BBC Films Announce Agreement With Pact On Deal Term Changes For Producers

The BBC has announced some key changes to the deal terms offered to UK film producers, a move that has been warmly welcomed by UK trade association Pact.
The changes are intended to support one of the stated intentions behind the government's implementation of the UK Tax Credit system - namely to increase UK producers' stakeholding in the films they make and ensure that film revenues in part flow back into supporting a sustainable film industry in the UK.
When the UK Tax Credit was introduced in 2007, the BBC, the UK Film Council and Film Four signed a joint statement to the effect that, wherever possible, any Tax Credit that was claimed on a film and used to fund the budget would be treated in the finance plan as if it were equity funding provided directly by the UK producer i.e. it would give the producer a proportionate share of initial receipts alongside the public funders and the other equity financiers. As many films do not reach the net profit stage, this was seen as an important way to push the producer's stake holding in the film higher up the chain and give a financial return on a par with other investors in the film.
In reality, this has proved hard for the BBC and producers to achieve in all cases.
The key change the BBC is making therefore is to create a corridor for the producer from the BBC's own equity recoupment. This will apply wherever the tax credit has not been treated as producer's equity even though the funding has been used to help finance the film. The corridor will be a standard 30% of the actual equity recoupment the BBC receives on a film and is intended to put the BBC back into the position it would have been in if the Tax Credit had been treated as equity funding from the producer. The corridor to the producer will be mirrored by a similar corridor to the BBC of the producer's eventual net profits, if the film is successful.
The BBC and Pact have also agreed a number of other changes. The BBC's broadcast licence in the UK will be for a maximum of 15 years. After 5 years, if the BBC has no further plans to transmit then either the BBC or the producer may look to exploit those rights elsewhere in the UK, sharing profits 70/30 if the BBC is unrecouped, 50/50 if the BBC's equity has been repaid.
The BBC is also dropping several of its standard requirements around development, in particular the charge of a 50% premium on development costs incurred to date if the project is turned down by the BBC and picked up by another financier. The requirements for trust accounts at development stage will also be abolished.
Further information is available at: www.bbc.co.uk/films and www.pact.co.uk.
(KMcA)