Casualties Of The Subsidy Trade War: Prime Focus London

June 11, 2014


Tuesday morning I woke up early to do an interview with the BBC about the VFX industry. I argued that while the UK is benefiting from recent increases in subsidies for the film industry, I warned that Canada was offering much larger subsidies that pay 60% of labor wages.

A few hours later I get contacted by some people in the UK with indications that Prime Focus would shut down their London office after the email above was sent to employees. One would suspect the reason why an Indian VFX firm like Prime Focus would shut down operations in London was to ship more work to India but that was not the case. The email clearly confirms what I told the BBC earlier that morning: The subsidies in Canada are larger and US studios that receive them have demanded more VFX work be sent there.

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Is Ontario Next To Fall Over Film Subsidy Cliff?

June 9, 2014


Last week I posted about Quebec winding down it’s film and games subsidy program by instantly cutting it by 20%. This week report Will Campbell uncovers an internal Ontario document that seriously questioned the sustainability of offering film subsidies and it seems to repeat what this blog has said for a long time:

The document states the subsidies may be a “zero-sum game or simply a race to the bottom” as Ontario and other jurisdictions outdo themselves to offer juicier tax credits while the total number of film and TV productions remains static.

You can view the original document here. Film Incentives 101 has more info on the number.

Some of the juicy parts:  Almost 70% of foreign films (mostly US based) and 60% of VFX companies who received subsidies that pay 60% of labor and 25% on non labor costs paid ZERO taxes.

Soldier On.



Quebec Austerity Measures Signal End Of Film And Game Subsidies

June 5, 2014

The Quebec government announced this week that it would cut subsidies across the board by 20%. This includes film and games subsidies:

On the spending side, an across-the-board cut of 20 per cent will be applied to the popular tax credits that government agencies often use to attract investment in industries such as video games, information technology, aerospace and pharmaceuticals.

That’s just the start of a complete review of how business tax credits and subsidies are doled out.

The longer term view by the government is to effectively eliminate industry specific subsidies:

Québec has many targeted tax assistance measures for businesses, particularly large corporations. These measures are costly and can create unfairness. The government wants to gradually change these incentives so that they are general rather than specific in scope. These measures of general scope will be simpler to apply, thus maximizing their benefits and limiting the administrative burden on businesses,

Here is what Quebec currently offered for VFX. On all expenses it paid for 25% of costs. For VFX labor it adds 20% on top of the 25% and when you add the 16% federal labor subsidy you could match the 60% subsidy British Columbia offers on labor. Since BC doesn’t offer to pay 25% on non-labor expenses like Quebec does, you can see why many VFX facilities are recently flocking there instead of BC. For the games industry QC offers to pay 37.5% of salaries.

As you can see, this is a completely unsustainable white collar welfare program. The latest budget slashes 20% across the board (so instead of 25%, it’s 20% etc) making it 20% more expensive to do production work there and that’s just the beginning. Those who argued that provinces in Canada could just continue to freely spend money to subsidize their jobs are dead wrong.

While Quebec is deep in debt those in British Columbia should be warned. BC’s debt-to-GDP ratio (17%) is less that half of Quebec but still more than twice of California (7%). The BC government recently proposed $56 million in education cuts which is leading to big strikes.

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LA Mayor’s Film Czar Office Accuses Local Businesses Of Extortion

April 21, 2014

The LA Daily News reports on some recommendations by the LA Mayor’s Film Czar office at City Hall which you can hear at the 16:25 mark here:

Alluding to industrywide complaints that store owners frequently ask for money in return for allowing a production to take place outside their businesses, Dalal recommended that lawmakers address ethical issues, perhaps by creating a “code of conduct” for the industry.

“Los Angeles is known as the extortion capital of the world for the film industry,” Dalal said.

Extortion? Really? I’d like to ask the LA Mayor’s Film Czar’s office how they can accuse business owners of extortion when the film industry does the same thing on a more perverse level with their demand for more film subsidies.

According to Mr. Dalal’s statement, when disrupted business owners ask for compensation from Hollywood studios that shoot in front of their shops, that’s extortion, but those same studios threaten to disrupt the CA film industry by leaving unless the government gives them more free taxpayer money. Is that not the same type of extortion the Mayor’s film czar office says the studios are a victim of?

Looks like the pot is calling the kettle black here and the media and the public are wising up to this ruse.

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LA City Council Ad Hoc Film Committee Meeting This Friday

March 18, 2014

A few weeks ago I went to City Hall to attend an Ad Hoc Film Committee Meeting setup by LA City Council. You can hear my statement in my post about the meeting. This event is open to the public and I will be “suiting up” to make another appearance to urge support for our legal effort to place anti-subsidy duties on subsidized VFX:

The Ad Hoc Committee on Film and TV Production Jobs will hold its second meeting on Friday, March 21 in City Hall.

In our first meeting, we heard about the tremendous human impact runaway production has had in Los Angeles. As we continue our work and focus on policy objectives, our next meeting will include a discussion on expanding California’s film and television tax incentives program and the need for Sacramento to join us in the fight for jobs throughout L.A. and California.

The meeting will begin at 2 p.m. in the John Ferraro Council Chamber, room 340 of City Hall, located on 200 N. Spring St. in Los Angeles.

I hope to see you there!
Councilmember, Second District

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Trouble Brewing

January 21, 2014

I just returned from my trips to NY and SF. I’ll have a post up about the meetings but first I wanted to give a few thoughts of some recent trouble brewing in the VFX industry.

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The Desolation of NZ: Government Bails Out US Producers Again

January 2, 2014


Image by Jesse Toves

An unprecedented display of corporate power over a sovereign nation.

In 2010, WB & Peter Jackson demanded that the NZ government offer more generous subsidies and a change in national labor laws or else the Hobbit would be made elsewhere. Prime Minister John Key eventually agreed and at the time I wrote a warning that the US studios would look to take advantage of them again.

Then in 2011, the US studios showed up again. This time they tried to take advantage of emergency legislation needed to help Christchurch earthquake victims by attaching bills that would grant them the power without due process to disconnect internet access of anyone they suspect of piracy.

Imagine my surprise when this past December James Cameron and Avatar producers demanded another increase in the amount of subsidies they would receive to make the Avatar sequels in New Zealand.

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Louisiana Taxpayers Pay $70,000 Per Episode To Duck Dynasty Cast

December 20, 2013

I often write about the absurdity of film subsidies and in the United States, one of the biggest offenders is the state of Louisiana which offers a 35% subsidy for film and television shows that shoot there. This is sort of why you probably see so many shows with Louisiana-based themes like Duck Dynasty.

This subsidy also goes to pay cast salaries which reportedly is $200,000 per episode. That means the Louisiana taxpayer cut Duck Dynasty producers a check of about $70,000 per episode for each cast member which was mentioned on a thread earlier this year. One of the cast members, Phil Robertson recently got into trouble with some very anti-gay remarks.

Mr. Robertson is allowed to have whatever anti-gay view he wants and A&E is allowed to give him a show or not at their discretion. The major problem I see here is that the Louisiana taxpayer is forced to endorse his view by providing funding of 35% for their show. This is in a state where a recent poll showed that 9 out of 10 residents oppose gay and transgender discrimination.

Furthermore, in general these film subsidies have been a big money loser in Louisiana. I pointed out earlier this year that the state loses a whopping -85% on the amount they dole out.

Soldier On.

UK Government Pumps More Air Into Subsidy Bubble

December 9, 2013

In the interview with FX Guide we talked about why this blog came into prominence: It was my observation 3 years ago that an accelerating subsidy race, not cheap labor in Asia, would dominate where VFX work would go.

One week later, the UK announces it will increase it’s subsidies from 20% to 25%:

The measures are intended to make the UK a more enticing location for filming special effects, sound and location shooting work, following fears that the industry will lose its world-leading position, and talent, to countries such as Canada, which already offer significant tax breaks.

I pointed this out last year. The idea with these subsidies is that it should create a sustainable local industry but that hasn’t been the case as various locations have to keep ratcheting up the amount paid to US studios or risk having the whole industry collapse. Also, as one UK director Edgar Wright notes, these subsidies are actually crowding out local filmmakers:

While the tax break is good for Hollywood films shooting here, it’s probably not that great for British films shooting in the UK,” he said. “Some middle-to-low budget films are going to find themselves without crew because all the American films are shooting here.

Other locations on the other hand are starting to question the policy of paying US studios to bring VFX work to their locations.

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Here We Go Again New Zealand

October 23, 2013

Screen Shot 2013-10-22 at 11.29.50 PM

Well it’s that time of the year! Seems almost every October the US studios start bullying New Zealand into handing over more free taxpayer money or else they’ll pull film work from the country. This time it’s about Avatar:

After the success of movies like The Lord of the Rings and Avatar, the New Zealand film industry is now facing crippling losses.

There are new calls for the Government to review tax incentives for foreign productions as the industry faces losing a billion dollar blockbuster.

Industry rumours about Avatar have been flying thick and fast – that production is moving to Australia or even Mexico.

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