For love or money? Assessing outcomes from direct public investment in film

ABSTRACT

This study examines Australian domestic film performance under two distinct policy regimes with respect to direct investment strategy. In particular, we contrast film performance under two public funding agencies with noted differences in (i) the number of films financed annually, (ii) the average (and maximum) funding per film, and (iii) the involvement of an expert review panel in funding decisions. In addition to box office returns, we consider performance benchmarks related to major film festival screenings, nominations and awards; critical acclaim based on IMDb user and critic reviews; and whether or not the film received a release in the major UK and/or US markets. Finally, we exploit a subset of our data where a ‘two-door’ policy was used for investment decisions that allows us to reflect on our more general results.

KEYWORDS:

• Film funding
• film policy
• film investment

JEL CLASSIFICATIONS:

• L82
• Z10

Acknowlegements

We thank David Court, Tessa Sloane and participants of (i) 20th International Conference, on Cultural Economics, Melbourne (June, 2018) and (ii) 20th Mallen Conference, Potsdam (September, 2018) for helpful comments. We also thank the editor and two anonymous reviewers for comments that have improved the final manuscript. The authors are responsible for any errors.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. See McKenzie and Rossiter (2018) for a detailed historical overview of public film funding in Australia.

2. Background to Proposed Changes in the FFC’s Draft Investment Guidelines, 2004/2005, page 2.

3. Certainly, the increase in the number of film investments was also the result of the increased demand created by the new Producer Offset.

4. We augment the MPDAA, FFC and Screen Australia data with data from a variety of other industry sources including Rentrak, IMDb, Box Office Mojo, The Numbers, Variety, Encore, among others.

5. The ‘other’ genre category was created to avoid estimation issues related to collinearity where only a small number of observations existed for a particular genre.

6. See, for example, Ravid (1999), Ravid and Basuroy (2004), Goettler and Leslie (2005).

7. We do not report genre, rating and year effects as they are not of primary interest in our analysis. However, we did undertake a comparison between the distribution of funded and non-funded films in both the FFC and Screen Australia eras, with respect to genre and ratings. Using Chi-squared tests, we are unable to reject the null in all comparisions and conclude there is no difference between the distribution of funded films vs. non-funded films with respect to genre or classification in each sub-sample.

8. This can be seen from a simple re-specification of the dependent variable in Equation (1)(1) $Y_i={\alpha }_{FFC}D{I}_{FFC,i}+{\alpha }_{SA}D{I}_{SA,i}+{{\mathbf{X}}^{\prime }}_i\beta +{\epsilon }_i$(1) such that log(ROI) = log(R/B) = logR − logB, where R is revenue and B is budget. Moving logB to the RHS gives logR = (1 + $\beta$)logB + …, where $\beta$ is the estimated coefficient of the ROI specification and (1 + $\beta$) is the hedonic elasticity. See Walls and McKenzie (2012) for an example of this alternative specification.

9. These festivals include Berlin, Cannes, Rotterdam, Sundance, Toronto and Venice.

10. There is an extensive literature on the relationship between critics’ reviews and box office outcomes. See, for example, Eliashberg and Shugan (1997), Basuroy et al. (2003), and Reinstein and Snyder (2005).

Additional information

Notes on contributors

Jordi McKenzie

Jordi McKenzie is an Associate Professor in the Department of Economics at Macquarie University.

Craig Rossiter

Craig Rossiter is a Senior Policy Officer at the Victorian Department of Education and Training and former Senior Analyst at Screen Australia.

Sunny Y. Shin

Sunny Y. Shin is a sessional lecturer in the Department of Economics and Graduate School of Management at Macquarie University.