The bargaining power of TV networks is the biggest challenge production companies are facing in Australia, according to an industry survey.
A Deloitte Access Economics survey into the independent production sector was commissioned by Screen Producers Australia.
The power of broadcasters, especially those in financial departments, in negotiating more and more rights /ownership is impacting on the cash-flow of small and mid-sized production companies.
22% of surveyed production businesses made a loss in 2017. A very high proportion of these businesses had revenue under $1 million. By contrast, all production companies with revenue over $25 million made a profit. All up, 48% of production businesses made a slight profit.
Nick Murray of CJZ said, “It is getting harder to make money here in Australia. Broadcasters are feeling the strain, and as a result are squeezing us for more rights, and lowering their licence fees. But if we think a show will sell overseas we can afford to take more risks. Sometimes we only just break even here, and we only make money when we sell the format internationally.”
Top challenges faced by screen producers.
Murray is concerned that original Australian ideas are less likely to be commissioned in the current environment.
“The broadcasters prefer to commission content reproduced from existing overseas content than take a chance on a new idea. If this trend continues, we’ll lose diversity of content, and the know-how to build a show from the ground up. That would be a big loss for Australia,” he says.
“At the moment, margins are unsustainable for many producers. Markets such as the UK have put additional regulation in place to support the industry. They have independent production quotas and mandated minimum profit margins. It gives more producers the freedom to do what they’re passionate about – bringing good content to life.”
The survey found the independent screen production industry generated $1.2 billion in production revenue in 2017. By way of comparison it makes the screen industry three times the size of the recorded music industry in revenue terms. Additionally, the businesses and productions responding to the survey supported almost 20,000 jobs in 2017 (not all full-time).
Australian productions are shown in at least 225 territories. More than two in every five production businesses (43%) exported, compared to 7.6% of Australian businesses overall. In total, the survey captured $163 million in export revenue in 2017.
Map of export destinations, 2017.
In its 2015-16 industry survey, the Australian Bureau of Statistics estimated there were 2,819 active film and video production businesses in Australia, as well as another 414 businesses specialising in post-production.
But despite the industry’s size, many production businesses seemed to struggle. Two in five (41%) production businesses with revenues less than $1 million made a loss in 2017.
Production businesses in Australia, by location.
In total, more roles were supported by scripted productions 10,370) than unscripted productions (7,885 production). Although the average scripted production supported 118 roles, some of the larger ones supported upwards of 700 roles.
Likewise, while the average number of roles in an unscripted production was 58, some supported close to 600.
46% of commissions surveyed were from ABC & SBS – the report does not include productions made by broadcaster-owned businesses.
The screen industry is actually well balanced from a gender perspective – 55% of employees who are permanently employed in production businesses are female. Two thirds of production businesses responding to the survey had more female employees than male in 2017.
Scripted productions cost around twice as much as unscripted productions, costing an average of $836,000 and $416,000 per hour respectively. Drama productions are more than three times as
costly to produce as documentaries and lifestyle productions and 11 times more costly than game show productions.
21% of production businesses responding to the survey expect to reduce their activity in the next five years, and almost one in ten production businesses are concerned about their solvency in the next five years.
Production businesses vary by size.
For the purpose of this report, “screen” is defined as television and film content. This excludes television commercials, promotional videos, corporate videos and games.