Framestore CEO Claims Up To 75% Work Lost Without Subsidies

The CEO of UK VFX facility Framestore claims that up to 75% of VFX work would be gone without subsidies:

Sir William Sargent of Framestore went so far as to claim that between 50 to 75 percent fewer films would come to the UK for visual effects work if that tax credit were not there.

The CEO of Animal Logic which recently purchased FuelVFX also admitted how much they need subsidies:

Nalbandian called on the Australian government to raise the level of the 16.5 per cent Location rebate in line with the 30 per cent Post, Digital and Visual effects (PDV) rebate. Qualifying productions are eligible for one, but not both rebates, so a large Hollywood production shooting in Australia and receiving the Location rebate is likely to go offshore for post and VFX where those rebates are more competitive.

The problem with the subsidy race to the bottom is that no matter how talented you are, no matter how efficient you are, VFX facilities and professionals are at the mercy of the next government that offers unlimited amounts of corporate welfare. Rhythm & Hues admitted that it could bid VFX projects with unsubsidized talent in California, yet producers are so fixated on getting a rebate that they are forced to do the work in Vancouver.

The Animal Logic CEO also commented that part of the reason Digital Domain failed was that it wasn’t a talent-driven company. As much as I’d like to disagree with that statement I have to say it’s true: The company lost it’s focus on it’s core and was too busy trying to get subsidies from all over the world.

That being said, you can see why subsidies are so heavily regulated by international trade agreements. As you know the European Commission has proposed capping film subsidies for EU members and they responded positively to my support for ending the subsidies. Could it be that the recent statement by Framestore’s CEO and the British Film Commission is in anticipation of the EC’s decision?

We’ll see but remember as I always say: if you live by the subsidy, you die by the subsidy.

Soldier On.

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96 Responses to Framestore CEO Claims Up To 75% Work Lost Without Subsidies

  1. rfk says:

    When you guys are done chasing the government bucks all over creation, there are plenty of talented artists in California that would love to do the work.

    • VFXguerrila says:

      California might not be the safest bet for long-term economic security either…Talent can be anywhere these days and since everyones already moving there is also reason to doubt California will ever be the home-base of VFX and animation. Say there was a huge earthquake tomorrow? One that crippled the entire western coasts infrastructure…Where then would Hollywood relocate? New Mexico is my guess and this is could be one major reason some have already left? Its not totally insane to reason that these studios took whats been happening in geographically unstable regions the world over seriously. I know this is a crazy notion but its what Hollywood’s words not mine.

      • Timber says:

        Force Majeur problems might be a reason to avoid California, but they’d equally be a reason to avoid New Orleans, Florida, New York, Seattle and Vancouver, etc., etc.

        I have a small studio and have shepherded more than a few through H1-B. They need to get a good immigration attorney.

      • Scott Squires says:

        Really? An earthquake that wiped out the entire Los Angeles region let alone the entire San Francisco bay area? If that were to happen I think there would be more issues than where the studios would need to ship their visual effects shots. There probably wouldn’t be studios or the original footage to worry about.

        The point is most of the work has been and continues to originate from southern california. It’s where most studios, writers and directors are. Logically it would make the most sense to do it in the same area for efficiency reasons. It’s only money issues that skew that idea and most of the money issues are based on government choices, not on cost of living. There’s no begrudging India’s film industry but I suspect if most of the work there was suddenly done elsewhere there’d be a few people upset.

  2. N says:

    Recently in Toronto there has been talk of Teachers striking due to upcoming wage freezes. I was speaking with a group of people on a Toronto Personal Finance forum about the fact that Ontario now has extremely generous tax subsidies for film, yet won’t budge on teacher pay.

    None of the people on the forum had any involvement in film/vfx/gaming but they universally supported the tax credit for those industries in Toronto/Ontario.

    This is because, without the credit, many of those jobs would not exist in their region. This also applies to Vancouver, London, Montreal etc..

    They understand that giving these subsidies is creating and maintaining jobs which result in a net positive for their regions/economies. Jobs that would not exist without the tax breaks.

    So, Soldier on?

    • The problem is that many studies show a net loss in most areas that provide subsidies. It can simply be wishful thinking that it’s creating jobs and the amount of income coming into a region makes up for the loss in taxes and improves the welfare of the people there.

      Most studies show states here in the US could simply provide that money directly to people in their area and it would benefit them more. Most subsidies have poorly designed regulations and so the amount of local income and benefit is much smaller than the studio benefit.

      If a government agencies is going to be doling out hundreds of millions of dollars, is giving all of that money directly to film studios provide the most return on investment? Is there another industry that would benefit more or is there a different method of using that money for the benefit of the region?

      Other things to consider:
      You’re simply shifting jobs from one location to another. Any win in an area with subsidies is a loss for places with less incentives. The net number of people working has stayed the same.

      You’ve now built most of an industry, along with the people and infrastructure, based on an artificial need and desire. When (not if) those subsidies are reduced or dropped, that entire area, including all those working in that industry will be devastated if there isn’t enough local business to maintain it. In many cases the only reason for these places to exist is man made. It’s kind of like building a ski industry in Florida and importing snow. AT some point that’s not going to work.

      Wouldn’t it be better to encourage local self sufficient businesses and new businesses? If governments put money into new things such as new energy or new high tech jobs that don’t exist now that could truly build an industry that would continue to support the area. Think of the original silicon valley or the original hollywood.

      • ukVFX says:

        “Could it be that the recent statement by Framestore’s CEO and the British Film Commission is in anticipation of the EC’s decision?”

        No, it has nothing to do with that.

        It does have *everything* to do with the fact that the UK government minister responsible for film subsidies was sitting 12 feet away from him.

      • N says:

        London, Toronto, Vancouver, Singapore’s gains are all California’s loss. They’re shifting jobs and revenue from another country, it’s a gain for them no matter how you look at it.

        And these places are just giving rebates on spending. They aren’t cutting 100 million dollar loans to these studios like Florida did.

        Tax payers aren’t on the hook, it’s a rebate on money spent in the state/province. No matter how you look at it, it’s a net positive for their region. Especially when those studios/businesses didn’t even exist there previously.

        Look at it this way… You could have a 30% tax rebate on wages resulting in 5000 film/vfx/game industry jobs in your City. With an average income of probably $70k+..

        Or you could have no rebate and probably less than 500 vfx/film/game jobs in your City.

        And of course there are other industries that could benefit. Most states/provinces have subsidies already for agriculture, renewable energy, medical/technical research and development. This is all about diversifying local economies.

      • vfxPeon says:

        @N, Your comment would make sense except that a lot of these tax incentives involve giving producers tax credits beyond their actual tax liability. That means you could spend 95 million plus 5 million in taxes on a movie in a country with a 25% tax rebate and they would send you a check for 25 million even though your tax liability was much lower than that.

        Obviously, that money comes out of the local taxpayers’ pockets and it is money that could be otherwise spent on teachers, police, etc. Instead it goes to a giant corporation in another country and the kicker is that the money coming back to the country is less than what they invested in the subsidies programs.

      • N says:

        @vfxpeon

        You are mistaken. Even if a foreign studio only pays a 5% corporate tax rate on $100 million film production and receives a 25%($25 million) rebate it is a net positive in Canada.

        Income tax on those salaries is another 25-35%. Just about everything those employees purchase is subject to another 5% sales tax (or over 10% with provincial/state sales tax). Add in taxes on liquor/smokes and additional corporate taxes paid by the businesses those studios and employees have transactions with and you’ll find that that $100 million investment has generated something like 50-60 million in tax revenue in the end.

        Google the “Multiplier Effect” and you’ll see how much investment actually contributes to taxes and consumption.

      • scottsquires says:

        To N: (This may be out of msg order on this forum)
        I’m not sure if you’re working for the people pushing the incentives or simply confused by how most of these tax incentives actually work.

        Last year I was discussing a potential project in canada with a canadian vfx company. I was informed I could bring some of my own people. They claimed that there were limits. If I was to work with a 50 person company and brought up 25 people that would be 25 people being paid indirectly through the incentives program (there are ways around many of the restrictions even if they’re in the law, same as before incentives if you could justify it then people could be brought it) So now you have a large number of non-local vfx people working and getting paid. Sure, they may have some expenses in Canada but most of the money will be saved and used in the US or other area. And Canadian income tax can be avoided with wavers. In Australia you have to work a certain number of days before the country tax kicks in. Each place varies but once again there can be ways to avoid or minimize the impact. So much of the money leaves the country or state to never return. You can’t count on a 100% of the money to flow through the regular corporate and consumer tax process

        A $100 million dollar film does not generate significant corporate taxes for Canada and even the sales tax is a tiny fraction of that.
        Only a very small portion of the money ever get’s counted as sales tax and that amount is shrinking as it changes hands at each stage. The true multiplier in most locations is less than 1 for film incentives. In many cases it’s at most .7 Probably best to check some of the links film incentives and check the actual numbers provided by something other than the lobby groups for film incentives..

      • vfxPeon says:

        @N…Not so sure about that.

        When economists look at the amount of money spent on subsidies versus what the government gets back the economists often report that the government does not make their money back and ends up spending many times what they receive in tax revenue.

        Just because a portion of the community benefits doesn’t mean that there is a net benefit towards the entire community who has to pay for the subsidies out of their own earnings no matter what.

    • SansLobbyist says:

      Definitely, Soldier on. I wouldn’t be so quick to victimize the regional economy because they are losing a subsidy especially since remote work is so prevalent now. Client’s are very familiar with doing Cinesyncs, and if they like working with you and there aren’t any other subsidies, they will most likely continue to work with you.

      A level playing field is all we are asking for – it’s not nationalism and it shouldn’t be ‘us’ against ‘them’. The work should go where the talent is regardless of country. Chasing subsidies will only lead to vfx work being done on board boats or Winnebagos. Imagine doing roto on a moving vehicle!

      • In reply to N: No, many of them are not rebates as such. They are in fact paid for by tax payers and in many areas they may be paid before production is even done – ie. up front money. That’s not a rebate. That’s another reason why studios opt for the film incentive even if a US company matches the bid. Rebates are not free money even if that were the case. A company or tax payer have to pay for them. The money you get from a rebate doesn’t magically appear from thin air.

        And no, it’s not necessarily a net positive. If you put 100 million into an investment but only get back 50 million then it’s a net loss. The government in those areas has agreed to invest tax payer dollars into a film project with no direct profit participation. The only thing they hope is it repeat enough benefits to offset the loss in money. You’re asking every person in an area to ‘donate’ $5, $10 or whatever into a project that may have no financial advantage to them or most of the people in the region.

        If the studio takes that 20-40% film incentive and uses that to help pay for Tom Cruise do you think he’s going to stay in that area and spend that money? He still gets paid his full amount and the vfx companies get paid their full amount but the tax payers made up the difference. And as someone else pointed out even weta gets people in from other countries. Do they spend 100% of their income and do they spend it all in the area that is subsidized? No. And that’s why you don’t necessarily get a full return on investment. With some types of investments you can get multipliers so it increases but almost every study has shown film incentives do not return their investment, let alone a profit.

        Suggested reading:
        Incentives 101

        VFX Incentives

      • N says:

        Scott,

        I don’t know about the UK/Singapore, but in Canada, the tax breaks in Quebec, Ontario and British Columbia are not up front cash.

        They are all rebates on tax paid already. This isn’t about the government getting a return on a $100 million investment. They are luring jobs to the area and refunding part of what the companies have paid directly to labor in that region.

        It has nothing to do with Tom Cruise’s paycheck and what he does with it.

        You spend $10 million on shooting with a full film crew or on sending shots to a studio in that province, you get a 25% tax CREDIT in return.

        As a result, where the industry only generated maybe $100 million in a province like like Ontario in previous years. It now generates over $1 billion dollars annually. That cash is going towards local unions that handle the live-action shots and the artists in VFX boutiques. They DO live in the area and spend that money on goods and services locally.

        It’s unfair to hubs like California. But it’s a way for these jurisdictions to diversify their local economies in ways that wouldn’t be possible without the tax breaks.

        http://arts.nationalpost.com/2012/02/07/film-and-television-industry-in-ontario-contributed-1-26-billion-to-provincial-economy-in-2011/

      • scottsquires says:

        Reply to N: I’m no expert on Canadian film incentives but it seems to me the values provided in that article (and much of the article) are fictional (Using wishful thinking, projection numbers and ‘journalism’ sponsored by the same people who pushed for the film incentives) Similar articles have been written for other areas and states which proved to be just as invalid. Those who have something to gain from specific film incentives (studios, producers, etc) push for such things and lobby the politicians with questionable figures and surveys because they are the primarily ones to gain.

        I have worked on projects in Canada where the studios considered the film incentives to be pre-money. Whether that’s due to actual cash, an accounting arrangement or some other process I couldn’t say but’s not like studio sits around for a year waiting for a ‘rebate’ check of the monies they spent. It’s discounted from the very start.

        Saskatchewan reduced or eliminated their film incentives because it was costing them money.

        And the film incentives are nto vying for work fro mCalifornia studios. They’re competing for everywhere else in the world, including other regions of Canada. In the last few months some Vancouver video game companies packed up and moved to Toronto(?).

        So who’s the winner? The area that provides the most incentives. Who pays for the incentives? The government. If you could get a $1.26 billion return on $300 million then why not make even bigger investment? Because the money doesn’t add up. It’s merely a race to the bottom. The final goal for the studios is to have the governments pay 100% of the film cost yet hold no direct investment position in the film.

        Look at Apple- Making billions of dollars. One of the most profitable companies around. (I own stock and Apple products)
        yet they made Nevada provide them $86 million in tax dollars for them to setup a facility there. Sure, over a a long time period Nevada is hoping that they will gain that money back but why did Apple actually require states to pay (bid) for Apple’s own facility? They had to build it somewhere. If Nevada didn’t have to pay Appel $86 million they could have been reaping the rewards sooner and the tax payers wouldn’t have been on the hook. in the meantime they have to cut funding for who knows what (education, hospitals, services, etc) Must be nice to be a large company getting kickbacks from different locations that simply help fund your project for no direct return. Just hopeful thinking.

        Film incentives -kick starter for large corporations with no provided rewards.

      • At the end of this it’s usually the tax payers and vfx workers (and vfx companies) that end up paying the price for film incentives. If you’re in an area with incentives the local taxpayers are helping to fund your job even though you’re not employed by the government. When that stops your job stops. Then you have to be like all the other vfx artists that have to migrate from place to place as politicians change tax incentives.

        Does a vfx career now require moving every year? How’s that supposed to work for your family and your life?

        Would you be willing to build an entire company based on temporally incentives with the hope they’ll never stop? Doesn’t seem like such a wise investment of money and time.

      • N says:

        Scott,

        I agree that Nevada paying Apple to setup a facility in their state is nuts. (But if the investment pays for itself, Apple is less likely to default and disappear than DigitalDomain or 38 studios).

        Canadian provincial governments aren’t paying millions to studios up front. They don’t have that kind of money sitting around. Taxpayers aren’t footing the bill for the film work. It’s not a cash subsidy, it’s a refund on investment.

        Yes, it’s unfortunate that we have to move around for jobs, but at least in Canada or the UK you have universal healthcare and employment insurance to pay bills between contracts!

  3. Easy says:

    I’m confused. So this industry would die without subsidies? Or is it that profits aren’t the kind that interest bean counters who always seem to do OK financially in these situations while all of the geeks crank out the product? I find it fascinating that anyone would buy this line of bullshit. Let’s look at it another way, imagine a car manufacturer going to Parliament or Congress and saying “You have to give us a subsidy, otherwise the market for our solid gold rocket cars will drop by 75%!” The logical response is: “Have you tried not making solid gold rocket cars and just make regular cars instead?”

    If no one was making money, no one would do it.

    Next time some chump in a suit or a producer starts talking, keep this in the back of your mind.

    • Tom Atkin says:

      Easy,

      Although they may not have been termed subsidies, the loans and stock purchases made by the US gov’t kept the US auto industry going. What is interesting, however, is that Ford did quite well without the billions in gov’t loans.

      Point is that subsidies under any name are the same and they do have impact on various businesses. Do you believe people would go to Louisiana, New Mexico, Michigan or other locations to shoot without the tax incentives?

      And, as long as the UK supports production and post production…this will continue to stimulate these businesses.

      Remember, in most cases, these directly benefit the producers and the studio suits who control the purse strings.

      The bigger problem is that California has been so far behind in this process that the recent 100 million approved is just like pissing in the ocean.

      • vfxCynic says:

        Actually they do call them subsidies. “The Obama administration filed a lawsuit with the World Trade Organization this week alleging that China is illegally subsidizing its auto industry” http://www.npr.org/blogs/money/2012/09/20/161484673/are-chinese-exporters-cheating

      • Easy says:

        The GM’s problem at it’s core is really one of efficiency, which is what I am getting at. If it’s not profitable to have a ginormous staff to work on “Abomination 3 – The Explosionator” run by people who wouldn’t be able to have a job without a government handout, perhaps it’s a bad idea to create a microcosm that relies on it? (As a side note, they should stop making more of those, I had enough with “Abomination 2 – The Explo-pocalypse” and yet everyone is shocked that it made no money at all.)

  4. Who is john galt? says:

    Wow, those are some staggering numbers! Just goes to show how skewed this industry is. Not only are subsidies an obvious issue, but on top of that the hiring practices in our industry are as well. For example Weta applies to hire 369 foreign workers for jobs. http://www.newstalkzb.co.nz/auckland/news/nbpol/1219962421-weta-applies-to-hire-foreign-workers

    • Andreas JABLONKA says:

      I can tell you that weta had an allowance if over 880 foreign workers in 2010. I got the visa, I saw the approval letter. What Scott said us right though: many take their cash and leave. Some buy houses but most if the cash does not go back into the NZ economy.

  5. Timber says:

    Direct rebates to producers should be illegal, everywhere. They’re a huge invitation to corruption. If a locale wants to foster a particular industry, they should give non-transferable credits to that industry for development only, training, infrastructure, etc., so that thereafter they can go and compete on their own merits.

    • ion says:

      Not so straightforward … a couple of UK firms, one of the biggest in particular, takes huge government training subsidies for training ‘local workers’, but also spends alot of time poaching staff from Canada/US for ‘longterm’ projects that seem to dry up after a few months … so they end up back here in North America.. like a merry-go-round of hiring temporary foreign workers with no particular labor rights while they are there, so are easy to cast-off when they get over big project hurdles, but not so sure where those training credits end up..

    • ion says:

      checked in with a colleague at the biggest player in this, at least 6 years so far claiming a training programme government finance but never remembers anyone ever actually being there on a training programme, apart from summer interns who run coffee and despatch erands for a couple of months. Then they get block temporary visa permits for experienced Canadian/US/Aussie workers because of ‘lack’ of suitably qualified candidates…. but they don’t have to justify the tax training transfers. Tax subsidies come in many guises, not such producer tax credits, it’s called corporate welfare.

  6. Kevin Baillie says:

    This is a super heavy topic, with many artists’ employment hanging in the balance. I wish the best for them, and don’t envy companies out there who feel that their survival is at the whim of their government’s actions.

    That said, I’ve heard many smart, experienced people say things like “[large London VFX shop] is so inefficient that they’d never exist without the tax credits.” Assuming that’s true (any input from others out there?), it means that these companies are being allowed to operate lazily, for the lack of a better word, due to the financial advantage that tax credits provide. If it’s true that Framestore, for example, wouldn’t be able to compete unsubsidized bids from R&H, ILM, Sony, etc on their own merits, then they’d be in deep sh!t for a good reason. Right? Why would 75% of the work go elsewhere otherwise? It’s not like Canada has any more capacity – the talent pool is already stretched way thin there as-is!

    If the incentives go away, either the Big London Boys see it as a kick in the butt to innovate, become more efficient and leverage their super-strong and talented artist pool…or they die a quick death.

    I guess what I’m hypothesizing at the end of the day is this: a level financial playing field will be a great catalyst for innovation and increased efficiency on a global scale. That could eventually result in higher quality end products, improved working conditions for artists in incentivized locations (OT is expensive!), and filmmakers being a bit more selective about when they use VFX. :)

    Just one possible (albeit knowingly oversimplified) way of looking at things. Looking forward to hearing peoples’ thoughts and rebuttals!

    Cheers,

    Kevin

    • Dave Rand says:

      You already have heard my spin on this one Kevin. So great to see your post here and your local work looks amazing! Anyway, I’ll be brief. I ran the VFX for a show for an A list director right in the middle of expensive Hollywood. I asked one thing, that he come everyday and “direct” this part of his movie like he did on the set, no middle men, no VFX sup, no creative hierarchy, just him. Boring? No, in the end he was comping shots he got so into it. Everyone made aprox 3k/week. We rarely got past version 3 of anything. We came in at a total cost of 1/3 the lowest bid….from Canada…..and that was with the incentives priced in. The key is to treat the virtual set like the practical. One voice, one vision. No fucking bidding. We did three more the same way. Only way to fly.

      • Thanks Dave – good to see you here too! This is getting a little off topic, but I’ll bite…

        I would absolutely LOVE for Atomic Fiction to work that way (cost+) with clients. Doing so would be more collaborative, foster stronger long-term relationships, and give the client more insight into where their money is really going. It would also go a long way to avoiding the irresponsibly gratuitous use of VFX that has become common component of artists and the general public alike.

        The concept is equally attractive from a financial standpoint, all but eliminating the risk for VFX vendors. Besides, the rest of the movie industry works that way, why shouldn’t we? Have you ever heard of a grip, carpenter or even a DP flat bidding a studio picture? I, for one, haven’t.

        There’s the problem, however: for studios and production companies, predictability is the most valuable thing going. Even if they might get a better deal at the end of the day by using this model, not knowing exactly how much they’re gonna be spending months ahead of time scares the crap out of them. Going with a “cost plus” model means “unbounded budgets” in their eyes. And, as much as I’d like to call bullshit on that belief, I have to be honest and say that it’s not without foundation.

        VFX is a young, quickly developing industry where technology alters what (and how quickly) something can be achieved with each new project. VFX companies aren’t like movie “companies” – the swings between the good ones and the not-so-good ones are far more dramatic. Reporting tools aren’t standardized in any way, so just getting accurate costing information on a facility engaged in multiple projects can be a nightmare (we spend countless hours on this for our own purposes). Those things, plus the ever-shifting talent pool, make it hard enough for those of us directly involved on the company management level to achieve target budgets – just imagine how the studio execs and producers who are several steps removed form the process feel! A “cost plus” world could be very scary indeed and, as it currently stands, shift a disproportionate amount of risk onto the studio/production.

        There’s gotta be a balance out these somewhere. What’s it gonna take for a billable hours type scenario to work for the industry? I certainly don’t have all of the answers, but here’s a “brain barf” of thoughts. Some of it comes down to time & maturation. Not much we can all do about that, other than wait ;) Expanded technology sharing (Alembic, OpenEXR, OSL, etc.) is a good start. A standardized production cost reporting mechanism seems like another key part of the puzzle, both in terms of billing and tracking real-time final estimates compared to a target budget. Demand-based software and hardware billing (hello cloud rendering!) are another. Responsible, communicative, honest and on-their-shit VFX Studio leadership is absolutely necessary. Production companies, producers, directors and studios who are willing to take a risk in order to help improve the industry and, ultimately, their end products, are a perhaps the most important piece of the puzzle.

        Via a combinations of the above things, amongst others, I honestly believe that projects could be managed to reliably hit a target budget while using a “cost plus” model – achieving the predictability that studios rightfully demand without putting undue risk on the shoulders of the shoulders of any one party.

        We here at Atomic Fiction are excited about helping to bring this dream to fruition sooner rather than later. But we’re relatively new players in the game – this effort needs the Big Boys to play along too. Big studios, big directors, big VFX companies, whatever. Once it starts working through a combination of any one of those things, I’ll go out on a limb and predict a veritable landslide. Let’s make it happen! :)

        Cheers,

        Kevin

      • Toasty says:

        This scenario would require VFX artists to be more schedule-conscious than ever, and on the other side, the end of pixel-fu*king.

      • Dave Rand says:

        So many variables on the set also and there’s an actual history of attempting to put bidding there in the beginning of it all but losses from the vendors and unionization put an end to it before it could become any type of standard.

        Bidding is a construction model and meant to go with a blue print, even then it can be a gamble as there are variables that can not be controlled. However, no construction company and none of the other components of production would gamble like the vendors in VFX do as evidenced by the collapse of even the subsidized houses . Actually the business world has to be laughing at us….except in Florida …not currently ..no.

        My experience has been nothing but positive in cost plus because when you work on billable hours the direction is what gets tangible and immediate and thereby the controlling factor of the bottom line. Even at our former alma mater that had daunting influences on the bottom line in politics not production.. .. when our director would request a change and a hand would go up stating “that’s due tomorrow”…a compromise would ensue. When I was at the model mentioned above in my last post, or prior to that at CFX the directors were parked upstairs in a loft…we did not have a problem at all with meeting the budget and were very profitable. After they parted ways and sold it, CFX became a vendor and in a matter of months began sliding downhill and quickly into the red, the rest is history.

        So yes billable hours with a budget and one voice calling the shots and “on set” –not poolside waiting for the black box to deliver monthlies. These ideas comprise a working model that I’ve worked in and never seen fail.

        I was once on a project of a major motion picture where 10% of the screen was practical an the director was there for every inch of it. When the meat of movie was being made he was placed at the other end of a dozen steps in a creative hierarchy and three continents away. This can only happen in the bidding model and is the main reason it’s mistakenly perceived as some how optimal. Had we charged like the set all economic forces would have placed him at our desks where he belonged, his product would have been better and far cheaper, and the shop would have stayed in business.

        It’s really the only way to build a creative staff that is truly brand able. Making outsourcing and incentives move to the back of the line.

        There’s now a creative dust bowl forming in California instead.

        However leaping out of that is a tough sell you are so correct….indeed…. mainly because it’s become so ingrained in our industry. My stepping stone would be billable hours on previs and concept art defining scene by scene, the look of all digital sets and component vfx, requiring shot counts, color pallets, edits, and components to be locked down. One frame of the previs should match a framed of the temp, the CBB, and the final (basically a vfx blueprint). And oh yes can we please know when you’ll be needing the exact shotts for your fucking trailer and temp screening ahead of time?..like at the beginning!! Straying from that should cost and be defined by a third party, and arbitrator. I’d start there. Only then could you have a plan that is profitably biddable. If each vendor were supplied with this or paid on billable hours to create it whether they got the work or not we’d all be living and creating in the right direction. I never want to be asked to put a price on something like this (true story)

        “The Hulk carries girl out of cave in the rain” ________ $$

    • Zippy says:

      You are on the money Kevin!

      If we ignore tax incentives or the relatively low salaries on average in London (Junior artists would be very lucky to see £20K a a year on years 1-3 and there are plenty of them there), the key thing is no OT being paid at the majority of the studios and there is no accountability for hours over 8 or 9 total each day.

      Instead of addressing the core issues of efficiency, for some of the big studios in London it appears to be sufficient to rely on the good will of the very talented work force or in the case of the many junior artists [looking to prove themselves] who will stay in until what ever time in the night to finish the shot with no increase on their day rate.

      Now, they still do pay for the Sat/Sun days worked and at one of the studios in London, which in the past few months has let go of a considerable number of people, better pipeline and workflow efficiency could have meant that less weekend days were required to complete the last projects that were completed. Which could have allowed them to hold onto the people for longer pending new projects.

      The London studios may start listening now that there is a reduction in work there but it may still not be enough to see them switch gears.

    • ukVFX says:

      On the first two Harry Potter films UK facilities were able to charge more than they’d been used to getting per shot up until then. Prior to that – before the simplification of the rebate process – UK facilities would generally only win out against the US by being cheaper. However, from film 3 onwards WB made the UK facilities match or beat *any* credible bid and then still took the rebate on top of their spend. The idea that the studios will pay 20% extra for work out of London because of “free” money is mistaken.

  7. Most global films originate and are funded from Studios and other entities in the US. US based studios and directors would just as soon do most of the work here if there were not a financial gain. They could drive over to the vfx company or have reps from the vfx company to the studio to review dailies and discuss creative, technical and budget issues. Most studios would not choose to work hundreds/thousands of miles away unless it’s either a major cost savings or the work is a large leap forward.

    If the UK or Canada or .. film incentives would disappear tomorrow, most studios would think twice about sending work there. You can do some things via CineSync but it’s not the most efficient. And if a director has to jump on a plane and fly half way around the world there is time and money being spent. And that is why the places that have incentives need to have local business to fall back to when the incentives stop.

    And yes, if incentives disappeared all vfx companies would have to consider how to be as efficient as possible. As important the studios themselves would have to be more efficient about how they used visual effects and minimized OT.

    • Tom Atkin says:

      The problem is that these incentives are pretty much baked into the budgets of the various places. Only a major recession and/or shortfall of government revenues might change this.

      Unfortunately, I believe it is unwise to hope or expect this dynamic to change, and thus ‘perhaps, help to level the playing field.

      Those who will survive will learn to be more efficient and to figure out ways to be cost competitive. And sadly, the future for those who do not will be bankruptcy as evidenced most recently with DD and Fuel. In these cases, it appears they will continue due to new owners and mergers…but, this too may pass.

      The problems are many and the answers are few if any. Under the current landscape I do not have a clue what can REALLY and PRACTICALLY be done.

    • ukVFX says:

      So why did Lucas choose to do only the VFX portion of his major movies in the US?

      • Which films? Some were due to incentives or lower rates elsewhere. Some were due to logistics. He chose to have the VFX done in the US because he owned the company and of course it was the only option for many of the films. He also did the post production in the US including sound mixing and editing. Shooting is only a portion of any film.

      • VFX Soldier says:

        Because ILM was based there. He filmed the latest star wars in Austrailia because of the currency:

        http://prequelrumors.tripod.com/rickmc2.html

        These days most locations have reached parity with the dollar so now it all about the subsidy.

      • ukVFX says:

        But your argument is that given a level playing field he’d have made the movies in the States – he hasn’t shot a movie in the US since 1973, and that includes the first three Indy films that he produced. Unless, of course, there was never a level playing field and the truth is that ILM was built on the back of British tax-payers’ subsidies – *all* of his films, either as director or producer from 1973 onwards have relied on subsidy to get financed.

      • vfxPeon says:

        @ukVFX Are you kidding me?

        The Indiana Jones movies WERE shot in the United States. And that includes the last one (2008) which I personally saw them building the sets for on the backlot of Universal Studios in Los Angeles.

        http://www.imdb.com/title/tt0367882/locations

      • ukVFX says:

        Ah, yes – Crystal Skull. You’re welcome to that one.

        The fact remains that the first three Indy films had all their stage work – and some locations – done in the UK. As with the first three Star Wars films they all took advantage of the Edie Levy – a UK box office tax/subsidy programme that ran from 62-85. Lucas famously couldn’t get any studio interested in Star Wars with the exception of Fox who wanted it so cheap he had to give up his fee – shooting in the UK, with its subsidy and cheaper labour, was the only way to get the thing made. Just think – no subsidy, no Star Wars, no ILM.

      • Eric Lampi says:

        Somewhere in an alternate universe VFX companies operate at a profit, workers are unionized, working conditions are the same as the rest of the industry, and there is some semblance of job security and Star Wars never existed. I like Star Wars but if you don’t think I’d trade it for a better life you’re crazy.

        I know lots of H1B visa VFX people in NYC. None are bad but few are exceptional beyond the abilities of the rest of us that are citizens. They get paid less and have to bust their asses because of the visa. So what does that do for the rest of us? Not much. It only drives down opportunities and increases certain expectations in the workplace. If you squeeze me too hard, I’ll walk, but they don’t have that luxury. Perhaps I sound a bit nationalistic but during a tight economy I can’t help but be more than a little annoyed by it when I have a lot more down time than I have ever had in years past and there are butts in seats occupied by folks who more times than not are no more experienced than myself or other guys who are struggling.

      • NWang says:

        In response to Eric Lampi’s:

        “Perhaps I sound a bit nationalistic but during a tight economy I can’t help but be more than a little annoyed by it when I have a lot more down time than I have ever had in years past and there are butts in seats occupied by folks who more times than not are no more experienced than myself or other guys who are struggling.”

        Actually i think i respect your honesty more than the vailed nationalism/protectionism many other posters use.

        The bulk of postings on this site are essentially advocating an isolationist Californian-or-die philosophy without actually being honest with themselves.

      • Eric Lampi says:

        It’s not like I’m xenophobic, I really enjoy the diversity as a matter of fact. It comes down to a scarcity of resources. My preference would be that there would be enough to go around, including for imported talent and I often wonder if the way visas work in our industry specifically is really good for anyone. I can’t imagine being in a job in an industry as unpredictable as this with the possibility of getting kicked out of the country in a matter of days after losing a job with your sponsor.

      • vfxPeon says:

        @ukVFX Now you’re just moving the goalposts.

        You originally said “why did Lucas choose to do only the VFX portion of his major movies in the US?”

        But you have been proven incorrect. Look at the imdb for all of his Indiana Jones movies. They all have extensive U.S. shooting locations. The last one, whether you like it or not, was shot almost entirely in the U.S.

        On top of that, most of the post on his movies outside of VFX was also done in the U.S.

        This is all besides the point. The fact that you mention that Lucas shot in Britain for the subsidies proves Scott’s original point that the subsidies are the main reason that Britain is able to gain work from Hollywood.

      • NWang says:

        (again responding to Erics’ comment, but its more aimed generally)

        OK, makes sense.

        The next question is how you feel about UK companies coming into the US to setup shop (thereby hiring US workers, and as we’ve seen elsewhere on this board there has to be vastly more US-born employees than imports). Good thing or a bad thing? Theoretically they’re not benefitting from any tax breaks that US companies couldn’t, yet there are a fair few of them.

        (I actually work for a UK company which has more than one US office…so i’m asking out of genuine curiosity. I want to know whether you resent us and therefore we should be focussing our expansion elsewhere. After all, no-one wants to be unwelcome!)

      • Eric Lampi says:

        @NWang – “Resent us”? I’m sorry you’re taking this personally because I don’t resent anyone. Please assure your CEO and Board of Directors and all of the stock holders that while I have expressed an observation (which may or may not be correct) on this forum where many remain anonymous, in no way do I resent them or their employees and they are free to set up shop in my city without fear of my walking by your offices casting dirty looks at your front door. My only condition is that you stock the kitchen with Ribena.

        In all seriousness, let’s call it frustration due to an economic downturn. Jobs being farmed out, people being brought in, some companies trying to cut day rates. Would it not concern you? A friend of mine, also a NYC freelancer who worked at a studio in London, sent by the NYC office, felt his presence wasn’t appreciated. At some point it was explained to him over a pint that it wasn’t personal, it was just that a spot taken by him means one of their mates isn’t working. Where have I heard that before?

        So if you set up an office here, sure, that’s great as long as you’re spreading the work around.

      • polyphemus says:

        I’m not sure how this is layered but this is to Eric Lampi

        Regarding the H1B Visa employees being locked into step and taking a lower wage, I’ve never seen that personally happen. It’s common in the tech industries, but at least in my case and of a few folks I work with in California we were earning the same if not more than our US Counterparts.

        Even so it’s easy to jump around on the H1B visa, it’s portable, something many aliens don’t realize. I was able to move between 3-4 major studios in the course of 6 years while on the same two visas.

        It takes about 2 weeks for the paperwork to process and about $1000. Of course you need an employer that’s willing to hire you and do that but usually that is not a problem.

        With H1B Portability you essentially have as many H1B visas with different companies as you can get hired at, its just that you are only able to work for one company at a time.

        That being said, it’ll be much easier for a local national to simply quit and do whatever they want. A foreign worker needs to have another job lined up first in writing before making that jump with the work visa.

  8. Paul says:

    Funny how these capitalist companies love a good socialism when it fucking suits them. Basically raise everyone’s taxes so your job stays or we’ll go overseas, job that by the way will be used to pay said taxes. When successful and profitable you won’t see a dime of it cause it’s already on its to the Bermudas. What an insane scam politicians have bowed down to! I wish them cancer of the most vicious form.

  9. I worked in Australia last year, and I don’t really see how my work had a net positive impact on their economy.

    What did I actually contribute? Some of my pay went to rent and food, sure. But the majority of my pay was sent back to the US. They also had a tax deduction that allowed me to deduct some of my travel expenses as well. So at the end of a pay cycle, I am taking home more money than the Australian citizen sitting right next to me , even though we are both earning the same hourly wage. And you can take home your retirement contributions, unlike Social Security (albeit with a tax penalty).

    I had a wonderful time there, and met some of the nicest people I’ve ever worked with in this business. But the economic side just doesn’t make sense to me.

    • ukVFX says:

      Your labour enabled them to do the job. If they couldn’t fill the position locally – and it sounds like they couldn’t – then they would have lost that revenue stream to the company and to the national treasury. You might have been able to dodge local taxes – not unreasonable since you’d be gone before you could cash in on healthcare, pensions etc – but the company would have been charging you out at a multiple of your salary, bringing revenue into the country. Without you they couldn’t have done that – or at least they’d be doing a lot less of it.

      No sane employer chooses to bring in overseas talent if a local equivalent is available – it’s expensive, time-consuming and increasingly fraught with legal hazards. Foreign nationals imported into countries like the US, NZ, OZ and UK are *never* cheaper than the local alternative – quite the opposite. If an employer is doing that then it’s because they believe that their business needs the talent.

      • ion says:

        yes they are because they are short term, have virtually no rights and can be cast off quickly. When you treat local workers that way, they tend not to come back, so the local talent pool available dwindles (as local people choose proper jobs, start their own firm, work in a more sane industry, etc, etc,.). So eventually, the firm finds less and less replies to job ads fromm the local work base as ex-employees say to themselves “Gee, not going back there, hire-and-fire-no-future, I want a have a proper life”. That’s why the firms then have to go abroad, or try and find the latest graudates for a 6 months or so (usually with hints about a stacked order book of projects, probably going to be another project straight afterwards, blah, blah). UK is probably the worst for it, but you can rinse-repeat-lather for US, Canada, Australia,

    • ukVFX says:

      Seriously – foreign hires are not cheaper. Not in the UK and the US they aren’t. Relocation, travel, visas, temp accommodation all add up. It’s not possible to bring entry-level people in and hasn’t been for a long time – imported foreign hires are by definition senior, and thus expensive, staff.

      As for EU citizens working in London, they have exactly the same employment rights as any UK citizen, so what’s the advantage in having to pay relocation etc?

      • ion says:

        @TomLincoln and @vfxUK

        Don’t wish to labor the point but you are talking pure rubbish. Try a little experiment ; couple years back I was recruiting some folk from a particular project that had been in London so I was looking up some of the guys on IMDB/linkedin. Go look at the names on UK project credits – every show seems to have an entirely different roster of names, very few even look like British names. Then you trace a person and see they were in London for three months, then Vancouver for six months, then LA for three months, then sydney for two months, then Toronto for three months, then Auckland for six months, then Vancouver three months, then …… No need to talk your book to me – try the IMDB/linkedin paper chase. Evidence is better than rhetoric. This is all about power, corporate welfare and short term workers.

        I can personally think of a number of US/Canadian citizens who were recently at Franklin’s place who are now gone and they were mostly not senior staff. I’ve seen the merry-go-round for suckers who head off to the UK for ‘long term’ jobs but then come back few months later with similar stories. If there is such a shortage, why don’t they keep onto to those staff then? Particularly for commonwealth countires like Australia and Canada where it is completely viable in most cases for ‘valuable’ staff to stay permanently, as EU citizens, if needed. Because it’s all about wanting to have a permanent revolving door of temp staff. The skills shortage is bullcrap spun to the immigration services to run a business on this manner. Like I say, eventually those firms in soho run out of options because locally qualified workers slip off the radar due to lack of regular working, often ending up in Vancouver or LA where you have a bigger choice of than three or four firms, setting up for themselves or going into related industries with stable work patterns.

        I have an issue with those soho firms listing their staff numbers as 500+ in various places because this gives the impression to distribution studios that they are large, Hollywood/weta scale studios when they are not. They maybe have less than 100 permanent staff, maybe less than another 100 long term freelance staff, the rest are short term workers. By definition, they are a comapny of maybe 80-150 workers and so a small size firm. But they use temporary staff numbers they may have, or be able to get, in order to present themselves as large multi discipline units. If you have a large west coast studio, you very will could have 400-500 permanent staff, and Vancouver studios will often be backed up by those mother companies for Vancouver based projects. You also have Weta and Animal Logic with large setups but London is not in these brackets for this reason,

        That is what chasing all the subsidies in the UK results in, boom and bust corporate welfare studios who are putting in speculative bids for projects based on subsidies, then have to furiously trawl international labor markets and hire in computers to try and fullfill the production quotas. Seriously, go try the IMDB/linkedin litmus test before reposting the same story. I can think of a very successful British VFX supervisor over here whom I once asked “why did you settle over here?” The answer? Because he couldn’t get a job in the UK when he came out of college! Given the number of Brits in Canada/US, I imagine this is not an isolated instance, given how much more difficult it is too bring staff into the US (they usually do need to be senior or supervisor minimum) and for them to produce the requirements for immigration services to settle for any length of time.

      • vfxPeon says:

        @ukVFX I have a friend who traveled both to Canada and to Australia to work as a ROTO artist on feature films. I was also offered the position in Canada. It’s hard to believe that companies are willing to take on the expense of bringing over entry level artists but roto is about as entry level as it gets.

  10. TomLincoln says:

    “so what’s the advantage in having to pay relocation etc?” –

    simple answer, it is talent. None of Londons’ Soho companies could make it without the skillset of people they fly in from other countries, if you don’t believe that, read this:

    http://folksonomy.co/?keyword=11695

    “It warned that, while special effects was enjoying a rapid growth, the sector was also ‘having to source talent from overseas because of skills shortages at home’.” (Paul Franklin)

    MPC, Framestore and Dneg would take a serious hit if foreign talent was removed – let’s assume they had to pay OT and the gov would also end the subsidies on top of that…goodbye VFX in the UK.

    And, to clear that up, it is absolutely possible to bring entry level people from the EU into the UK – there are no immigration restrictions for anyone holding an EU-passport.

    Vancouver is pretty much about to take over from London now, the “dry” summer in Soho was just the first sign…

    • Easy says:

      And yet The Mill NYC is full of UK citizens and Europeans. Which, if what you say is true, begs the question why that is.

    • NWang says:

      If the US studios weren’t able to recruit internationally, how do you think that would effect them? I know an awful lot of people on H1B visas, with all the fear-of-being-kicked-out that this entails, working in California. Are you saying that US studios shouldn’t be hiring foreigners?

      • ion says:

        Well, you could expect that. The Mill is a UK firm. I would say, comparatively, there are very few foreign workers in the US as it is really, really, really difficult to get people through the US visa process. Bodering on impossible/futile for 90% of cases, unless the candidate has an exceptional list of awards, PHD, proveable business success AND if someone wants you bad enough to put up money. And H1Bs themselves would really want to come for a job, even if they can qualify, because if that job goes, US immigration gives you 24 hours to leave the country!

        The UK is far more flexible in pretty much having an open door and no questions asked policy for (temporary) workers. But you really are a sucker if you move from LA/NY/Vancouver to become the proverbial ‘mexican mellon picker’ for fly-by-night operations in London. Anyone ever read any of Charles Dickens books?

      • NWang says:

        (Responding to “Ion”‘s comments rather than my own)

        I’m not sure i’m clear which bit you’re responding to. I’m asking whether the US companies’ use of foreign workers (and which if you look up the public records of H1 applications you’ll see they have many) is something you consider good or bad.

        My point being that there often seems to be one response for non-US companies (“You’re all stealing our work and need to hire non-nationals to do it, jerks!”) versus the US companies where everything goes.

        (Perhaps some of the confusion might be coming from London having lots of non-UK workers, but who are EU citizens. As far as the UK is concerned they’re as easy to hire as locals, as in effect they are locals. I really don’t come across that many US workers here in London, so i’m surprised at all the vitriol!)

        Lastly, Ion, i’m curious whether you’ve ever worked in London? I don’t recognise London in your description of it, so i’m wondering whether you’re speaking from any personal experience?

      • ukVFX says:

        “Well, you could expect that. The Mill is a UK firm” what, are they like some kind of VFX embassy, exempt from the usual US immigration rules? Can they also park where ever they want and not get a ticket?

        “The UK is far more flexible in pretty much having an open door and no questions asked policy for (temporary) workers” What a load of crap. Non EU to UK immigration is now as tightly capped as the other way around with quotas for the number of key workers allowed in, furthermore the gov is threatening to take away the 17 VFX-specific definitions from the key worker list, the result will be more VFX jobs off-shored to Singapore, India, China etc. BTW: your Mexican comment reveals you to be the racist you are.

      • ion says:

        @ukVFX
        “BTW: your Mexican comment reveals you to be the racist you are.” Sorry, I am not letting that go by. That is the usual tactic of someone backed into a corner, try some total curve ball to try and distract the argument. You are going so far off the topic from “framestore begining for more tax payer money”. Illegal mexican workers is an analogy to the way foreign workers (all workers tbh) are treated there. Those mellon pickers are victims of circumstance trying to scramble a living in a difficult circumstance and deserve sympathy as fellow human beings.
        If you read, I also mentionned how those studios take over large numbers of overseas workers from non-EU nations to get through projects, mostly non-senior levels, but never retain their services, even though they claim they are ‘essential’ staff to the services. It is all about running a business like a seasonal harvest, with those folk probably duped over with the suggestion that a proper job exists there. That is why you get the huge turnover of names on the crew lists with each project, all hinging on the particular tax break secured for that particular project. The seasonal fruit picker analogy fits. And some of those firms also claim additional tax government transfers from the training and education departments. Well, what are they using that for? If they never seem to bridge this ‘skills’ gap. There is no skill gaps. The seasonal tax-break workers finish their project, get cast off, then mostly choose not to come back and work elsewhere. Because UK firms are so heavily dependent on corporate wlefare tax breaks, they can never build solid business models and end up like a seasonal harvesting operation.

    • ukVFX says:

      I’d go further – MPC, FS, Dneg would be completely screwed if they couldn’t bring in foreign talent – roughly 50% of their respective workforces are non-UK. Most of the rest is EU. A key driver of the UK facilities’ drive to open up shops in BC, India etc is to go to places where immigration policy is more flexible.

      • Toasty says:

        I hadn’t thought of India as having a more relaxed immigration policy than the UK (snark).

      • ion says:

        yeeahhh… makes you think huh? Lobby your government for tax breaks, tax transfers and cash grants for your ‘national’ industries and local ‘training and development’, then ship off the work to a market where people are desperate and work for a fraction, then ship the product back at full price, depositing yourself an enhanced profit through your cayman island offshore account, through your non-profit charitable foundation subsidiary, avoiding any tax on the ‘National’ transfers and breaks the local tax payers gave you. All seems straightforward! Hold on …. wait a minute …. eeerr ……

  11. Paul says:

    “Bodering on impossible/futile for 90% of cases, unless the candidate has an exceptional list of awards, PHD, proveable business success AND if someone wants you bad enough to put up money”

    BS. I could refer you to 10s of people in LA with H1B and O visas that are nowhere as you say credential wise and worse, are average and in no way unique at what they do as VFX artists. Who you know and luck (right timing) work a great deal in landing a visa.

    Money for a visa is pretty irrelevant in regards to salaries in this industry. $5k at most for H1B and $5k more for a GC. I Know I spent 9 years dealing with all this before becoming citizen.

    When it’s not replacing you overseas, it’s replacing you at right at home far more easily than you might think sorry.

    • ion says:

      My perspective is from bringing people over, liasing with immigration lawyers and labor bureaus. If you were on the process 9 nine years ago, renewing inbetween, the change in new applicant entries over the past three years would have entirely passed you by. 10 years ago and less, it was straightforward. Around three years ago, new regulations regarding district judge approvals, were introduced for new entrants, together with far smaller annual limits. For all visas you have to produce documentary evidence in several categories. Who you ‘know’ will not be enough. I couldn’t get several people through last year due to missing one or two categories. If you are that interested, you can easily research the changes with a interweb search. Agreed for periods upto ten years ago, when some systems were costing upwards of 1m dollars, you could have been very average and just having an ability to turn the computer box on was good enough. Not now. Uh uh.

      http://www.huffingtonpost.com/2012/06/14/high-skilled-worker-visas-immigrants-h1-b-visas_n_1598390.html

    • polyphemus says:

      I agree with Paul, it’s not “that hard” to get an H1B/O1 for the average vfx worker in the United States. All you need is the right sponsor and most workers already meet the base level credentials.. usually having some form of degree and foreign work experience.

      An immigration officer sees Lucasarts, Sony, or some other big production/vfx company on the petition along with a laundry list of movie credits, with a few reference letters that’s usually enough credentials.

      Remember immigration officers aren’t VFX/Biochem/tech folks, the petitions are largely simplified so I’m sure there’s a degree of rubber stamping in place if your paperwork is in order.

      However, it’ll be harder for a recent graduate or a smaller studio to pull off.

  12. Mr tell you so. says:

    The government wants the fame to be able to setup vfx houses / animation industry and grow it’s own local/ regional talent and the foreign company to get as much work done for cheaper cost. Seems like a fair exchange but the crux of the whole issue is that both entities want different things which would produce 2 different outcomes and they wouldn’t care about the “partner’s” want. In reality, is the government really building a pool of local talent? Not really, because foreign talent is always pooled in usually to be able to pull off such work. and the cost to hire these people are usually not cheap so the locals usually have their salaries offset to welcome these people in. Now the vfx company get what they want at the end of the day -” cheaper” work but it hurts itself by undercutting the industry but also itself by being heavily reliant on subsidies, because the talents probably came from their own initial local talent pool for a higher cost without foreign government subsidies.

    Singapore’s government pays for half or even more for the local employee’s salary and pays all for lucas’ facility rental. Of course there’s some sort of exchange like promised movies for all that offer. Sounds like a fair one but the whole deal is so artificially controlled that the company is so mismanaged in terms of their talent and I bet production feels compelled to deliver movies which might turn out just to be a government pleaser at the end of the day. I can safely bet the local government is constantly trying to keep the company from moving. pathetic agreement on both sides.

    Now how long can this last? researching Singapore government’s practices, it would pull the plug on subsidies after some time once it’s sustainable- has build up it’s own talent pool which would not happen. And if the plug is pulled. The company will just find another non- dried up well.

  13. Steve London says:

    Does anyone else disagree with calling tax breaks ‘subsidies’? They are not the same thing?

    • Timber says:

      I prefer to call incentives “corruption” or “bribery” as long as it’s money going to the producing entities. If they were grants directly to locally-owned VFX shops for educational and other developmental support, that would be an entirely different matter. One might fairly ask what long-term DAMAGE is being done to incentive areas as a result of these market distortions? A culture of dependency, for sure, that’s being borne by the taxpayers of the region, which may eventually become politically destabilizing.

    • scottsquires says:

      They’re not tax breaks. In most cases they have nothing to do with taxes except to state where the money comes from. They are incentives. Incentives from government = subsidies. The incentives subsidize work in a given area that the area would likely not get entirely on their own.

      • Steve London says:

        I class a subsidy as money generated from elsewhere (e.g. taxation) being assigned to an unrelated industry. Taking from A to pay B.

        I don’t see how that can be the same as a tax incentive designed to attract a particular industry activity. The incentive might mean you get less tax than you would without it, but without it the entire activity might not take place at all, so you (I mean the tax gathering body) would have got nothing. Meantime, no money generated by other taxation has been diverted for the cause (IMHO), which would be a subsidy.

      • scottsquires says:

        Once again – tax incentives don’t have anything to do with taxes. It’s not simply a reduction in taxes by production and it’s not like the income from the film industry supports this and is simply fed back in.

        Tax incentives is the term used by the lobbyists and the politicians to soften the impact of what is really happening. The hard earned tax money (that could be used for anything else – hospitals, education, roads, etc) is being paid to studios and other investors. The correct term should be film incentives.

        Hence the money is coming from somewhere else to pay and support an industry. That to me a subsidy and according to your definition is a subsidy as well.

      • Timber says:

        http://www.nafta-sec-alena.org/en/view.aspx?x=283

        Quoted:

        What is dumping?

        Dumping is the sale of goods in foreign markets at prices below those charged for comparable sales in the home market or that are below the cost of producing the goods.

        What is antidumping (“AD”)?

        An antidumping duty is a special levy imposed on imported merchandise to protect an affected domestic industry from injury caused by sale of dumped goods in the importing country.

        What is subsidy?

        Generally, subsidy occurs when imported goods benefit from foreign government financial assistance.

        Examples of subsidies include: loans at preferential rates, grants, tax incentives, or a provision of goods or services by a government at prices below market levels.

        What is a countervailing duty (“CVD”)?

        A countervailing duty is a special duty imposed on imported merchandise to protect a domestic industry from injury caused by subsidized imports from other countries.

        What is injury?

        Injury is caused by dumped or subsidized imports resulting in lost sales, reduced prices, lost market share, decreased profits, and other such difficulties for the injured industry.

        Who may complain about dumped or subsidized goods?

        Injury is caused by dumped or subsidized imports resulting in lost sales, reduced prices, lost market share, decreased profits, and other such difficulties for the injured industry.

        For guidelines in preparing a written complaint, you may consult:

        Canada:

        http://www.cbsa-asfc.gc.ca/sima-Imsi/publications-eng.html

        U.S.A.

        http://ia.ita.doc.gov/admanual/index.html

        http://ia.ita.doc.gov/filing/index.html

        ftp://ftp.usitc.gov/pub/reports/studies/PUB3257.PDF

      • ion says:

        The government does not possess resources of its own – every cent it spends must be taken from the private sector in one way or another. The government can not add one iota of new wealth to the economy – it can only dispose of already existing wealth by taking it from the private sector. It matters not if this is done by means of taxation or borrowing – the latter method is merely a means of deferring the former (we will discuss inflation further below).

        In order to believe that this will create ‘economic growth’, one has to believe that government bureaucrats are better at allocating scarce resources than the private sector. This seems an absurd proposition to us. Since government bureaucrats are not driven by the profit motive in their allocation decisions, they have no means of ascertaining the opportunity costs of their actions. They are faced with a somewhat milder form of the socialist calculation problem – ‘milder’ only because they can observe prices in the market economy and are thus not entirely groping in the dark. The only sense in which government spending can be said to add to ‘growth’ is the fact that it is treated as a positive contributor to GDP. However, this merely reveals that GDP is a very flawed measure of wealth creation.

    • scottsquires says:

      Timber: I would agree. Governments should subsidize education and improving their local people in careers that make sense to nurture in their areas.

      • Steve London says:

        UK govt does subsidise education. It pays for almost of it in fact!

      • Toasty says:

        Indeed. Now all it has to do is stop bribing producers, and everything’s fine. I’m all for structural incentives.

      • ion says:

        well, here is another propaganda piece from the various UK corporate welfare queens ;

        http://www.bbc.co.uk/news/technology-13354845

        Basically, they are yet again asking for yet more taxes to be transferred over to them – likely from the lowest paid in the country like overnight office cleaners who patrol their studios at night to eek a minumum wage – so they can continue to endulge their desire to play ‘movies’.

        Again, The government does not possess resources of its own – every cent it spends must be taken from the private sector in one way or another. The government can not add one iota of new wealth to the economy – it can only dispose of already existing wealth by taking it from the private sector. You have a fierce lobbying group there with sharp elbows and loud voices. You may also note that most of those company leaders are almost always ‘oxbridge’ (equivalent of Yale-Harvard ‘skull-and-bones’, only much, much more so. It is the nepotistic school of the privileged where parents can ensure their lazy children can maintain a strangle-hold over opportunity and ensure freemarkets and aspiration is chanelled through their control system of lords, dukes, etc., refer boston tea party and war-of-independence for more background on the British system of patronage – little changed in 1000 years).

        Particularly like the bit ;

        “A report, commissioned by the government and published earlier this year, delivered a worrying prognosis.It warned that, while special effects was enjoying a rapid growth, the sector was also “having to source talent from overseas because of skills shortages at home”. The study, entitled Next Gen, concluded: “That is mainly a failing of our education system – from schools to universities and it needs to be tackled urgently if we are to remain globally competitive.”

        Well, they have been claiming government and lottery funds training for a decade or more and still seem to have never achieved this training and structural short fall. You would think the state planner bureaucrats and lobbying groups would be questioned by now, told “hey, you are saying one thing, taking money and never seeming to produce a result”

        They won’t of course, because it is probably the plan. Use your Oxbridge connections within government (who all mostly attend the same groups and schools so know each other) to ensure ‘training and infrastructure’ becomes part of your revenues. In the meantime, you trawl the international labor markets for temporary ‘harvest-time’ staff to try and fullfill your projects. The DNEG fella was even in another interview admitting “we have a temporary, project lead business model”. So of course you will always be just using and disgarding non-local and local staff in an unstable workflow. How can you ever base government funding for such a business model? And how will you ever develop a sound business model if you are always running to the taxpayers and temporary international staff to keep going? Sad as many of the closures in the US has been over the past few years, at least it shows the lobbying has limits here and something resembling free-markets may exist, with the establishment and consolidation of other companies in their place, and many other companies surviving through competitive business planning and private investment. Not so in the UK, home of corporate-welfare cheats.

      • ion says:

        And just thinking of that quote ;

        The study, entitled Next Gen, concluded: “That is mainly a failing of our education system – from schools to universities and it needs to be tackled urgently if we are to remain globally competitive.”

        Isn’t bournemouth university in southern england meant to be the flagship premier training centre in Europe for visual effects?
        Doesn’t that institution draw the vast majority of its students from other european countries (fee-paying not free)? So what is the story here? Bournemouth vocational graduate and undergraduate programmes are not up to scratch? Compared to say Savanah in North America? If so, how come so many students from Bournemouth, Ravensbourne and NTFS jumped ship to forge successful careers in North America? And why then are so many nationals of Central and Eastern european nations taken over en-mass, for short term contracts, when those nations have a tradition of free, socialist and even communist education systems? What is the deal with that then? Is it a case that the semi-private or private, fee paying education systems of the UK, with heavy student funding and indebtness, is inherently inferior to those socialist/communist education systems and not producing the results they are whining about? It doesn’t add up. Unless its all about continually claiming tax subsidies from the local tax payers and having access to revolving door cheap labour? Head is spinning now ….

      • education says:

        Bournemouth University grads are totally up to scratch – that’s why they end up supervising shows like Prometheus (Weta) and Star Trek (ILM) at shops all over the world as well as holding senior positions in all the major UK VFX houses. But the courses at BU only produce around 150 grads a year which isn’t nearly enough to feed the UK vfx and animation community which employs well over 2500 people just in Soho. The report is calling for more courses like Bournemouth’s, not criticising it.

      • ion says:

        So does bornemouth produce general supervisory and producer skills then? Because that will always be a smaller number of bodies required. What are the ‘skills’ these tax-payer lobbyists are complaining about? Is it sharp-end skills? You see, its all a bit vague. Every industry in the UK seems to complain about shortages and needs for short-term, temporary workers, ironically from the socialist or formerly communist educational systems of other central european nations or dictorship based less developed nations. In the EU, UK is about the only nation with completely open labor borders to the single market – a UK choice – nearly every other EU nation has restrictions and quota systems for entry and skill categories. Again, its all about cheap labor and exploitation. How could the short-term, temporary nature of subsidy-dependent UK media production companies even accomodate 150 fresh new bournemouth faces every year? And what skills does a year or three of ‘maya animation’ or ‘renderman shaders’ really equip someone with? Doesn’t that lack the academic rigour to produce flexible, dynamic individuals? Compared to say a general fine art or engineering training? Maybe vocational training is a problem? A lack of detail in the report. Deliberately.

        Just to reiterate, it isn’t really a problem. Its just another facet of tax payer lobbying for a UK based industry propped up
        and dependent on subsidies, with inefficient, ‘temporary-harvest’ based business models, built on tax transfers and short term international workers cast-on, cast-off at will. They do not want – and could not accomodate – 150+ fresh new faces annualy in an essentially cynical, subsidy dependent business model.

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  15. Actually, to confirm you folks that the Canadian tax credits can be taken as upfront cash ready for fund the production of the show, but not by the Canadian Government (they will come by last after the official taxes have been filed by the production company after production wraps) but by Canadian private financing companies such as Aver Media or Canadian banks which can bank on the Canadian tax credits based on the project by project basis, but then, each project needs to submit their Movie Magic budget on a detailed level, along with their sales estimates determined by the sales company plus final cast and crew attachments.

    However, the bank can only bank up to 75-80% of the tax credits upfront, with 20-25% discount, based on the assumption that there will be overages later on included on the final report for matching comparison. That way, they wouldn’t risk 100% banking of the tax credit upfront.

    For that, either the producers still need the remaining 25% of tax credit money from the investors or live it with a hole in the budget, by having their salaries and other fees deferred, in order to make up for the 20%-25% of labor tax credit (i.e. nearly10-12% of final total budget), which is more about the producers’ fees and some part of the 10% contigency budget as well…. etc.

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