Review of Government Screen Funding Arrangements

Discussion Paper

CONTENTS

1. INTRODUCTION 3

Purpose of the Discussion Paper 3

The Review’s Terms of Reference 3

2. CONTEXT FOR THE REVIEW 5

The Developing New Zealand Screen Industry 5

The Role of the Government 5

Recent Government Initiatives 6

Looking Forward 7

3. OBJECTIVES AND PRINCIPLES FOR GOVERNMENT SCREEN SUPPORT 8

Objectives of Government Support 8

Working Principles for Government Support 8

4. CHALLENGES AND ISSUES FOR GOVERNMENT SCREEN- FUNDING ARRANGEMENTS 9

Achieving Coherence across Multiple Government Objectives 9

Managing Multiple Funding Pathways 12

Supporting Development in a Project-driven Industry 14

Working Effectively with the Industry to Achieve Sustainable Sector Development 15

5. OPTIONS FOR ENHANCING FUTURE EFFECTIVENESS 17

Options Must Address the Challenges Ahead 17

Strengths and Weaknesses of Current Arrangements 17

Institutional Design and Organisational Behaviour 17

Options for Consideration 18

6. FEEDBACK 24

ANNEX I: CURRENT FUNCTIONS AND ACCOUNTABILITIES OF GOVERNMENT FUNDED ORGANISATIONS INVOLVED IN SCREEN ACTIVITIES 25

ANNEX II: SCREEN PRODUCTION TASKFORCE ‘MAP’ OF FUNDING FLOWS UPDATED WITH 2002/03 FIGURES 26

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1. Introduction 1.1 This discussion paper has been prepared by a review team in the Ministry for

Culture and Heritage in collaboration with other key departments. It draws on discussions with a range of people from the screen industry and Crown entities, as well as published reports, strategic plans and policy documents from New Zealand and overseas screen agencies. Discussions are continuing and will, along with direct feedback on this paper, help inform the review team’s final report and recommendations to the government.

Purpose of the Discussion Paper 1.2 The discussion paper:

• sets out the context for the review of the government’s various screen-funding support mechanisms;

• articulates the outcomes and objectives of government support for screen-funding, and the principles underpinning the government’s interventions;

• identifies and discusses challenges and issues in relation to the government’s screen-funding arrangements;

• proposes options for enhancing the effectiveness of existing arrangements; and

• seeks feedback from stakeholders by 30 April 2004.

1.3 A series of questions have been posed in this paper as a prompt for feedback. Several options have also been outlined at the end of this paper as

potential structures for government screen production agencies, which are also prompts for feedback.

1.4 Feedback can be provided in written form either by email to

screenreview@mch.govt.nz or by hard copy to Screen Review, Ministry for Culture and Heritage, PO Box 5364, Wellington. A report will be finalised for Cabinet consideration by June 2004.

The Review’s Terms of Reference 1.5 As part of its response to the report of the Screen Production Taskforce, the

government agreed to review its current institutional mechanisms for screen funding.

1.6 The terms of reference as determined by Cabinet for the review are to:

• report whether the government’s funding arrangements continue to be appropriate and effective, and whether there is scope for enhancing these funding arrangements so they will meet more effectively the government’s objectives and the aspirations of the screen production sector;

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• focus on the roles and functions of the New Zealand Film Commission, the Film Production Fund, NZ On Air, and Te Māngai Pāho, as the current core central government funding agencies for screen production activities;

• take account of other government interventions in the screen sector, including support for FilmNZ and the newly set up Screen Council, and the work of economic development agencies such as New Zealand Trade & Enterprise; and

• review the alignment of the government’s programme of work in developing a broadcasting strategy and the Māori Broadcasting Strategy.

1.7 The review is to take into account:

• recent policy developments in relation to the screen industry, including the establishment of the Large Budget Screen Production Grant scheme, a further $10 million increase in film funding through the New Zealand Film Commission and the funding for the chartered remits of TVNZ and the Maori Television Service; and

• recent funding and institutional developments overseas.

1.8 The quantum of the government’s funding support is not the focus of this review. A number of government funding initiatives in the sector have recently been launched and it will be some time before their impact can be assessed.

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2. Context for the Review The Developing New Zealand Screen Industry 2.1 The development and current status of the New Zealand screen industry has

been well documented through the recent work of the Screen Production Taskforce in its report of March 2003, which can be accessed at www.nzte.govt.nz (under Creative Industries).

2.2 Screen productions are particularly significant for their impact on how New

Zealanders see themselves and how this country is perceived abroad. A simple catalogue of film titles from Broken Barrier in 1952 to last year’s Whale Rider, along with a list of landmark domestic TV programmes and memorable commercials, evokes a strong sense of a distinctive multicultural New Zealand identity and set of values. In 2002 sixty per cent of New Zealanders attended the movies at least once for a total of 17.7 million admissions generating box office receipts of $142.7 million (Motion Pictures Distributors of NZ figures).

2.3 Screen productions are also of considerable economic importance. As at

2000, screen production in New Zealand was believed to sustain around 2000 business units and around 14,000 jobs spread across domestic films, TV programmes and commercials, co-productions, and the servicing of foreign film and TV projects being made in New Zealand locations and facilities. According to figures cited in the FilmNZ Strategic Review of May 2001, total production financing in 2000 amounted to $497 million, of which $343 million was from foreign sources (including Lord of the Rings expenditure).

2.4 Against the background of industry development in recent years, the 2003

Screen Production Taskforce has set ambitious aspirational industry targets for growth over the next five years which, if achieved, would effectively double the size of the sector to 10 companies with an annual turnover of $50 million and another 20 companies with an annual turnover of $10 million.

2.5 A new dimension has been brought to screen production in New Zealand by

the extraordinary scale, complexity and success of Peter Jackson’s Lord of the Rings trilogy and the associated development here of facilities and capabilities in various technical fields, including interactive applications. As well as being an inspiring model for the ambitions and aspirations of New Zealand filmmakers, the Lord o the Rings achievement has created a wide international appreciation that this country has the skills, capabilities and facilities to undertake major high-quality productions. This demonstration of what is possible here should have a positive influence on international investors’ perception of business risk in financing productions in New Zealand, and encourage them to look at the merits of funding New Zealand films as distinct from overseas films made in New Zealand.

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The Role of the Government

2.6 Screen productions are the outcome of efforts by creative and entrepreneurial

individuals across various disciplines collaborating, mostly on a project-by-project basis, to bring to fruition a particular vision or concept. The

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government has no role in the creative process itself but can play a major part in fostering a supportive environment in which the various elements contributing to screen production can be developed and encouraged to interact in an effective manner. In the words of a 2003 United Kingdom House of Commons report, ‘Public policy has a role to play in strengthening the industry in order to generate substantial economic rewards and important cultural benefits.’ It is also the fact that in the absence of large-scale corporate or private patronage, certain types of cultural experience or content would not be available to the New Zealand audience without public-funding support.

2.7 Current government structures and mechanisms relating to screen funding in

New Zealand have evolved over several decades. They reflect differing priorities and approaches by successive governments, an ongoing restructuring of public service and Crown entity delivery and accountability mechanisms, the need to give effect to judicial decisions in respect of Māori issues, and the impact of new technology and changes in the marketplace.

2.8 Direct government involvement began with the establishment of the National

Film Unit in 1941. The first television transmissions from the New Zealand Broadcasting Service started in 1960 with a second state-owned channel being launched in 1975. The management of these two channels was subsequently amalgamated and in the 1980s the State-Owned Enterprises Act gave the national television broadcaster a new and profit-driven mandate. The 1989 Broadcasting Act established the Broadcasting Commission, later branded as NZ On Air, which could allocate funding directly to independent producers who had secured a commitment from a television network to broadcast their programme. Also in 1989, TV3 was launched as the first private television network.

2.9 Specific government funding for independent film production came into being

with the 1978 legislative establishment of the New Zealand Film Commission, which had a wide mandate emphasising the development of the fledgling industry. In the 1980s the use of tax incentives to secure private investment in film saw the industry boom; during this period the National Film Unit was also sold off. In the 1990s TVNZ and TV3 were increasingly commissioning programmes from independent producers who also began to make productions solely for overseas markets. Te Māngai Pāho, the Māori programme funding agency, was set up in 1993 as part of the commitment made by the Crown to promote te reo Māori. In 1999, the then government abolished the decades-old broadcasting fee in favour of making appropriations direct to NZ On Air from general tax revenue.

Recent Government Initiatives 2.10 Under the current government a number of significant further developments

have taken place. In 2003 TVNZ was reconstituted as a Crown entity company with a charter. This change is part of government policy to strengthen the place of public broadcasting values within a ‘mixed economy’ of broadcasting. From 2002/03 TVNZ has been granted direct funding for charter purposes to supplement the funding available through NZ On Air.

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2.11 In addition, the government has established the Māori Television Service (MTS), funded through Te Māngai Pāho and the government department Te Puni Kōkiri to ensure broadcasting is a medium for te reo Māori, and to promote Māori language and culture for all New Zealanders as a key part of our national and international identity.

2.12 In the screen sector, the government has: established the independently

administered Film Production Fund to support the production of larger scale New Zealand feature films; increased New Zealand Film Commission funding by $10 million annually from 2004; established the Large Budget Screen Production Grant scheme; and provided increased funding for two years for FilmNZ. It has also acted upon the recommendations of the government-initiated Screen Production Taskforce to undertake a review of the government’s screen funding, to improve the collection of screen industry statistics and to establish a Screen Council.

2.13 These initiatives have resulted in a funding increase of $12.87 million for

government supported screen activities through the New Zealand Film Commission, NZ On Air, Te Māngai Pāho, TVNZ, FilmNZ, Statistics NZ and the Screen Council from 2002/03 to 2003/04, along with the provision of operational funding for MTS of $5.9 million in 2002 and $12.98 million in 2003/04. In addition, a contingency provision of $40 million has been made for the Large Budget Screen Production Grant scheme. In very broad aggregate terms, and taking into account Budget 2004 decisions announced to date, the flow of government screen funding in 2004/05 will be in the order of $134 million for television and $27 million for domestic film project/industry support, supplemented by such project specific grants as may be disbursed under the Large Budget Screen Production Grant scheme where its criteria are met.

Looking Forward 2.14 From the historical background as outlined above has emerged a complex

institutional framework for screen production. A ‘map’ of government screen funding flows prepared by the Screen Production Taskforce and up-dated with 2002/03 figures is attached as Annex II. At present at least nine government-funded organisations have an active funding role in the sector1 and several departments are involved in monitoring agency activity and providing policy advice. Looking forward, and taking into account the government’s policy objectives and interests discussed in more detail below, it is clearly timely to consider whether this institutional framework is appropriate for the evolving New Zealand screen environment, and whether it can be expected to best serve future needs.

1 New Zealand Film Commission, NZ On Air, New Zealand Film Production Fund, FilmNZ, TVNZ, Te Māngai Pāho, MTS, New Zealand Trade & Enterprise, Creative New Zealand.

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3. Objectives and Principles for Government Screen Support Objectives of Government Support 3.1 The government has an interest in the impact and outcomes of its screen

support across a range of areas. These include:

• the intrinsic cultural and national identity value of New Zealanders telling our own stories and interpreting our national experience, within which is a special place for the protection and enhancement of Māori culture and language;

• the economic benefits a successful domestic screen-production industry can generate through the foreign-exchange earnings from the international sale of its products and intellectual property; the use of New Zealand locations and technical services by foreign productions, and the spill-over of high technology advances from screen production to other creative sectors and the wider New Zealand industry and training scene; and

• the successful marketing abroad of screen productions so as to project a distinctive New Zealand identity and to build perceptions of this country as a desirable place to work and invest in, and to visit.

Working Principles for Government Support 3.2 Government screen-funding support should be based on:

• The screen sector’s ability to contribute to the government’s broad cultural and economic objectives;

• the identification of gaps in the sector where government intervention is appropriate and effective and will be complementary to activities in the private sector;

• the readiness of the industry to work together with the government so that both parties can leverage the value of the other’s contribution;

• clear specification of objectives and expected outcomes from particular interventions;

• consistency with New Zealand’s international legal obligations; and.

• independence, transparency, accountability, and efficiency of the decision-making processes for funding specific screen projects and programmes.

Question for feedback:

Q1: Are there additional principles that should be taken into account in framing the nature and delivery of government screen-funding support?

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4. Challenges and Issues for Government Screen-Funding Arrangements 4.1 A forward-looking perspective and sense of the challenges ahead are

important in considering whether the current screen-funding arrangements are likely to give best effect to the government’s objectives.

4.2 In preliminary analysis the review team has identified a number of key

challenges and associated issues, which are discussed below. A set of questions seeks feedback on these challenges and any other screen-funding issues considered significant.

Achieving Coherence across Multiple Government Objectives 4.3 The government has to balance several desired public policy outcomes in the

sector. These outcomes include: expression of culture and identity; direct economic benefits from greater activity in foreign and domestic production; indirect benefits from marketing New Zealand as a desirable investment/tourism destination and promoting screen technology as a growth and innovation ‘enabler’.

4.4 There is a need for continuing mechanisms that enable both the development

and delivery of coherent approaches which balance and manage the different perspectives inherent in multiple government objectives. In particular, the changing context is throwing up new challenges for the interface between cultural and economic objectives, as well as that between television broadcasting and film.

Interface between Cultural and Economic Objectives 4.5 Traditionally, boundaries have been drawn between cultural and economic

objectives and between domestic and international screen productions. In reality, however, the boundaries are blurred. There is a spectrum of reasons for why and how screen productions are made; nevertheless, government agencies today tend to focus on particular points on the spectrum. For example, as a cultural funding agency the New Zealand Film Commission focuses on developing and promoting domestic production. FilmNZ, working with New Zealand Trade & Enterprise’s Investment New Zealand, focuses on bringing international screen production and investment to New Zealand. Placing administration of the Large Budget Screen Production Grant within the New Zealand Film Commission is one example of where the government has more recently decided that it is appropriate to manage screen funding interrelationships more broadly.

4.6 The challenge ahead in optimising these objectives is now of a different

order. It is a challenge arising from growth and success – a good challenge to have. In recent years it has been demonstrated to the international market that New Zealand has the creative, technical and physical environment to support significant screen-production (and post-production) activity in New

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Zealand. Incentives are in place both to foster New Zealand film stories and encourage overseas productions in New Zealand.

4.7 Managed well, these opportunities have the capability to bring employment

and growth to a multitude of businesses associated with screen activity, as well as a blossoming of New Zealand films. Managed badly, they may risk a boom-bust scenario and tensions between local and overseas filmmakers as they compete for resources, with the potential to crowd out New Zealand-generated stories and initiatives as well as turn away overseas investors through over-committing resources and inflating costs.

4.8 The present configuration of agencies means that cultural or economic issues

are directed to individual agencies, without the benefit of policy advice integrating these perspectives. Each organisation has its own distinct primary focus, delivery mode, and lines of accountability. (The diagram in Annex 1 schematically sets out the organisations’ key functions and accountabilities.) The management and resolution of activities to help the screen sector requires joint agency approaches and often joint Ministerial consideration.

4.9 There is a question as to whether integrating the governance of the streams

of activity, which are now separately managed through the New Zealand Film Commission, FilmNZ and Investment New Zealand would provide a more effective approach to addressing national and international perspectives in achieving government objectives. While coherence between these streams of activity may not necessarily be best achieved through the establishment of a single agency, the present ‘separation’ of these organisations may not provide well in the future for an integrated and transparent approach to meeting government’s cultural and economic objectives for screen in the national and international arenas.

Interface between Television Broadcasting and Film Production 4.10 Television production is a major driver of the domestic screen industry. Hence

the further evolution of the broadcasting strategy and the Māori broadcasting strategy may also affect the range of options for improving the effectiveness of government mechanisms for screen funding.

4.11 Key questions for the broadcasting strategy, which is currently being

developed by the Minister of Broadcasting, are centred on determining the appropriate mechanisms for supporting the government’s broadcasting objectives and on how to address the special charter role of the public broadcasters. Possible arrangements in this broadcasting context could include the use of supplementary grants to support the statutory charter of these broadcasters, rebalancing contestable and institutional funding, closer institutional co-ordination, and adjustment of contestable funding arrangements. A key driver for the Māori Broadcasting Strategy arises from giving effect to the promotion of Māori language and culture through public broadcasting. Related considerations relevant to the review of screen funding arrangements are discussed below.

4.12 If (and to the extent that) the government decides to fund TVNZ and MTS

more directly, there is a likelihood of these institutions strengthening their

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own production capacity at the expense of diminishing the strength and potential of the independent sector. If this is not considered desirable in view of the government’s wider screen-funding objectives, then provision would need to be made – through their statements of intent – to ensure that TVNZ and MTS support independent production. A shift in the balance of funding from contestable to institutional funding would also have implications for stronger monitoring and accountability of these agencies to ensure value from public funding.

4.13 Another consideration is clarification of the objectives and extent of

contestable funding for television. In recent years the design and emphasis of contestable-funding models more generally has been shifting from competitive contracting for efficiency to putting more emphasis on fostering complementary and diverse provision of services. In the case of television, one possibility is that some portion of contestable funding might not be so tightly tied to a pre-production broadcaster commitment, allowing funding agencies greater scope to finance innovative and risk-taking projects.

4.14 Clarifying the broadcasting objectives and adjusting the funding mix will have

implications for the roles and functions of NZ On Air and Te Māngai Pāho. The extent to which management of contestable television funding from NZ On Air and Te Māngai Pāho might be more closely connected within a wider screen-funding agency is a question for discussion in this paper – and ways of doing this can be seen in Option 3 and Option 4 at the end of this paper. If a more integrated management approach were taken, it would still be possible to run differentiated funding streams to meet specific objectives and obligations such as Māori language and Māori culture television.

4.15 In New Zealand there is strong overlapping of television commercials and

programmes and film as arenas in which creative personnel acquire skills and experience, develop capabilities, and find employment. This cross-over between television and film is recognised in the various development/innovation schemes run by Creative New Zealand, the New Zealand Film Commission, Te Māngai Pāho, and NZ On Air.

4.16 There are, however, significant divergences. The ‘turnaround’ time for

television from conception to screen is shorter than for feature films, where a project might take several years to bring to fruition and involves different packages of funding/production and distribution/marketing arrangements (and thus often a different mix of commercial skills and experience).

4.17 In a market the size of New Zealand, there is a question of whether there are

synergies and benefits to be gained from a more closely connected approach to funding and capability development across television and film. A number of overseas models for government screen funding (e.g. in Australia and Canada) take an integrated single-agency approach to film and television funding. These do, however, operate within different broadcasting systems with instruments such as compulsory local content quotas whereas in New Zealand local content and diversity have been promoted through access to contestable funding. In addition, the Large Budget Screen Production Grant scheme applies both to television and film formats.

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4.18 It needs to be borne in mind that, in the New Zealand framework, the screen funding activities of NZ On Air and Te Māngai Pāho are currently integrated within a wider suite of broadcasting responsibilities concerning radio and television. While synergies between film and television in capability and development should be pursued as far as possible, this may be achievable without significant institutional change to these organisations.

Managing Multiple Funding Pathways 4.19 The project-driven nature of the industry and the desire to sustain a strong

flow of ideas and projects are reasons why so many people in the industry emphasise the need for ‘many doors’ to secure public funding.

4.20 From the perspective of those seeking government finance for their projects,

having a range of possible funding pathways means dispersed power to veto ideas (especially at an early stage) and more scope to ‘pitch’ new ideas to a range of decision makers. It can also mean that, with government funding sourced from a number of mechanisms (e.g. NZ On Air plus New Zealand Film Commission plus Film Production Fund), total funding may be higher than it would be if only one funding route were available.

4.21 From a government perspective, a major benefit of varied, contestable

funding pathways is that it provides for a valuable diversity of ideas. Nevertheless, a ‘many doors’ screen funding approach operating across several agencies carries some risks and costs:

• less overview and clarity about the mix and balance of different funding instruments, with potential for blurred boundaries and overlaps;

• duplication of administrative systems and limited depth of capability in small agencies;

• potential confusion about accountabilities; and

• lack of transparency about total government exposure to specific projects and producers.

These risks and costs are discussed below.

Overview and Clarity about Mix and Balance of Funding Instruments 4.22 Preliminary analysis suggests that currently there is reasonably clear

differentiation of purpose for the main funding mechanisms, which operate through NZ On Air, Te Māngai Pāho, the New Zealand Film Commission, the Film Production Fund, and Creative New Zealand. Where joint funding of projects occurs, the proportions allocated tend to reflect the extent to which objectives are shared (e.g. broadcasting commitment to a feature film).

4.23 There is, however, blurring of boundaries and overlaps – particularly between

New Zealand Film Commission funding and the Film Production Fund, and potentially between funding for ‘Signature Television’ and other television funding. The role boundaries between Investment New Zealand’s screen-related activities and FilmNZ (and, to a lesser extent, the New Zealand Film

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Commission) are also blurred. Role overlaps need examination to see how they can best be dealt with. In cases where overlaps are significant it may mean integrating the functions in one organisation; in other cases boundaries may be better managed with a clear statement of shared objectives and relationship protocols.

4.24 Under current arrangements it is also difficult to give regular consideration to

the mix and balance of funding streams, and issues such as how well these streams fit together, as well as the overall quantum of screen funding, gaps in provision, relative allocations among different instruments, and to assess how funding contributes to the government’s overall objectives. The ability to maintain flexibility and responsiveness on the basis of regular strategic review is important in today’s fast-changing screen environment, particularly given the significant contribution government funding makes.

Administration, Agency Size and Capability 4.25 Early analysis suggests that the scope for administrative efficiency gains from

institutional streamlining should not be over-emphasised. The two principal players, the New Zealand Film Commission and NZ On Air, are well focused and lean operations. Their small staff, with some contracted-in specialist expertise, achieve a great deal within their current mandates and funding. The Film Production Fund, FilmNZ and Te Māngai Pāho are similarly lean. Te Māngai Pāho and MTS have clearly focused visions for their organisations.

4.26 Over time having fewer institutional players may offer some potential

efficiency savings in administrative costs, through consolidating essential ‘back office’ functions and making these more robust. Government experience with very small agencies suggests that leanness sometimes comes at a cost of vulnerability and limited capability. A greater combining of resources could also lead to higher capability, with increased job size attracting higher levels of skill and experience. There would be further gains from building and consolidating a broader, deeper base of industry knowledge and relations.

Accountability and Transparency 4.27 Multiple funding pathways administered by different agencies increase the

risk of unclear accountabilities. A particular risk is the lack of overall monitoring and responsibility for total government exposure to specific projects and producers. In the light of experience procedures have been tightened considerably but it is nevertheless the case that from a government perspective, multi-agency funding carries greater accountability costs and risks.

4.28 Individual agencies maintain different levels of transparency about their

funding commitments to projects. NZ On Air regularly publishes the detail of all funding commitments. New Zealand Film Commission and Film Production Fund commitments to feature film funding are not fully transparent. While there may be commercial reasons for withholding some of this information during negotiation, it would be more transparent to make this information publicly available following the first round of market sales.

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4.29 Two organisations, the Film Production Fund and FilmNZ, are currently configured as charitable trusts. While the trust structure provides flexibility, it can also mean there is less publicly transparent accountability. There is an issue of the appropriateness of this governance structure, given that these organisations are virtually fully government funded.

Supporting Development in a Project-driven Industry 4.30 Screen support has tended to be project-focused rather than industry-focused

– which is not surprising, given the project-driven nature of the industry. Film is a fickle and unpredictable market worldwide, with long lead-times and high failure rates: a frequently quoted rule of thumb is that one feature film in ten makes a profit and one in eight breaks even on production costs. Television production, although more stable overall, nevertheless runs on project-based production of programmes and commercials. Ideas and talent embodied in project proposals vie for dollars.

4.31 The project nature of television and film makes it harder to address

development continuums. Both NZ On Air and the New Zealand Film Commission have in recent years endeavoured to take a wider development perspective. NZ On Air has proactively encouraged a range of genres that reflects New Zealand content, and has worked with a range of producers. In initial discussions with the review team, many stakeholders have affirmed the significant role that the NZ On Air model has played in the growth of screen-production capability and the promotion of diversity. In film, the New Zealand Film Commission has increasingly seen the need to foster talent and skills through writer and director programmes, producer up-skilling, Māori filmmaking, short films, and digital production.

4.32 Project approvals are now taking place within a wider context and with an

understanding of the domestic and international industry – but weak spots and vulnerabilities remain.

4.33 Concern has been expressed that the production margins for projects have

been so tightened they leave little room for producer-led research and the development of new ideas and content, potentially constraining innovation. Some people see the current requirement by NZ On Air and Te Māngai Pāho for broadcaster commitment to television programmes as also constraining innovation and risk-taking.

4.34 In feature films, the long lead-times and heavy resource demands make for

difficult trade-offs. More films can be made if they are low budget with new (relatively inexpensive) talent. Films with more experienced creatives and crews and higher production values, cost considerably more.

4.35 The establishment of the Film Production Fund has provided both additional

funding and a mechanism that enables support to be taken beyond first and second-time feature filmmakers. There is debate among filmmakers about the policy settings for the Film Production Fund and whether it should be more flexible in supporting a wider range of film budgets, although there is recognition that extending funding to bigger-budget films may reduce the overall number of films that can be supported by the Fund.

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4.36 The respective roles of government funded organisations in the international arena, and how they can best work together to avoid overlap, needs consideration. In particular the appropriate investment in overseas marketing and distribution of films and television programmes is a challenge for government agencies. The established production companies with significant resources and networks can normally handle this themselves. Small and new producers of television programmes may, however, need marketing support from government agencies. 4.37 More broadly, it has been suggested that the operations of government agencies in supporting development would be enhanced by the regular

recruitment, on term contracts, of experienced industry personnel as is done in Australia. This practice would increase both government and industry understanding of each other’s perspectives and challenges.

4.38 The recently announced additional $10 million annual funding for the New

Zealand Film Commission (which almost doubled its budget) represents a significant lift in funding for New Zealand screen productions. The relationship of the New Zealand Film Commission’s funding to that of the Film Production Fund is still being worked through. Some people have raised the question whether it now might be a good time to integrate the Film Production Fund more closely into the New Zealand Film Commission; others consider that having the Film Production Fund as a separate charitable trust (albeit with the New Zealand Film Commission’s Chair and CEO on its trust board) provides ring-fenced funding that can respond to requirements both flexibly and rapidly.

Working Effectively with the Industry to Achieve Sustainable Sector Development 4.39 Development is dynamic – there is a need for smart ways that enable

government to effectively engage with the screen industry on development issues.

4.40 In response to the Screen Production Taskforce, the government has

provided funding for two years for a Screen Council, which is seen as the progenitor of a single self-sustaining industry body. In its developmental role the Screen Council (and other existing industry bodies) need to interact with a wide range of ministries, agency boards, and executives – which may not be efficient or effective. This could be mitigated by the creation of a ‘Screen Board’ or ‘Screen Co-ordination Group’ (comprising representatives from relevant agencies) to develop a strategic and coherent government perspective (among other responsibilities) and also to interact with the Screen Council.

4.41 Some specific issues that have been raised by the Screen Production

Taskforce and others in relation to enhancing the development of a strong independent sector and which are likely to be addressed in more detail by the Screen Council are:

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• attracting private-sector investment and finance (as there is virtually no private investment from within Australia or New Zealand in local content films);

• tensions concerning the ownership and commercialisation of intellectual property for screen productions funded by government;

• relationships with the Australian film and television markets;

• education and training;

• taxation issues; and

• broadband and related technology. Questions for feedback:

Q2: Looking forward from 2004, what other significant issues or challenges do you see for the screen industry which may involve government action that are not identified in this paper?

Q3: Do you support a more coordinated and strategic approach amongst

government agencies for better integration of cultural and economic considerations?

Q4: What do you see as the issues in the interface of film and television for

industry development in the New Zealand context? Q5 What do you see as the potential advantages and disadvantages in more

closely integrating film and/or television funding streams? Q6 How do you think government can most effectively work with the screen

sector; and what might the government and industry need to do in organisational terms to facilitate this?

Q7 What gaps, if any, do you see in the range of current arrangements for

government support for the screen industry?

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5. Options for Enhancing Future Effectiveness Options Must Address the Challenges Ahead 5.1 The focus of this review is on assessing whether the government’s

institutional funding arrangements for screen production will effectively achieve the government’s objectives in light of the challenges ahead.

5.2 From a government perspective, it is important for the future that:

• organisational and funding arrangements enable the development and delivery of a coherent approach, which will link and balance a range of government objectives across the whole screen sector;

• flexibility and responsiveness are built into the system, with the ability to review strategy periodically, in the light of industry trends and changes that might warrant some recalibration of relative funding support across the range of government interventions; and

• the government, through its agencies, has the ability to interact with industry from a whole-of-government perspective - this is particularly the case in dealing with industry bodies such as the Screen Council.

5.3 Further matters for government attention are to decide on the best way to

manage a ‘many doors’ funding approach and to investigate whether there are gains in effectiveness and capability to be made by some agency consolidation.

Strengths and Weaknesses of Current Arrangements 5.4 Although there is criticism at the margins, some key features of the present

funding system are widely supported across the sector and their continuation is seen as essential. This includes the availability of a number of special purpose and contestable funding streams, which are administered in ways that encourage a flow of project ideas and the development of a strong independent production sector.

5.5 On the downside, multiple funding streams administered by separate

agencies add up to a complex system, entailing a significant amount of management and governance. While individual agencies may be lean and efficient, dispersed management across many small agencies can constrain capability, especially in terms of skills and industry knowledge.

Institutional Design and Organisational Behaviour 5.6 The options outlined below focus on institutional arrangements. It is worth

noting that, while institutional change can shape an environment to support effective linkages and co-ordination, the key drivers of change will be organisational leadership and collaborative behaviour.

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Options for Consideration 5.7 A number of options for bringing greater strategic oversight of government’s

multiple objectives and enabling effective funding management are outlined for consideration and feedback. These range from enhanced consultative arrangements between existing agencies and their boards through to legislatively backed institutional change.

5.8 In the following charts the shaded areas highlight the structural changes(s)

envisaged under each option. 5.9 Option 1 - Current institutional structures with a formalised

co-ordination group of Board Chairs and Chief Executives.

Minister of Minister of Minister for Minister for Māori Affairs Broadcasting Arts, Culture Economic

Development & Heritage Charitable Trust Board

Charitable Trust Board

Statement of Intent (Māori

Statement of Intent

Statement of Intent

Business Plan (focus

INZ objectives in

NZTE Statement of

Intent

Business Plan (focus on

overseas film production in

NZ)

Broadcasting priorities)

(links with (focus on on feature film funding)Broadcasting

priorities) NZ film making)

* Group could also include Creative New Zealand in respect of Screen Innovation activities 5.10 This option preserves the current differentiated organisational priorities,

Ministerial responsibilities and funding streams. Possible ways to formalise links are:

• Joint membership of agency boards could be more consciously structured to encourage co-ordination. (Some joint membership is already present, but there is scope to extend it.)

Te Māngai Pāho

NZ On Air NZ Film Commission

Film Production

Fund

FilmNZ

INZ’s screen-related

activities

CEOS / BOARD CHAIRS CO–ORDINATION GROUP*

(incorporatedin NZTE)

18

• Chairs and CEOs could be required to meet regularly as a ‘Screen Co-ordination Group’ to consider cross-sector issues and their implications for agency operations, and to bring these to Ministers’ attention. Such a group would also be a useful vehicle to enable co-ordinated government discussion with industry bodies, including the Screen Council.

• Objectives and priorities could be aligned during preparation of agencies’ statements of intent and strategic plans.

5.11 A major advantage of this option, particularly of the Screen Co-ordination

Group, is that it could be rapidly implemented and could be an interim step towards a more integrated organisational approach to screen activity (if this were desired in the future).

5.12 While this option could provide a more coherent approach than the status

quo, some of the potential synergies to be gained from closer integration of different streams of screen activity might not be realised.

5.13 Option 2 – Brings together national and international aspects of

‘film’ (New Zealand Film Commission (NZFC), Film Production Fund, FilmNZ, Investment New Zealand’s screen-related activities) under one board/agency. Maintains separate management of contestable television funding through NZ On Air and Te Māngai Pāho.

Single Minister

NZ Film Board (governance)

NZ Film Agency (operations)

NZ Film National NZ Film International

National development International marketing/ focus combining NZFC investment focus combining

and Film Production Fund NZFC, FilmNZ, INZ’s screen-related activities activities

Sales/market/industry information, training links

Administration of grant schemes

5.14 This option provides a structural mechanism for more integrated

management of government objectives for screen production. Under this option it is envisaged that:

• There would be a single board and agency with two broad but interlinked streams of activity (national and international);

19

• The board’s governance role would focus on strategic direction and advice, and the setting up and auditing of project approval procedures. The board would not itself be involved in project approvals;

• The board would implement mechanisms to link regional film offices with the international activity stream;

• Governance arrangements for the Film Production Fund and FilmNZ charitable trusts would need to be changed;

• Management of television funding continues separately within a broadcasting framework, but could be closely linked with the film agency (e.g. through consultation on business plans);

• It would be possible to have joint Ministers/monitoring agencies but a single Minister/monitoring agency would be more consistent with the overall approach taken in this option; and

• The agency could have a specific mandate to interact from a whole-of government perspective with industry bodies, particularly the Screen Council.

5.15 The major advantage of this option is the opportunity it gives for more

integrated and strategic governance, particularly the interface of cultural and economic screen objectives. It also provides opportunities for synergy in industry intelligence, infrastructural development, and sales and marketing.

5.16 An alternative view, however, argues that it is better to manage healthy

tensions through agency interactions (such as proposed in Option 1) rather than internalising them within a single organisation; and that bringing a range of objectives together in one organisation may risk dominance by particular perspectives. This in turn could lead to diminished results.

5.17 Option 3 – Integrates management of film and contestable

television funding from the New Zealand Film Commission, Film Production Fund, NZ On Air and Te Māngai Pāho. Retains separate structure and management for FilmNZ and INZ’s screen-related activities.

Single or Joint Ministers

NZ Film and Television Board (governance)

NZ Film and Television Agency (operations)

NZFC Film Production NZ On Air’s TMP’s Fund contestable contestable

screen funding screen funding

20

5.18 The focus of this option is on consolidating agencies concerned with

administering contestable television and film funding. The key features are:

• A single agency to administer contestable film and TV funding;

• A single board;

• A single Minister or joint Ministers (as desired);

• Legislative change would be required;

• Differentiated funding streams (if desired); and

• Some consequential regrouping and consolidation of radio broadcasting and other broadcasting functions.

5.19 This option does not necessarily reduce the number of funding streams or

pathways. Contestable television and/or Māori television funding could still be ring-fenced within the proposed agency with its own approval processes and links to broadcasting objectives.

5.20 A key argument for this option is that since television production is the

mainstay of screen activity it makes sense to place television production under a single screen board/agency. Other arguments are that there may be opportunities for streamlining administrative, contracting and legal costs; and that a single agency would allow greater transparency about total government exposure to projects and producers. It also allows a more whole-of-government approach to the funding of screen production.

5.21 Arguments against this option are centred on concerns that specific

objectives for film and television may be diluted; and that there may be a risk that Māori language and Māori cultural objectives get overshadowed. It is also thought that, even with specific approval processes for different funding streams, a single organisational culture may gather and exert power in ways that reduce the growth of creative ideas.

5.22 This option does not address the overlaps between FilmNZ, the screen-

related activities of Investment New Zealand and the Film Commission in respect of international activities.

5.23 The more substantial institutional and legislative changes involved in this option and also Option 4 would require significant implementation effort. Also, a super-funding group may be more, rather than less, expensive to run with the risk that a larger bureaucracy will not be as responsive to industry requirements.

21

5.24 Option 4 – Creates a single screen board/agency to manage all government’s screen interests (including the New Zealand Film Commission, the Film Production Fund, FilmNZ and contestable funding streams from NZ On Air and Te Māngai Pāho).

Single or Joint Ministers

Screen Board (governance)

5.25 This option proposes a fully integrated single agency model for all

government’s screen interests. Its features are:

• A single agency to administer con estable film and TV funding; t

• A single board;

• A single Minister or joint Ministers (as desired);

• Legislative change would be required;

• Differentiated funding streams (if desired); and

• Some consequential regrouping and consolidation of radio broadcasting and other broadcasting functions.

5.26 A possible advantage of this option is that it provides a single governance

model and fewer institutional players for addressing the challenges and issues outlined earlier. This option also provides scope for administrative efficiencies, robust accounting and related systems and greater transparency about total government exposure to projects and producers.

5.27 Arguments against this option are similar, but potentially greater in scale, to

those outlined in paragraph 5.21 in respect of Option 3.

Funding/Development

National focus

Marketing/International

NZ On Air Contestable

Screen Funds

Film Fund

NZFC

Film NZ INZ’s screen-related activities

Screen Agency (operations)

TMP Contestable

Screen Funding

22

Questions for feedback: Q8: How would you rank the four options outlined above and what are your

reasons for the option you prefer? Q9: What might be helpful variations within these options? Q10: What other options would you propose?

23

6. Feedback 6.1 Feedback on this discussion paper should be provided in writing, including

name and contact details, either by e-mail to screenreview@mch.govt.nz or by hard copy to Screen Review, Ministry for Culture and Heritage, P.O. Box 5364, Wellington by 30 April 2004. It would be helpful if comment could be related to the specific questions (Q1-Q10) where appropriate.

You can also respond to the questions online here: http://www.mch.govt.nz/publications/screen-review/review.html#form Official Information 1982 The content of feedback provided in response to this document may become subject to public release under the Official Information Act 1982. Please advise of any objection to the release of any information provided in response to this document, and in particular, which part(s) should be withheld, together with the reason(s) for withholding it/them. This will be taken into account when responding to requests for information on submissions to this document under the Official Information Act 1982. Privacy Act 1993 The Privacy Act 1993 establishes certain principles with respect to the collection, use and disclosure of information relating to individuals, and access by individuals to information relating to them. Any personal information you supply in response to this document will be used by the Minister and officials in conjunction with consideration of matters covered by this document only. Please clearly indicate if you do not wish your name to be included in any summary of feedback which may be prepared for public release.

24

Annex I: Current Functions and Accountabilities of Government Funded Organisations Involved in Screen Activities *

•

NZ FILM COMMISSION

Feature film production financing

Audience research, development

Digital/new format innovation with Creative NZ

International marketing, distribution sales

Co-productions Short film production funding

Professional development for screen creatives and producers

Admin. of LBSP Grant scheme

FILM PRODUCTION

FUND

Feature film production financing

NZTE INVESTMENT

NZ

Inward investment in screen production projects

FILM NZ

Location services for foreign & co-production (with NZTE/ local authorities)

Inward investments in screen production (with Investment NZ & NZTE)

CREATIVE NEW ZEALAND

Screen innovation fund

NZ ON AIR

Allocation of contestable TV programme funding to national free-to-air broadcasters (some feature film investment)

Audience research feedback

Contributing to television industry statistical collection/ analysis

Archival interests

TVNZ

Commissioning and broadcast of TV programmes under charter

MĀORI TELEVISION

SERVICE

Commissioning and broadcast of Māori content programmes

Board Charitable Trust Board

Board Charitable Trust Board

Arts Board

Board Board Board Board

Arts Council

Minister for Arts, Culture & Heritage

Funding Agreement

Funding Agreement

Minister for Arts, Culture & Heritage

Joint Ministers

MFAT / MED

Minister of Broadcasting

Minister ofMāori Affairs

Joint Share holding

Ministers

TE MĀNGAI PĀHO

Allocation of contestable funding to MTS and other national broadcasters for Māori programming to support te reo and tikanga Māori

Audience research Archival interests

Joint Share holding

Ministers

* The Screen Council is an industry body established as a charitable trust and intended to be self-sustaining. Establishment funding is being provided through the Ministry of Economic Development/NZTE for the Council’s initial two years.

25

Annex II: Screen Production Taskforce ‘Map’ of Funding Flows updated with 2002/03 figures

26

$100,633,778

Nil

$482,941

$222,012

Nil

$3,000

$8.154m

$13.473m $48,288,919

$12m

$37.8m

$945,000

$1,984,000

$140,000

$40,000

$3.97 m$2.813m$10 m

$45,875$75,000

Nil

$40,000$9,151,255

$0.25m

$1.682 m

$0.32m

$0.25m

$8.04m

$5,080,889

$1,390,934

$288,000 $534,000

$175,000

$10,706,827

$4.905m

$49.745m

$7.7m

$220,000$115,000

All figures are exclusive of GST

Figures related to 2002/03 year unless otherwise indicated

Moving Image Centre

Pacific Arts Committee

Te Waka Toi

Arts Board

Film Production Fund*

Creative NZ

TVNZ Programmes

TV3 & TV4 Programmes

Revenue from sales

NZ Film Archive

Ministry for Culture &

Revenue from sales

Lottery Grants Board

Revenue from TV sales

NZ Film Commission

Screen Innovation Fund

NZ on Air

Te Puni Kokiri

Revenue from sales

Te Mangai Paho Maori TV

Ministry of Economic

Development

Industry NZ(now NZTE) Investment NZ

(now in NZTE)

Strategic Investment Fund

Industry Support Guilds

Film NZ

Business Growth Fund

Enterprise Dev. Fund

Trade NZ (now NZTE)

Film Fund Nil Strategic IF Nil Business GF 75,000 TMP 13,473,000 NZOA 48,288,919 Enterprise 45,875 NZFC 9,151,255Screen IF 482,941Arts Board 222,012 Te Waka Toi NilPacific AC 3,000 TVNZ 49,745,000 TV3 Not Available Trade 10,000 TOTAL 2002/03: 121,487,002

Tertiary Training

Tourism Events/ Internet/LOTR

Ad Campaigns

Visiting Media/LOTR

Tourism NZ

Ministry of Tourism

$949,459

$10,000

$120,000INDEPENDENT PRODUCTIONS

Lotteries Commission

Colmar Brunton Survey 2003 • sales of completed films/tv

programmes o/s $46m • total foreign exchange

$325m

$2.095m

World Class NZ’rs Business Missions

World Class NZ’rs Intl Business

Exchange

$60,000

$3.9m

Ministry of Education

$21.7m

$55m

L.O.T.R

$594,000

* Film Production Fund received one-off funding of $22m via NZFC. Disbursement is project linked rather than annual. $5m was disbursed in 2001/02 and substantial draw down is anticipated in 2003/04

Ministry of Foreign Affairs