Profit Shares Give Hope For UK Film Industry

The film adaptation of The History Boys, the Alan Bennett play which opened to critical acclaim on Broadway last week, will test a new business model for British film-making when it opens in cinemas this autumn.An unusual financing package put together by a specialist media and technology legal practice, Wiggin, the film is designed to turn a profit from opening day.

The History Boys is the story of a bunch of bright but unruly sixth formers seeking sex, sport and a university place, and their maverick English teacher. It opened as a play at the National Theatre in London in 2004. Following this West End success, playwright Alan Bennett and the play's director, Nicholas Hytner, joined forces to make the film with producer Kevin Loader (Enduring Love, Captain Corelli's Mandolin.)

Even these combined talents and successful track records, could not guarantee funding, so the producers decided to approach Wiggin, a UK law firm. They have previously advised on films like the Da Vinci Code and Mission Impossible 3 for big US studios and also for small, independent film-makers. Two years ago Wiggins set up a film and TV practice under the British lawyers Miles Ketley and Charles Moore. Both have previously worked inside leading US studios, including Fox Searchlight.

Wiggin advised reducing the budget for The History Boys by more than a half, with almost all cast and crew working for a minimal fee. Everyone, including Wiggin, was then allocated a share in future profits. This financing approach has previously been restricted to just a few small, low-budget, independent films.

To cover production costs, eight rights deals were secured before filming began in July 2005. The final film financing package was with BBC Films, BBC 2, a UK tax deal, finance house Ingenious Media, and a worldwide “excluding UK” distribution deal with DNA Films and Fox Searchlight. According to Mr Ketley, the aim was to structure finance in a way that would reward talent in proportion to its contribution to the film and isolate the strongest markets for that package; those being the UK, television and DVD distribution.

"We advised them to make the film for as little as possible, thereby enabling us to finance the production costs from one rights package, so preserving as many other rights as possible to reward the film-makers after all costs were covered," he said. Covering production costs through one rights package left the producers in a stronger bargaining position to maximise returns from the sale of other rights.

Mr Moore added: "Most UK films of this type would have a budget somewhere between £4m and £6m. In this case, the film-makers reduced their budget expectations by more than 50% when you consider what top talent like Alan Bennett, Nicholas Hytner and Kevin Loader might have expected to charge. If it had been funded conventionally, talent would have seen little more than their fixed fee.

"The good news for the cast and crew of The History Boys is that as a result of how it was financed the film's costs are more than covered, and it is in profit from day one."

Financing a British feature is usually achieved through a complex jigsaw of deals, partnerships and grants. Despite the introduction on April 1st of a new tax-break scheme, film financing remains a precarious hand-to-mouth affair.

The new tax break regime means the makers of films that cost £20m or less can claim a guaranteed tax benefit of 20% of production costs. Films costing more can get a 16% reduction.

The new scheme has been cautiously welcomed. Pact, the independent producers' trade body, said it "should mark the beginning of a new era for British films". The Treasury's definition of what is a British film is causing some concerns though, as features shot abroad are not eligible for the new tax break. International co-production finance is an essential part of the funding for many British films, and this often requires producers to shoot outside the UK, according to Pact's director of film, Tim Willis.

"For the time being, getting finance for films is just as tough as it has always been," he said. "It is dependent on multi-party deals, and this restricts producers' options when it comes to how best to exploit their rights. The big issue is how a producer can move from patching together finance for a single film to being able to run a series of film productions as a viable and sustainable business."

The profit-share approach is one way around this, and it is a model also being used by Vertigo Films, the independent film production company that made The Football Factory and It's All Gone Pete Tong, which has generated considerable revenue from its films through DVD licensing agreements.

Mr Ketley and Mr Moore are negotiating similar finance packages for a further five British feature films. "There is a groundswell in the UK film business in favour of this sort of approach," Mr Ketley said.