London, 11 August 2009

Since January 2008 fifty percent more film makers became insolvent than TV or radio production companies in the UK - as they struggle to finance making movies in an industry feeling the effects of the credit crunch. The PricewaterhouseCoopers LLP insolvency statistics confirm that 59 of these businesses collapsed over the eighteen months. Christmas 2008 saw the low point for the very small UK independent film industry with 13 companies collapsing in Q4, the highest amount in a three-month period over the course of the downturn.

Despite the fact that UK filmed entertainment raked $6.6bn in 2009 remains the largest market in EMEA (Europe, Middle East and Africa), film finance has become increasingly scarce particularly for independents. Nick George, media partner, PricewaterhouseCoopers LLP, said: "The recession has sent hoards of consumers to the cinema and therefore large scale, expensive films, such as Harry Potter, remain in production and eagerly awaited. However, due to the credit crunch, sources of financing for smaller indie films have dried up - meaning many plots remain on the story board."

The majority of the small independent film production companies that collapse are in the precarious position of relying on the success of one film. While large studios can rely on blockbuster hits and ultimately strong parent companies for funding, smaller players, benefitted historically from a diversity of funding - from wealthy individuals to hedge-funds.

Hollywood films account for a majority of ticket sales in most countries but the performance of local films often determines whether box office spending rises or falls. "From 2007 to 2008 the UK box office admissions revenue crept up one percent, and projected figures for 2008 to 2009 are similar (1.1 per cent)*. This can be accounted for by a strong blockbuster presence in 2008, as a second consecutive rainy summer in the UK brought people to the movies with Mamma Mia becoming the highest grossing film in UK history, surpassing Titanic," he added.

Digital doesn’t discriminate between blockbuster and indie

Large scale feature films in 3-D command higher prices, sell more tickets, and generate far more money per screen than standard films do. As a result Hollywood is set to ramp up its 3-D production to release 47 of these films over the next two years. George explained: "Digital formats are substantially less expensive than standard duplication and therefore films can be made for less money. This will allow new releases to be available in more theatres than is currently economically feasible and benefit the industry as a whole.”

Digital prints also provide better quality picture and do not deteriorate after repeated screening. These characteristics should improve the theatrical experience and boost admissions. “But it's not the only at the top end of the market where new technology and innovation are having an effect - the recently released "Colin" (£45 total cost via a digital camcorder) shows that at the other end of the scale movies can be made much more cheaply,” he added.

However, George continued to say, while more high profile directors are becoming increasingly interested in 3-D films, this may impose a new challenge for the indie film maker, as the ability to finance such expensive conversions will become more difficult as credit is less available.

He concluded: "The credit crunch has clearly made fundraising tougher for independent film makers but things tend to move in cycles, and the distribution of films like "Colin" and success of non-mainstream films like Juno and Slumdog Millionaire demonstrate a strong appetite for original, creative work, so in time we ought to see investors returning to the market."

* Figures taken from the PricewaterhouseCoopers LLP Global Entertainment & Media Report 2009 - 2013