Real estate special situations: Investing in studios and sound stages

Streaming services and downloadable content are fast becoming big business. COVID-19 is driving an accelerated structural shift into online streaming platforms. And the demand for production and studio facilities to create this content is far outstripping supply.

Just as we’re seeing in the US, the UK film and television industry has seen huge growth in recent years, spurred on by the increased demand of streaming services and lucrative tax incentives. The motion picture, television and music industry grew 43% between 2016 and 2019. In 2019, film and television production spend reached a record £4.1bn, and the sector has the potential to reach £6bn by 2024/25.

A system of tax credits for productions based in the UK are also very attractive. Companies can claim a 25% tax credit for films that incur 10% of their core costs in the UK, pass certain cultural criteria and are intended for theatrical release. There is no cap, and tax relief may be claimed over 80% of total core expenditure or UK core expenditure, whichever is lower. And certain television programmes may also benefit from tax reliefs too.

In this report, 'Spotlight on UK Studio Financing', Ropes & Gray draws on its experience in this area to look at the commercial drivers of this industry and some of the financing techniques for new players in the market.