Wednesday, June 25, 2008

Terry Lipman Talks about Fostering the Film Industry in Austin

Terry Lipman Talks about Fostering the Film Industry in Austin, the challenge with Villa Muse-like projects, and other efforts to promote the Austin film industry

What is your background in the film industry?

I started in film in Australia in the 1980s when the Aussie Government introduced tax incentives to attract local investors to support locally made films. To obtain the incentives, however, certain “strings were attached.” Even though I was not a filmmaker, I was able to handle the strings. These included the provision of certain business services to protect the government and investors – accounting, legal, insurance bonding distribution etc. My initiative was very successful and went far to help develop an independent Australian film industry growing from a fledgling state to become a leading member of the world filmmaking community. I assisted in providing the business services in the making of over 200 movies including the legendary “Crocodile Dundee.” Gradually the US studios saw opportunities in making their films in Australia using the highly skilled local crews and facilities that were developed and moved in. They now have a number of major studio facilities there and in New Zealand.

When I came to Austin about ten years ago I immediately saw a similar situation as Australia. Austin had a great filmmaking community, perfect climate and other benefits and was only 1500 miles from Hollywood. More importantly it had a very active group of aggressive business entrepreneurs and investors enjoying enormous rewards from developing a successful technology industry. (There was so much technology needed in the making of films and music that Hollywood did not yet have.) The challenge I saw was how to bring the filmmaking and the business and investment community together so that, rather than Austin just relying on being a back lot for Hollywood, films could be made here with local ownership and control. I spent a year or so working with some local leaders – Pike Powers, Jerry Converse, The Texas Film Commission and film director Dwight Adair with support from local filmmakers to create a strategy with the State for funding help. As a result the State passed a loan guarantee program for Texas banks that financed films made in Texas using local crews, services and facilities. George Bush signed it. We celebrated. Everyone was happy. But unfortunately after 18 months work, the bank – Chase Bank – refused to accept the State’s guarantee as it had not put any money into a bank account! So the initiative died. It was a disaster.

What was that program called?

The Texas Film Industry Development Loan Guarantee Program. Though it was sunsetted a couple of years ago I have been invited to resubmit it if at any time it could show that it would create jobs for Texas. Now might be a good time with the enormous loss of filmmaking business to other States.

Is it completely dead?

No. Not completely dead. It just needs resuscitation in a new form. I started revisiting the situation about a year ago when so much Texas film business was being lost to other States and I read that if we built a film studio in Austin “they will return.” It’s a nice thought but it doesn’t work that way. It’s true that many Hollywood producers love making films here in Austin and would love to return but the way it works is that the major film studios go where it’s the cheapest. Louisiana and New Mexico states have provided such tremendous tax incentives that they have attracted the lion’s share of the interstate business from Hollywood. New York is doing something similar this year. Texas did pass a bill last year but, unfortunately its small 5% incentive didn’t help. It was just a token and many of Texas’ 6000 members of the filmmaking community are now moving to Louisiana. From my experience in Australia, I believe that building a successful industry is not about building sound stages and back lots first. That’s putting the cart before the horse. Sure it’s good to have a studio facility available – and we do have several right now - but only where there is a guarantee of ongoing usage to confidently cover its costs. And the costs of running a studio that operates 24/7 day and night can be very expensive. In my opinion building a local industry starts by owning and controlling the making of films. First we make a lot of good quality locally funded, reasonably budgeted films so there’s a return on investment. Then, as the confidence is built up by the investment community an industry is slowly and strategically developed. Then as the needs develop the call for the studios is created with a guarantee of business.

What will get it going?

By having local investors fund films made in Austin along the lines that Austin Ventures did guiding local investors to enter the software business. I am proposing a low cost “VC style” business corporation that would contract with Austin’s highly regarded filmmaking community and local service providers that is staffed by experts in all aspects of film business. It would seek out, acquire and raise funds for commercially viable films and serve in a risk management capacity to minimize the investors’ risk and maximize their opportunity for profits. In addition it would protect its investors with the highest levels of insurance, completion bonding, legal, accounting, marketing and other business services and serve as the Executive Producer on all projects funded. I see the corporation strategically positioned at the forefront of the economic development of a well-coordinated entertainment industry capitalizing on the growing digital capability based here in Austin, as Austin Ventures did for the software industry. And, with Austin being voted by Movie Maker Magazine this year as the number one place in the US to make movies, I believe now is the time to do that.

How far are you with packaging this up as a deal?

I am in the early stages but I do have the support of a highly regarded producer in Los Angeles with extensive experience to bring to Austin a package of five high quality and commercially viable very low budget films to be made here in which local investors will have the opportunity of substantial ownership for a relatively low investment. I have also secured support from an experienced film investor with substantial investments in Central Texas and who will put up some of the funds on a co-funding basis for this slate of films and others and who will take on a consulting role for any investors who might be interested in having a look at investing in film and who can see and support an economic development opportunity that we have right here in Austin via the “VC style” film industry catalyst organization.

A few years ago we had the Burnt Orange Productions unit? What ever happened to them?

It just didn’t work. I was involved in the early days. They were all great people with worthy motives but the experiment of creating a commercial film production company around a film school where young students could have practical experience working with leading directors was a great idea but it just didn’t work for a variety of reasons. Even with Carolyn Pfeiffer, a first class and most experienced person in the business, that wasn’t enough. I may be wrong but to me the organization did not appear to be operated on a commercial basis. It was more of a bureaucratic organization that concerned many in the local film community who saw their jobs at risk. Also unlike what I am proposing for Austin, the investors in the operation were not experienced in film and were more interested in supporting UT’s initiative rather than really investing in films.

What do you think about projects like Villa Muse that recently presented to the City Council for creating a studio in Austin?

I could be proved wrong but I don’t believe it will work - not at this early stage in Austin’s development in film. At least not the elaborate and expensive facility I have read about. It seems to be one of those ‘build it and they will come’ projects. In Australia the studios were not built until after there was a demand from the film industry for them not before. I don’t see any demand here at all. I see Villa Muse more as an interesting real estate deal proposed before its time rather than filling a local need. I heard they were seeking some $50M. Goodness knows how they could possibly generate a return on that sort of investment that would get anywhere near covering their costs let alone paying investors a dividend - not for years. Also I fail to see how it would attract the sort of business it is being built for. First Hollywood have numerous sound stages and back lots in their home town and will only go elsewhere where they can save money and they go to great lengths to save money. As an example almost no films have been made at Las Colinas Studio in Dallas over the 25 or so years since it was built for the same reason. It is currently promoted as a tourist attraction! They did a few lower budget television shows there initially like Texas Ranger but since then it has become a great big white elephant. I really believe to create a film industry with sophisticated studios to service it, you first need to create a demand by making commercially viable films and controlling where they are made. I really know that the way to change the paradigm from merely being at the mercy of Hollywood is by proactively seeking out and funding the best projects from around the world to be made here in Austin using some leverage to get the best deals from all the local crews, facilities and service providers plus international distributors. That, in my humble opinion, is the way we become a major industry force in the future.

Best regards,
Hall T.