Even box-office hits can take a long time to recoup their budgets.
17 Sep 2012 - 12:23 PM  UPDATED 5 Nov 2012 - 4:50 PM

Red Dog is the 8th highest grossing Australian title of all time, raking in $21.4 million. It's racked up DVD sales of more than $17.5 million in Oz and been sold to all major territories including the US, the UK and France.

That hasn't resulted in a financial windfall for Screen Australia, the main equity investor, but the canine caper is well placed to reward all its investors over time as most films take three-five years to reach their full earning potential.

The economics of releasing films in Australia usually mean that returns to producers are just a fraction of the box-office takings. On films such as Red Dog, which don't open huge (it took $1.8 million in the first weekend) but enjoy long runs in cinemas, exhibitors pay distributors a fee of about 25% of the gross. In turn, the distributor recoups the cost of prints and advertising out of its share of the revenues before money flows back to the producer.

“My hope is that Red Dog will travel the long journey to eventual recoupment,” producer Nelson Woss tells SBS Film. “The film continues to deliver strong worldwide revenues from DVD, pay TV, VOD, Free TV etc. Our exclusive USA Walmart deal certainly puts us in good stead.”

The film's private investors have fully recouped and Roadshow has recouped its investment and its prints and advertising outlay. “As a direct result of Screen Australia's backing Red Dog allowed the filmmakers to show there is an audience for this type of film in Australia," Woss adds.

The success rate of Australian films probably is similar to that of indie films in the US and other territories. Only about one in 15 Oz films breaks even financially or give returns to investors, compared to one in seven in the US, according to IBISWorld's Australian Film and Video Production report.

That may be an overstatement in both cases. Film Finance Corp. Australia invested in 248 films including feature-length documentaries and IMAX Films from its inception in 1988 until it was folded into Screen Australia in 2008. The FFC fully recouped its investment in just 11: The Adventures of Priscilla, Queen of the Desert, Green Card, Muriel's Wedding, Napoleon, Rabbit-Proof Fence, Shine, Sirens, Strictly Ballroom, The Wog Boy, Wolf Creek and IMAX film Antarctica.

That's a batting average of 1 in 22. To be fair, the FFC wasn't involved in privately-financed hits such as The Castle. And because the federal funding agencies usually are the last in line to recoup, many films did generate returns to private investors.

Screen Australia hasn't fully recouped yet on any film in which it's invested but no one should draw any conclusions from that, given the earnings-life of most of those films. There are valid cultural and economic reasons, such as job creation and skills development, for the federal and state subsidy systems. Without that support, private investors would be loath to commit their funds, many films would not get made and the production industry would all but collapse.

Fiona Cameron, Screen Australia's chief operating officer, tells SBS Film, “The economics of screen production in Australia are such that government support will always be necessary.”

Cameron credits the 40 percent producer offset introduced five years ago with stimulating private investment in features and in improving producers' recoupment position. She says private investment jumped from 2 per cent of budgets in fiscal 2008 to 15 percent in 2011.

Producer Anthony Buckley contends, with some justification, that any evaluation of Australian films should start with the formation in 1970 of the Australian Film Development Corporation, which funded Tim Burstall's Stork (which cost $70,000) and Bruce Beresford's The Adventures of Barry McKenzie (a snip at $250,000). The AFDC evolved into the Australian Film Commission, which fully funded scores of films in the 1970s and '80s.

“In the halcyon days of the '70s and '80s it was one in fourteen Oz films that returned either a profit or broke even,” says Buckley, whose credits include Caddie, The Irishman, Bliss and The Oyster Farmer.

Money, of course, shouldn't be the only yardstick. “Complete recoupment isn't the only mark of a film's success – and that's true in Hollywood too. Many American movies that we now deem classics at the time didn't make their money back, and yet they've had an enormous impact culturally and influenced our thinking,” says producer-director Bill Bennett, who cites Billy Wilder's Some Like it Hot, Alfred Hitchcock's Vertigo and Francis Ford Coppola's Apocalypse Now.

“Awards as well aren't necessarily an indicator of success – how many awards did The Castle get? Not many, if any at all. And yet the film is still regarded as one of the best Australian movies ever made. My mark of a film's success is if it's remembered. And if it's had an impact on our culture. Sometimes films hit all three – they make a lot of money, they win awards, and they impact our culture. But that's rare. Having commercial success of course helps producers garner investment, particularly from outside sources, but ultimately we are a state subsidised industry and our government bodies have a responsibility to look beyond the bottom line.”

The IBISWorld report is more positive about TV dramas, noting miniseries and telemovies usually offer a return of 20% or more. Buckley's track record attests to that: Six of the nine miniseries he produced are profitable, including Harp in the South, Poor Man's Orange, Heroes and Heroes 2: The Return.