Contents Objectives
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 Contents
 The objectives of the project were to conduct strategic research on the local and international audio-visual markets for the Gauteng Film Commission (GFC)
 Background to the Project The Gauteng Film Commission (GFC) is a provincial government agency, tasked with the development and promotion of the audio-visual industry in Gauteng The Gauteng Film Commission (GFC) lacks sufficient market intelligence to adequately fulfil its mandate …
 … and so subsequently requires comprehensive industry intelligence to inform its short-to-medium term strategic objectives Project Framework We defined a high-level project plan that detailed the key activities needed to deliver on the project’s objectives We started by reviewing the GFC’s existing documentation, to establish any gaps in market data We then mapped both the Gauteng and SA audio visual markets, in addition to reviewing industry best practices … … having chosen to review the Gauteng audio-visual market in relation to both the national and international AV landscapes Finally, we evaluated our findings to identify potential opportunities for the GFC and Gauteng as a whole We mapped out a project timeline, with key milestones to measure progress The project was structured into defined streams of work, with subject matter expertise and research support  … and sourced reliable and comprehensive secondary research data from the Deloitte Global Research Centre Setting the Scene The audio-visual (AV) industry is large and complex, with a myriad of role players and sub-sectors The AV industry value chain contains value enhancing activities and role players that stimulate growth Film Commissions tend to be established at a national or regional level, with a strategic mandate   We used a number of different sources to establish the extent of audiovisual production in South Africa Key Findings We conducted a review of the GFC’s available market documentation to gain an understanding of any data gaps Global Trends and Industry Benchmarks Global Trends and Industry Benchmarks Global growth estimates for the film and television industries in 2003 were 9.4% and 6.3% respectively Traditional industry revenue streams are on the decline worldwide, due to technology convergence, among other factors  The global film industry is in a state of flux, as movie theatre attendance stagnates and content delivery channels proliferate Box office attendance is on the decline globally, primarily due to rising ticket prices In the UK, digital media distribution and an increase in personal movie watching has driven down box office sales The high risk nature of big budget films has led to changes in production funding approaches … … which has forced changes in traditional business models In the United Kingdom, the film business model has traditionally been driven by box office sales … … however new distribution channels such as online portals are expected to change this The digitisation of film content has led to an increase in piracy … … that has in turn led to a shortening of the window period between movie theatre and DVD release The digitisation of film production, distribution and exhibition is bringing greater efficiencies to the industry Digitisation has facilitated the growth of the animation industry Digitisation has facilitated the growth of the animation industry (cont.) In South Africa, animation is seen as the possible next big break for the industry however challenges exist The digitisation of film production, distribution and exhibition is bringing greater choice to TV audiences Digitisation has enabled the production of higher quality content that can be distributed faster and cheaper In a bid to increase market share and boost revenue, national film industries are now targeting global audiences As a result of technology convergence, online revenue streams are gaining importance Low budget, high volume films are the driving force behind the success of Nigeria’s film industry Global Trends and Industry Benchmarks Accessibility and suitability of setting are both industry growth drivers and they play a role in the choice of a location  Mexico’s technical infrastructure and conducive regulatory environment have helped make it an attractive location The “Made in New York Incentive program” is a good example of the benefits of creating a film-friendly environment There are a range of both financial and non-financial incentives that are typically used to attract productions Incentives are a popular instrument employed by countries to attract productions Incentives are a popular instrument employed by countries to attract productions (cont.) In Ireland, a wide range of financial incentives are offered to help create opportunities for foreign and local involvement in the industry The general business environment in Ireland is also supportive of the audio-visual industry Government financial incentives in New Mexico have helped film productions grow tenfold In the UK, public funding is available for a wide range of AV growth initiatives and capacity building Both public and private sector funds are available to meet the needs of the AV industry in Spain Funding should ideally be spread across the different segments of the value chain, with a focus on areas of greatest need Revenue generation guarantee requirements are the largest barrier to access to funding in South Africa In South Africa, funds from the National Lottery cannot be allocated to private companies in the industry however… The audio-visual industry can have a proven positive economic impact on the economy of a region or country The audio-visual industry can have a proven positive economic impact on the economy of a region or country The audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.) Job creation is often the single largest economic outcome of the audio-visual industry The GFC can better demonstrate the economic impact of the audio-visual industry, so as to lobby government for more resources The broader economic competitiveness of a location has an effect on investor perceptions of its attractiveness The availability of skilled resources, and the flexibility of the labour market, has helped attract productions to competitor countries Productions are more likely to be shot in locations with readily available state-of-the art facilities and high-tech equipment Global Trends and Industry Benchmarks The role of a Film Commission typically ranges from facilitating the approval of permits to dealing with trade and investment policy related matters Certain areas of commonality were identified amongst the Film Commissions / Film Offices that were reviewed Certain areas of commonality were identified amongst the Film Commissions / Film Offices that were reviewed Some differences were identified amongst the Film Commissions / Film Offices that were reviewed   Film Commissions have a diverse range of stakeholders within the audio-visual industry … … to whom they need to provide different products and services Few Film Commissions focus their efforts consistently within every segment of the audio-visual industry value chain Ideally, Film Commissions add value by creating an environment that is conducive for the growth of the industry The Gauteng Film Commission (GFC) is a provincial government agency, tasked with the development and promotion of the audio-visual industry in Gauteng The GFC’s stated core functions are not divergent from industry expectations The value proposition of a Film Commission is dynamic i.e. it evolves as the industry evolves Full public or full private funding are the two extremes of the continuum of revenue models for Film Commissions The major source of revenue for Film Commissions is usually government funding The bulk source of revenue for Film Commissions is usually government funding (cont.) In the US, some Film Offices have been established with limited government involvement or public funding Film festivals are just one of the many marketing platforms for Film Commissions Although National and Regional Film Commissions employ similar marketing strategies, Regional Film Commissions also have a domestic focus The AFC utilises different types of marketing initiatives to raise the profile of its industry The Irish Film Board aims to maximise the participation of its industry in the international and national marketplace Strategic industry partnerships often lead to better coordinated marketing efforts Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC In Spain, various government-related and privately funded agencies support the audio-visual industry South African AV Industry Overview South African AV Industry Overview The South African audio-visual industry dates back to the ‘birth’ of film, circa 1895 The South African audio-visual industry has two segments - the servicing of foreign productions and production of local content South Africa has established audio-visual hubs in Gauteng, the Western Cape and Kwazulu Natal The Cape Film Commission is mandated to promote Cape Town and the Western Cape region to the entertainment industry, as a world class production destination Similarly, the Durban Film Office has a mandate to promote KZN as a world class production destination and attain 3% of the global film making share by 2008 There are also several other emerging hubs in South Africa, evidence of the growth potential of the local audio-visual industry The primary value proposition of local Film Offices and Commissions is to market their regions as locations of choice In South Africa, various government-related and privately funded agencies support the audio-visual industry There are a number of initiatives being undertaken at provincial government level to promote the audio-visual industry … … with the GFC engaging in a range of AV activities within Gauteng The last 5 years have seen a renewed focus on strategies to grow the national and provincial audio-visual industries South African AV Industry Overview  In 2006, almost R3 billion revenue was generated in the South African audiovisual production industry Over a 3 year period, the bulk of commercials produced nationally were concentrated in Gauteng and the Western Cape With very few exceptions, the local box office is dominated by foreign films … … with ‘slapstick’ the most successful of local movie genre’s South African audiences perceive local films as being either ‘slapstick’ or socio-political; there is little variety of genre In South Africa, cinema attendance is characterised by areas of growth, stagnation or decline Countrywide, new content delivery channels are booming due to falling prices of DVDs, computers and cell phones South Africa faces impediments to increasing its market share as a globally competitive film-making destination The AV industry has had a positive economic effect on the local economy South African AV Industry Overview There are several factors influencing the growth of the national audio-visual industry One of the main impediments to growing the local industry has been poor audience development South Africa has an internationally recognised comprehensive and progressive legal framework There have been a few initiatives to reduce bureaucracy and inconsistent application of rules There have been a few initiatives to reduce bureaucracy and inconsistent application of rules (contd.) There are a number of commercial and government organisations offering film production financing in South Africa  The Large Budget Film and TV Production Rebate is the prime investment incentive available to both foreign and local big budget producers Other incentives are available to support the industry in South Africa As at 24 April 2007, R124 million had been paid from the Large Budget Film and TV Production Rebate Scheme
 The cost of production in South Africa is relatively cheap compared to developed countries, such as in the European Union South Africa has a vibrant service industry catering to all aspects of the audio-visual industry …
 … and a variety of small to medium-sized fully equipped studio spaces
 South Africa has well-developed public infrastructure with modern facilities and services available in all major centres
 South Africa’s diverse physical environment makes it an attractive location Limited skills data on the South African AV market has restricted our evaluation of the skills set within the industry Employment figures in the Commercials sector show a a general decline in overall numbers … A comparison of two locally produced movies shows a high degree of employee transformation, with most employees working as freelancers
 There are also skills gaps that have been identified by stakeholders as needing urgent redress to ensure the continued growth of the local industry Several public and private sector organisations are providing training programmes to help address identified skills gaps Tertiary institutions are also playing a key role in developing the skills required by the AV industry From a global perspective, the business environment in South Africa is generally perceived to be supportive of businesses and is conducive for growth Gauteng AV Industry Overview Gauteng AV Industry Overview   Gauteng has the largest cinema audiences nationally, reflecting its strong movie-going culture … … but cinema facilities are concentrated in the wealthier northern suburbs of Johannesburg and Tshwane The Gauteng audiovisual production industry achieved revenue of approximately R1,1 billion in 2006 … … and is generating a total of over R2 billion a year in economic activity due to multiplier effects Gauteng’s audiovisual industry is dominated by television series production Most popular South African TV shows are Gauteng-based Commercials production in Gauteng is dominated by local production Gauteng accounts for the bulk of locally produced films
 Gauteng AV Industry Overview Gauteng is perceived as having strong technical skills, with easy access to both the wider South African and international skill pools Gauteng is strong in technical infrastructure, particularly in the Auckland Park-Randburg corridor Gauteng’s public infrastructure is excellent, but rapid economic growth is putting pressure on the system Gauteng has a business environment that is conducive to the AV industry Safety and security however, have emerged as a key concern for the industry Film budgets in the province rely heavily on subsidies, incentives and soft loans Other incentives are available, such as in the Jhb urban development zone Gauteng has a good physical environment, not only for shooting of films but for post production as well Sound infrastructure and a conducive business environment rate as the most important factors for the local industry Gauteng AV Industry Overview   The challenge for the industry is how to effectively address the constraints it faces, so it can unlock the province’s growth potential High-Level Strategic Recommendations A visionary strategy provides the platform for rapid growth The principles of good strategy highlight the importance of government supporting activities rather than individual firms or projects
 The GFC’s mandate aligns to these principles and does not mandate case-by-case interventions, instead focusing on ‘public goods’ In line with its mandate, the GFC is focusing on supporting activities that benefit the whole industry, not one or two players To successfully execute its mandate, we recommend the GFC focus on five key areas to sustainably grow the industry To meet its mandate, we recommend that the GFC focus on five key areas to sustainably grow the industry (cont.)  Bearing in mind that the international industry has potential to generate high revenues within the province ... ... sustainable growth in the province could be achieved by exploiting the synergies between the local and international AV industries The GFC would need to tailor its functions to meet the different needs of both the international and local industries An analysis of the provincial landscape suggests a lack of institutional capacity at local level, with overlap at national level The GFC is one of a number of bodies supporting the AV industry, as part of the province’s strategy to drive economic growth An institutional structure that contains national, regional and local structures would benefit from greater co-ordination and integration … The GFC needs to play an increasingly strategic role in growing the provincial AV industry, even as it fulfils its stated mandate This role however will need to evolve in line with the demands of its rapidly changing operating environment The GFC needs to strategically drive the creation of a film-friendly environment in Gauteng Though the GFC is fully government funded, it could consider other funding options to reduce its dependence on government grants In conclusion, Gauteng film industry has the potential to be a significant economic force with the right strategy in place  Appendices Appendices We developed an overall project charter that outlined the project’s key objectives, activities and deliverables Stream Charter: Gauteng Market Analysis Stream Charter: South Africa Market Analysis  Appendices References References References   References References References References References Appendices The audio-visual industry value chain contains value enhancing activities and role players that stimulate the growth of the industry (cont.)  All the countries we reviewed provide support for funding and are focused on promoting their locations Film Commissions typically have mandates that are developed by government in consultation with key industry stakeholders The Madrid Film Commission is funded by a variety of public sector organisations Effective performance management, including monitoring and reporting, ensures accountability in Film Commission operations Best-in-class Film Commissions typically operate within a clearly defined governance framework Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC Australia has a number of agencies that are dedicated to the audio-visual industry and supportive of the AFC (cont.) In Spain, there are various government and private related agencies that support the audio-visual industry In Spain, there are various government and private related agencies that support the audio-visual industry (cont.) In terms of the global movie theatre market, there is also a growing shift towards alternative sources of entertainment The audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.) The audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.) Some degree of transformation has occurred in the sector, for part time and full time employees South Africa has a vibrant service industry catering to all aspects of the audio-visual industry …
 … and a variety of small to medium-sized fully equipped studio spaces We have calculated the multiplier for the industry as a whole to be 2,3 Gauteng’s strengths complement other regions in the country A BCG matrix provides a way of ranking different sectors in terms of their relative attractiveness and competitive advantage In Gauteng, TV and commercials are classic cash cows, whereas film is a ‘question mark’ With the right strategy in place, ‘question marks’ have the potential to become cash cows or stars
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