Quebec Government Says Bon Voyage To Film Subsidies

I haven’t posted much on this blog but some recent news caught my eye:

Last week’s Godbout Commission report sent shivers up the spines of Quebec’s film and television production industry. The Quebec Taxation Review Committee, chaired by economist Luc Godbout, recommended phasing out the Quebec Production Services Tax Credit beginning in 2020.

If you’re a reader of this blog you shouldn’t be surprised by the news. Last year I posted how the Quebec’s austerity measures led to an immediate 20% cut to their film and games subsidies. At the time the government was paying up to 60% of resident VFX salaries.

This is pretty significant news as there are a number of European VFX facilities that have opened satellites there to stay competitive with subsidies offered in Vancouver. My guess is those facilities will have to open in BC and move their talent there. This is also the first time since my blog started that a major international location is planning a massive cut to their film subsidies. Ontario is also having serious conversations about the costs of these film subsidies.

Here in the US, many states have begun to curtail the use of film subsidies: Louisiana, Massachusetts, Michigan, Maryland, New Mexico, Nevada, Connecticut, Alaska, and Florida.

If you work in VFX, be always prepared to move to the next place offering the most amount of free money.

Soldier On.

As CA Film Subsidy Passes, MPAA Prepares To Raise Stakes

If you read through the posts on this blog about film subsidies one trend should be abundantly clear:

Hollywood studios will take one government’s offer and game it against others in the hopes of increasing and maximizing the total amount of free taxpayer money available. So no sooner than a few days after film and VFX workers celebrated the passage of CA film subsidy bill AB1839, the MPAA will be looking to meet with other states to increase the stakes:

Well, that’s certainly looks like a kick in the teeth to the home of Hollywood. Just days after the state Senate voted overwhelming to increase and expand California’s $100 million Film and TV Tax Credit Program to $330 million for the next five years, the MPAA has announced it is hosting a shindig in the nation’s capitol to help other states compete.

You’d think the state of Louisiana which offers a 30% film subsidy would be on solid ground but even they lose out as studios will take their offer and game them against international governments agreeing to give even more free money. Can you see how this is a race to the bottom? In order to win you have to be willing to be the biggest loser and even then, it’s expected that you keep raising the stakes. It’s also not cheap as the LA Times questions the cost effectiveness of these programs.

Trade Provision Supporting ADAPT Legal Effort In AB1839

Big news came last week as CA bill AB1839 was amended:

An amendment to proposed legislation to expand California’s film and TV tax credit urges trade action as a response to countries that have lured visual effects firms away with the promise of generous subsidies.

Huge thanks to everyone who helped and Assemblymember Mike Gatto for standing up to the studios and writing a provision into a bill he co-authored supporting out effort. While it’s a huge step in the right direction, I obviously have issues with the subsidies in the bill and was hoping that the trade provision had more teeth to it.

When our law firm helped the shrimping industry get trade relief from injurious subsidies, the government of Louisiana actually helped fund the legal effort. Since our legal effort costs a fraction of what the hundreds of millions of dollars in subsidies needed, we felt it would’ve been a small cost that could lead to a more effective outcome.

Soldier On.

CA Legislative Support For ADAPT Legal Efforts

When the blog is quiet it usually means I’m busy working with people on the legal effort. There was some remarkable news that broke this week in Variety:

To take the fight to the government, in this case, U.S. trade authorities, Daniel Lay — author of the popular VFX Soldier blog —  and others have formed the Assn. of Digital Artists, Professionals and Technicians (Adapt). Their plight has drawn the attention of Assemblyman Mike Gatto (D-Calif.), who aims to add language to pending tax-incentives legislation. The wording would urge the federal government to impose sanctions, including tariffs, as a way to combat “unfair and illegal competition” from other countries that have hijacked visual effects, music scoring and other post-production work.

London Calling

Lots of news coming out about ADAPT next week and I’ve been burning the midnight oil. However I do have a note that may interest some of you in London.

A NYC based documentary filmmaker is currently filming a project about the changing business of Hollywood filmmaking.  She recently interviewed me about the international subsidy race and will be in London to film in August.  She’s looking to interview people who can address the impact of the film incentives in London.  She’s particularly interested in speaking with people who counter my views.  Anyone interested in being part of this documentary should email her at:

MadhouseMuse (at) Gmail (dot) com

Soldier On.

Casualties Of The Subsidy Trade War: Prime Focus London

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.

Is Ontario Next To Fall Over Film Subsidy Cliff?

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

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.

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

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.

LA City Council Ad Hoc Film Committee Meeting This Friday

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!
PAUL KREKORIAN
Councilmember, Second District
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