Scenes of struggle for emerging film industry

Despite the Hollywood hoop-la, most New Zealand film-makers are struggling to emerge from a low-budget ghetto, writes JOHN DRINNAN.

The Lord of the Rings and a run of Hollywood movie shoots have led to unprecedented optimism about the film industry and its role in New Zealand's economic future.

As one of the "creative industries", film is singled out for special attention in the Government's innovation strategy, making it a party to a bewildering array of taskforces, consultative groups and upbeat scoping studies.

Apart from another Peter Jackson blockbuster, in foreign-investment terms the big hope is that the Hollywood films shooting here will stay in New Zealand for post-production. And there is no doubt the Hollywood shoots, or "serviced films", already make a big contribution to the regional economies.

Investment New Zealand estimates filming for Columbia-TriStar's Vertical Limit in 2000 put $80 million into the Queenstown economy.

In the next big project, Mt Taranaki will stand in for Mt Fuji in Warner Bros' The Last Samurai, starring Tom Cruise. The New Zealand budget is touted to be more than $50 million but as with all these film deals the actual amount is hard to pin down.

Among the other Hollywood projects in advance planning are a Dreamworks-Winchester Films feature, Harv The Barbarian, and an HBO mini-series about the Knights of the Round Table. More, we are told, are looking our way.

As for Jackson, he overshadows the rest of the New Zealand film industry because of his astonishing personal, business and creative success in pulling together the estimated $600 million Lord of the Rings deal.

The former newspaper printer, who made his first movie, Bad Taste, on a shoestring budget during weekends with his workmates, was this year named by movie magazine Premiere as the 41st most powerful player in Hollywood.

Premiere estimated his share of Lord of the Rings multimedia revenue at $334 million, or about 30 times the annual budget of the New Zealand Film Commission.

But film budgets and Hollywood estimates revenue should sometimes be treated with scepticism. For instance, true budgets are kept secret because a low figure can diminish a film's appeal when it is being sold to distributors.

One of the truisms of the film industry is that there is no sure thing, so there is no guarantee that the second and third Rings films will be as popular as the first.

Film production and investment are, by nature, high-risk and built around personal relationships, proven track records and delivering on budget, on time.

The big studios have the critical mass and the distribution networks to make films in bunches or slates in the hope that one will be successful and cover losses on the other half-dozen.

Studios also seek to remove exposure to the strong likelihood that a film will not make a profit at the box office, finding money to produce the film through advance sales to distributors, using tax breaks.

In New Zealand there has been muted debate about how much the tax break contributed to the budget of Lord of the Rings and how much the production returned to the economy. In part, it has seemed churlish to question the value of Jackson's soaraway success.

Jackson is a powerful advocate for incentives, warning that New Zealand has to keep up with countries such as Australia, Canada, Ireland and Britain, which already have them in place.

In the meantime, New Zealand attracts Hollywood with its scenery, but more particularly with its flexible (read non-union) film crews.

Government officials won't use the 'C' word, but the fact is New Zealand is popular because it is Cheap, certainly compared with Hollywood, where organised labour is a powerful player on the film sets.

In the short and medium term while rates stay low, and while Lord of the Rings keeps our profile up, New Zealand should get good mileage in foreign investment from servicing Hollywood films. It is good for building what has been until lately a cottage industry.

The bad news is that while these improvements are occurring the bulk of New Zealand film producers are still struggling to emerge from a low-budget ghetto reliant on taxpayer funding. That is partly because there is no local investment.

According to a Colmar-Brunton study for the Screen Producers and Directors Association, there was $308 million total investment into New Zealand-produced (as distinct from Hollywood-produced) feature films in the financial year 2000-2001. The vast bulk of that can be attributed to The Lord of the Rings and its New Line Cinema backers.

Just $12.1 million was from within New Zealand.

Compare that with 1998-1999, when there was $15.5 total investment and $8.6 million from New Zealand, and you can see the impact of Rings.

Nowadays, producers say local finance is almost non-existent because Inland Revenue scrutiny of any film investment has frightened everybody off.

Ray Austin of Northington Partners is one of a handful of New Zealand financiers looking at film, but he sees no prospect of raising money in New Zealand and is looking instead to overseas funding.

Another film financier, Gary Hannam, who was involved in the financing of Jackson's previous Hollywood film, The Frighteners, left the country in February to live solely in Germany, where tax-based investments have been the engine for financing much of the European industry and about 20 per cent of Hollywood movies (although there has also been a crackdown by the German tax officials).

Hannam says Inland Revenue's approach has stifled the film industry (the department would not explain its approach to tax-based investment in film).

Apart from international co-productions, the major source of funding for local films is the Film Commission and the $20 million-plus Film Production Fund, aimed at producing six to eight films over the next few years.

Producers can obtain $2.5 million from the fund as well as another $500,000 from the commission for every project the fund approves - but they are expected to bring with them 40 per cent of the budget.

The first film funded under the scheme, the South Pacific Pictures project Whale Rider, obtained support from Filmstiftung NRW, a regional German financier.

Last week Whale Rider won the People's Choice award at the Toronto Film Festival, one of the key events on the international film festival promotional circuit.

Wellington-based Gibson Group obtained around 10 per cent of the (estimated) $16 million budget for Castle of Lies through a British sale and leaseback tax-break investment. This project is also thought to have some German money.

But there has been widespread disappointment in the industry that the commission has waived guidelines for the Preston-Laing Productions film Perfect Strangers, which is now virtually wholly funded by the taxpayer.

South Pacific Pictures, Gibson and Preston-Laing are the high flyers, relatively speaking, of the non-Peter Jackson NZ film industry. There is also an emerging pool of young producers and directors who have beaten the odds and secured overseas finance off their own bat.

More dispiriting is the fate of Kahukura Productions, the Wellington production company that went into liquidation with creditors owed $1.5 million and three incomplete, low-budget films the commission financed.

Ironically, the creditor who filed for liquidation was The Film Unit, the country's highest profile post-production company, owned by Peter Jackson's business interests.

Inevitably, in this tight-knit industry where everyone knows everyone else, and where investment cash is limited, the commission is constantly the subject of speculation for being biased for or against one producer or another.

It has also faced trenchant criticism from leading players in the distribution and exhibitors about the type of films it has been funding.

The most vociferous critic has been Tim Ord, the outgoing head of NZ operations for UIP, which releases a third of all films shown at local cinemas.

"I have been accused of wanting 'nice' pictures, but that is not true," he said.

"What I want is to see 'attractive' films that appeal to the audience's aspirational natures. Australia used to have the same problem but they have moved on. It is time we did too."

Ord's swipes have been so persistent they have gone largely ignored at the commission which, to be fair, must meet cultural as well as commercial aims under its act.

But there are signs that Culture and Heritage Minister Judith Tizard heeded years of criticism from local distributors and exhibitors by appointing Barrie Everard commission chairman, replacing lawyer Allan Sorrell.

Indeed, there are high hopes for Everard, who is joint-owner of Auckland's 15-screen Berkeley cinema chain and has a management contract for Wellington's new, upmarket Courtenay Reading cinema. He also produced 1988's Never Say Die, a creditable attempt at a Hollywood-style, Kiwi action movie.

Everard is cautious explaining his philosophy but says he wants to "instil in filmmakers the need to keep the audience in mind".

But the commission is in a difficult position, having to both support the industry and meet cultural obligations.

For every dollar the commission has invested in films, it has got back 27c - compared with 31c for an Australian counterpart, the Film Finance Corporation, which has a more commercial brief.

Since 1987, four features with commission investment have gone into profit. They are Bad Taste, Lee Tamahori's gruelling Once Were Warriors, Jane Campion's biographical An Angel At My Table and the Gibson Group's horror The Irrefutable Truth About Demons.

But even combined with the Film Production Fund, the commission's $8 million-$10 million a year is unlikely to make an economic impact anywhere close to one single Hollywood blockbuster.

Short term it will be tempting for the Government and the new film industry boosters at Industry NZ, the Ministries of Economic Development and Arts and Culture, Trade NZ and assorted taskforces to focus more attention on the instant payoff of foreign money from Hollywood movies.

But local producers point out that Hollywood is fickle and could disappear in a blink if new incentives are offered elsewhere.

Delve in any depth into film production investment and you conclude that in many ways it does not make sense as a business proposition.

The upside of this high-risk business is that, like gambling, you can hit the jackpot. You could become the next Peter Jackson.