UDPATE, 2 AM WRITETHRU: With the British film and TV industry in the throes of a capacity crisis, it’s a good — if frustrating — time to be in the studio facilities business. The Pinewood Shepperton group today announced consolidated results for the six months ended September 30th with £36.6M ($59.1M) in revenues compared to £27.1M ($43.8M) in the same period last year. After-tax profit was $5.5M, up from $3.2M in 2012. The Pinewood studio is currently host to Kenneth Branagh’s lavish Cinderella, Hammer sequel The Woman In Black: Angel Of Death, and just had Ridley Scott’s Exodus on the lot which has now gone on location. Lucasfilm has also hung its shingle with the new Star Wars installment gearing up to shoot in 2014. Johnny Depp-starrer Alice In Wonderland 2 is expected to turn up, and Bond will be back with No. 24 next year. Over at nearby Shepperton, Marvel has wrapped Into The Woods and has The Avengers 2 on deck. But I hear its Ant Man had to forgo shooting in the UK due to the lack of space.
Pinewood Shepperton has had its share of good and bad news of late. The home of the James Bond franchise is reporting a significant increase in operating profit for the fiscal year, has a steady stream of productions on its stages and is growing abroad. But, it’s still facing a stubborn local council that’s twice rejected its UK expansion plans, most recently in May. A public inquiry into the matter begins November 19. CEO Ivan Dunleavy notes, “Our customers are concerned that the company has sufficient capacity to meet their needs… The need for further, effective infrastructure to meet demand for the UK is a priority.”
Revenue for the 2012/2013 fiscal year ended March 31 was £63M ($96.3M) with operating profit of $8.25M versus $4.13M in the previous period. Among recent films to shoot at Pinewood are The Muppets… Again! and Maleficient. Upcoming are Kenneth Branagh’s Cinderella, Marvel’s Guardians Of The Galaxy and Star Wars: Episode VII.
Pinewood Shepperton is continuing an aggressive expansion drive with its new Pinewood Atlanta joint venture. The studios are partnering with River’s Rock LLC, an independently managed trust, to develop 288 acres of land south of Atlanta into world class studio facilities. Pinewood has a 40% share in the venture which is being funded by River’s Rock and a debt facility from Synovus Bank. Georgia’s tax incentives can reach up to 30%: there’s a 20% credit for qualified productions, which are then eligible for an additional 10% credit if they include a Georgia promotional logo within the finished product.
Fayette County Development Authority president Matt Forshee recently told the Atlanta Business Chronicle that the new studio would provide the infrastructure required to attract large-scale Hollywood productions. Georgia has been the backdrop for a number of film and TV shoots that require natural scenery, but it’s had a harder time with productions that need big studio space. Construction on the facility will start immediately.
The UK’s Pinewood Shepperton is the latest Western outfit to hook up with Chinese media mogul Bruno Wu via a joint-venture to finance and produce content in China for the global market. The 50/50 partnership with Wu’s Seven Stars Media Limited will be called Song Lin (Pinewood in Chinese) with each side initially putting up $1M for R&D on local business proposals. Those include co-production opportunities; training courses to be given by British institutions in Beijing and other cities; financing and related services for local productions; film-themed entertainment venues in Shanghai and regionally; and film-themed projects in Beijing, Shanghai and Wuhan. A UK chairman will be appointed.
This is the most recent announcement involving Wu in what’s been a busy 14 months. In February 2012, he burst onto Hollywood’s radar with plans for an $800M media and investment fund and subsequently formed a joint-venture with Fast Five helmer Justin Lin for a slate of films. He also outlined plans to build entertainment and media hub Chinawood in Tianjin with an investment of over $1.27B. Wu was then in Cannes to say he would back the John H. Lee remake of John Woo’s The Killer and in December hooked up with Avi Arad’s Arad Productions to develop superhero franchise properties inspired by Chinese history and mythology, starting with Rise Of The Terracotta Warriors. Those films along with Gong Li-starrer The Last Empress are in development.
Some industry insiders both in China and in Hollywood have been skeptical of Wu and his ambitious announcements, which so far don’t appear to have produced much tangible output. However, he is understood to be “incredibly well-connected politically” which foreigners believe cannot hurt in a territory like China, where the government retains a tight grip on the media.
Studios operator Pinewood Shepperton’s unaudited six month results for the year ended September 30 show a marked improvement over the last comparable period. Before-tax profits are at £3M largely reversing a £5.4M loss in 2011. Revenues were £27.1M, up from £24.6M and operating profit jumped from £3.7M to £6.1M. Specifically, revenues from film were £18.8M, up from £16.4M. During the period, the UK facilities hosted Disney’s Maleficent; Marvel’s Thor: The Dark World; Working Title and Universal’s Les Misérables; Paramount’s latest Jack Ryan pic, Maryland; Universal’s Fast And Furious 6, Marv Films/Kick Ass 2 Productions’ Kick Ass 2 and Eon, MGM and Sony’s Skyfall. Pinewood Shepperton CEO Ivan Dunleavy said “The number of film productions contracted so far for next year is encouraging and the Board looks forward to the future with confidence.” TV revenues, however, were down to £2.5M from £3.6M in the earlier period. That was due to the increased film activity that saw those productions spill over to the TV studios.
A new study finds that British film contributes over £4.6B to UK GDP and more than £1.3B to the government. The Economic Impact of the UK Film Industry report, commissioned every two years by the British Film Institute and Pinewood Shepperton, notably shows the UK film industry directly employs almost 44,000 people, up from 36,000 in 2009. That’s more than are found in both the fund management and pharmaceutical manufacturing sectors. The median salary for film and TV workers is about $63,000. However, the report acknowledges there is a risk of highly-skilled workers taking their talent abroad if things like compensation, taxes and opportunities don’t remain competitive. The study further highlights the importance of the Film Tax Relief, warning that without the incentives, UK production would be a staggering 71% smaller.
Pinewood chief exec Ivan Dunleavy said: “The trends show that we’re performing well, relative to today’s economic climate. We can do more though. We now need to look at how to enable further investment in infrastructure and how to build on the UK’s growing international reputation to boost exports. By making gains in these areas film can provide more jobs and help play our part in bringing growth to the UK economy.”
Seven Group Still Undecided On News Corp.’ $2B Offer For Consolidated Media
In June, News Corp. launched a $2.1B bid for Consolidated Media Holdings, a 25% owner of pay-TV platform Foxtel and 50% owner of the Fox Sports channels, but Seven Group Holdings still hasn’t decided whether to sell its 25.3% stake in CMH. During an earnings report today, Seven Group chief executive Peter Gammell said News has yet to make a formal proposal and there would be no response until then. Gammell said the Seven Group’s request to the Australian Competition & Consumer Commission to review whether it could buy the balance of the shares in CMH did not mean the company would make a counter-offer, only that it wanted to know whether such a transaction would be approved. The ACCC will announce its decision on September 13. James Packer, who owns 50% of CMH, has said he will accept News’ bid in the absence of a higher offer. Seven Group reported today its net profit for fiscal 2012 more than doubled to $165.9M on revenues of $4.46B. But it wrote down by $483.5M the value of its investment in Seven West Media which owns the Seven Network, Pacific Magazines and West Australian Newspapers. The group also announced Ryan Stokes, son of the company’s chairman Kerry Stokes, has been appointed COO. – Don Groves
Pinewood Shepperton Studios’ £200 million Project Pinewood development hit a roadblock today when its planning permission was rejected by the Secretary of State for Communities and Local Government, effectively kiboshing the project. Back in 2009, Pinewood submitted an application to develop what would have been a purpose-built living and working community for the creative industries – including 16 permanent streetscapes for external filming. The streetscapes would have represented such cities as Paris, Venice, Amsterdam, Prague, San Francisco and New Orleans giving British filmmakers on a tight budget the opportunity to shoot locally while also enhancing Pinewood’s international offer. Further, Project Pinewood envisioned building 1400 homes, including affordable housing, that would have been open to all comers and provided special discounted rates for staff. Technical and craft training facilities were also on deck. In a bugaboo somewhat reminiscent of the DreamWorks/Playa Vista debacle, however, the acreage Pinewood is eyeing is in a “greenbelt” of protected land. Pinewood owns the land, but had to prove “special circumstances” in order to go ahead with the building. Complicating matters,
Hollywood studios have a long history of shooting blockbusters in England. For instance, Britain’s Pinewood Shepperton has been the location of choice for big Hollywood blockbusters like the Harry Potter, James Bond and Batman franchises. But for all intents and purposes the U.S. majors have viewed the 20% UK tax credit they receive for making films here as free money. Now Matthew Vaughn, director of X Men: First Class which is just about to start shooting here, is floating an interesting suggestion. He is proposing that Hollywood majors who take advantage of the 20% British tax credit then repay the money in the event of a hit — and plough that portion of the profits into a UK film fund backing British-produced pics.
“The thing I’m annoyed about,” Vaughn tells me, “is how many movies are made in Britain without any British money in them. It’s tragic how we’ve handled things. Most British producers think it’s an achievement even getting a film made. My goal is that we won’t even need Hollywood money in 10 years’ time.”
Vaughn tells me that the UK needs to monetize that 20% studio tax credit. Since Hollywood needs investor equity now that Wall Street money has dried up, the studios could count on UK plc as a firm partner that takes a secondary equity position. “In today’s cash-strapped world, ‘soft equity’ is a valuable commodity for studios and producers alike,” Vaugh insists. “Looking at the UK’s position …
First half operating profits after exceptional items have also fallen 3% to £3.2 million. Total revenue fell 6.4% in the first 6 months to £19 million. Film production revenue fell by 8.5% to £10.8 million, while TV shooting income fell 7.3% to £5.1 million. Martin Scorsese’s Hugo Cabret was the biggest production to use Pinewood Shepperton between January and June. Other productions using the studios included Disney’s John Carter of Mars and Ruby Films’ Jane Eyre. Pinewood Shepperton has been hit by several Hollywood productions being delayed.
Crystal Amber, which yesterday became Pinewood Shepperton’s biggest shareholder, characterises chairman Michael Grade as “clueless” and called on him to stand down. The investor complains that Pinewood’s revenues have fallen, costs have risen and profits broadly halved since the group raised £50 million at flotation in 2004.
The former ITV chairman has survived a shareholder rebellion at this morning’s annual general meeting of the company that owns Pinewood and Shepperton film studios.
Crystal Amber, an activist investment fund with 18% of the shares in Pinewood Shepperton has attacked Grade’s “poor stewardship” as chairman of the company. The fund says the board needs fresh leadership.
Grade led the management buyout from Rank in 2000. Profits and return on capital have fallen by more than half since the business was floated in May 2004.
The fund first invested in Pinewood Shepperton 18 months ago because it felt the studio was undervalued. It then put forward its own proposals as to how market perception of the value of the business might be improved. Richard Bernstein, Crystal’s investment adviser, said that although initially well-received, nothing has happened and subsequent meetings with Grade have been “unproductive”.
Pinewood Shepperton says that most shareholders are behind it, which “gives us confidence that they support the board, its stewardship and strategy”.
The group has invited Steven Underwood of investor the Peel Group, which holds 26.6% of the company, to join the board.