Australia’s ‘China opportunity’

Few countries in the world have benefited more from China’s rapid economic growth than Australia. The boom in exports Australia has enjoyed due to surging Chinese demand, especially for raw materials, is a key reason – perhaps the determining factor – why the country avoided a recession after the 2008 financial crisis. China now accounts for over a quarter of its exports – far greater than America’s share.

Chinese screen industry and entertainment & media market poses as a significant opportunity for Australia.

Current status and challenges

Australian screen industry is one of the most subsidised in the world. Finance for Australian features comes from a range of sources, including government agencies, private investors, industry sources such as distributors, sales agents and broadcasters, plus, for eligible titles, the Producer Offset.

Nevertheless, the government screen funding is volatile. The Australian federal government allocation to Screen Australia dropped from $100.8 million in 2013-14 to a projected $84.1 million in 2017-18. Since its formation from three entities in 2008, Screen Australia has reduced its operating costs by 44 percent.

Looking back the period from 1977 to 2004, Australian film productions, as opposed to international blockbuster productions produced in Australia, had problems in reaching domestic, let alone international audiences. In 2004, Australian films accounted for only 1 per cent of the Australian box office results, the lowest figure since records started to be kept in 1977.

The following graph illustrates this:

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It is important to note that Australia films are experiencing an exciting resurgence with 2015 recorded 7.18% box office share. Adjusted for inflation, it is the best Australian result in 14 years.

In 2016, total Australian box office and admissions were up by 2.7 per cent and 1.2 per cent respectively compared with the year prior.

admissions-box-office

Perhaps it is important to look at the list of Top 100 Australian Feature films of all time to get a sense of the market size for Australian films.

The no. 1 Australian film at the Australian box office is Crocodile Dundee (1986), with earnings of $47M.  Australia (2008) came second on the list with a result of $37.6M earning. Babe (1995) came third with $36.8M earning.

Three 2016 new titles entered the top 100 all-time Australian films: Lion ($23M), Hacksaw Ridge ($8.9M) and Red Dog: True Blue ($7.4M).

To achieve positive financial benefits, Australian screen products must find success in the domestic market as well as find receptive audiences overseas.

The core of the challenge of Australian screen industry is that it is a capital-deprived industry. The characterisation of niche and elitist films that are mostly driven by passion and vanity markedly contributes to the lack of rational investments to the sector and creates a financing landscape that has historically titled in reliance on government subsidies.

So much of the pop-cultural knowledge on the screen industry is based on skewed statistics and ill-formed readings of the market. Such preconceptions make it difficult for potential investors to make objective evaluations of the film business.

(Read more on my thoughts on WHY INVEST IN FILM here.)

It is imperative for independent producers to offer investors a rational investment with lower costs, smarter movies and better returns.

Australia’s ‘China Opportunity.’

The push to strengthen relationships between Australian and Asian region businesses is supported by the Australian Government through a range of measures. The presence of government is a useful component of building credibility and trust in Asia. Screen Australia and other government agencies or government supported bodies such as Department of Foreign Affairs, Austrade, Ausfilm and the ABC have relationships with the Chinese screen industry and are committed to building on these relationships.

In addition to positive political climate, Australia has some key advantages: we are liked and trusted; our skills are valued; and Australia is located geographically in the fastest growing, most dynamic region in the world.

As China has now grown to become the world’s second largest market at the box office, Hollywood has begun to take notice.

The best advertisement for Australia is bluntly: “You don’t need to go to Hollywood. Go to Australia. They have government subsidy, and they are just as good as Hollywood.”

Australia screen industry has a proven record in offering creative and technical skills, professionalism and international best practice, and experiences in creating content for global markets.

Australian screen production industry simply cannot miss out the opportunity of the decade. That, by default, means Australia has to establish a much closer relationship with China.

 

 

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