Pinewood Studios: Business Case and Economic Impact Assessment

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Pinewood Studios LtdPinewood Studios: Business Case and Economic Impact AssessmentJanuary 2013growth of 3-D cinema, whereas the development and expansion of digital channels 22 is behindthe forecast return to growth of the home entertainment market.3.2.2.3 Box office revenues are forecast to increase by 6.3% per annum between 2011 and 2016. Whiledeveloped economies are expected to grow, growth will be particularly evident in the BRICcountries (especially China at 23.5% per annum).3.2.2.4 Although US-produced films account for the majority of global box office takings, the UK’smarket share has been rising and in 2011 stood at 17% of the global theatrical market ($32.6billion). Both the US and UK film industries continue to benefit from the rapid box office growthand demand for English-language film and content in emerging markets.3.2.2.5 In 2011, an estimated 95% of films with budgets above $20 million were US or UK(co-)productions. It is these films and particularly major films with budgets of $100 million ormore, that are the more likely to require premium facilities such as Pinewood.3.2.2.6 The number of major films with budgets of over $100 million continues to rise - from 8 in 2001to 23 in 2011 (see Figure 3.2). By August 2012, the number of major films stood at 24. Whilethe 2008 credit-crunch led to a decrease in the number of US films being produced, these weregenerally $20m - $50m budget productions. The larger core market for premium film studioslike Pinewood has held up well and, indeed, grown with the UK attracting sustained inwardinvestment.Figure 3.2: Major (>$100m budget) film releases, by production budget 2001-20123.2.2.7 Since 2006, the UK Government has made available the tax relief for films because it recognisesthe importance of the industry to the economy. Between 2006/07 and 2010/11, 100 tax creditclaims (valued at £390 million) were made by films with budgets greater than £20 million.22Particularly where they are providing new means to access content – including downloads to rent or buy, as well as access via subscription.16
Pinewood Studios LtdPinewood Studios: Business Case and Economic Impact AssessmentJanuary 20133.2.2.8 The UK Government has also entered into bilateral film agreements with other territories. Forexample, it recently signed a bilateral Film Co-production Treaty with Brazil strengtheningcollaboration in film and supporting growth in the creative industries. Both Governments agreedthat film is a powerful medium which shapes global perceptions of countries, and noted thatproduction companies in both countries see the potential for films which appeal to aninternational audience in an increasingly competitive international marketplace.3.2.2.9 Overall, the film industry needs to continue to provide new high quality content in order tosatisfy growth in consumption. In particular consumer demand for major films and an expandingglobal consumer base are fuelling requirements for high-end production facilities.3.2.2.10 In parallel with increasing consumer demand for content, production costs are increasing andare being driven by the use of a greater number of sets, more expansive and elaborate sets,more intricate props, increased use of digital editing and special effects, and larger productionteams including special effects teams. The demand for space – in terms of the both the size andheight of the studios – is also being fuelled by a move away from location filming for highbudget productions and a consequent increased demand for sets constructed within majorstage and studio facilities. This also gives rise to an increased demand for ancillary space suchas workshops with increased height and production offices.(ii)Television3.2.2.11 Major television productions, such as large scale live entertainment shows, are also drivingdemand for larger studio facilities such as those provided by Pinewood.3.2.2.12 Television broadcast revenues are forecast to continue to increase in all regions, with the globalmarket expected to grow by 6.4% per annum between 2011 and 2016. The UK televisionindustry has had significant success globally, with programming exports increasing by 23%between 2009 and 2011 to £1.5 billion.3.2.2.13 In response to consumer trends, broadcasters are investing in bigger budget, large-scale and/orhigh quality TV production that requires extensive studio space and top-end facilities. Totalproduction costs for a premium drama series can now be similar to those of a major film. Forexample, Sky is increasing its investment in new content. In addition, the US cable providers,such as HBO, Showtime and Starz expend substantial budgets on major episodic dramas.3.2.2.14 As budgets and production values increase, certain programmes (for example, premium dramasand live entertainment shows) require larger and more sophisticated studios. This is placingfurther demand on the UK’s limited supply of large modern stage facilities. Recent additions toPinewood’s studio and stage facilities (such as the Richard Attenborough Stage and the currentinvestment in the South Dock stage) have been designed specifically to meet the demands ofboth film and TV production.3.2.2.15 Given the success of the film tax relief, the UK government is also currently consulting ontargeted tax reliefs for animation, high-end TV and video games. Based on the experience ofthe film tax relief, it is envisaged that the UK will potentially benefit in three ways:prevention of UK production moving overseas;increased inward investment by overseas producers; and17
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