The UK Film Council has drawn up an aggressive new plan to prepare the industry for what it describes as a "crucial" three years, despite the body's funding being slashed to help pay for the 2012 Olympic Games in London. The Government-backed council unveiled its latest three-year plan last week. John Woodward, the council's chief executive, said it planned to tackle head on the British movie industry's failure to get to grips with the challenges of the digital age.
"The business model has been the same since the invention of the video recorder 25 years ago, but has been stuttering for a few years," Mr Woodward said. "The web has changed everything. Viewers have moved away from television and DVD has hit a brick wall. Everyone can see viewers moving to the web, but no one has come up with a business model that is 100 per cent substitutional for those lost revenues."
The UK Film Council spent three months consulting with a broad range of companies throughout the industry about the best way to support British film, help them deal with the move into the digital era and also to face the fallout from the recession.
Mr Woodward said: "Aside from the six major studios, the UK film industry is a collection of small and medium-sized enterprises. All the companies face the same problems with the business models collapsing, of how they find a way through."
To help tackle the issue, the council has launched a £5m "innovation fund". Mr Woodward said: "We have taken a hard-nosed look at what we think we can achieve in this period for the industry. Many of the small companies know the world is changing but have not been able to look beyond.
"The innovation fund is designed to help provide technology driven ideas to find different business models in the digital age."
Tim Bevan, the co-founder of Working Title Films, chairs the film council and will oversee a think-tank set up to identify new policy initiatives to help UK film companies grow. This underlines the fact that there are few independent British production houses that are actually sustainable.
Mr Bevan said: "[We have] a new set of priorities, and a new way of working. With the right level of support, a successful British film industry can continue to help get the UK out of recession, drive innovation and create more high-skilled jobs."
The problems faced by the industry have been compounded by the economic downturn and the forthcoming London Olympics, which will swallow up £25m of the film council's funding over the next three years. But rather than provide fewer investments for film projects, the body has slashed its overheads by 20 per cent. And, for the first time, it has pulled together its three separate film investment funds to launch
a combined £15m a year fund for "emerging, experimental and world class" film-makers. Whereas before the film council had 24 staff running three funds, there are now 11 staff looking after one fund. Mr Woodward explained: "With less money, we wanted to retain the level of funding for the industry so we delivered the same and cut our overheads. It's not about doing more but about not doing less, which feels like a victory."
The film council's role is especially important now as investment from the private sector has slowed. For this reason it will try to maintain the level of investment for film development. "In the film world, the development money is the hardest to find," said Mr Woodward. "It is risk money and in the past there has been more from the private sector.
"In financing a film we are flexible, but we are not normally more than 25 to 30 per cent invested. You have to be canny, especially with public money. The private sector has to have skin in the game. If they don't, that tells you something."
Beyond the changes to the structure of the film council's fund and among its managers, there could be a further shake-up ahead. The Department for Culture, Media and Sport is overseeing merger talks between the council and the British Film Institute which have been going on since August, although they could be disrupted by the election. The UK Film Council was set up by the Government a decade ago and is backed by money from the National Lottery. It has helped to fund more than 900 short films and features and Mr Woodward believes it is one of the few, if any, lottery-backed projects that succeeds in bringing in revenue. For every £1 of lotto money received, the council generates £5. Recently acclaimed movies which were backed by the fund include Fish Tank, a gritty drama about an Essex teenager which won the Jury Prize at Cannes and a Bafta for best British film. Other big hits include the Oscar-nominated political satire In the Loop and Man On Wire, a film about high wire walking which won a best documentary Oscar.
The council's other roles include promoting digital cinema and attracting US film-makers to shoot at British studios and use British post-production facilities and special effects teams. In the past year, US studios have been convinced to make such films as Clash Of The Titans and Ridley Scott's Robin Hood in the UK. Mr Woodward said the film industry and the council had grown in importance, adding: "The two have changed together. In the early years we said film could grow beyond a cottage industry."
The UK film industry turned over £7bn last year, making a £4.3bn contribution to Britain's gross domestic product and employing 49,000 people. "It is one of the most important film industries in the world," said Mr Woodward. "The creative industries will become more important. The next three years will be crucial because of the shift in technology."
Box-office success: The five highest-earning movies backed by the UK Film Council
Gosford Park (2002)
Director Robert Altman managed both critical acclaim and popular appeal with this country-house murder story examining Britain's class system, which grossed $87.8m (£57.9m) at cinemas worldwide
St Trinian's (2007)
With a cast that included Rupert Everett in drag and Russell Brand, the first modern re-imagining of the cult 1950s comedy about mischievous schoolgirls grossed $22.4m (£14.8m) at box offices
Touching the Void (2003)
A surprise hit, Kevin MacDonald's documentary about a near-fatal climbing accident in the Andes made $13.9m (£9.1m)
Bend It Like Beckham (2002)
Football and multiculturalism make unlikely bedfellows, but this comic drama about traditional values and modern society touched nerves worldwide, bringing in $76.6m (£50.6m)
The Constant Gardener (2005)
Based on a John le Carré novel, Fernando Meirelles's drama about a British diplomat investigating his wife's death in Kenya made $82.4m (£54.4m) and was nominated for four Academy Awards