Slide1: Project Gaullywood: Project Book Phase I: Market Intelligence and Sector Competitiveness 27th July 2007


Contents: Contents Objectives Background to Project Gaullywood Project Framework Setting the Scene Key Project Findings High-Level Strategic Recommendations Appendices


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


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


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


… and so subsequently requires comprehensive industry intelligence to inform its short-to-medium term strategic objectives: … 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 Framework Project Plan Project Charter and Timeline Project Methodology


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


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


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


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


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


We mapped out a project timeline, with key milestones to measure progress: 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 TASK Wk. 1 - 4 Wk. 5 - 8 Wk. 9 - 12 Wk. 13 - 16 Wk. 17 - 20 Preparation of Report Framework validation Charter sign-off Final Submission Stakeholder Validation Initial Insights First-cut SWOT Analysis 19/2 16/3 13/4 11/5 8/6 29/6 Gap analysis


The project was structured into defined streams of work, with subject matter expertise and research support: The project was structured into defined streams of work, with subject matter expertise and research support Subject Matter Experts (SME’s) Project Team Structure: Global Research Centre (GRC)


Slide16: 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 Activity 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 Objective 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


… and sourced reliable and comprehensive secondary research data from the Deloitte Global Research Centre: … 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 Data Analysis and Synthesis


Setting the Scene: Setting the Scene


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


The AV industry value chain contains value enhancing activities and role players that stimulate growth: 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 Government and Regulators Industry Associations Cost Consumption Revenue Generation


Film Commissions tend to be established at a national or regional level, with a strategic mandate: Film Commissions tend to be established at a national or regional level, with a strategic mandate Source: Deloitte Best Practice Research Film Commission vs. Film Office:


Slide22: We selected 6 diverse comparator countries that would provide appropriate benchmarks for South Africa and the GFC Comparator countries: Source: Key GFC Stakeholders and Industry Experts Country Audio-visual Industry Characteristics


Slide23: We selected 6 diverse comparator countries that would provide appropriate benchmarks for South Africa and the GFC (cont.) Comparator countries: Source: Key GFC Stakeholders and Industry Experts Country Audio-visual Industry Characteristics


We used a number of different sources to establish the extent of audiovisual production in South Africa: 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 : Key Findings Global Trends and Industry Benchmarks South African AV Industry Overview Gauteng AV Industry Overview


We conducted a review of the GFC’s available market documentation to gain an understanding of any data gaps : We conducted a review of the GFC’s available market documentation to gain an understanding of any data gaps Documentation Review: 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 etc Relevance 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 Trends and Industry Benchmarks Global Industry Trends Key Growth Drivers Film Commission Best Practice


Global Trends and Industry Benchmarks : Global Trends and Industry Benchmarks Global Industry Trends Key Growth Drivers Film Commission Best Practice


Global growth estimates for the film and television industries in 2003 were 9.4% and 6.3% respectively : 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 Source: Deloitte Best Practice Research


Traditional industry revenue streams are on the decline worldwide, due to technology convergence, among other factors: Traditional industry revenue streams are on the decline worldwide, due to technology convergence, among other factors Summary of Global Industry Trends: Source: Deloitte Best Practice Research


Slide31: Casting and crewing agents, actors, camera crews etc. 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. Five Forces Analysis: Source: Deloitte Best Practice Research


The global film industry is in a state of flux, as movie theatre attendance stagnates and content delivery channels proliferate: The global film industry is in a state of flux, as movie theatre attendance stagnates and content delivery channels proliferate Industry Snapshot: Source: Deloitte Best Practice Research 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)


Box office attendance is on the decline globally, primarily due to rising ticket prices: Box office attendance is on the decline globally, primarily due to rising ticket prices Trend: Box Office Attendance Source: Deloitte Best Practice Research In emerging economies however e.g. Mexico, Egypt and Thailand, attendance is on the rise.


In the UK, digital media distribution and an increase in personal movie watching has driven down box office sales: In the UK, digital media distribution and an increase in personal movie watching has driven down box office sales Declining Box Office Attendance: UK Source: Deloitte Best Practice Research Year Revenue UK £M


The high risk nature of big budget films has led to changes in production funding approaches …: The high risk nature of big budget films has led to changes in production funding approaches … Trend: Production Funding Models Source: Deloitte Best Practice Research


… which has forced changes in traditional business models: … which has forced changes in traditional business models Trend: Changing Business Models Source: Deloitte Best Practice Research


In the United Kingdom, the film business model has traditionally been driven by box office sales …: In the United Kingdom, the film business model has traditionally been driven by box office sales … Changing Business Models: UK Source: Deloitte Best Practice Research United Kingdom Traditional Business Model


… however new distribution channels such as online portals are expected to change this: … however new distribution channels such as online portals are expected to change this Changing Business Models: UK Source: Deloitte Best Practice Research United Kingdom Emerging Business Model


The digitisation of film content has led to an increase in piracy …: The digitisation of film content has led to an increase in piracy … Trend: Increased Piracy Source: Deloitte Best Practice Research


… that has in turn led to a shortening of the window period between movie theatre and DVD release: … that has in turn led to a shortening of the window period between movie theatre and DVD release Trend: Shrinking Theatre-to-DVD Window Source: Deloitte Best Practice Research


The digitisation of film production, distribution and exhibition is bringing greater efficiencies to the industry: The digitisation of film production, distribution and exhibition is bringing greater efficiencies to the industry Trend: Digitisation Source: Deloitte Best Practice Research


Digitisation has facilitated the growth of the animation industry: Digitisation has facilitated the growth of the animation industry Trend: Digitisation Source: Deloitte Best Practice Research


Digitisation has facilitated the growth of the animation industry (cont.): Digitisation has facilitated the growth of the animation industry (cont.) Trend: Digitisation Source: Deloitte Best Practice Research


In South Africa, animation is seen as the possible next big break for the industry however challenges exist: 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 Source: Deloitte Best Practice Research


The digitisation of film production, distribution and exhibition is bringing greater choice to TV audiences: The digitisation of film production, distribution and exhibition is bringing greater choice to TV audiences Trend: Digitisation Source: Deloitte Best Practice Research


Digitisation has enabled the production of higher quality content that can be distributed faster and cheaper: Digitisation has enabled the production of higher quality content that can be distributed faster and cheaper Trend: Digitisation Source: Deloitte Best Practice Research


In a bid to increase market share and boost revenue, national film industries are now targeting global audiences: In a bid to increase market share and boost revenue, national film industries are now targeting global audiences Trend: Global Entertainment Source: Deloitte Best Practice Research


As a result of technology convergence, online revenue streams are gaining importance: As a result of technology convergence, online revenue streams are gaining importance Trend: Online Revenue Streams Source: Deloitte Best Practice Research


Low budget, high volume films are the driving force behind the success of Nigeria’s film industry: 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. Source: Deloitte Best Practice Research


Global Trends and Industry Benchmarks : Global Trends and Industry Benchmarks Global Industry Trends Key Growth Drivers Film Commission Best Practice


Accessibility and suitability of setting are both industry growth drivers and they play a role in the choice of a location: Accessibility and suitability of setting are both industry growth drivers and they play a role in the choice of a location Physical Location Infrastructure Funding and Incentives Government Support Other Growth Drivers Influencing Choice of Location: Source: Deloitte Best Practice Research


Slide52: In addition, the decision involves a balance between a set of complex economic factors and production requirements Growth Drivers Influencing Choice of Location : Source: Deloitte Best Practice Research Production Location Decision Economic Factors Production Requirements Anticipated Revenue Production Cost Production Capability Talent/Creative Considerations Above the line Below the line Residuals Exchange Rates Govt. Rebates Work Rules Rates Crew Cost Facilities & Equipment Other Work Rules Rates Director/ Actor Requirements Script Requirements Ability to Control Finance Vehicles Infrastructure Crew Depth Crew Quality


Mexico’s technical infrastructure and conducive regulatory environment have helped make it an attractive location: Mexico’s technical infrastructure and conducive regulatory environment have helped make it an attractive location Case Study: Mexico 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 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 Source: Deloitte Best Practice Research Temporary work permit, which allows actors and technicians to enter and leave Mexico without the need for additional permits


The “Made in New York Incentive program” is a good example of the benefits of creating a film-friendly environment: 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 Source: Deloitte Best Practice Research


There are a range of both financial and non-financial incentives that are typically used to attract productions: There are a range of both financial and non-financial incentives that are typically used to attract productions Types of Incentives: Source: Deloitte Best Practice Research Tax Incentives Other Financial Incentives Non-Financial Incentives


Incentives are a popular instrument employed by countries to attract productions: 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. Source: Deloitte Best Practice Research 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


Incentives are a popular instrument employed by countries to attract productions (cont.): 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. Source: Deloitte Best Practice Research Spain UK Mexico


In Ireland, a wide range of financial incentives are offered to help create opportunities for foreign and local involvement in the industry: 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. Source: Deloitte Best Practice Research


The general business environment in Ireland is also supportive of the audio-visual industry: 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 Source: Deloitte Best Practice Research


Government financial incentives in New Mexico have helped film productions grow tenfold : 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 Source: Deloitte Best Practice Research


In the UK, public funding is available for a wide range of AV growth initiatives and capacity building: In the UK, public funding is available for a wide range of AV growth initiatives and capacity building Sources of Funding: UK Source: Deloitte Best Practice Research


Both public and private sector funds are available to meet the needs of the AV industry in Spain: Both public and private sector funds are available to meet the needs of the AV industry in Spain Sources of Funding: Spain Source: Deloitte Best Practice Research 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.


Funding should ideally be spread across the different segments of the value chain, with a focus on areas of greatest need : Funding should ideally be spread across the different segments of the value chain, with a focus on areas of greatest need Funding Distribution: Australia Source: Deloitte Best Practice Research


Revenue generation guarantee requirements are the largest barrier to access to funding in South Africa: 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: Source: Focus Interviews with Key GFC Stakeholders and Industry Experts


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


The audio-visual industry can have a proven positive economic impact on the economy of a region or country: The audio-visual industry can have a proven positive economic impact on the economy of a region or country Economic Impact: Australia Source: Deloitte Best Practice Research N.B. The Australian Bureau of Statistics sets the output multiplier for screen production at 2.67


The audio-visual industry can have a proven positive economic impact on the economy of a region or country: 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 audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.): The audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.) Economic Impact: Ireland Source: Deloitte Best Practice Research


Job creation is often the single largest economic outcome of the audio-visual industry: Job creation is often the single largest economic outcome of the audio-visual industry Economic Impact: UK The 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 Source: Deloitte Best Practice Research


The GFC can better demonstrate the economic impact of the audio-visual industry, so as to lobby government for more resources : 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 Contribution to GDP Spin-off for the tourism industry Skills development Multiplier in South Africa is 2.5 Source: Focus Interviews with Key GFC Stakeholders and Industry Experts


The broader economic competitiveness of a location has an effect on investor perceptions of its attractiveness: 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. Source: Focus Interviews with Key GFC Stakeholders and Industry Experts Factors Influencing Perceptions:


The availability of skilled resources, and the flexibility of the labour market, has helped attract productions to competitor countries: The availability of skilled resources, and the flexibility of the labour market, has helped attract productions to competitor countries Technical Expertise: Source: Deloitte Best Practice Research


Productions are more likely to be shot in locations with readily available state-of-the art facilities and high-tech equipment: Productions are more likely to be shot in locations with readily available state-of-the art facilities and high-tech equipment Technical Infrastructure: Source: Deloitte Best Practice Research 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.


Global Trends and Industry Benchmarks : Global Trends and Industry Benchmarks Global Industry Trends Key Growth Drivers Film Commission Best Practice


The role of a Film Commission typically ranges from facilitating the approval of permits to dealing with trade and investment policy related matters: 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 Source: Deloitte Best Practice Research 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


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


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


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


Slide79: 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:


Slide80: 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:


Film Commissions have a diverse range of stakeholders within the audio-visual industry …: Film Commissions have a diverse range of stakeholders within the audio-visual industry … Key Stakeholders: Source: Focus Interviews with Key GFC Stakeholders and Industry Experts General Business Community Other Government agencies Companies in the industry Key Stakeholders Municipalities National and Provincial Government Film Producers and Industry Associations Community Media Funders/Financiers


… to whom they need to provide different products and services: … 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: Source: Deloitte Best Practice Research


Few Film Commissions focus their efforts consistently within every segment of the audio-visual industry value chain: 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            Source: Deloitte Best Practice Research      Australia Film Commission United Kingdom Film Council United States (various) Conafilm (Mexico) Film Commission Spain Film Commission Irish Film Board Gauteng Film Commission 


Ideally, Film Commissions add value by creating an environment that is conducive for the growth of the industry: 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” Source: Focus Interviews with Key GFC Stakeholders and Industry Experts


The Gauteng Film Commission (GFC) is a provincial government agency, tasked with the development and promotion of the audio-visual industry in Gauteng: 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 To support greater access to and participation in the film and television industry by Previously Disadvantaged Individuals (PDI).


The GFC’s stated core functions are not divergent from industry expectations: The GFC’s stated core functions are not divergent from industry expectations The GFC’s Core Functions: Source: GFC Business Plan 2007 – 2010


The value proposition of a Film Commission is dynamic i.e. it evolves as the industry evolves: 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. Film Commission engages and develops policies related to the industry such as skills development, investment, exports, research and development. Source: Deloitte Best Practice Research


Full public or full private funding are the two extremes of the continuum of revenue models for Film Commissions : Full public or full private funding are the two extremes of the continuum of revenue models for Film Commissions Hybrid funding models Source: Deloitte Best Practice Research 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. Funding Models: The GFC is 99% government funded


The major source of revenue for Film Commissions is usually government funding: The major source of revenue for Film Commissions is usually government funding Revenue Model : Australian Film Commission (AFC) In order to reduce government dependency and to be financially self-sustainable, the AFC is expected to: Source: Deloitte Best Practice Research 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.


The bulk source of revenue for Film Commissions is usually government funding (cont.): 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 Source: Deloitte Best Practice Research 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.


In the US, some Film Offices have been established with limited government involvement or public funding: 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. Source: Deloitte Best Practice Research


Film festivals are just one of the many marketing platforms for Film Commissions: 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: Source: Focus Interviews with Key GFC Stakeholders and Industry Experts Attend and hold Film Festivals


Although National and Regional Film Commissions employ similar marketing strategies, Regional Film Commissions also have a domestic focus: 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 AFC utilises different types of marketing initiatives to raise the profile of its industry: 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 Marketing Initiatives National Events and Seminars E.g. Holding feature finance markets and distribution forums Source: Deloitte Best Practice Research Dissemination of Information E.g. via the AFC website


The Irish Film Board aims to maximise the participation of its industry in the international and national marketplace: The Irish Film Board aims to maximise the participation of its industry in the international and national marketplace Marketing Initiatives: Irish Film Board Source: Deloitte Best Practice Research


Strategic industry partnerships often lead to better coordinated marketing efforts: 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. Source: Deloitte Best Practice Research


Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC : Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC Institutional Arrangements: Australia Source: Deloitte Best Practice Research


In Spain, various government-related and privately funded agencies support the audio-visual industry : 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 National Regional Local Source: Deloitte Best Practice Research


South African AV Industry Overview: South African AV Industry Overview Institutional Landscape Key Trends Industry Growth Drivers


South African AV Industry Overview: South African AV Industry Overview Institutional Landscape Key Trends Industry Growth Drivers


The South African audio-visual industry dates back to the ‘birth’ of film, circa 1895: The South African audio-visual industry dates back to the ‘birth’ of film, circa 1895 South Africa AV Industry Brief Timeline: State support For 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 democratic dispensation. Cultural industries established as a priority sector by government 1895 1956 1962 1950s 1970s Mid-1980s Late-1980s Segregation of cinemas Post-1994 1950s Source: Deloitte SA Market Research


The South African audio-visual industry has two segments - the servicing of foreign productions and production of local content: The South African audio-visual industry has two segments - the servicing of foreign productions and production of local content South Africa AV Industry Snapshot: Source: Deloitte SA Market Research


South Africa has established audio-visual hubs in Gauteng, the Western Cape and Kwazulu Natal : 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: Cape Film Commission 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. Audio-visual Hubs: Source: Deloitte SA Market Research


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: 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 The Cape Film Commission was launched in 2001 by the City of Cape Town and the Provincial Government of the Western Cape. 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: Source: Deloitte SA Market Research


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: 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 The Durban Film Office was launched in 2003 by Ethekwini Municipality. 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: Source: Deloitte SA Market Research


There are also several other emerging hubs in South Africa, evidence of the growth potential of the local audio-visual industry: There are also several other emerging hubs in South Africa, evidence of the growth potential of the local audio-visual industry Source: Deloitte SA Market Research 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:


The primary value proposition of local Film Offices and Commissions is to market their regions as locations of choice: The primary value proposition of local Film Offices and Commissions is to market their regions as locations of choice Source: Deloitte SA Market Research Comparative Overview:


In South Africa, various government-related and privately funded agencies support the audio-visual industry : In South Africa, various government-related and privately funded agencies support the audio-visual industry Institutional Arrangements: South Africa National Regional Local 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 Source: Deloitte SA Market Research


There are a number of initiatives being undertaken at provincial government level to promote the audio-visual industry …: There are a number of initiatives being undertaken at provincial government level to promote the audio-visual industry … Source: Deloitte SA Market Research 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:


… with the GFC engaging in a range of AV activities within Gauteng: … with the GFC engaging in a range of AV activities within Gauteng 6-month Snapshot of GFC Activity: Source: GFC 6-month Production and Marketing Activity Report (Apr – Sept 2007)


The last 5 years have seen a renewed focus on strategies to grow the national and provincial audio-visual industries: The last 5 years have seen a renewed focus on strategies to grow the national and provincial audio-visual industries Source: Deloitte SA Market Research National Growth/Development Plans:


South African AV Industry Overview: South African AV Industry Overview Institutional Landscape Key Trends Industry Growth Drivers


Slide113: Local Operating Environment: The South African AV industry operates is an environment that is rapidly and continuously changing Source: Deloitte SA Market Research


In 2006, almost R3 billion revenue was generated in the South African audiovisual production industry: In 2006, almost R3 billion revenue was generated in the South African audiovisual production industry South African AV Industry Revenue: * 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


Over a 3 year period, the bulk of commercials produced nationally were concentrated in Gauteng and the Western Cape: Over a 3 year period, the bulk of commercials produced nationally were concentrated in Gauteng and the Western Cape * From Commerical Producers Association (CPA) member data Source: Deloitte South African Market Research Annual Commercials Production Data*: No. of Commercials Location


With very few exceptions, the local box office is dominated by foreign films … : With very few exceptions, the local box office is dominated by foreign films … Sample Local Box Office Earnings: Source: Deloitte SA Market Research


… with ‘slapstick’ the most successful of local movie genre’s : … with ‘slapstick’ the most successful of local movie genre’s Top 15 Local Films: Source: Deloitte SA Market Research


South African audiences perceive local films as being either ‘slapstick’ or socio-political; there is little variety of genre: 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: Source: Deloitte SA Market Research


In South Africa, cinema attendance is characterised by areas of growth, stagnation or decline: 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: 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. 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. Source: Deloitte SA Market Research


Countrywide, new content delivery channels are booming due to falling prices of DVDs, computers and cell phones: Countrywide, new content delivery channels are booming due to falling prices of DVDs, computers and cell phones Content Delivery Channels: Source: Deloitte SA Market Research


South Africa faces impediments to increasing its market share as a globally competitive film-making destination: South Africa faces impediments to increasing its market share as a globally competitive film-making destination Global Market Share: Source: 1. GFC Business Plan (MEFS) 2007 – 2010; Deloitte SA Market Research


The AV industry has had a positive economic effect on the local economy : The AV industry has had a positive economic effect on the local economy Source: Deloitte SA Market Research 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.


South African AV Industry Overview: South African AV Industry Overview Institutional Landscape Key Trends Industry Growth Drivers


There are several factors influencing the growth of the national audio-visual industry: Destination of Choice Funding and Incentives Physical Environment Infrastructure Technical Public Regulatory Environment There are several factors influencing the growth of the national audio-visual industry Growth Drivers: Business Environment and Cost Advantage Human Resources Capacity Audience Development Source: Deloitte SA Market Research


One of the main impediments to growing the local industry has been poor audience development: One of the main impediments to growing the local industry has been poor audience development Audience Development: Source: Deloitte SA Market Research


South Africa has an internationally recognised comprehensive and progressive legal framework: South Africa has an internationally recognised comprehensive and progressive legal framework 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. Source: Deloitte SA Market Research 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.


There have been a few initiatives to reduce bureaucracy and inconsistent application of rules: 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. Concessions: Source: Deloitte SA Market Research 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. .


There have been a few initiatives to reduce bureaucracy and inconsistent application of rules (contd.): There have been a few initiatives to reduce bureaucracy and inconsistent application of rules (contd.) Concessions: Source: Deloitte SA Market Research 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.


There are a number of commercial and government organisations offering film production financing in South Africa: 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 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. Source: Deloitte SA Market Research Other funds that are being investigated for establishment include the SABC Film Fund.


Slide130: 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: Source: Focus Interviews with Key GFC Stakeholders and Industry Experts Local banks consider the industry to be high-risk, with few mitigation strategies in place.


The Large Budget Film and TV Production Rebate is the prime investment incentive available to both foreign and local big budget producers: The Large Budget Film and TV Production Rebate is the prime investment incentive available to both foreign and local big budget producers Key Incentives: Source: Deloitte SA Market Research


Other incentives are available to support the industry in South Africa: Other incentives are available to support the industry in South Africa Other Incentives: Employers can claim back the Skills Development Levy if they provide training that is MAPPP-SETA accredited. Enables productions from participating countries to apply for benefits or programmes of assistance from both countries. Source: Deloitte SA Market Research


As at 24 April 2007, R124 million had been paid from the Large Budget Film and TV Production Rebate Scheme: As at 24 April 2007, R124 million had been paid from the Large Budget Film and TV Production Rebate Scheme Source: Deloitte SA Market Research


The cost of production in South Africa is relatively cheap compared to developed countries, such as in the European Union: 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. Source: Deloitte SA Market Research Cost Advantage:


South Africa has a vibrant service industry catering to all aspects of the audio-visual industry …: South Africa has a vibrant service industry catering to all aspects of the audio-visual industry … Service Providers Source: Deloitte SA Market Research


… and a variety of small to medium-sized fully equipped studio spaces : … 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. Source: Deloitte SA Market Research Technical Infrastructure:


South Africa has well-developed public infrastructure with modern facilities and services available in all major centres: 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. Source: Deloitte SA Market Research Public Infrastructure:


South Africa’s diverse physical environment makes it an attractive location : South Africa’s diverse physical environment makes it an attractive location Source: Deloitte SA Market Research Physical Environment: 14 hours of sunlight during summer months. Weather and seasons that alternate with Europe and North America. 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.


Limited skills data on the South African AV market has restricted our evaluation of the skills set within the industry: 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. Source: Deloitte SA Market Research 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%).


Employment figures in the Commercials sector show a a general decline in overall numbers …: Employment figures in the Commercials sector show a a general decline in overall numbers … Source: Commerical Producers Association (CPA) member data * Approximate figures Employment Data:


A comparison of two locally produced movies shows a high degree of employee transformation, with most employees working as freelancers: A comparison of two locally produced movies shows a high degree of employee transformation, with most employees working as freelancers ... Source: Deloitte SA Market Research Case Studies:


There are also skills gaps that have been identified by stakeholders as needing urgent redress to ensure the continued growth of the local industry: There are also skills gaps that have been identified by stakeholders as needing urgent redress to ensure the continued growth of the local industry Source: Deloitte SA Market Research 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


Several public and private sector organisations are providing training programmes to help address identified skills gaps: Several public and private sector organisations are providing training programmes to help address identified skills gaps Source: Deloitte SA Market Research Skills Development Initiatives: MAPPP SETA Public – Private Partnerships NFVF Private Initiatives


Tertiary institutions are also playing a key role in developing the skills required by the AV industry : 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


From a global perspective, the business environment in South Africa is generally perceived to be supportive of businesses and is conducive for growth: 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: Source: Deloitte SA Market Research 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: Gauteng AV Industry Overview Key Trends Industry Growth Drivers SWOT Analysis


Gauteng AV Industry Overview: Gauteng AV Industry Overview Key Trends Industry Growth Drivers SWOT Analysis


Slide148: Source: Deloitte Gauteng Market Research Strong economic growth is driving booming demand for entertainment in Gauteng … Economic Growth:


Slide149: Source: Deloitte Gauteng Market Research … 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.


Gauteng has the largest cinema audiences nationally, reflecting its strong movie-going culture …: Gauteng has the largest cinema audiences nationally, reflecting its strong movie-going culture … Average Cinema Attendance: Source: Deloitte Gauteng Market Research


… but cinema facilities are concentrated in the wealthier northern suburbs of Johannesburg and Tshwane: … but cinema facilities are concentrated in the wealthier northern suburbs of Johannesburg and Tshwane Cinema locations in Gauteng: Source: GFC Spatial analysis Carlton Centre and Sterland doing well (Sterland Junction has experienced rapid growth)


The Gauteng audiovisual production industry achieved revenue of approximately R1,1 billion in 2006 …: The Gauteng audiovisual production industry achieved revenue of approximately R1,1 billion in 2006 … Gauteng AV Industry Revenue: * 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 Gauteng Market Research


… and is generating a total of over R2 billion a year in economic activity due to multiplier effects: … and is generating a total of over R2 billion a year in economic activity due to multiplier effects Estimates of Economic Activity: 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 Source: Deloitte Gauteng Market Research


Gauteng’s audiovisual industry is dominated by television series production : 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


Most popular South African TV shows are Gauteng-based: Most popular South African TV shows are Gauteng-based 7 out of the top 10 SA TV shows are Gauteng-based Source: Deloitte Gauteng Market Research


Commercials production in Gauteng is dominated by local production: Commercials production in Gauteng is dominated by local production SA/International Servicing of foreign productions Locally produced % of Commercials produced in Gauteng Breakdown of Commercials Produced in Gauteng: Source: Deloitte Gauteng Market Research 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.


Gauteng accounts for the bulk of locally produced films : 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 Source: Deloitte Gauteng Market Research


Gauteng AV Industry Overview: Gauteng AV Industry Overview Key Trends Industry Growth Drivers SWOT Analysis


Gauteng is perceived as having strong technical skills, with easy access to both the wider South African and international skill pools: Gauteng is perceived as having strong technical skills, with easy access to both the wider South African and international skill pools Human Resources: 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


Gauteng is strong in technical infrastructure, particularly in the Auckland Park-Randburg corridor: 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.


Gauteng’s public infrastructure is excellent, but rapid economic growth is putting pressure on the system: Gauteng’s public infrastructure is excellent, but rapid economic growth is putting pressure on the system 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: Source: Deloitte Gauteng Market Research


Gauteng has a business environment that is conducive to the AV industry: Gauteng has a business environment that is conducive to the AV industry Key Statistics: 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. Source: Deloitte Gauteng Market Research


Safety and security however, have emerged as a key concern for the industry: Safety and security however, have emerged as a key concern for the industry Safety and Security: Source: Deloitte Gauteng Market Research 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.


Film budgets in the province rely heavily on subsidies, incentives and soft loans: Film budgets in the province rely heavily on subsidies, incentives and soft loans Funding: 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. Source: Deloitte Gauteng Market Research


Other incentives are available, such as in the Jhb urban development zone: Other incentives are available, such as in the Jhb urban development zone Thinking beyond ‘traditional’ film incentives: Source: Deloitte Gauteng Market Research


Gauteng has a good physical environment, not only for shooting of films but for post production as well: Title 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: Source: Deloitte Gauteng Market Research


Sound infrastructure and a conducive business environment rate as the most important factors for the local industry: Sound infrastructure and a conducive business environment rate as the most important factors for the local industry Industry Perception Survey Output: Source: Focus Interviews and Online Survey output No. of respondents = 33


Gauteng AV Industry Overview: Gauteng AV Industry Overview Key Trends Industry Growth Drivers SWOT Analysis


Slide169: Strengths and Weaknesses: The Gauteng film industry can grow by leveraging its sound technical infrastructure and domination of the TV and local commercial market …


Slide170: SWOT: The industry must also act to grasp opportunities by focusing on creating a ‘film-friendly’ environment


The challenge for the industry is how to effectively address the constraints it faces, so it can unlock the province’s growth potential: 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: High-Level Strategic Recommendations Optimal Role of the GFC to best Position the Gauteng AV industry for Growth


A visionary strategy provides the platform for rapid growth: A visionary strategy provides the platform for rapid growth Versus Incrementalism [One reason why companies stagnate] Incrementalism [Leads to stagnation] TIME GOAL Where we are 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 GOAL Actions driven by strategy Where are we 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: Source: Deloitte Gauteng Market Research


The principles of good strategy highlight the importance of government supporting activities rather than individual firms or projects: 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: Source: Deloitte Gauteng Market Research


The GFC’s mandate aligns to these principles and does not mandate case-by-case interventions, instead focusing on ‘public goods’: 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 To support greater access to and participation in the film and television industry by Previously Disadvantaged Individuals (PDI). Source: GFC Business Plan (MEFS) 2007 – 2010


In line with its mandate, the GFC is focusing on supporting activities that benefit the whole industry, not one or two players: 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: Source: GFC Business Plan (MEFS) 2007 – 2010


To successfully execute its mandate, we recommend the GFC focus on five key areas to sustainably grow the industry: To successfully execute its mandate, we recommend the GFC focus on five key areas to sustainably grow the industry High-level Strategic Recommendations:


To meet its mandate, we recommend that the GFC focus on five key areas to sustainably grow the industry (cont.): To meet its mandate, we recommend that the GFC focus on five key areas to sustainably grow the industry (cont.) Strategic Recommendations:


Slide179: Availability of technical expertise: Including practitioners with skills in digital and animation technology. 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


Bearing in mind that the international industry has potential to generate high revenues within the province ...: Bearing in mind that the international industry has potential to generate high revenues within the province ... Case Studies: Source: Deloitte Gauteng Market Research


... sustainable growth in the province could be achieved by exploiting the synergies between the local and international AV industries: 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. 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


The GFC would need to tailor its functions to meet the different needs of both the international and local industries: 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: Source: Deloitte Gauteng Market Research


An analysis of the provincial landscape suggests a lack of institutional capacity at local level, with overlap at national level: Institutional Alignment: An analysis of the provincial landscape suggests a lack of institutional capacity at local level, with overlap at national level High focus Neutral Low focus Source: Deloitte Gauteng Market Research


The GFC is one of a number of bodies supporting the AV industry, as part of the province’s strategy to drive economic growth : 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: 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


An institutional structure that contains national, regional and local structures would benefit from greater co-ordination and integration …: An institutional structure that contains national, regional and local structures would benefit from greater co-ordination and integration … Proposed Institutional Structure: National e.g. NFVF? Regional e.g. Gauteng Local e.g. Ekhuruleni Supporting Agencies/Organisation


The GFC needs to play an increasingly strategic role in growing the provincial AV industry, even as it fulfils its stated mandate: 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 Practice GFC Mandate 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”


This role however will need to evolve in line with the demands of its rapidly changing operating environment: This role however will need to evolve in line with the demands of its rapidly changing operating environment Evolving Role: Declining Box Office Attendance Changing business Models Shift in Production Funding Models Digitisation TREND GFC RESPONSE / ROLE


The GFC needs to strategically drive the creation of a film-friendly environment in Gauteng: Proposed Role of GFC: The GFC needs to strategically drive the creation of a film-friendly environment in Gauteng Source: Deloitte Best Practice Research 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 Development of a Film Culture Industry Partnerships Marketing International - National Domestic - Provincial National GFC (Regional) Local Monitoring and Evaluation Policy Development


Though the GFC is fully government funded, it could consider other funding options to reduce its dependence on government grants: Though the GFC is fully government funded, it could consider other funding options to reduce its dependence on government grants Alternative GFC Revenue Model: 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” “Public-private partnerships… could raise funds to be used for specific projects” “Self-generated funds could be obtained by charging fees for services and … a fee-paying membership base” Source: Deloitte Gauteng Market Research and Focus Interviews


In conclusion, Gauteng film industry has the potential to be a significant economic force with the right strategy in place: 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: 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.


Slide191: Thank You!


Appendices: Appendices Charters References Supporting Documentation


Appendices: Appendices Charters References Supporting Documentation


We developed an overall project charter that outlined the project’s key objectives, activities and deliverables : 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 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 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 Jacques Stoltz, Senior Marketing Manager 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 1 x Project Director 1 x Project Manager 1 x 3 Consultants 2 x Subject Matter Experts (SME’s) Global Research Center (GRC) Support


Stream Charter: Gauteng Market Analysis: 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 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 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 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


Stream Charter: South Africa Market Analysis: 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 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


Slide197: 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 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) 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: Appendices Charters References Supporting Documentation


References: References American Film Market Website (2007) www.afma.com Animation Production Training Initiative Website(2007) www.anamazing.co.za Andalucia Film Commission Website (2007) www.andaluciafilm.com Animation School Review Website (2007) www.animationschoolreview.com Associated Press Newswires (2005): ‘Mexico Exchange Rate Favours Foreigners’ www.ap.org Audio-visual Federation Review (2006): ‘Film and Television Production in Ireland’ Australian Film Commission Website (2006): ‘The Economic Contribution of a Film Project’, 2006 Australia Film Commission Website (2007): National Survey of Feature Film and TV Drama Production, 2005/2006 www.afc.gov.au Australia Film Commission Website (2007): Fast Facts, 2006 www.afc.gov.au


References: References Australia Film Commission Website (2007): Corporate Plan, 2006/07-2008/09 www.afc.gov.au Australia Film Commission Website (2007): Report on State Owned Enterprises by the Minister of Arts and Sport www.afc.gov.au Australia Film Commission Website (2007): Service Charter, 2006 www.afc.gov.au Australia Film Commission Website (2007): Annual Report, 2005/06 www.afc.gov.au Australia Film Commission Website (2007): ‘Statement of Intent by the Australian Film Commission for the Minister of Arts and Sports’ www.afc.gov.au Australia Film Commission Website (2007): ‘About the AFC’s Film Development Funding Programs’ www.afc.gov.au


References: References Australia Film Commission Website (2007): National Survey of Feature Film and TV Drama Production, 2005/06 www.afc.gov.au Australia Film Commission Website (2007): Australia’s audio-visual Markets www.afc.gov.au Australia Film Commission Website (2007): Film Agency Funding in Australia www.afc.gov.au Australia Film Commission Website (2007): The Economic Contribution of a Film Project www.afc.gov.au Australia Film Commission Website (2007): AusFilm Fact Sheet on Incentives www.afc.gov.au 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 California Film Commission Website www.film.ca.gov


Slide202: Cape Film Commission Website www.capefilmcommission.co.za Centre for Justice and Crime Prevention Website (2007):’Crime and Victimisation Mapping Tool’, http://www.cjcp.org.za CineEuropa Website, www.cineuropa.org Commercial Producers Association (CPA) Industry Surveys, 2005 - 2006 Community, Social and Personal Services Industry Survey: ‘Gauteng Motion Picture Statistics’, www.statssa.gov.za Deloitte (2007): ‘The Digital Turn On, 2007’ Deloitte (2006): ‘Overview of the Film Sector in the United Kingdom, 2006’ Deloitte (2007): ‘Movies and Music Quarterly Industry Report, 3rd Quarter, 2006’ Deloitte (2003): ‘Understanding the Business of Hollywood, 2003’ Department of Arts and Culture: ‘Cultural Industries Growth Strategy, 1998’ Department of Trade and Industry: ‘CSP Report, 2005’ Department of Trade and Industry: ‘Film and Television Production Rebate Guidelines’ Department of Trade and Industry South Africa (2005): ‘Film and TV Sector Development Strategy, 2005’ Durban Film Office Website, www.durbanfilmoffice.co.za References


Slide203: Durban Film Office: ‘KwaZulu Natal Film Commission Draft Business Plan 2005 – 2008’ Evolution Research Solutions (2005): ‘Commercial Producers Industry Survey’, 2005 Evolution Research Solutions (2006): ‘Commercial Producers Industry Survey’, 2006 European Observatory (2006): ‘World Market Film Trends Focus, 2006’ European Observatory (2006: ‘Public Aid Mechanisms for the Film and the Audiovisual Industries in Europe’ Film LA Annual Report 2006 Film LA Inc Website, www.eidc.com Film New Mexico Website www.nmfilm.com Filmmaker South Africa (2007): ‘Animation, the Next Big Break?’, 2007 www.filmmaker.co.za www.findarticles.com Financial Express Website www.financialexpress.com References


References: References 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


References: 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


References: 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


References: 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


References: 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


Appendices: Appendices Charters References Supporting Documentation


The audio-visual industry value chain contains value enhancing activities and role players that stimulate the growth of the industry (cont.): The audio-visual industry value chain contains value enhancing activities and role players that stimulate the growth of the industry (cont.) Detailed Value Chain: Source: Deloitte Best Practice Research


Slide211: A number of other potential benchmark countries were also considered Comparator Countries: Source: Key GFC Stakeholders and Industry Experts


All the countries we reviewed provide support for funding and are focused on promoting their locations: All the countries we reviewed provide support for funding and are focused on promoting their locations Different Roles of Film Commissions: Source: Deloitte Best Practice Research


Film Commissions typically have mandates that are developed by government in consultation with key industry stakeholders: Film Commissions typically have mandates that are developed by government in consultation with key industry stakeholders Los Angeles Australia Source: Deloitte Best Practice Research Mandate Development:


The Madrid Film Commission is funded by a variety of public sector organisations: The Madrid Film Commission is funded by a variety of public sector organisations Revenue Model: Madrid Film Commission Source: Deloitte Best Practice Research


Effective performance management, including monitoring and reporting, ensures accountability in Film Commission operations: Effective performance management, including monitoring and reporting, ensures accountability in Film Commission operations 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 Source: Deloitte Best Practice Research


Best-in-class Film Commissions typically operate within a clearly defined governance framework: Best-in-class Film Commissions typically operate within a clearly defined governance framework Governance Framework: AFC Source: Deloitte Best Practice Research


Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC: 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 Institutional Arrangements: Australia Source: Deloitte Best Practice Research


Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC (cont.): Institutional Arrangements: Australia Source: Deloitte Best Practice Research Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC (cont.) 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. ScreenACT New South Wales Film and Television Office (FTO) Film Victoria Film Agencies


In Spain, there are various government and private related agencies that support the audio-visual industry: In Spain, there are various government and private related agencies that support the audio-visual industry Institutional Arrangements: Spain Source: Deloitte Best Practice Research The Film and Audio-visual Arts Institute National The Spain Film Commission National Andalusia Film Commission Regional Regional Madrid Film Commission


In Spain, there are various government and private related agencies that support the audio-visual industry (cont.): In Spain, there are various government and private related agencies that support the audio-visual industry (cont.) Institutional Arrangements: Spain Source: Deloitte Best Practice Research Barcelona Plató Film Commission Council office Galicia Film Commission Regional Jerez Film Commission Council office Santiago de Compestela Film Commission Council office Tenerife Film Commission


In terms of the global movie theatre market, there is also a growing shift towards alternative sources of entertainment: 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%. Source: Deloitte Best Practice Research


The audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.): The audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.) Economic Impact: Australia Using the National Multiplier 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.


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


Some degree of transformation has occurred in the sector, for part time and full time employees: Some degree of transformation has occurred in the sector, for part time and full time employees Source: Commerical Producers Association (CPA) member data * Limited data available Employment Data*:


South Africa has a vibrant service industry catering to all aspects of the audio-visual industry …: South Africa has a vibrant service industry catering to all aspects of the audio-visual industry … Service Providers: Source: Deloitte SA Market Research


… and a variety of small to medium-sized fully equipped studio spaces: … and a variety of small to medium-sized fully equipped studio spaces Facilities: Source: Deloitte SA Market Research


We have calculated the multiplier for the industry as a whole to be 2,3 : 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….)


Gauteng’s strengths complement other regions in the country: Gauteng’s strengths complement other regions in the country What can Gauteng offer the national industry? 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


A BCG matrix provides a way of ranking different sectors in terms of their relative attractiveness and competitive advantage: 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 Source: Deloitte Gauteng Market Research


In Gauteng, TV and commercials are classic cash cows, whereas film is a ‘question mark’: In Gauteng, TV and commercials are classic cash cows, whereas film is a ‘question mark’ BCG matrix for the Gauteng AV industry: Film Commercials TV Multimedia Source: Deloitte Gauteng Market Analysis


With the right strategy in place, ‘question marks’ have the potential to become cash cows or stars: 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: