts

Good/ExcellentWeak/AverageN/A

No. of respondents = 33


• Key Trends


• SWOT Analysis

169

Strengths and Weaknesses:

• Strong business environment.• Strong provincial economy leads to strong

domestic demand for entertainment.• Strong existing local film industry.• Availability of TV infrastructure capacity

e.g. studios, crews and support services.• TV infrastructure can be expanded to film

infrastructure.• National tax incentives. • TV and commercials production business

expertise.• Increased tourism profile.

• Strong business environment.• Strong provincial economy leads to strong

domestic demand for entertainment.• Strong existing local film industry.• Availability of TV infrastructure capacity

e.g. studios, crews and support services.• TV infrastructure can be expanded to film

infrastructure.• National tax incentives. • TV and commercials production business

expertise.• Increased tourism profile.

StrengthsStrengths

The Gauteng film industry can grow by leveraging its sound technical infrastructure and domination of the TV and local commercial market …

• Safety and security.• ‘Gauteng’ is a weaker brand than ‘Cape

Town’ which is widely known internationally.

• Lack of provincial incentives and funding.• Lack of co-ordination between national,

provincial and local agencies.• Lack of distribution outlets for local

filmmakers.• Distance from major markets.• Skills exist, but at busy times capacity is

stretched.

• Safety and security.• ‘Gauteng’ is a weaker brand than ‘Cape

Town’ which is widely known internationally.

• Lack of provincial incentives and funding.• Lack of co-ordination between national,

provincial and local agencies.• Lack of distribution outlets for local

filmmakers.• Distance from major markets.• Skills exist, but at busy times capacity is

stretched.

WeaknessesWeaknesses

… while overcoming perceptions around safety and more aggressively marketing the province.

… while overcoming perceptions around safety and more aggressively marketing the province.

170

SWOT:

• Low-cost destinations in South America and Eastern Europe.

• Digitisation requires capital investment and coordination; other locations may implement rapid digistisation quicker than Gauteng.

• Increased film activity in other provinces.• Development of advanced post-production

infrastructure in other provinces e.g. Dreamworld.

• Low-cost destinations in South America and Eastern Europe.

• Digitisation requires capital investment and coordination; other locations may implement rapid digistisation quicker than Gauteng.

• Increased film activity in other provinces.• Development of advanced post-production

infrastructure in other provinces e.g. Dreamworld.

ThreatsThreats

• Digitisation – province has advanced communications network and industry will benefit from reduced cost of filming.

• Hub for productions shooting in remote locations (particularly in Africa).

• Development of Gauteng specific AV policies.• Favourable exchange rate.• Development of technological expertise and

infrastructure.• Capitalising on 2010 Soccer World Cup.• National tax incentives developed for local

production.• Development of training and development

programmes.• Development of the distribution sector.• Use of new business and financing models.• Building on growth areas such as animation.• Dreamworld will bring in more international

productions into SA, and Gauteng can benefit from providing services.

• Digitisation – province has advanced communications network and industry will benefit from reduced cost of filming.

• Hub for productions shooting in remote locations (particularly in Africa).

• Development of Gauteng specific AV policies.• Favourable exchange rate.• Development of technological expertise and

infrastructure.• Capitalising on 2010 Soccer World Cup.• National tax incentives developed for local

production.• Development of training and development

programmes.• Development of the distribution sector.• Use of new business and financing models.• Building on growth areas such as animation.• Dreamworld will bring in more international

productions into SA, and Gauteng can benefit from providing services.

OpportunitiesOpportunities

The industry must also act to grasp opportunities by focusing on creating a ‘film-friendly’ environment

171

The challenge for the industry is how to effectively address the constraints it faces, so it can unlock the province’s growth potential

Summary:

• As South Africa’s key economic hub, the province has a wealthy, growing population hungry for entertainment, which provides a ready audience for both local and international content.

• Gauteng is already a leader in sections of the AV industry, with television emerging as the province’s key strength, followed by local production of commercials and film.

• Technical infrastructure emerges as the province’s competitive edge, and this can be leveraged to benefit from AV activity in other regions and neighbouring countries, as South Africa is increasingly used a location for international AV productions.

• The province is well positioned to expand into new high-growth areas - there are significant opportunities in new technologies such as digitisation and animation, as well as in the shift to alternative content delivery channels e.g. internet, DVD, handheld devices etc.

• Continued growth of the provincial industry is likely, but constraints such as difficulty accessing funding and distribution channels, skills shortages and concerns about safety and security may dampen growth.

High-Level Strategic Recommendations

Optimal Role of the GFC to best Position the Gauteng AV industry for Growth

173

A visionary strategy provides the platform for rapid growth

Versus

Incrementalism[One reason why companies

stagnate]

Incrementalism

[Leads to stagnation]

TIME

GO

AL

Where weare now?

Actions taken in response to circumstances

Where can we be next year?

Focus[One reason why companies grow]

Vision[Leads to rapid growth]

TIME

GO

AL

Actions driven by

strategyWhere arewe now?

Vision of where we need to be five years from now

“Incremental innovation” is the

process of making a few things slightly

better

“Disruptive innovation” provides the opportunity to create something new

and create explosive growth

High-Impact Strategic Approaches:


174

The principles of good strategy highlight the importance of government supporting activities rather than individual firms or projects

• Target productivity-enhancing “activities” instead of individual firms or sectors.

• Provide additional support for new activities, while existing ones can be assisted by removing regulatory or infrastructure-related obstacles.

• Promote an environment conducive to experimentation with products, production and distribution e.g. Innovation hubs.

• Reduce information gaps that may limit private-sector economic activity, while avoiding creating economic opportunities for some firms and not others.

• Avoid creating a form of corporate welfare. Incentives should be designed up front to be discontinued so that companies and the State do not come to depend on specific programmes.

• Maximise public accountability and transparency, which will help to ensure positive net economic benefits and provide clear mechanisms for discontinuing programmes that do not work.

• Take into account economic benefits and costs of interventions.

Principles of Good Strategy:


175

The GFC’s mandate aligns to these principles and does not mandate case-by-case interventions, instead focusing on ‘public goods’

GFC Mandate:

• To promote Gauteng as a preferred film destination

• To facilitate transformation of the film industry

• To regulate and co-ordinate inter-government communication of permit issuance, code of conducts, municipal by-laws and risk management factors through the development and implementation of provincial film policy

• To facilitate, support and promote new investment in film production within Gauteng thereby contribute to economic growth and sustainable job creation

• To create and manage a repository of statistical and industry related information

• To monitor and support local industry developments

• With the approval of the MEC and Board, to provide finance for any projects which will develop filming in the Province

• To develop strategic and business partnership and other co-operative activities with the filming and television industry both locally and internationally


Source: GFC Business Plan (MEFS) 2007 – 2010

176

In line with its mandate, the GFC is focusing on supporting activities that benefit the whole industry, not one or two players

GFC Core Functions:

Marketing Gauteng as a location of choice.Marketing Gauteng as a location of choice.

Source: GFC Business Plan (MEFS) 2007 – 2010

Acting as a centralised industry intelligence hub and resource.Acting as a centralised industry intelligence hub and resource.

Working with, and providing advice to, industry, government agencies and other key stakeholders to support the development and growth

of a sustainable audio-visual industry.

Working with, and providing advice to, industry, government agencies and other key stakeholders to support the development and growth

of a sustainable audio-visual industry.

Promoting and celebrating an active screen culture across the Province.

Promoting and celebrating an active screen culture across the Province.

Supporting the transformation of the sector into a world-class industry and that is reflective of South Africa in its entirety.

Supporting the transformation of the sector into a world-class industry and that is reflective of South Africa in its entirety.

The challenge however lies in translating its mandate into successful interventions.

The challenge however lies in translating its mandate into successful interventions.

177

To successfully execute its mandate, we recommend the GFC focus on five key areas to sustainably grow the industry

Facilitate synergies between attracting international productions and growing the local industry

Facilitate synergies between attracting international productions and growing the local industry

• Develop accessibility to Gauteng specific financial mechanisms e.g. a regional fund,

• Improve logistics support,• Facilitate easy access to varied locations,• Assist the establishment of state-of-the infrastructure,• Support the development of technical expertise.

• Develop accessibility to Gauteng specific financial mechanisms e.g. a regional fund,

• Improve logistics support,• Facilitate easy access to varied locations,• Assist the establishment of state-of-the infrastructure,• Support the development of technical expertise.

Holistic packaging of Gauteng as a Location of Choice

Holistic packaging of Gauteng as a Location of Choice

• Attract local and foreign productions through incentives and availability of finance. Incentives should focus on building industry e.g. incentives for skills transfer,

• Facilitate the building of basic infrastructure for production,• Support the training of below-the-line cast and crew,• Develop studios, sound stages, recording studios etc,• Encourage equity investments,• Develop production clusters.

• Attract local and foreign productions through incentives and availability of finance. Incentives should focus on building industry e.g. incentives for skills transfer,

• Facilitate the building of basic infrastructure for production,• Support the training of below-the-line cast and crew,• Develop studios, sound stages, recording studios etc,• Encourage equity investments,• Develop production clusters.

High-level Strategic Recommendations:

1

2

• Industry benefits from greater coordination and integration,• Ensure clarity on roles,• Deliver according to national, regional and local needs.

• Industry benefits from greater coordination and integration,• Ensure clarity on roles,• Deliver according to national, regional and local needs.

Lobby for greater national coordination and institutional reform

Lobby for greater national coordination and institutional reform

3

178

To meet its mandate, we recommend that the GFC focus on five key areas to sustainably grow the industry (cont.)

Strategic Recommendations:

Our recommendations highlight the need for the GFC to take a focused approach to stimulating activities that will benefit the film industry.

Our recommendations highlight the need for the GFC to take a focused approach to stimulating activities that will benefit the film industry.

Define the Strategic Role of the GFC

Define the Strategic Role of the GFC

• Developing Industry Partnerships,• Funding and incentives support,• Training and development assistance,• Lobbying,• Monitoring and evaluation,• Building of a screen culture,• Facilitate the development and availability of state of the art facilities and

equipment,• Support the industry in the development of new content delivery windows.

• Developing Industry Partnerships,• Funding and incentives support,• Training and development assistance,• Lobbying,• Monitoring and evaluation,• Building of a screen culture,• Facilitate the development and availability of state of the art facilities and

equipment,• Support the industry in the development of new content delivery windows.

4

Explore Alternative Models for the Funding of GFC

Explore Alternative Models for the Funding of GFC

• Long-term strategy to reduce dependency on government and provide value-added services to industry,

• For specific projects, leverage private funds rather than committing government money.

• Long-term strategy to reduce dependency on government and provide value-added services to industry,

• For specific projects, leverage private funds rather than committing government money.

5

179

Availability of technical expertise:•Including practitioners with skills in digital and animation technology.

The GFC needs to take the lead in coordinating the development of a holistic package for the industry.

The GFC needs to take the lead in coordinating the development of a holistic package for the industry.

The Gauteng Advantage:

Availability of state-of-the-art technical infrastructure:• Can help reduce production costs.

Easily accessible and varied locations

Reduced filming cost and hassle through sound logistics support e.g.•Free / subsidised government services,•Reduction in bureaucracy.•Provision of safety and security measures etc

Access to differentiated Gauteng specific financial incentives e.g. • Availability of regional specific funding mechanisms,• Loan guarantees,• Low interest loans,• Government grants, • Private equity etc.

To compete successfully and be a leading destination of choice, Gauteng needs to offer the industry a holistic package

1

180

Bearing in mind that the international industry has potential to generate high revenues within the province ...

Home-grown with Gauteng as location: • Pre-production: SA Story idea from Athol Fugard’s novel• Production: SA, including actors, director etc.• Post-production: SA • Distribution: International

• Production budget: $3m• Spent in Gauteng: R21m• Earned: $5m• Raised profile of SA and Gauteng industry

Home-grown with Gauteng as location: • Pre-production: SA Story idea from Athol Fugard’s novel• Production: SA, including actors, director etc.• Post-production: SA • Distribution: International

• Production budget: $3m• Spent in Gauteng: R21m• Earned: $5m• Raised profile of SA and Gauteng industry

......

Foreign-originated film shot in Gauteng:• Pre-production: US• Production: location SA, some SA actors, rest US• Post-production: US / SA• Distribution: US

• Production budget: $17,5 m• Spent in Gauteng: + R150m• Earned: $23,5 m

Foreign-originated film shot in Gauteng:• Pre-production: US• Production: location SA, some SA actors, rest US• Post-production: US / SA• Distribution: US

• Production budget: $17,5 m• Spent in Gauteng: + R150m• Earned: $23,5 m

......

2

Case Studies:


181

Hybrid Approach

Grow the International (Servicing) Industry

Grow the Local AV Industry

... sustainable growth in the province could be achieved by exploiting the synergies between the local and international AV industries

High growth potential: Develop local AV industry and leverage strengths (e.g. post-production capacity) to attract big foreign players. Local industry benefits from increased revenue and better facilities (AusFilm model).

Develop and support local industry through range of directed initiatives.

Grow the service industry for foreign films; high but sporadic revenue.

The optimal positioning for Gauteng may be to expand its local production market to service international productions as well.

The optimal positioning for Gauteng may be to expand its local production market to service international productions as well.

Industry Approach:

•Benefits of Foreign production: Once-off economic impact with potential spin-offs e.g. Hotel Rwanda (R200m)

•Benefits of Domestic production: Broad economic impact (multiplier of 2 – 2.5) e.g. Jozi H led to the creation of 500 jobs

182

The GFC would need to tailor its functions to meet the different needs of both the international and local industries

• Local AV industry requirements:

Skilled resources,

Access to marketing opportunities,

Access to finance,

Access to distribution channels.

• Additional international AV industry needs:

Access to financing and incentives e.g. rebates,

Logistic support (permits, locations assistance etc),

Understanding of the complexities of the local market e.g. labour legislation,

Assistance with interacting with role players at national, regional and local level.

Industry Requirements:

The GFC needs to ensure that that it effectively balances its support for attracting international films and growing the local Gauteng industry.

The GFC needs to ensure that that it effectively balances its support for attracting international films and growing the local Gauteng industry.


183

Institutional Alignment:

Significant areas of overlap exist between different institutions.Significant areas of overlap exist between different institutions.

An analysis of the provincial landscape suggests a lack of institutional capacity at local level, with overlap at national level

GFC NFVFMetros and

Municipalities

Market as a location of choice

Act as a centralised industry intelligence hub and resource centre

Work with, and provide advice and support to, industry, government agencies and other key stakeholders

Promote and celebrate an active screen culture across region

Support the transformation of the sector into a world-class industry that is reflective of South Africa in its entirety

Act as a permitting office for the region

Assist in the sourcing of finance for any projects which will develop filming in the province

High focus

Neutral

Low focus

3


184

The GFC is one of a number of bodies supporting the AV industry, as part of the province’s strategy to drive economic growth

Stakeholder Relationships:

A complex institutional environment can make it difficult to coordinate industry growth. The GFC should be an interface for the industry, rather than being

another layer of bureaucracy.

A complex institutional environment can make it difficult to coordinate industry growth. The GFC should be an interface for the industry, rather than being

another layer of bureaucracy.

National and local government

Industry

Provincial government

AV Industry

DAC

DTI

NFVF

Industry groups: IPO CPA

DED

OTHER DEPARTMENTS

Strategies: ASGI-SA, Incentives,

Microeconomic Development

Strategy

Strategy: Provincial Economic strategy

Source: Deloitte Gauteng Market Research and Focus Interviews

185

An institutional structure that contains national, regional and local structures would benefit from greater co-ordination and integration …

Proposed Institutional Structure:

… as well as gaining from clarity on roles and the ability to deliver at the appropriate level.

… as well as gaining from clarity on roles and the ability to deliver at the appropriate level.



Local Film

Office

Local Film

Office

LocalFilm Office

LocalFilm Office

Local Film

Office

Local Film

Office

Local Film

Office

Local Film

Office

Local Film

Office

Local Film

Office

Local Film

Office

Local Film

Office

Local Film

Office

Local Film

Office

Local Film

Office

Local Film

Office







Local Film

Office

Local Film

Office

Nati

on

al

e.g

. N

FV

F?

Reg

ion

al e.g

. G

au

ten

gLocal e.g

. Ekh

uru

len

i

Supporting Agencies/Organisation

186

The GFC needs to play an increasingly strategic role in growing the provincial AV industry, even as it fulfils its stated mandate

Proposed GFC Role:

Best PracticeGFC Mandate

4

• Industry Transformation

• Industry Intelligence Hub

• Monitoring and Evaluation

• Destination Marketing

• Strategic Industry Partnerships

• Funding and Incentives

• Training and Development

• Policy Development and Implementation

• Lobbying

• Logistics Support

• Audience Development

• Technology

“Overlap”

187

This role however will need to evolve in line with the demands of its rapidly changing operating environment

Evolving Role:

Declining Box Office AttendanceDeclining Box Office Attendance

Changing business ModelsChanging business Models

Shift in Production Funding Models

Shift in Production Funding Models

DigitisationDigitisation

• Actively build a screen culture in underserviced areas/demographics and support the development of alternative content delivery channels.

• Actively build a screen culture in underserviced areas/demographics and support the development of alternative content delivery channels.

• Support the industry to develop new content delivery windows.

• Support the industry to develop new content delivery windows.

• Promote the development of a variety of funding models from both public and private sources.

• Promote the development of a variety of funding models from both public and private sources.

• Facilitate the development of technical infrastructure and expertise as the industry becomes increasingly digitised and new technologies emerge.

• Facilitate the development of technical infrastructure and expertise as the industry becomes increasingly digitised and new technologies emerge.

TREND GFC RESPONSE / ROLE

188

Proposed Role of GFC:

The GFC needs to strategically drive the creation of a film-friendly environment in Gauteng


Role of Film Commissions

Technology• Facilitate availabilty of

state-of-the art technology to attract production and post-production acitvities

Logistics Support

Human Resources• Support the development

of skilled human resources

Funding and Incentives• Develop the local industry

by attracting productions Lobbying


Industry Partnerships

Marketing• International - National• Domestic - Provincial

NationalGFC

(Regional) LocalMonitoring and Evaluation

Policy Development

189

Though the GFC is fully government funded, it could consider other funding options to reduce its dependence on government grants

Alternative GFC Revenue Model:

However, given the GFC’s mandate, it is likely to remain primarily government funded in the short-term.

However, given the GFC’s mandate, it is likely to remain primarily government funded in the short-term.

100%Public

funding

100%Public

funding

100%Private funding

100%Private funding

GFC

Increasing self-generation of funds and institutional funding

• 5% self-generation of funding e.g. fees for resource centre information

• 10% institutional funding e.g. IDC

“Self-generated funds could be obtained by

charging fees for services and … a fee-paying membership base”



“Though self-generated funding is not viable at present, sales of permits or levies on movie tickets are a future option”

“Though self-generated funding is not viable at present, sales of permits or levies on movie tickets are a future option”

“Public-private partnerships… could raise funds to be used for specific projects”

“Public-private partnerships… could raise funds to be used for specific projects”





5

Source: Deloitte Gauteng Market Research and Focus Interviews

190

In conclusion, Gauteng film industry has the potential to be a significant economic force with the right strategy in place

Key considerations for a film sector development strategy:

GFC has within its grasp the opportunity to make a meaningful contribution to the Province’s AV industry.

GFC has within its grasp the opportunity to make a meaningful contribution to the Province’s AV industry.

• Build on the strong already-existing base of TV, commercials and local film: Gauteng is already a leader in sections of the AV industry.

• Focus on its value proposition: Where can the GFC add greatest value to industry?

• Assist the industry in developing new markets: Explore options for film, TV and commercials.

• Support activities rather than specific projects.

• Align provincial strategy to national strategies: The GFC strategy should align with national AV sector strategies, the Media/Entertainment Sector strategy and overall Economic strategy of the province.

Thank You!

Appendices

I. Charters

II. References

III. Supporting Documentation

Appendices

I. Charters

II. References


194

We developed an overall project charter that outlined the project’s key objectives, activities and deliverables

•To acquire sound market intelligence on the local and international audio-visual markets:

• Comprehensive overview of the SA and Gauteng audio-visual industries

• Global trends, best practices and industry benchmarks

•To assess the competitiveness of the Gauteng audio-visual industry:

• SWOT and Critical Success Factors•To make strategic recommendations to

the GFC: • Optimum positioning of the Gauteng

audio-visual film industry• Optimal role of the GFC

ObjectivesObjectives

• Key research and analysis findings, including:

• Global trends, best practices and industry benchmarks

• Overview of the Gauteng and SA audio-visual markets

• Gauteng audio-visual industry sector competitiveness assessment

• High-level strategic recommendations:• Optimum positioning of the Gauteng

audio-visual film industry• Optimal role of the GFC

DeliverableDeliverable

• Access to, and availability of, data:• GFC documentation, benchmarking

data etc• Availability of GFC resources• Support from GFC management to

expedite decision making• Sound planning and effective time

management• Integration of work streams • Access to key stakeholders

Critical Success FactorsCritical Success Factors• Jacques Stoltz, Senior Marketing

Manager

Project SponsorProject Sponsor

Project Charter:

• Review existing client documentation and other available data:

• Identify gaps • Analysis of the SA audio-visual market:

• Operating landscape • Regulatory environment • Incentives and Financing• SWOT

• Analysis of the Gauteng audio-visual market:

• Market activity • Market supply (facilities, skills,

infrastructure, funding etc) • Competitive positioning• “As-Is” review of the GFC• SWOT

• Review global trends, best practice and industry benchmarks:

• Competitor countries /destinations• Other Film Commissions / Offices• Critical success factors

• Prioritise and validate key issues and potential opportunities (Steercom)

• Consolidate findings and outcomes for submission to GFC Board

Key ActivitiesKey Activities

• 1 x Project Director • 1 x Project Manager • 1 x 3 Consultants • 2 x Subject Matter Experts (SME’s)• Global Research Center (GRC) Support

Project Resources (Deloitte)

Project Resources (Deloitte)

195

Stream Charter: Gauteng Market Analysis

• To conduct a comprehensive overview of the Gauteng audio-visual market

• To assess the competitiveness of the Gauteng audio-visual market

• Identify key challenges and potential opportunities

• To conduct a strategic review of the GFC and its operations

• Role and value proposition • Make strategic recommendations

(high-level):• Critical success factors for both the

Gauteng audio-visiual industry and the GFC

ObjectivesObjectives DeliverableDeliverable

• Access to, and availability of, reliable statistical data

• Comparability of different sources of data

• Availability of GFC resources• Sound planning and effective time

management• Integration with other work streams • Access to key stakeholders

Critical Success Factors Critical Success Factors

Stream Charter:

• Develop work stream story board• Develop issue based hypothesis to

guide research on the Gauteng audio-visual industry

• Review existing client documentation and other available data

• Identify gaps• Perform desktop research• Identify industry players• Conduct interviews with industry

players• Set up detailed questionnaires

• Review of information obtained• Evaluate findings

• Analysis of the Gauteng audio-visual market

• Establish competitive positioning• Evaluate GFC against similar bodies• Evaluate findings against global best

practice • GFC “As-Is” analysis• Develop detailed SWOT analysis

• Prioritise and validate key issues and potential opportunities

• Present insights from research to project team for review

• Integrate stream output into final project deliverable


• 1 x Deloitte Consultant• 2 x SME’s

Stream Resources (Deloitte)


• Comprehensive overview of the Gauteng udio-visual industry

• Market activity and facilities• Market demand and supply• Competitive positioning• Skills and resource availability• Local industry expectations and

requirements• Key challenges and opportunities

• Overview of the GFC• Mandate and role• Structure• Operations and activities• Value proposition• Key challenges and opportunities

• High-level strategic recommendations

196

Stream Charter: South Africa Market Analysis

• To conduct a comprehensive overview of the South African audio-visual market:

• Identify key challenges and potential threats

• Make high-level strategic recommendations

• How to leverage the strengths of, and opportunities within, the national audio-visual industry

ObjectivesObjectives DeliverableDeliverable

• Access to, and availability of, data• Availability of GFC resources• Sound planning and effective time

management• Integration with other work streams • Access to key stakeholders


Stream Charter:

• Develop work stream story board • Develop issue based hypothesis

to guide research on SA market• Review of current information,

including available information from GFC

• Identify gaps• Identify industry players and similar

bodies to GFC• Conduct desktop research• Design and conduct focus interviews • Collate , evaluate and analyse findings• Analyse the SA audio-visual market• Establish the competitive framework

on a national level • Identify competitive positioning• Analyse regulatory environment,

incentive schemes and funding• Develop detailed SWOT analysis• Prioritise and validate key issues and

potential opportunities• Identify critical success factors • Present insights from research to the

project team for review• Integrate stream output into final

project deliverable


• 1 x Deloitte Consultant• 2 x SME’s



• Comprehensive overview of the SA audio-visual industry.

• Current competitive framework in terms of skill and facilities

• Current complementary and competitive activities in SA

• Current level of demand in SA• Current competitive positioning in the

SA market• Overview of sector competitiveness

outlining key challenges and potential opportunities

• High-level strategic recommendations

197

Stream Charter: Best Practice

• To review global trends, best practices and industry benchmarks:

• Film Commissions/Offices• Competitor countries and

destinations• To identify opportunities and

challenges• Make strategic recommendations

(high-level):• Critical success factors for both the

Gauteng audio-visual industry and the GFC

ObjectivesObjectives

• Global trends, best practices and industry benchmarks:

• Film Offices • Audio-visual industries

• An overall assessment of factors to:• Enable the GFO to be a leader in

the audio-visual industry• Make the Gauteng region a

destination of choice• Strategic recommendations (high-

level)

DeliverableDeliverable

• Timely and comprehensive identification of data requirements

• Maintain constant contact with the GRC & BICS to ensure that relevant information is obtained

• Timely feedback and support from the GRC & BICS

• Access to, and availability of, local industry data

• Sound planning and effective time management

• Integration with other work streams


Stream Charter:

• Develop work stream story board• Develop issue based hypothesis to

guide research on global trends, best practice and industry benchmarks

• Review existing client documentation and other available data:

• Identify gaps • Draft research brief to be used by the

GRC & BICS:• Contact GRC & BICS and commission

research• Conduct desktop research• Conduct focus interviews with key

industry experts (DTT)• Review information obtained:

• Identify best practice, trends and benchmarks

• Identify challenges and opportunities for the Gauteng Film Commission & Gauteng audio-visual industry

• Identify performance measures used by global:

• Film offices• Audio-visual industries

• Identify critical success factors• Present insights from research to the

project team for review• Integrate work stream output into final

project deliverable


• 1 x Deloitte Consultant• 2 x SME’s• GRC Support



Appendices

I. Charters

II. References


199

References

1. American Film Market Website (2007)

www.afma.com

2. Animation Production Training Initiative Website(2007)

www.anamazing.co.za

3. Andalucia Film Commission Website (2007)

www.andaluciafilm.com

4. Animation School Review Website (2007)

www.animationschoolreview.com

5. Associated Press Newswires (2005): ‘Mexico Exchange Rate Favours Foreigners’

www.ap.org

6. Audio-visual Federation Review (2006): ‘Film and Television Production in Ireland’

7. Australian Film Commission Website (2006): ‘The Economic Contribution of a Film

Project’, 2006

8. Australia Film Commission Website (2007): National Survey of Feature Film and TV

Drama Production, 2005/2006

www.afc.gov.au

9. Australia Film Commission Website (2007): Fast Facts, 2006

www.afc.gov.au

http://www.afma.com/

http://www.anamazing.co.za/

http://www.andaluciafilm.com/

http://www.animationschoolreview.com/

http://www.ap.org/

http://www.afc.gov.au/


200

References

10. Australia Film Commission Website (2007): Corporate Plan, 2006/07-2008/09

www.afc.gov.au

11. Australia Film Commission Website (2007): Report on State Owned Enterprises by

the Minister of Arts and Sport

www.afc.gov.au

12. Australia Film Commission Website (2007): Service Charter, 2006

www.afc.gov.au

13. Australia Film Commission Website (2007): Annual Report, 2005/06

www.afc.gov.au

14. Australia Film Commission Website (2007): ‘Statement of Intent by the Australian

Film Commission for the Minister of Arts and Sports’

www.afc.gov.au

15. Australia Film Commission Website (2007): ‘About the AFC’s Film Development

Funding Programs’

www.afc.gov.au







201

References

16. Australia Film Commission Website (2007): National Survey of Feature Film and

TV Drama Production, 2005/06

www.afc.gov.au

17. Australia Film Commission Website (2007): Australia’s audio-visual Marketswww.afc.gov.au

18. Australia Film Commission Website (2007): Film Agency Funding in Australia

www.afc.gov.au

19. Australia Film Commission Website (2007): The Economic Contribution of a Film

Project

www.afc.gov.au

20. Australia Film Commission Website (2007): AusFilm Fact Sheet on Incentives

www.afc.gov.au

21. New York Film and TV Office Website (2007) Boston Consulting Group

Presentation: ‘New York Visual Media Industry and the Digital Age’ ,2000

www.nyc.gov

22. California Film Commission Website

www.film.ca.gov






http://www.nyc.gov/

http://www.film.ca.gov/

202

23. Cape Film Commission Website

www.capefilmcommission.co.za

24. Centre for Justice and Crime Prevention Website (2007):’Crime and Victimisation

Mapping Tool’,

http://www.cjcp.org.za

25. CineEuropa Website, www.cineuropa.org

26. Commercial Producers Association (CPA) Industry Surveys, 2005 - 2006

27. Community, Social and Personal Services Industry Survey: ‘Gauteng Motion Picture

Statistics’, www.statssa.gov.za

28. Deloitte (2007): ‘The Digital Turn On, 2007’

29. Deloitte (2006): ‘Overview of the Film Sector in the United Kingdom, 2006’

30. Deloitte (2007): ‘Movies and Music Quarterly Industry Report, 3rd Quarter, 2006’

31. Deloitte (2003): ‘Understanding the Business of Hollywood, 2003’

32. Department of Arts and Culture: ‘Cultural Industries Growth Strategy, 1998’

33. Department of Trade and Industry: ‘CSP Report, 2005’

34. Department of Trade and Industry: ‘Film and Television Production Rebate Guidelines’

35. Department of Trade and Industry South Africa (2005): ‘Film and TV Sector

Development Strategy, 2005’

36. Durban Film Office Website, www.durbanfilmoffice.co.za

References

http://www.capefilmcommission.co.za/

http://www.cjcp.org.za/

http://www.cineuropa.org/

http://www.statssa.gov.za/

http://www.durbanfilmoffice.co.za/

203

37. Durban Film Office: ‘KwaZulu Natal Film Commission Draft Business Plan 2005 –

2008’

38. Evolution Research Solutions (2005): ‘Commercial Producers Industry Survey’,

2005

39. Evolution Research Solutions (2006): ‘Commercial Producers Industry Survey’,

2006

40. European Observatory (2006): ‘World Market Film Trends Focus, 2006’

41. European Observatory (2006: ‘Public Aid Mechanisms for the Film and the

Audiovisual Industries in Europe’

42. Film LA Annual Report 2006

43. Film LA Inc Website, www.eidc.com

44. Film New Mexico Website

www.nmfilm.com

45. Filmmaker South Africa (2007): ‘Animation, the Next Big Break?’, 2007

www.filmmaker.co.za

46. www.findarticles.com

47. Financial Express Website

www.financialexpress.com

References

http://www.eidc.com/

http://www.nmfilm.com/

http://www.filmmaker.co.za/

http://www.findarticles.com/

http://www.financialexpress.com/

204

References

48. Galicia Film Commission Website

www.filmcommissiongalicia.org

49. Gauteng Film Commission (2007): ‘Spatial Analysis’, 2007

50. Gauteng Film Commission (2007): ‘Business Plan - Medium Term Expenditure

Framework Submission 2007-2010’

51. Harvard Business School website

www.hbs.edu

52. Hollywood Reporter (2007): ‘IRS Ruling Stings Film Production, 2007’

53. Hollywood Reporter (2006): ‘Location Spotlight - Mexico Locations, 2006’

54. Institute of Security Services Website

www.iss.co.za

55. Internet Movie Database Professional (2007): ‘Internet Movie Statistics’, 2007

www.imdpro.com

56. Irish Department of Arts, Sports and Tourism Report 2005

57. Irish Film Board Website

58. Japan Economic Monthly (2005): ‘Japan Animation Industry Trends’, 2005

http://www.filmcommissiongalicia.org/

http://www.hbs.edu/

http://www.iss.co.za/

205

References

59. Lotteries Act, 1997: Regulations Relating to Allocation of Money in National Lottery

Distribution Trust Fund

60. Los Angeles County Economic Development Corporation website

www.laedc.org

61. Los Angeles Times (2006): ‘New York is Making a Comeback As Film

Production Ramps Up’, 2006

62. Los Angeles Times Website

www.latimes.com

63. Madrid Film Commission Website

www.madridfilmcommission.com

64. MAPPP SETA ’Sectors Skills Update 2008/9’ v.1

65. Marketing Mix Volume 25 Issue No. 1 / 2

66. Motion Picture Association (2006): U.S. Theatrical Market Statistic Report,

2006

67. Monitor Report 2001, US Runaway Film and Television Production Study Report

68. National Productivity Institute (2007): ‘South Africa’s 2007 Standing in World

Competitiveness’, 2007

69. New Jersey Economic Development Authority - Film Production Assistance in New

Jersey

http://www.laedc.org/

http://www.latimes.com/

http://www.madridfilmcommission.com/

206

References

70. New Jersey Film Website

www.njeda.com

71. New Mexico Economic Development Department Website

www.newmexicodevelopment.com

72. Producers Masterguide Film Production Directory and Guideline, 2005

New York Film and TV Office Website

www.nyc.gov

73. Oxford Economic Forecasting (2004): ‘Economic Contribution of the UK Film

Industry, 2004’

74. PriceWaterHouse Global Entertainment and Media Outlook, 2006-2010

www.researchandmarkets.com

75. Screen Africa Website

www.screenafrica.co.za

76. Screen Africa News Volume 19 March 2007

77. Sithengi Website

www.sithengi.co.za

http://www.njeda.com/

http://www.newmexicodevelopment.com/

http://www.nyc.gov/

http://www.researchandmarkets.com/

http://www.screenafrica.co.za/

http://www.sithengi.co.za/

207

References

78. South African Advertising Research Foundation (2007): ‘All Media and Products

Survey’

www.saarf.co.za

79. South African Gateway Website

www.southafrica.info

80. South African Federation Against Copyright Theft (SAFACT) website: Piracy

Figures 2006, http://www.safact.co.za/statistics.htm

81. South African Labour and Development Research Unit (2006): ‘The South African

Feature Film Industry: Comparative Analysis’, 2006

82. Statistics South Africa (2001): ‘Census 2001’

83. Statistics South Africa (2007): ‘Gross Domestic Product 2006’

84. Strategic Economic Solutions (2006): ‘A Strategic Economic Analysis of the

Cape Town and Western Cape Film Industry’, 2006

85. Reed Business Information website

www.reedbusiness.com

86. Tenerife Film Commission Website, www.tenerifefilm.com

87. The Economist (2006): ‘Nollywood Dreams – Nigeria’s Film Industry, 2006’

89. The Film Makers Guide to South Africa, 2007

http://www.saarf.co.za/

http://www.southafrica.info/

http://www.safact.co.za/statistics.htm

http://www.reedbusiness.com/

http://www.tenerifefilm.com/

208

References

90. The Times web article, ‘Joburg is World’s 8th Cheapest City’, 20th June 2007

www.thetimes.co.za

91. Trade and Industry Monitor: ‘Microeconomic Development Strategy for the

South African Film Sector’

92. United Kingdom Film Council Annual Report 2006

93. United Kingdom Film Council Website

www.ukfilmcouncil.co.uk

94. United States Department of Labour Website

www.dol.gov

95. United States Entertainment Industry (2006): Market Statistics, 2006

Value Based Management Website

www.valuebasedmanagement.net/methodsbcgmatrix.html

96. Western Cape Department of Economic Development and Tourism (2005): ‘Film

Sector 2005 Western Cape Micro Economic Development Strategy’, 2005

97. Western Cape Trade and Investment Promotion Agency: ‘Film and Multimedia

Sector Brief 2005 – 2006’

98. Wikipedia Website

www.wikipedia.org

99. Wall Street Journal (2004): ‘Private Equity Goes Hollywood’, 2004

http://www.thetimes.co.za/

http://www.ukfilmcouncil.co.uk/

http://www.dol.gov/

http://www.valuebasedmanagement.net/methodsbcgmatrix.html

http://www.wikipedia.org/

Appendices

I. Charters

II. References


210

The audio-visual industry value chain contains value enhancing activities and role players that stimulate the growth of the industry (cont.)

Detailed Value Chain:


211

A number of other potential benchmark countries were also considered

Comparator Countries:

Gauteng aspires to establish a flourishing high quality audio-visual industry.Gauteng aspires to establish a flourishing high quality audio-visual industry.

Brazil • Similar to Mexico i.e. representative of Latin America.

Canada • A mature industry, similar to the UK. The UK however was selected due to language similarities, closer time zone, ease of access to data and an interlinked history with South Africa.

Colombia • Questions regarding the legitimacy of sources of funding/financing.

Croatia • Primarily competing from a location point of view, rather than from a ‘holistic package’ basis.

Dubai • The investment in Studio City an initiative of the Crown Prince rather than government per se. Industry at a very early developmental stage.

India • Strong domestic market characterised by high volumes of sometimes poor quality content.

Nigeria • Characterised by high volume but fairly poor quality content; not in line with GFC’s aspirations for the local industry. Lessons to be learnt from distribution model i.e. made-for-video/DVD content.


212

All the countries we reviewed provide support for funding and are focused on promoting their locations

• Funding of script development and production• Input into skills development, investment, exports and R&D

government policy development• Support to screen culture development• Promotion of use of digital platforms• audio-visual archiving

• Funding of script development and production• Input into skills development, investment, exports and R&D

government policy development• Support to screen culture development• Promotion of use of digital platforms• audio-visual archiving

Australia (National)Australia (National)

• Promotion of the UK film industry in the global market• Development of distinctive UK films• Promote distribution and reach to more audiences• Support appropriate training of talented youth• Support to make people appreciate UK films and film

making• Development for access to cinema history and heritage

• Promotion of the UK film industry in the global market• Development of distinctive UK films• Promote distribution and reach to more audiences• Support appropriate training of talented youth• Support to make people appreciate UK films and film

making• Development for access to cinema history and heritage

United Kingdom (National)United Kingdom (National)

• Assistance with location selection and permits• Post-production assistance• Support for the acquisition of film resources• Development of guidelines for filming in their areas• Financial incentives• Internships• Liaison with communities and government• Labour relations assistance

• ......

• ......

• Assistance with location selection and permits• Post-production assistance• Support for the acquisition of film resources• Development of guidelines for filming in their areas• Financial incentives• Internships• Liaison with communities and government• Labour relations assistance

• ......

• ......

United States (State)United States (State)

• Promotion and development of film, audio-visual and multimedia production

• Promotion of Spain as a location for productions• Coordination, cooperation and collaboration of activities of

film commissions and offices operating in Spain• Facilitating formal debates on the industry

• Promotion and development of film, audio-visual and multimedia production

• Promotion of Spain as a location for productions• Coordination, cooperation and collaboration of activities of

film commissions and offices operating in Spain• Facilitating formal debates on the industry

Spain (National)Spain (National)

• Promotion of the high quality domestic productions• Promotion of the distribution of Mexican films nationally

and internationally• Facilitating contact of producers with government agencies

that support production• Advises foreign film producers on licenses, customs and

import regulations, fiscal matters etc.

• Promotion of the high quality domestic productions• Promotion of the distribution of Mexican films nationally

and internationally• Facilitating contact of producers with government agencies

that support production• Advises foreign film producers on licenses, customs and

import regulations, fiscal matters etc.

Mexico (National)Mexico (National) Ireland (National)Ireland (National)

Different Roles of Film Commissions:

• Funds development and production of Irish films• Location promotion• Ensuring that Ireland is film friendly• Partners with other government agencies to market, sale

and distribute films and for training and development• Creation of employment is a criterion for approval of

applications for funds

• Funds development and production of Irish films• Location promotion• Ensuring that Ireland is film friendly• Partners with other government agencies to market, sale

and distribute films and for training and development• Creation of employment is a criterion for approval of

applications for funds


213

Film Commissions typically have mandates that are developed by government in consultation with key industry stakeholders

Minister of Sports and Arts and the Department of Communication, Information, Technology and Arts developed the mandate.

Minister of Sports and Arts and the Department of Communication, Information, Technology and Arts developed the mandate.

Los Angeles

Los Angeles

Various representatives involved: • The entertainment industry,• Labour and trade,• Local businesses, • Civic and community bodies etc.

Various representatives involved: • The entertainment industry,• Labour and trade,• Local businesses, • Civic and community bodies etc.

AustraliaAustralia


Mandate Development:

214

The Madrid Film Commission is funded by a variety of public sector organisations

Revenue Model: Madrid Film Commission

Its sponsors include:• The Entity for the Management of the Rights of Audio-visual

Producers• The Federation of Spanish Audio-visual Producers

Associations• The Society of Filming, Cinema and Television Commissioners• The Community of Madrid Culture and Sports Commission• Madrid City Council Arts Commission

Its sponsors include:• The Entity for the Management of the Rights of Audio-visual

Producers• The Federation of Spanish Audio-visual Producers

Associations• The Society of Filming, Cinema and Television Commissioners• The Community of Madrid Culture and Sports Commission• Madrid City Council Arts Commission

This encourages the Madrid Film Commission to work closely with the other institutions to advance its objectives.

This encourages the Madrid Film Commission to work closely with the other institutions to advance its objectives.


215

Effective performance management, including monitoring and reporting, ensures accountability in Film Commission operations

Accountability:

It may be beneficial for the GFC to implement a service charter, to improve stakeholder perceptions around accountability.

It may be beneficial for the GFC to implement a service charter, to improve stakeholder perceptions around accountability.

• The AFC’s current Service Charter describes the range of services and service standards that clients can expect. The AFC has recently revised its Service Charter to consolidate the previously separate Service Charters of the AFC and the NFSA into one document.

• In 2005/06 the AFC recorded 19 formal compliments for its service standards and over 370 ‘informal’ compliments in the form of emails and telephone calls. Four complaints were recorded against the service charter.

Service charter

• In providing financial assistance and grants to organizations in the screen industry, the AFC is publicly accountable under various Commonwealth Acts, codes and protocols. These include (but is not limited to) the Australian Film Commission Act 1975 and the Commonwealth Authorities and Companies Act 1997.

• These Guidelines are intended to assist AFC-funded organizations to identify and implement better governance policies and procedures to fit their own needs and circumstances.

• The AFC, in considering grant applications for the forthcoming and subsequent funding rounds, will take into account subsequent governance standards of AFC-funded organizations, as part of its public accountability responsibility.

AFC Corporate

Governance Guidelines

The AFC Has Developed a Service Charter to Instil Accountability


216

Best-in-class Film Commissions typically operate within a clearly defined governance framework

Governance Framework: AFC

AustralianFilm

CommissionGovernanceFramework

AustralianFilm

CommissionGovernanceFramework

• The legal framework for the AFC’S corporate governance practices is set out in the Australian Film Commission Act 1975 and the Commonwealth Authorities and Companies Act, 1997.

• The legal framework is supplemented by a number of other internal protocols and measures that are consistent with the Department of Finance and Administration – Governance Arrangements for Australian Government Bodies (2005), the DCITA publication on General Guidance for Directors of Statutory Authorities (2004) and the Australian National Audit Office publications on Public Sector Governance.

• The AFC has established a number of governance practices and procedures to ensure it adheres to appropriate levels of accountability, disclosure and transparency.

• The legal framework for the AFC’S corporate governance practices is set out in the Australian Film Commission Act 1975 and the Commonwealth Authorities and Companies Act, 1997.

• The legal framework is supplemented by a number of other internal protocols and measures that are consistent with the Department of Finance and Administration – Governance Arrangements for Australian Government Bodies (2005), the DCITA publication on General Guidance for Directors of Statutory Authorities (2004) and the Australian National Audit Office publications on Public Sector Governance.

• The AFC has established a number of governance practices and procedures to ensure it adheres to appropriate levels of accountability, disclosure and transparency.

CorporateGovernanceCorporate

Governance

• The members of the AFC are appointed by the Governor-General on the nomination of the Minister of the Arts. All Commissioners serve in a non-executive capacity.

• Under section 16 of the AFC Act, Commissioners can be appointed for a period not exceeding 5 years, with the provision for re-appointment.

• The Commission is responsible for the governance practices of the AFC. To this end, Commissioners participate in ongoing corporate governance workshops.

• The members of the AFC are appointed by the Governor-General on the nomination of the Minister of the Arts. All Commissioners serve in a non-executive capacity.

• Under section 16 of the AFC Act, Commissioners can be appointed for a period not exceeding 5 years, with the provision for re-appointment.

• The Commission is responsible for the governance practices of the AFC. To this end, Commissioners participate in ongoing corporate governance workshops.

CommissionersCommissioners


217

Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC

• Film Australia is one of the nation’s largest producers of television documentaries and educational programs, whose mission is to create an audio-visual record of Australian life. Film Australia produces programs under the National Interest Program, a contract with the Australian Government to devise, produce, distribute and market productions that deal with matters of national interest or illustrate and interpret aspects of Australian life.

• Film Australia is the executive producer on these productions.

• The AFTRS is the national centre for professional education and advanced training in film, broadcasting and interactive media for Australian citizens and permanent residents. A variety of full-time courses (mostly at postgraduate level) are conducted in Sydney and hundreds of short courses are conducted nationwide each year. AFTRS also offers online courses.

The ACTF is a national non-profit organization encouraging the development, production and dissemination of television programs, films and other audio-visual media for children, and the promotion of these programs in the community.

The FFC is the government’s principal agency for funding the production of Australian film and television programs. It invests in feature films, telemovies, mini-series and documentaries which have financial backing from the film and television marketplace, both domestic and international. The FFC’s share of returns from around the world are re-invested in production

The FFC also provides information on production, distribution and legal matters to applicants intending to seek funding and suggests advice be sought before negotiations begin with potential co-financing and distribution partners.

Australian Film Television And Radio

School (AFTRS)

Australian Children’s Television Foundation

(ACTF)Film Australia

Film Finance Corporation Australia (FFC)

Film Agencies



218



Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC (cont.)

These institutions complement each others roles and mandates.These institutions complement each others roles and mandates.

• ScreenACT is the Australian Capital Territory (ACT) Office of Film, Television and Digital Media. ScreenACT aims to advance the capability and professionalism of these industry sectors in Canberra and the surrounding region, and promote the ACT as a filming location. The agency liaises with organizations and persons of interest to the industry sectors.

The FTO offers support for project development, production finance and industry and audience initiatives in New South Wales. Established and emerging talent is actively supported through initiatives such as the Aurora Script Workshops.

Industry and audience development grants encourage a sustainable industry, professional development and promote public interest in screen content as a n art form and medium of communication. A Regional Filming Fund exists to support filming outside the Sydney metropolitan region.

Film Victoria is a government agency that provides leadership and assistance for film, television and digital media production in Victoria. The agency develops and invests in both projects and people, and promotes Victoria as a centre for production nationally and internationally.

Film Victoria provides filmmakers with assistance and information on locations, permits immigration, customs, taxation, unions, studios and facilities. Two incentive funds are available to encourage film and television producers to bring their projects to Victoria. Film Victoria offers a range of programs to assist filmmakers with content creation, production investment and professional development.

It also supports cross-platform development between the traditional and new sectors in niche markets such as animation and game innovation.

ScreenACTNew South Wales Film and Television

Office (FTO)Film Victoria

Film Agencies

219

In Spain, there are various government and private related agencies that support the audio-visual industry



• Support, promote and plan Spanish audio-visual activities in the areas of production, distribution and screening

• To recover, restore, preserve, research and disseminate film heritage

• To contribute to the training of professionals in the different film disciplines

• To maintain relations with international and national bodies with similar purposes

• To co-operate with the autonomous communities in audio-visual arts

• Support, promote and plan Spanish audio-visual activities in the areas of production, distribution and screening

• To recover, restore, preserve, research and disseminate film heritage

• To contribute to the training of professionals in the different film disciplines

• To maintain relations with international and national bodies with similar purposes

• To co-operate with the autonomous communities in audio-visual arts

• Promote and develop the audio-visual production industry

• The promotion of Spain as a location for productions

• Coordination, cooperation and collaboration in activities developed by regional film commissions

• Facilitate formal debates on the industry

• Promote and develop the audio-visual production industry

• The promotion of Spain as a location for productions

• Coordination, cooperation and collaboration in activities developed by regional film commissions

• Facilitate formal debates on the industry

• Non-profit making organisation• Created by the Andalusia Radio and Television• Advises national and foreign producers

regarding production logistics• Promotes the Andalusia region• Create and coordinate Film Commission

regional offices in the Andalusian autonomous region

• Information on locations• Liaison between production companies and

government administration

• Non-profit making organisation• Created by the Andalusia Radio and Television• Advises national and foreign producers

regarding production logistics• Promotes the Andalusia region• Create and coordinate Film Commission

regional offices in the Andalusian autonomous region

• Information on locations• Liaison between production companies and

government administration

The Film and Audio-visual Arts Institute

Nati

onal

The Spain Film Commission

Nati

onal

Andalusia Film Commission

Regio

nal

Regio

nal

• Negotiate filming guidelines with city, town and district councils

• Manage a website• Extend information on logistic services• Process film permits• Negotiate filming permit prices and conditions

with city, town, district councils, churches and private individuals

• Promote locations• Negotiate economic advantages (discounts,

subsidies etc.) to attract audio-visual productions

• Negotiate filming guidelines with city, town and district councils

• Manage a website• Extend information on logistic services• Process film permits• Negotiate filming permit prices and conditions

with city, town, district councils, churches and private individuals

• Promote locations• Negotiate economic advantages (discounts,

subsidies etc.) to attract audio-visual productions

Madrid Film Commission

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In Spain, there are various government and private related agencies that support the audio-visual industry (cont.)



• Provides a wide range of free services to aid audio-visual production in Barcelona. Its services include:

• Free use of municipal locations• Fee reduction in non-municipal spaces• Processing of shooting permits• Professional and industrial support

• Provides a wide range of free services to aid audio-visual production in Barcelona. Its services include:

• Free use of municipal locations• Fee reduction in non-municipal spaces• Processing of shooting permits• Professional and industrial support

• Represents Galacia at the main audio-visual fairs and commercial missions abroad

• It is the reference point for information on policy of the Galician audio-visual industry

• It promotes an information line addressed to the Galician sector on aspects related to the international commercialisation

• Represents Galacia at the main audio-visual fairs and commercial missions abroad

• It is the reference point for information on policy of the Galician audio-visual industry

• It promotes an information line addressed to the Galician sector on aspects related to the international commercialisation

• Its main aim is to create a conducive environment for film and TV production companies

• Promotes the audio-visual industry in Jerez


• Promotes the audio-visual industry in Jerez

Barcelona Plató Film Commission

Counci

l offi

ce

Galicia Film Commission

Regio

nal

Jerez Film Commission

Counci

l offi

ce


• It provides free services such as location scouting, processing of film shoot permits and professional support and advice

• Liaison between the local audio-visual industry and ancillary industries


• It provides free services such as location scouting, processing of film shoot permits and professional support and advice

• Liaison between the local audio-visual industry and ancillary industries

Santiago de Compestela Film Commission

Counci

l offi

ce

• Promotes Tenerife abroad as a film location• Facilitating obtaining of permits• Liaison between foreign and local production

and service companies• Identification of commercial opportunities for

local productions internationally• Collaboration with other public institutions

• Promotes Tenerife abroad as a film location• Facilitating obtaining of permits• Liaison between foreign and local production

and service companies• Identification of commercial opportunities for

local productions internationally• Collaboration with other public institutions

Tenerife Film Commission

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In terms of the global movie theatre market, there is also a growing shift towards alternative sources of entertainment

Global trends:

• Worldwide box-office revenue decreased by 8%, from $25.24B in 2004 to $23.24B in 2005.

• Canada experienced the steepest percentage decrease in box-office revenue — almost 14%, followed by EMEA (Europe, Middle East and Africa ) at 13% and Asia-Pacific at 4%.

• Worldwide admissions decreased by 2%, down from 7.57 billion in 2004 to 7.45 billion in 2005.

• However, admissions in Asia-Pacific were modestly up by 4%.


222


Economic Impact: Australia

Using the National Multiplier

Suppose a film company decided to shoot a feature film in Australia in February 2007, which involved new expenditure within Australia of $20 million (say the total budget for the film was $25 million, but $5 million was spent overseas on script and specific inputs). Note that this $20 million needs to be assessed as incremental – new expenditure, not a transfer of expenditure from some other investment project. In this case, the $20 million expenditure represents the ‘initial new demand’ for the products and services of the film and video production and distribution industry, and the impact on the Australian economy as a whole can be estimated as follows:

Impact on gross value added Impact on employment

= Initial demand x Gross Value Added Multiplier

= $20m x 1.80

= $36m (approximately the contribution to GDP resulting from the initial $20m expenditure)

= Initial demand x Employment Multiplier (adjusted for inflation)

= 20 x 30.7

= equivalent to approximately 614 people employed full-time for one year

• This increase in employment is not just in the film industry but an economy-wide increase. It should be noted, however, that as this multiplier is derived from IO methodology it assumes there are no constraints in the economy, whereas in reality at the national level there are some constraints, such as a limited labor supply or the impact of expenditure on inflation.

• It can be generally concluded that the film production and distribution sector is at the higher end of industry-based multipliers, with a Gross Value Added Multiplier of 1.8, relative to a median for all industries of 1.35, and an Employment Multiplier (2005/06 dollars) of 30.7 relative to a median of 15.

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• The multiplier captures the overall impact of what might be termed the ripple effects of an economic activity. For example, a film distributes its budget amongst various suppliers of Irish goods, services and labour. Each of these individuals will, in turn, spend a proportion of this additional income on suppliers of Irish goods, services and labour in a ripple effect expanding throughout the economic system, far beyond that of the film industry..

• A GNP and Employment multiplier captures the sum of all successive ripples, in terms of both output and employment, respectively.

• The multiplier estimates are taken from a report for Bord Fáilte by Professor Eamon Henry “Estimated Irish 1993 GNP and Employment Multipliers by Input-Output Modelling”, tables 6 and 8. The multiplier impact of audio-visual production activity on the economy was calculated, using the Henry multiplier for the NACE sector Other Market Services and allowing for the proportion of domestic and foreign-funded expenditure. The multiplier data for this sector are shown in the table below:Multiplier Direct Direct +

IndirectDirect + Indirect + Induced

Direct + Indirect + Induced + Government

GNP 0.5064 0.7354 0.9284 1.2558

Employment 24.01 35.60 41.96 56.91

• In order to allow for the impact of both domestically funded and foreign-funded expenditure, a composite multiplier is generated comprising the Direct + Indirect multiplier and the Direct + Indirect + Induced multiplier weighted by the proportion of domestic and foreign-funded expenditures respectively. For example, the GNP multiplier is calculated as (0.7354 * 0.73) + (0.9284 * 0.27) = 0.7874

• By applying the composite GNP multiplier of 0.7874 to the Irish expenditure of €97 million, it can be estimated that the final contribution of this expenditure to the Irish economy to be €76.4 million. Similarly, by applying a weighted employment multiplier of 37.32 to the expenditure of €97 million in Ireland, it can be estimated that the final contribution of this expenditure to Irish employment to be 3,620 full-time jobs.


Economic Impact: Ireland

224

Some degree of transformation has occurred in the sector, for part time and full time employees

Transformation Figures - Full time

020406080

100120140

2005 2006 2007

Year

No. of

Em

plo

yees

Indian

Coloured

Black

Source: Commerical Producers Association (CPA) member data* Limited data available

The equity ownership profile of production companies in the sector however has improved marginally over the last 3 years*.

The equity ownership profile of production companies in the sector however has improved marginally over the last 3 years*.

Employment Data*:

Transformation Figures - Part time

0

5

10

15

20

2005 2006 2007

Year

No. of

Em

plo

yees

Indian

Coloured

Black

225

South Africa has a vibrant service industry catering to all aspects of the audio-visual industry …

Service Providers:

Value Chain Segment

Small/ Medium Large

Production Numerous small production companies employing between 1-3 people

Based in Gauteng: Endemol (TV), Philo Pieterse, Franz Marx (TV)Based in Cape Town: Made in Africa, McKenzie Rudolph, DO productionsCountry-wide: Video Vision, Velocity, Moonlighting

Post Production Prosound, The Audio Lab, TheFacilities Factory

Country-wide: Sasani, The Refinery Based in Cape Town: CondorBased in Gauteng: Blade and Pudding

Distribution- Film and Video

Film Resource Unit, Video Vision Primedia, Johnnic Communications, United Independent Pictures (UIP)

Exhibition -Cinema 131 Independents Ster-Kinekor (Primedia), Nu Metro (Johnnic)

Exhibition - Video Retail and Rental

United Independent Pictures Ster-Kinekor Home Entertainment, Nu Metro Video

Exhibition-Broadcasters

SABC, M-Net, Etv


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… and a variety of small to medium-sized fully equipped studio spaces

Facility Facility Facility

Audio Duplications 7 Equipment Hire - Grips 12 Outside Broadcasts 26

Broadcast Facilities 25 Equipment Hire - Lighting 47 Post Production - Audio 45

Broadcast Signal Distributors 5 Equipment Hire - Sound 35 Post Production - Facilities 94

CD Duplications 10 Equipment Hire - Video 27 Post Production - Film 33

Concert Sound Equipment 10 Film Laboratories 4 Post Production - Video 75

Equipment 27 International Control Rooms 2 Radio Facilities 4

Equipment Hire - Aerial Mounts 5 JIB Hire/Operators 1 Recording Studios 59

Equipment Hire - audio-visual / Presentations

23 Live Sound Recording 8 Recording Studios (Music) 12

Equipment Hire - Camera 45 MPEG Encoding 24 Satellite Broadcasting 30

Equipment Hire – Camera/Editing HD

1MPEG Transfers - Internet Delivery Solutions

17 Satellite News Gathering 6

Equipment Hire - Camera Support 12 Music Video Production Facilities 8 Sound Studios 34

Equipment Hire - Editing 16 Narrowcasting / Nichecasting 6 Studios / Studio Facilities 71

Equipment Hire - Film 17 News Facilities 8 Video Duplications 29

Equipment Hire - Generators 19 Optical Services 3 Video Streaming 14

Facilities:


227

We have calculated the multiplier for the industry as a whole to be 2,3

Multiplier calculation:

• Out of each R1 spent by the industry, approximately 63c ultimately becomes employment income

• This income is then spent in the economy, generating new spending on goods and services equal to a further 60c.

• This estimate is based the proportion of crew expenditure versus other expenditure and proportion of employment income generated by each sector in the economy.

• This 60c generates a further 34c worth of employment income, with generates a further 18c….

• As a result, R1 becomes R2,30 (R1+63c+60c+34c+18c….)

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Gauteng’s strengths complement other regions in the country

What can Gauteng offer the national industry?

Gauteng should leverage off its strengths in TV, commercials and local film production.

Gauteng should leverage off its strengths in TV, commercials and local film production.

• Province has competitive edge due to the clustering of TV and local film producers,

• Local producers are attracted to the province because of its good business environment, advanced infrastructure (technical and public) and its skills set,

• Film and TV production is about more than shooting, and Gauteng offers supporting infrastructure,

• While less glamorous than film, TV and commercials are the bread and butter of the Gauteng industry, providing jobs, training and boosting economic activity,

• TV has brought to the province large studio facilities (e.g. Sasani complex in Highlands North), excellent producers, crew, directors etc,

• Commercials industry is world-class, and Gauteng industry is locally focussed,

• Commercials are strong in multimedia e.g. animation,

• Skills in TV and commercials are transferable to film, but constraints exist.

“Everyone describes themselves as a film producer, but they make their money out of TV or ads” – TV executive

229

0%

25%

50%

75%

100%

0% 25% 50% 75%

Market share

Bus

ines

s gr

owth

rat

e

A BCG matrix provides a way of ranking different sectors in terms of their relative attractiveness and competitive advantage

A stylised Boston Consulting Group (BCG) matrix:

Question mark:

• High growth rate, but low market share

• Select a few and focus on growing market share

Star:

• High growth, high market share

Dog:

• Low growth, low market share

• Beware of expensive plans to fix dogs

Cash cow:

• Low growth, but high market share

• Are often in relatively mature markets so avoid over-investing


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In Gauteng, TV and commercials are classic cash cows, whereas film is a ‘question mark’

BCG matrix for the Gauteng AV industry:

0%

25%

50%

75%

100%

0% 25% 50% 75%

Gauteng's share of the South African AV market

Gro

wth

rat

e

Film

CommercialsTV

Multimedia

Source: Deloitte Gauteng Market Analysis

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With the right strategy in place, ‘question marks’ have the potential to become cash cows or stars

• Film industry – Given its existing advantages (good technical infrastructure, conducive business environment and good skills base), Gauteng has the potential to grow its market share,

• Television – typical cash cow, and Gauteng should avoid over-investing in the industry as it is already growing near its potential,

• Commercials – also a cash cow, but Gauteng is losing market share as international commercial producers prefer Cape Town,

• New media / multimedia – the province’s existing strength in this area and the potential for explosive growth makes this the province’s star; it is still in early stages of development however.

Differentiated strategy:

Project Gaullywood: Project Book Phase I: Market Intelligence and Sector Competitiveness 27 th July 2007.

Documents

gauteng audiovisual

gauteng av industry

television industry

industry benchmarks

local industry developments

industry related information

qualitative industry

south african av industry