Monthly Archives: May 2012

Zones of growth – thoughts on how to improve Mid Wales’ economy

Many of you may be aware of the proposal to create ‘Growth Zones’ in Powys – at Brecon, Llandrindod Wells and Newtown – roughly equivalent to the new Enterprise Zones created by the government elsewhere in the UK. My opinion is that these are a good idea. The Welsh Government has put out a call for evidence on the proposal and information can be found on its website here.

Unfortunately, the deadline for entries is June 1. I’m writing this on May 28 so, if you want to make a submission, you need to act fast!

What follows is my own submission. I want people to see what I’ve put forward because I think it might help them in shaping their own thoughts. I’m not saying it’s perfect because I hope others will have different or better ideas; I’m putting it up in the hope that it will stimulate your imagination, and the Welsh Government will get better submissions as a result.

I would also appreciate your comments and suggestions – just use the form at the bottom.

Here’s my submission:

All three possible locations must be able to compete with the Enterprise Zones that have already been announced, therefore the features common to all of those should be included here. These include: Government support to ensure super-fast broadband, achieved through guaranteeing the most supportive environment and, if necessary, public funding; low levels of regulation and planning controls; a 100 per cent business rate discount over a five year period for businesses that move into a Growth Zone during the course of this Parliament (although I recommend a graded scheme to reintroduce business rates thereafter, alongside a graded penalty scheme for businesses that choose to move away once the discount is removed); all business rates growth within the zone for a period of at least 25 years will be retained and shared by the local authority to support its economic priorities; and Government and local authority help to develop radically simplified planning approaches.

I believe funding should be provided for an office that would help film makers (cinema or television) find locations within Powys. Llandrindod Wells would be the best location (as it is in the centre of the county). Powys has breathtaking natural beauty that has gone unused by film makers, simply because nobody knows about it. A film locations office would bring income to landowners whose land would be used, and to residents who could be hired as ‘extras’ during filming.

Material I have read on Enterprise Zones has categorised them in certain ways, stating what tax breaks, planning controls and broadband levels might be possible, along with a line called ‘Sector Focus’, declaring what businesses should be encouraged into the zone. I would recommend:

Tax break: Save businesses money in foregone business rates.

Planning: Simplified regime permitted the change of use of existing buildings.

Broadband: Explore delivery of superfast broadband with suppliers.

This leaves the ‘Sector Focus’. I would like to propose several possibilities as follows, based on my knowledge of local industry and the possibilities that could be accommodated here in Powys:

Sector focus: Green technologies; Advanced technologies; Movable skills (small businesses that could benefit from working in a rural setting); sustainable agriculture (farming techniques that are beneficial to the environment); creative industries; energy sector (carbon-free/green).

Dead weight doesn’t pay – why firms should take the less-travelled way

‘Two paths diverged in a wood and I

‘I took the one less travelled by

‘And that has made all the difference.’ – Robert Frost, The Road Not Taken.

I have a lot of time for Kevin Smith, the film director and co-creator of the Smodcast podcast network. Not only does he know the difference between the media and a medium, but he worked out what is wrong with the modern business model, and is pointing the way towards changing it so that people can make a decent living again.

The fact is that there are too many people in the business world who charge far more than they are worth, in order to provide a service that is either very small or irrelevant – and get away with it because they have conned everybody who does the actual work into thinking they’re necessary.

These people suck cash away from businesses and push the break-even point up and up until it becomes nigh-on impossible to reach.

Kevin Smith is one of the first people I’ve seen standing up and saying it’s time to get rid of this dead weight. And he’s absolutely right.

The way he tells it, he came to this realisation on the set of his most recent movie, Red State, a satirical horror flick shining a light on the atrocities committed in the name of religion along with those committed in the name of law and order (more or less; I don’t want to spoil it for anyone. Go see it). The film had a budget of four or five million dollars and most of the people working on it, including stars John Goodman and Oscar-winner Melissa Leo, were doing it for a lot less pay than they would normally take.

I’ll let Mr Smith narrate his story from here for a while (quoted from passages in his book Tough Sh*t):

“On day four on the set of Red State, while watching all the beautiful people in my cast and on my crew pull together to make this ugly little story, I started thinking about how the marketing dollars spent to open this film eventually would be four or five times the amount that all the generous filmmakers on my cast and crew (who took drastic cuts in salary to work on the flick) ever had to work with in their departments to actually make the flick. I was asking the cast and crew to eat gristle when, postpurchase, the choice cuts would go elsewhere.

“We all hoped someone would eventually buy the film when it was finished, but how much would they buy it for? And if it got bought, what would happen then? Let’s say Lionsgate picked up Red State. Lionsgate spends an almost-standard $20 mil to open any flick (which is lower than the industry norm; LG is actually one of the more frugal studios, spending less on marketing than the majors). So now, my flick doesn’t cost $4 million anymore, it costs $24 million. It’s gotta make $24 million to break even and start seeing profit. But the studio/distributor doesn’t get all that box office, so assume the studio only gets back half of that announced box-office figure. Suddenly my little four-million-dollar movie has to make $50 million JUST TO BREAK EVEN. Like… what happened? Instead of spending all that money trying to make the movie, the money is spent on trying to convince people to come see your shit.

“It just started to gnaw at me. Many cats were breaking their backs to see us hit an ambitiously low budget cap, but whoever bought the flick would then give people who never worked on the movie way more money to simply sell it to an audience that didn’t care about or want it. Four million bucks? We could make that make, without all the crazy marketing spending.”

So he took Red State to the Sundance Film Festival where, “stick in hand, I gave a barn-burner of a speech in which I advocated for art and said the business half of the show-business equation was out of control – particularly marketing spending.

“Then came the moment of truth. ‘Ladies and gentlemen, when I came here seventeen years ago, all I wanted to do was sell my movie. And I can’t think of anything worse, seventeen years later, than selling my movie to people who just don’t get it.’”

He retained the distribution rights for himself and took the movie on a tour of selected cinemas, with the screenings accompanied by talks and question-and-answer sessions. “Over the course of the fifteen shows of the Red State USA Tour, we made almost one million dollars from ticket and merchandise sales. You take the million we made on the tour, you add that to the two million we pulled in from foreign sales, and you add to that two million more from Lionsgate for the VOD and home video rights, and another million from NetFlix for the streaming rights, and you’ll notice our gains were higher than our spending. And without any dopey marketing figures to have to recoup, simple math dictates Red State is in the black.”

Now. I don’t know whether Mr Smith intends – or intended – to give any of that profit to the cast and crew who tightened their belts and took lower salaries to make the film in the first place. To be honest, it’s none of my business. I would – for me, that would be the point of the operation.

But the message is perfectly clear and blatantly obvious if you just stop to think about it: If you want to get by in the world – especially a world in financial crisis as it has been over the past few years – you get rid of the dead weight. For Kevin Smith, that meant ditching a bunch of disinterested marketers who would have provided a bog-standard service on his work while demanding five times as much money as it cost to make the movie in the first place.

I live in Powys, Wales, where during the last financial year the county council spent £6 million – SIX MILLION POUNDS – on consultancy fees. They paid big bucks to people in smart jackets and denim trousers for PowerPoint presentations that provided the kind of – and quality of – information that I could have written on the back of an old envelope and offered to them for nothing.

In fact, my advice would probably have been better.

During the same financial year, the Welsh Assembly Government provided more than £1 million to the county council in the hope that it would not raise taxes on local residents. This proved futile, and council tax rose by 2.5 per cent. The money from the Assembly, coupled with that provided by the tax rise, more or less equals the amount paid to the consultants – for information that was either obvious, unnecessary or inaccurate (in my opinion). The people of this county were forced to forfeit this cash at a time of massively increased austerity, when every household in the UK is having to, as Mr Smith put it, “eat gristle”.

It seems to me that there are similar disinterested third parties in many aspects of business and that now is the time to get rid of them and offer services direct. Ditch the middle person and go straight to the buyer. With the internet and all that, it shouldn’t be too hard to do, in many cases.

My bet is that, in many cases, this would turn a loss-maker into a profitable concern – or at least, as with Powys County Council, make the burden on the investor (the council taxpayer in this case) a little more bearable.

And that – in this day and age – might make all the difference.