For Broadcast November 12, 2009

Producers and fund managers alike profit from their relationship.

Counting on investor tax relief schemes to fix your funding problems might sound to some producers like a pipe dream or a short road to hell, but it can work. For how much longer, though?

The good news is that Enterprise Investment Scheme (EIS) money, which includes 20% tax relief for investors, is still available. Several fund managers, including Ingenious and Octopus Investments, have EIS money for UK TV production.

Last summer, Octopus made available £8m of EIS funds in the form of advances to TV producers against distribution rights and this is now starting to pay off.

Octopus has invested nearly £4.5m so far through DCD Rights. Sister company West Park Pictures has already recouped a six-figure advance for Stephen Fry in America.

DCD also works with third-party producers and has 25 EIS-funded projects underway, including recent BBC1 drama The Land Girls. DCD Rights uses its sales expertise and international contacts to decide how much it can recoup through distribution sales; this varies, but typically it’s 20% of the programme budget.

So DCD gets to compete for distribution rights against the likes of All3Media and FremantleMedia, while Octopus gains access to new TV expertise.

Both partners admit the investment parameters took a while to hammer out as they got to know each other. Octopus is interested in higher-end drama and longer documentary series for their international sales opportunity. Stephen Fry’s series fits the criteria, with the additional comfort that a big-name star brings. Now the show has turned a profit, Octopus investment manager Joe MacCarthy plans to put more money into TV and to sign up at least one other UK distribution company to work with the fund.

“The steepness of the curve in terms of deal flow is growing exponentially,” he says, predicting that the remaining £3.5m of the original £8m will be invested in the next 30 days. “The model works,” he says.

The bad news is that some “aggressive packaging” of EIS money, particularly around film projects, has caught the attention of the Inland Revenue, which is worried that “soft money” intended to help smaller UK film and TV companies is being hijacked by aggressive tax strategies that pay off for investors but might not adhere to the spirit of the law.

“There are some rumblings about EIS and the powers that be may want EIS to be made available to other businesses such as biofuel rather than the luvvies in the TV and film business,” said an insider, who requested anonymity.

Killing EIS for TV would be a shame, particularly when commercial broadcasters are paring back budgets. Tightening up the rules is a better option. Ingenious, which describes itself as an “enthusiastic supporter” of EIS funds, wouldn’t quantify how many EIS funds it currently operates, but a spokesperson said it would be “both surprised and disappointed if the scheme were to be trimmed back in any way.”

All eyes on the Chancellor’s pre-budget report then, yes?