In 2015-2016, Screen Australia, the government body for films ran up $110 million in total expenses while only producing $10 million income of its own, with the taxpayer covering most of the $100 million deficit...
With our budget deficit at $36.5 billion and our economy at a crossroads as China relies less on our commodities, every cent of expenditure counts. Where we invest is crucial to how our economy can continue to grow and develop in the future. Should we still be chasing screen dreams?
At this year’s Shanghai International Film festival, the Australian Academy for Film and Television Arts flagged Australia’s ambition to enter the Asian film market through new collaborations. It’s understandable that the Australian film industry is trying to cover shortfalls in domestic box office success with Chinas growing consumer market, but these tactics don’t address the larger issue at hand.
Not only are these aspirations misplaced, but the entire notion that Australia can achieve a sustainable domestic film scene, let alone an international following, is questionable. By looking to a country with stalwart film protectionism, how do we expect our feature films to compete with Hollywood blockbusters and films orientated for Chinese audiences when they can barely compete with them in Australia?
The purpose of state funding entities, like the Australian Film Commission and the Film Finance Corporation, was to create a film culture and a film industry within Australia. Certainly there have been many successful films that came out of this period like the Crocodile Dundee and Mad Max films, but the Australian directors that produced these films found themselves in Hollywood sooner or later with the budgets and technology that the local industry couldn’t provide.
This brain-drain of Australian talent and our relatively small population meant that after the Film Finance Corporation invested $1.345 billion dollars in local productions between 1988 and 2008, only $274 million was returned in taking. We might have made an impressive cultural footprint, but had no sustainable film industry to show for it.
In Screen Australia’s 2015-16 Annual Report, $46 million in taxpayer’s dollars was given in grants and only $7.2 million was returned in recoupment and royalties.
The majority of subsidised Australian feature films failed to breakeven, let alone produce any returns. This year’s release ‘Berlin Syndrome’ received $1.8 in public support. At the start of last month it has only brought in $400,000 globally. Another, Few Less Men returned only $230,000 despite $840,000 funding – and both productions are the rule, not the exception.
Only a minority of films made any profits in the box office and even when titles like Red Dog and The Sapphires made headway domestically, they had limited international success.
The purpose of Screen Australia’s predecessors was to invest in promising films and use those returns to maintain a domestic industry. After decades of limited successes, is the industry a viable option economically? The Australian share of the box office had fallen to a measly 1.9 percent in 2016 from 7.2 percent in 2015 – just $24 million – despite subsidies, tax offsets, and rebates that amount to much more.
The government still keeps this dying animal on a lifeline with a 40 percent feature film rebate and $84 million in subsidies for this calendar year alone. According to the Productivity Commission, this is the ninth biggest budgetary assistance program to any industry.
Screen Australia’s sole objective of ‘Enhancing Australia’s screen culture’ doesn’t seem to correlate itself in finances where even the feature films only attract a small domestic following. It’s hard to sustain an economy of scale reliant on population size when the population of Australia is the same as Shanghai’s. So if Screen Australia and its predecessors have failed in their objective year after year, why should the Australian taxpayer provide for an industry where we have no comparative advantage?
At least Australian commercial television have local content protection quotas enforced on them that require at least four hours per day of Australian programs. Even so TV channel audiences are decreasing exponentially annually. When the free trade agreement with the United States grants Australian consumers with an abundance of highly financed Hollywood blockbusters and series, how do we compete when our feature films are viewed as indie art-house even within our own borders? It costs less for channels to buy the rights for an American show than to produce an Australian series. Free trade disadvantages producers of local content and keeps them down regardless of how much we sink into the film industry, a natural consequence of investing in a market where we don’t have the comparative advantage.
As of the present, we’re sitting on the fence. Our filmmakers aren’t making a profit or found an audience to export Australian life and culture. We try to validate these sunk costs with rosy-lensed critical appraisal, but ignore the time value of money and how our cinema can only be artificially sustained.
If we want to create a film industry simply for the sake of jobs and growth, the subsidies and 16.5 percent tax offsets would be better spent in other industries.
Either we introduce protective measures, like China has done with ‘blackout periods’, and restrict freedom of expression, consumer surplus and access, and use more taxpayer funds indefinitely or we extricate ourselves from this state funded black hole. Rationale suggests the latter. A million here and a million there adds up eventually.
Conan Feng is a Research Associate at the Australian Taxpayers' Alliance
[This article first appeared in The Spectator Australia]