Making films is never easy but we can fix the local industry

Forty years ago Gough Whitlam launched the Australian Film Commission and charged it to encourage “the making, promotion, distribution and exhibition of Australian films”. The plan was to build on the early successes of the “new wave” of Australian films that began in the 1960s.

There have been many subsequent successes. But 40 years of bipartisan government support have not been enough to lift the industry into independent viability. Problems that were thought to be those of an industry in its infancy continue to beset the industry in its middle-age.

The problem with innovation

None of the innovations of the past 40 years has helped.

Home video delivered a gush of new money in the 1980s and 1990s but that gush has turned to a trickle.

The internet opened up a new frontier but it’s a Wild West where “free” is viewed as a right and the dominant business model is aggregation, not creation.

Meanwhile the same digital technologies that gave independent filmmakers the laptop and the GoPro camera have sparked a special-effects arms race among the major studios. Movie behemoths costing hundreds of millions of dollars now crowd out the smaller films we mostly make.

The risks

Fundamentally, nothing has changed. The heart of the problem has always been a simple mismatch of risk and reward: the risks of filmmaking outweigh the financial rewards.

We can express this with the equation R < r, where R is the reward earned by capital invested in film copyrights and r is the risk of the investment. When R < r, the returns earned by a film will not be adequate to compensate for the risks of making the film.

The mismatch is the reason why raising the money to make a film is so difficult. Even if the film is a hit the returns will be too small – relative to the risk – to justify the investment. And if the film misses, the returns will be derisory, a puddle of red ink. Risk and reward are crucially out of whack.

R < r summarises the problem faced by filmmakers everywhere. It is not a problem peculiar to Australian films but a universal condition of filmmaking.

Looking ahead

So are there grounds for optimism in the years ahead or is the industry permanently incapacitated? Three factors argue for guarded optimism:

1. Giving people what they want

We are getting closer to a time when audiences will be able to watch exactly what they want to watch, at any time, on any screen.

For digital natives that’s almost a given but for anyone who started out in analogue media – back when spectrum was scarce – it is breathtaking.

To be able to choose a film from a nearly universal library and have it served immediately, seamlessly to a screen of your choice, and to be able to pause it, share it, or resume watching it on another screen is not an incremental advance but a fundamental rewriting of media’s contract with audiences.

I write this as someone who grew up in a small city with a handful of cinemas, two television stations and just one good bookshop. From that low base, the increase in the value proposition of media seems nearly vertical.

Granted there are still obstacles to its full fruition – some legal, some technical – but these will be overcome within a few years. What is in train now is a tour de force of technology and enablement.

2. Closing the circle between filmmaker and audience

During cinema’s first century the first time a filmmaker met the audience, it was too late for changes. The film was in the can and no correspondence could be entered into.

Digital technologies have put a feedback loop in the filmmaking process. Some filmmakers reach out to audiences very early on to help fund their films, for example by crowdfunding. Others test concepts and release teasers while the film is still in production. Audiences are in the loop.

Beyond that, digital media are shrinking the distance between filmmaker and audience, reducing the number of intermediaries and challenging their control of access to audiences.

These changes mean a filmmaker can be in touch with the audience, talking steadily with those people over time, building a direct relationship.

3. Building better payment systems

Outside cinemas, collecting payments from audiences in the old mass media was so difficult it was rarely even attempted. Instead payments were collected from advertisers, who bought the opportunity to interrupt the content stream with ads.

Digital media are much more interactive. Audiences are no longer unknown masses; they are knowable and therefore billable, and payment systems themselves are becoming easy to use, exact, and efficient.

We begin to see the possibilities of frictionless transactions and penny payments, of metered use and pinpoint pricing.

Optimism then?

Putting these things together, a different world emerges.

If the value proposition is strong and the payment method seamless, then perhaps the losses due to piracy and poor collecting capacity can be slowed.

And if people can be persuaded, at least some of the time, that the money they pay will find its way to the filmmakers they support, then perhaps they won’t begrudge it.

Connecting with audiences and delivering value: these are the tools we can use to repair the broken financial equation R < r.

They are grounds for optimism.

David Court does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.