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Economic Impact of UK Distribution Log Out

The Economic Impact of the UK Theatrical Distribution Sector
 
October 2015 
Foreword
 
Long before I took up my role as President of the UK trade organisation, Film Distributors’ Association, I had a close understanding of the distribution sector’s unique and pivotal contribution to the film industry. Throughout my career as a film producer I’ve worked with many distributors, both studio-backed and independent, to bring the movies I’ve produced to audiences in the UK and around the world.
 
Film distribution companies are relatively high fixed-cost, high-risk enterprises. Their margins are being squeezed ever tighter as ever increasing media choices fragment audiences further and further. It’s abundantly clear to me that, in today’s super- abundant digital era, the skills needed to ‘cut through’ and connect high-quality entertainment with audiences on a viable and sustainable basis are essential if the industry is to maintain let alone develop its place at the heart of the UK’s vibrant creative industries.
 
And of course it’s only when films are experienced by audiences that they come to realise their potential; distributors being the arm of the industry that most greatly influences the depth and breadth of access to movies.
 
This new analysis is rigorously evidence-based, avoiding speculative or excessive claims; whilst also being admirably comprehensive. It takes you methodically through the economic activity generated by film distributors, detailing their direct and indirect impacts, arriving at some impressive yet wholly realistic conclusions. More than that, it sets the figures clearly in the context of how film distribution actually works in the competitive theatrical sector and beyond into the rapidly extending value chain.
 
To the best of my knowledge no such analysis, focused on the UK film distribution business, has ever been compiled before. The sector is adept at marketing, promotion and partnerships (launching over 700 feature films every year), but for obvious reasons has always ducked what could be interpreted as self-publicity.
 
2015 is however a special year, marking an important centenary: it was back in 1915 that the ambitious albeit fledgling companies specialising for the first time in the distribution of stories on film – separately from the fast spreading cinématographe machines – formed their own trade body, the Kinematograph Renters’ Society.
 
On behalf of today’s incarnation, Film Distributors’ Association, I am delighted to commend this very timely economic impact analysis for your interest and delight.
 
Lord Puttnam of Queensgate, CBE
FDA President
 
Key points
 
Data collected from the Office for National Statistics (ONS), Companies House and a survey of film distribution companies indicates that in 2013 the film distribution sector had a turnover of £1.2 billion, and generated 3,100 full-time equivalents (FTEs) of direct employment as well as £356 million in direct gross value added (GVA). Through its direct economic impact, the UK’s film distribution sector also generated an estimated £132 million in export revenue for the UK economy.
 
Marketing and promotions: Film distribution companies spent an estimated £330 million on the marketing and promotion of films in 20131. This total included £177 million on the placement of advertising in television, print, radio, outdoor, online and other media and a further £153 million on a variety of other types of promotional activities, including film trailers, festival events, premieres, talent tours and publicity junkets.
 
Multiplier effects: A GVA multiplier of 2.30 was applied to the film distribution sector’s direct GVA impact of £356 million to derive an estimate of £463 million for multiplier effects GVA. The multiplier effects generated by film distribution sector also generated 8,000 FTEs of employment in other supplier industries, including the advertising, professional services and transportation industries, to name just a few.
Total economic impact (direct impact + multiplier effects): On a combined basis, the direct impact and multiplier effects associated with the film distribution sector generated a total economic impact of 11,100 FTEs in employment and £819 million in GVA.
 
Tax revenue: The economic activity generated by the film distribution sector through both its direct and multiplier effects yielded an estimated £190 million in tax revenue for the UK government in 2013, including Income Tax, National Insurance, VAT, Corporation Tax and Council Tax.
 
Wider economic impacts: The theatrical film distribution sector is, in many respects, the lynchpin of the entire film sector value chain: it links creators and the production of films with consumers. For this reason, to understand the full scope of the economic impact of the film distribution sector in the UK, it is important to examine the wider economic impact it has by enabling film production as well as consumers’ engagement with film content. The magnitude of this wider economic impact is summarised in Figure 1 (page 4) and includes the employment, GVA, exports and tax revenue generated by US studio production, independent production in the UK, cinema exhibition, viewing of films on TV and home entertainment platforms, and the sale of film-related merchandise in the UK.
 
Exports: Through its direct and wider economic impacts, the film distribution sector also has a positive impact on the UK’s export position. Many multinational film distribution companies use the UK as the hub for their European operations and so earn export revenue from the sale of film distribution services to other countries. Many of these same companies are also part of vertically integrated media companies which produce US studio films within the UK. This inward investment film production also represents the export of production services to a foreign country. Altogether, through these two channels, the film distribution sector generated £884 million in exports for the UK economy in 2013.
 
Overall economic impact: When viewed as the lynchpin of the film sector in the UK, film distribution was responsible for creating an estimated 135,200 FTEs of employment in 2013. It was also responsible for generating £5.8 billion in GVA for the UK economy, £884 million in exports and nearly £2.1 billion in tax revenue. By several measures, therefore, the theatrical distribution sector makes an important contribution to the UK economy.

Click here to download a pdf of the full report.