'Trouble always seems to arrive just as I'm tucking into my dinner'

Gary Smith, 39, has one film out, two waiting for release and three in production. But the thrust of his pounds 6m AIM-listed company is towa rds the exploitation of intellectual rights in various media.

In any enterprise there will inevitably be setbacks. When that happens in Britain, people say you shouldn't have taken the risk. But in America they won't hold it against you. They know you've learned from it and are all the stronger for it. I realised this after sorting out Winchester Multimedia's investment in ECP, a magazine publisher, which proved to be my biggest headache to date.

When ECP launched Ikon, a glossy movies, music and sport magazine, the distributor's circulation figures suggested that it was doing very well. Months later they told us they had made a mistake. Circulation had fallen and it was too late for us to kickstart our marketing campaign to rescue it. Rather than throwing good money after bad we decided to put the company into voluntary liquidation. It was horrendous. What I found interesting was the reaction of a Nasdaq official I know in New York who said that if it had happened in America, I would have had head hunters calling because I'd made a difficult decision and hadn't let the setback stop me.

I'm a chartered accountant by training and Winchester's philosophy is all about reducing risk through its portfolio approach without being too conservative. But I was working in investment management before going into the film and TV business. My first job in the sector was as chief executive of Storm, now called Caspian Group, which owns the TV rights to Paddington Bear and has just bought Leeds United FC. In 1993 I decided to leave Storm and set up my own company. I founded Winchester with Mike Prince and set about building a quality film and TV company.

One of the problems with the British film and television industry is that while it's very creative, people forget about finance and marketing. Feature films, children's TV and music are all international, multi-billion- dollar industries that revolve around exploiting rights. It is rare for this to be done in Britain, although its commonplace in the US where companies like Disney have made a fortune out of it.

I put pounds 200,000 into the company and raised another pounds 100,000 by selling stakes to three Birmingham businessmen, which effectively valued Winchester at pounds 2m. One of the first things we did was to start talking to a small film production company run by a father and son team, Ashley and Robert Sidaway, which we eventually bought for pounds 400,000.

Trouble always seems to arrive just as I'm tucking in to dinner. Once I was celebrating a friend's 30th birthday when the agent for a big name comedian called. He said the performer wouldn't show up for filming when he was due two days later unless we paid his full $100,000 fee in advance. We had a contract, of course, but what we really needed was to have him on the set so we paid up the next day. Agents like to show off their power against small, independent British film producers.

Another time I was taking my first holiday in years in Sri Lanka when another phone call interrupted dinner with my wife. The bad news was that some payments had not arrived on time and Winchester had bills to pay and nothing to pay them with, even though we had pounds 1.5m in new cash from our flotation due in the account five weeks later. It's enough to give you indigestion.

Anyone watching the credits for our first feature film, Rainbow, may notice the name John Porter scroll by. It doesn't say who he is or what he did for the project because it was intended as a personal thank you. John is my bank manager and it is to him that I turn when I need a financial Alka-Seltzer.

Rainbow, which was released two weeks ago, is a story about children who discover the end of the rainbow and are transported from New Jersey to Kansas. We showed the script to Bob Hoskins and he liked it so much that he agreed to direct it and turned down several offers brought to him by his agent. Through Bob we were able to attract other big names, like Dan Ackroyd. We co-produced it with a Canadian company so we could take advantage of the government grants available there.

Getting Rainbow into the US market has been difficult. We had one executive ready to sign, only to see him leave Universal to go to Miramax. We're currently in talks with another distributor. You have to use distributors in each country, but you don't have to let yourself be held hostage. One of the things we've done is invest in our own marketing. We've put together a whole load of promotions for Rainbow, with trips to Legoland, Trocadero and Planet Hollywood being advertised in women's magazines.

While I work on the film side, Mike is working on television, where he has over 20 years' experience. Our first children's series is called The Big Garage and features four animated taxis. We had to develop a form of silicone puppet, similar to the ones on Spitting Image, to cut production costs. It will be appearing in the UK on the Disney channel this year, and we've already signed a worldwide agreement with a French toy manufacturer and a video distributor.