Australians create a crocodile market: Robert Milliken on Paul Hogan's financing lesson for the UK industry

THE BLUEPRINT for the revival of the British film industry may lie in Australia, where the government has offered bold tax incentives to encourage investment in what was already a lively production scene with more than a touch of nationalism to keep it bubbling.

However, Australian film backers are facing their toughest test yet: a one-film company quoted on the stock market. The mere idea was enough to make institutions gulp and, sure enough, shareholders are on a roller-coaster.

After a week of volatile trading, sparked by unflattering reviews from the United States, the share price of the company owning Paul Hogan's latest film, Lightning Jack, closed well down on Friday from its high point a month ago.

The film is attracting close scrutiny from investors and financiers as well as critics. It is the first feature film in Australia, and possibly anywhere else, to be funded by raising the bulk of its budget from the public through shares on the stock market.

Mr Hogan co-produced and wrote the screenplay for Lightning Jack, in which he plays an Australian cowboy in the American west. The film is Mr Hogan's latest bid to relaunch himself after an earlier movie, Also an Angel, failed to repeat the huge success of his two Crocodile Dundee films, which made him a household name in America.

Lightning Jack's budget of Adollars 36m (pounds 17m), fairly modest by Hollywood standards, was raised through a trust in which 36 million units at Adollars 1 each were offered to about 6,000 investors on the Australian stock exchange. The two largest investors are Mr Hogan and Village Roadshow, the film's Australian distribution company, with 2.3 million units each. Most of the others are small investors, for whom the main incentive was a tax deduction of 45 per cent of the subscription price for the year ending June 1994, and another 45 per cent in June 1995.

For the producers, there were additional advantages in the scheme. Tony Stewart, executive producer of Lightning Jack, said: 'It was a punt on Hogan, a big name with a strong track record. A fundamental reason why we raised the money this way was to retain complete creative control, which may not have happened if we had gone through the usual Hollywood finance circles.'

Mr Stewart said the scheme also allowed the producers greater flexibility in doing deals with the distributors, Savoy Pictures Inc in the US and Walt Disney for the rest of the world apart from Australia. But then came a string of disastrous reviews after Lightning Jack opened on 1,700 screens across America a week ago.

A month ago, in anticipation of the film's release in the US followed by Australia in a fortnight and Britain in July, Lightning Jack units were trading at Adollars 1.90, almost double their issue price. When Australian newspapers splashed reports of scathing US reviews, the price plunged to Adollars 1.15 on Monday before climbing back to Adollars 1.27. On Friday, it closed at Adollars 1.18. Despite the reviews Lightning Jack did excellent business in America last weekend, taking USdollars 5.4m (pounds 3.6m) at the box office, according to the producers. This was second only to Shirley MacLaine's new film, Guarding Tess, for the same two days.

If the film goes on to be a hit, the investors stand to gain from any profits, after deferments are met, which will be paid into the trust up to a maximum of Adollars 36m. Mr Hogan himself will receive a producing and acting fee of dollars 2m, plus another dollars 2m if the film goes into profit. He will also be paid dollars 235,000 for writing the script, and his company, Lightning Ridge Productions, will receive management and marketing fees together with 50 per cent of any profits.

The trust itself will continue to operate until 2001, although there are provisions for an earlier winding up 'if the film doesn't generate enough revenue to keep expenses going', said Mr Stewart.

If it works well enough, the share scheme pioneered by Lightning Jack may be taken up by other film producers. Mr Stewart said Australia's regulatory bodies, the Australian Film Commission and the Australian Tax Office, were 'tough but co-operative' in helping the producers to set it up. 'It's been unique and ground-breaking because the market is determining our share price based on emotion more than anything else. I don't think you could launch such a scheme unless you had a big-name star or director. We couldn't have done it without Hogan.'

(Photograph omitted)