Animation UK: Interview with Oli Hyatt
Last week we went to the Blue Zoo offices to meet up with Oli Hyatt, Chairman of Animation UK. We wanted to talk to him about their campaign for fairer trading conditions for animation studios, specifically for children's TV.
In short, they believe that the UK industry is losing out to overseas competitors due to other governments offering attractive tax incentives, which means that ultimately the UK economy is losing out and the animation industry is in danger of losing funds and talent.
Interview with Oli Hyatt
I think that Animation UK has a good argument, something does need to be done and there is evidence to show that companies have lost work as a direct result of low funding. We will keep you updated of the campaign's progress on the blog.
Could you tell us a bit about animation UK and what you are hoping to achieve?
Animation UK started when we (Blue Zoo) lost out on a couple of jobs and the client came back to us and said that the budget was lower than the company we were competing against. Our work was better and they wanted to work with us more, but due to tax incentives overseas they had their arms twisted by their shareholders to take the work over there. Now for a small growing company, this was going to be one of the biggest jobs we'd ever had so it was obviously very frustrating to lose work - not based on your ability but your costs because other governments were offering incentives.
So when this had happened a couple of times I started looking into the issues around animation and the decline of animation in this country. We managed to pull together a team of people to fund a report which we're taking to the government and making recommendations to them as a way to save the industry from further decline.
So far, has there been a good reaction from people in power? Have you noticed an increase in recognition for the campaign?
Yes, we've got a lot of friends in high places which is really good. It's actually quite easy to get in to see ministers when you're talking about animation because many of them have got children who are very young and understand the things that we make and understand the importance of the things that we make so it's been easier than I thought to get in and see people.
We've got good feedback, whether it's actually easy to achieve anything is another matter, we've learnt a lot about how slowly the cogs of the political world turn and I'm not sure that anyone really knows how you're meant to get any of this stuff done, it's just by sort of the constant pressure by lobbying.
How hopeful are you that you will achieve your goals?
I'm obviously really hopeful that it'll all get through, how much of that is false hope I don't know, but in the mission of getting this done we have achieved a lot.
We now have a seat at the table, we are on a thing called the creative industries council. Previously, animation wasn't on there as a body; they have representatives from dance, theatre, film, everything else and we weren't on there.
One of the things that the government has said to us about this is that we've been massively under-represented in the past, they didn't know about any of this stuff. They thought we were safe because they had passed the film tax break and thought that animation was film or thought we were a tiny cottage art industry who just pushed sand round a piece of glass on some arty projects. They didn't really understand our industry and they do now, so the really important thing even if it doesn't get through is to make sure that we have a voice in the future.
I'm hoping that it will get through, if it does get through there is so little work done in this country now from our own ideas and our own IP that straight away all that work will start coming back, so new ideas people come up with now will get made in this country, projects where they have done the first series abroad will come back. It's easier to answer when you're asked 'how do you know that?' because all of the people who have produced them have put money into this report so it's a really obvious thing.
Broadcasters want it, parents want their children to grow up with culturally British stuff, we want to make it licensors, distributors, they all want to sell our stuff because notoriously it sells better than most other nations so there will be a lot more work. In fact I don't think the infrastructure will be in place to deal with the amount of work that we could do so I think it will actually build slowly over the next 5 or 6 years, pretty much in the way you have seen Ireland's animation industry do.
If studios have better access to funding, it means that Intellectual Property can be more easily retained. How important is this?
It's really important. If you look at it in terms of tax breaks already available for film, that was set up to try and get more British films made, make money to put back into the British pot, make more films and grow the industry like that. Now what has essentially been happening is that there have been a few films that have been made and owned in this country. Some have been successful, some haven't, but it hasn't really had the generation of income that's fed back into other films.
Mostly what the film tax credits have done is slightly prop up the production, special effects and visualisation industry whereas the only reason we can't make money by selling shows to TV is that it just doesn't work like that anymore. If you sell to every channel in the world you might just about make your money back, so the only reason to be making animation, apart from the fact that we love making it, is to hold on to the IP.
The tax credit for animation in the UK is much more targeted than the film one; it's only because we want to hold on to the really valuable rights and if you look at it in terms of the values of films versus animation, I think the best selling UK film ever was Mamma Mia - whether you like it or not - and I think worldwide that grossed something like £660 million. Thomas the Tank Engine sells £1.5 billion of toys every single year so the difference between those two figures is massive. If you look at say, The King's Speech, I think it's done about £330 million at the box office. If you compare that to something like Peppa Pig it turns over the same in retail in the UK every year and now it's going over to America it could be another Thomas, They're looking to do their first £1 billion year so if you look at it as an investment, it's such a better investment.
With all of these being so successful and making tons of money, your question might be "why do we need help if these things can make so much money?". The point is, things like Peppa Pig were nearly not made because they couldn't find anyone to back it for them. I think it took about 5 years, they had to remortgage their houses, nearly bankrupt themselves. Whereas all around Europe and all around the world you can see these incentives, so people aren't willing to bankrupt themselves to make the shows any more so they sell the rights and IP in exchange for money so the products can be made in other territories.
When you make the products in other territories you lose some of your control as well, though because often you sell it to one of their broadcasters who want to put their own educational spin onto it. So quite quickly you get a degradation of how UK orientated or how UK educational it is as well as handing over the rights.
So it's a bigger issue than just IP but in terms of the treasury and the argument, we're just saying "if you give us the opportunity to hold on to our IP and make fantastic shows, they will sell around the world" we have a huge track record and something that we're very good at in this country.
The report mentions the fact that the film tax credit may be damaging the TV animation industry, how does that happen?
It's really simple economics, if an industry is buoyant and doing well and there is competition for jobs then the salary for those jobs is going to go up because they compete for staff. They (the film industry) employ similar people to us, so you can trained up from us to go and do film or you can move between the two. But when we're getting squeezed on price and generally have to come in a million pounds cheaper on a £4 million budget than someone overseas because of tax breaks. We're already having to lower our costs by a quarter and and the same time the film competition is increasing our staffing costs so while the film tax credit isn't helping us, it definitely is hurting us. We do lose staff because of this and at the moment they're not coming back, whereas if there was a more level playing field in this country as well as around the world, then we could compete on a more level basis.
So you want to be able to compete financially with other countries so work can remain in the UK, but if another country raises their funding even more won't that imbalance things further?
It's a perfectly valid point but it's in the industry that we want in this country and we think is valuable for children. The BBC have a multibillion pound budget every year and how much of that filters down to our children? Not very much. I think there's an acquisition budget of about 4.5 million, when you look at that as a percentage that the BBC get, your children are getting a really rough deal. If we're saying that that's OK because the commercial arm of children's TV - i.e. us trying to sell our IP will step in and fill that gap, but if we're not making money off our IP then there's a massive breakdown in how that works. So if we want our children to watch our shows and watch UK content, then something has to be done about it.
Other countries are going to always have more than us, for example the government are never going to give us as much as you can get out of Canada but what we're saying is that we've got the talent here, the ideas here and such good IP here, we don't necessarily have to have the same amount as everybody else. We just need to be able to compete and at the moment it's obvious that we can't.
One of the really important things that we found out while doing this is that on average, pre-school children watch on average 2.2 hours on average of TV a day, and that's a fifth of their waking day. By the time they've reached school they've spent an entire waking year of their lives watching our shows which predominantly tends to be animation. An entire year of their lives at such a vital learning age, it's really important that we provide them with UK educational content to help them learn. Also, children who tend to watch all of that tend to be from ethnic backgrounds or deprived families - exactly the sort of people that the government are looking to help. So why not invest more at this stage? It won't cost them much as a very cost effective way of reaching these children and help us to produce the high quality IP that we can sell around the world as well.
Posted: Mon 20th Feb 2012
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