VFX Subsidy War Grows Into Global Trade War

There has been some news in the VFX and game industry concerning subsidies that I would like to comment on. Basically the subsidy war is slowly transforming into an all out trade war.

Troy Brooks, head of studio at Digital Domain Vancouver

Canada Plays Hardball With VFX Houses

So after VFX companies like Digital Domain and Imageworks went through all the work to open facilities in Vancouver, they are now upset that the Canadian government is going to take it’s time to thoroughly review foreign visa applications for VFX/Game jobs.

The real reason they should be crying is how badly studios like Disney twisted the arms of VFX facilities to open up shop in Vancouver. Studios were hungry for free government money and wanted to take advantage of the Canadian film subsidies which are arguably the most generous. However, in order for this scheme to work, they need the talent. Fellow Canadian VFX artists may not like to hear this but most of the jobs for Vancouver are posted in California. They need us up there to make it work, but once the project is over, many of us come back home to spend that money in California which is probably why the state is so hesitant to get involved in the subsidy war.

Unlike the feeble VFX facilities, the Canadian government wants to assure that the money they spend to lure that work to Canada results in some return for them. That means taking the time to make the companies check that any open positions can be filled by Canadians. After all, they have offered these subsidies for a long time and yet the big studios threaten to leave every time a better subsidy is offered elsewhere.

Corporate Group Pisses Off UK Gaming Industry With Canadian Passport Stunt

The UK government has been forced to engage in austerity to prevent larger deficits. As I predicted, one of the first casualties were subsidies the UK gaming industry expected. In reaction, a multinational business group at a trade event handed out mock Canadian passports with information on why Canada, which offers 30% subsidies, would be a better option for gaming companies. Britsh game developers aren’t too happy about that.

China Spirals Further Into Protectionism

The Hulett-zer posts on China’s front in the trade war:

China is opposed to importing a large number of foreign cartoons because the move would hinder its domestic animation industry, said a senior official with the country’s top TV and film watchdog.

Is it me or did everybody this week just realize we are in the middle of a huge trade war? Former Intel CEO Andy Grove lays out his strategy for the US to fight. Former Labor Secretary Robert Reich leads readers through the smoke trail and why this is big.

Peter Jackson Maims Weta Digital?

Peter Jackson recently released a review of the NZ Film Commission. Unlike the UK Film Commission fluff piece, it was brutally honest. I was shocked to read the report mention this:

The Treasury report refers to a 2005 LBSPG evaluation, which concluded that ‘very large budget films that come to New Zealand usually did so for quality and creative reasons rather than economic reasons’. This is simply untrue. Without the LBSPG , Universal would have insisted King Kong be moved to Canada in the blink of an eye. There’s nothing this country offers that justifies the budget hit Universal would have taken by basing the film in a country with no production incentives.

Does Mr. Jackson seriously think that after all the Oscars and accolades Weta Digital has received for it’s superb work that it amounts to nothing without a subsidy for the big studios? Wow. Thanks for the hard work Weta, here’s a slap in the face! The report also mentions how big a money loser the New Zealand subsidies are but tries to justify it by essentially saying it makes the citizens proud of the country.

While we were unable to access data for the full 31 years of the Commission’s life, data for the 1993-2006 period shows the Commission recouped just under 20 per cent of its investment in the 58 films it supported in that time – in dollar terms, $12.9 million recouped against $66.2 million invested.

Globalization and VFX

Scott Squires has a post going over his thoughts on Globalization.

Unfortunately the location that has the most to lose (and gain) from subsidies is California. They have done too little, too late. A large revenue stream for California (especially southern California) comes from movies. There are a lot of people employed in this business and they in turn spend their money locally on services and products.

It’s a sad state of affairs when experienced vfx artists, with all of their creative and technical skills, are likened to migrant farm workers moving to where the work is. At least there’s a real reason farm workers move is because of locations of the crops and growing seasons. In the case of the vfx artist a cubicle is a cubicle, no matter where in the world it’s located. The only reason for moving is purely at the whim of the counties incentives and the studios.

My number one reason for being against subsidies is that is causes VFX artists and their families to bounce around places so studios can get some free money. If subsidies didn’t exist, the vfx work would go where the majority of vfx artists want to live. I get accused of being pro-Californian because I live here but the real reason I support the Californian VFX market is that it is the only vfx market that exists without subsidy and therefore has the least artificial price.

Has the Californian VFX job market taken a hit? Yes and I hate to see many artists get smashed by this subsidy war but the most important thing we need is discipline. The UK, Canada, Australia, and New Zealand are all killing each other to get the work. Nobody wins in a trade war but California indirectly benefits from this. The big studios reside in California and intend to make larger profits from foreign subsidies. This leads to larger tax revenue and the legislature knows this. They have studied film subsidies and know it’s a losing battle. In the short run this will be painful but in the long run I’m confident we will look back and remember how stupid this period was.

17 Responses to VFX Subsidy War Grows Into Global Trade War

  1. Owen says:

    I don’t know if you’ve heard of a TN visa, but it is very quick and easy for North Americans to get and this federal IT category wouldn’t have any impact on it.

    Also, there’s a much higher tax incentive for these studios to hire Canadians.. Pixar is specifically doing very small projects that doesn’t really require a large senior staff that you seem to imply (besides a very small core). And is mainly hiring juniors fresh out of school or with little experience. Sony is just doing animation in Vancouver, which this category doesn’t even include!!

    You seem to think that these projects can’t get done without artists from California… which is a pretty big slap in the face to some very talented crews in Vancouver. I also know a number of people who have permanently moved to Vancouver from LA and have now made it their home and residence and are spending the money they’ve made in Canada.

    • vfxsoldier says:

      My intent was to point out that Digital Domain was upset over tougher visa regulations for non-canadians. Many of the job ads for Vancouver are posted here in California. If it’s a slap in the face to Canadians it’s not from me, it’s from the employers opening shop up there.

  2. majik says:

    I think you miss the point a bit on the whole Vancouver situation.

    Yes these studios are given incentives to set up shop but to qualify for the tax break a certain percentage of staff must be Canadian (permanent resident or citizen).

    If you read the whole Vancouver Sun article it would have also pointed out that most of the shops do no more than 10-12% of their hiring from abroad. So in a shop of 100 artists, thats 12 people from abroad and not only just from the US, so the impression you give of hordes of workers decamping north from California is just plainly false.

    Look at any of the major players in the Californian vfx business and no doubt you’ll find a similar percentage of foreign hired workers in companies there too. Show me a decent sized shop in the US that doesn’t hire from abroad and I’ll eat my hat.

    As the Vancouver Sun article also pointed out those hired from abroad tend to be key senior artists, projects leads etc., so Jimmy the junior roto artist in Santa Monica shouldn’t be packing his bags just yet.

    I like your site and enjoy reading your posts but this one stinks of protectionism. You seem to think that California has a god given right to the vfx business, that it somehow ‘owns’ it. The notion that your movtivation for this ‘protection’ stems from your concern for ‘families’ is laughable. Every foreign worker I know in this business who also has a family is in a staff position. Freelancing is for young single people.

    You also assume that most vfx artists want to live in California? why?

    As for the lack of subsidies in California, I’m sure they would be in place if the state could afford them but it can’t, why? Because the scale of production in California still dwarves anything in the UK, Canada, NZ and Australia.

    • vfxsoldier says:

      Ahhh! so many things wrong here!

      How can you accuse me or protectionism when you just admitted that studios are given incentives to hire Canadians only? That’s protectionism. No policy like that here in California which is why im for California, its the only vfx market that exists without subsidy.

      Of course only a small percentage of foreign workers are at the studios in Canada, there’s no tax break for bringing a worker there which the vfx houses would prefer to do.

      Do foreign workers come to California? Yes, and many of them are Canadians. Why? Well anecdotally I asked a Canadian friend why he stays here when so many shops are in Canada. He said most of the jobs have lower pay than California.

      California lacks subsidies because studies show subsidies lose money. Not because of some “scale” issue which is factually incorrect. Canada is a maquiladora industry – it exists for a subsidy. Without it most houses would leave.

  3. Owen says:

    Majik, thank you for explaining that way better then I could and was poorly trying to..!

  4. majik says:

    “No policy like that here in California which is why im for California,”

    Do you know what, in my haste in my last post, I made a poor assumption and admit I was wrong, California can afford subsidies. As part of the overall California film tax credit program, vfx done in California on qualified projects with a budgets of up to $75m is a qualified expense for productions and is covered under the program.

    Granted that won’t cover the big vfx shows but will cover the many non-vfx driven movies that require vfx, the very same movies that helped grow the Canadian vfx industry in the first place. Yes I know its not a direct subsidy for the business but the notion that the business in California is completely unsupported by the state is not right, is it?

    ” its the only vfx market that exists without subsidy.”

    I could list dozens of countries that have healthy vfx industries and exist without subsidy. Your narrow worldview is really starting to grate a bit.

    “Canada is a maquiladora industry – it exists for a subsidy. Without it most houses would leave.”

    Most houses? You have a very skewed vision of the Canadian vfx industry. The number of big foreign owned vfx/animation firms could probably be counted on one hand, yet it is they that garner all the attention from yourself. Here is a nice list so that you can see for yourself

    http://www.3dcanada.ca/r-cgcompanies.html

    Most of the canadian vfx /animation businees is made up of small to medium sized enterprises, owned and operated by locals. These were the companies that initially started the feature vfx boom in Canada, not the big foreign firms. The industry in Canada does not exist for the big firms.

    “there’s no tax break for bringing a worker there which the vfx houses would prefer to do.”

    I’m really starting to get lost here, you say that a company would rather hire from abroad than locally or within Canada, why? Granted if the talent pool is small and a particular specialist can’t be found locally then yes Canadian firms will loook abroad, any Canadian firm in any industry would do the same. But every worker from abroad? Are you aware of the added costs in hiring a foreign worker?

    “He said most of the jobs have lower pay than California.”

    Ok so it’s all about the Benjamins then? Lets not get into a cost of living and quality of life argument here, it would be a one sided affair.

    Look, you sound like a decent guy with the right ideas at heart but you need to expand your view of the world. Feature film vfx/animation is a really really really small niche business but you’ve made the choice to stay in California and work solely on feature work. You’ve narrowed your work choices incredibly, so please don’t complain ad nauseum when the economics of the business shift slighty and you are left out in the cold.

    ———–
    For the record, I work in Canada but am neither a Canadian citizen or a permanent resident.

    • vfxsoldier says:

      Excluding China and India for its low cost labor, can you name me those vfx markets that exist without subsidy?

      • majik says:

        Why are you so fixated on feature film vfx, vfx is more than just features and non-subsidised vfx industries exist in nearly every major global city that has a healthy advertising sector.

        Look at most of the foreign companies you rail against. Where did they get their start? The very non-subsidized world of commercials! All of these companies in London and elsewhere were world leaders in commercial vfx long before they started working in features.
        You see your timeline is all screwed up. You seem to think the subsidies came first and the companies followed? Nope.

        Here and there these commercial firms began to slowly branch out into features, bit by bit they got bigger doing these features. Eventually governments took notice because being a labour intensive industry, vfx/animation sustain large workforces. Large workforces mean bigger income tax revenues. To sustain the work, the workforces and the tax takes, governments offer incentives to sustain the work. Businesses flourish and the government gets a nice kickback in the form of a higher income tax take.

        You paint a very wrong picture of whole tax incentive system, as if the governments in Canada, the UK and New Zealand are handing out free money without any expectation of return! Far from it, they’re expecting increased tax revenues from all of us well paid vfx artists!

  5. […] Zealand offers production subsidies, but does anybody seriously believe that a government underwriting of a few million dollars makes […]

  6. anonymous... says:

    All your whining leads me to a conclusion: Why don’t you just GET OUT of the biz???

    It’s a BUSINESS, it’s global, and it’s changed in the last 20 years. Nobody owes you a living. Boo Hoo, it’s not “automatically California’s” anymore…just like cars aren’t Detroit’s, just like no more TV’s are made in America…You can’t change with the economic times…too bad…adapt or die….I’m sure the last buggy whip makers made the finest buggy whips in the world..and they still went out of business.

    The era of “I found what I like to do and I should just be allowed to to it at one company/city for 45 years” is LOONG over…Stop whining about the “good old days”….adapt, die or change your career….Too bad if you have to move to Wellington, New Zealand or Vancouver to work…guess what? Both cities have a better quality of life than Hell-A! Don’t want to move? Become an IT guy, work at a video game company, teach at Gnoman or the LA Film school…

    You’re dinosaur with your “this is the way it was and it should go back to that because that’s what I’M comfortable with” schtick is just like saying….”we need more horse drawn buggies so I can keep making buggy whips”….

    You don’t like what VFX companies are offering in wages? Don’t work there. Your $100,000 non retirement scenario is laughable because…most Americans makes NO WHERE near 100K a year….and YOU have the gall to whine “it’s not enough”…talk about a sense of entitlement whiny brat!! People in the VFX industry do fine (if you are GOOD enough…maybe YOU’RE just a “jouneyman geek” and not a “star”)….it may not be $15 million/pic an A list star makes but Hollywood is an “artificial economy”…look at what an average VFX artist make vs the average American NOT in the film biz….suddenly you’re looking like a rich dude…Studios are businesses not charities..they want product and they want it cost effectively. From their point of view it’s easier to cut “below the line” costs than “above”. People will notice if you swap Brad Pitt out for Patrick Dempsey and will vote with their $$. If a studio swaps out ILM for DD or Weta…most moviegoers will not decide ‘not to go’ based on that, so studios squeeze VFX companies for the lowest bid (or any below the line department). That why movies shoot “anywhere but LA” now…below the line savings are in the MILLION$ and most moviegoers don’t care/notice is a film is shot in New Mexico, or Louisianna or Toronto. Perfect business sense. London, Wellington and Vancouver all now boast Oscar calibre/nominated VFX companies that are on par quality wise with any of the “big guns” in LA and if LA can’t compete on a dollars and sense level…well too bad. If you’re gonna whine about subsidies, then write Sacramento. Your taking cheap “pot shots” at other VFX centers just shows what a little whiny bi-otch you are.

    Tax breaks and subsidies are a fact of life in the film biz…not just overseas locations but many other states in the lower 48. If California can’t step up, maybe it’s time you moved.

    • vfxsoldier says:

      You’re overreaction gives me the impression that you aren’t a vfx artist… just a guess.

      I’ll say it once and I’ll say it again: I’m for a global vfx market as long as there is no protectionism. The California VFX market exists without any help from government.

      All the others need government assistance which is protectionism and which is probably why the attitude of your writing gives me the impression you have something to fear about that.

    • Paul says:

      anonymous I understand that u say if u don’t like the field leave. But do you know that this is happening to many many fields. Do you know how it is to change careers when you have 2 kids and a house? How can someone who worked for 20 years to gain experience over night change careers and do something else? Sure it easy for you to say, just leave, do something else.
      California is not only not helping but abusing production and post production companies.

  7. Rolling Red says:

    Solidarity, vfxsoldier. I admire you for single-handedly fending of hurt egos, Canadian nationalism and libertarians clamoring at your article. As a Canadian vfx professional who worked abroad (NZ and US-California) for 12 years out of 15, and having landed in Vancouver BC at the critical time when every large studio and their grandmother either already set up an affiliate branch office or are considering it as latecomers – you are 100% correct in your analysis.
    Vancouver vfx market specifically is an offshoring business very much like that in India or China. It trends heavily towards very compressed production schedules turning the workplaces into upscale sweatshops. Young Canadian artists hungry for jobs and experience will put up with breaches of BC labor laws just to keep working. Canadian government subsidies in the form of tax breaks are often sited, but what is not being told is that many companies abuse the so called “High Technology Sector” classification to deny their employees proper overtime pay in order to cushion their admittedly thin profit margins – wrongfully at the expense of their dedicated employees. VEABC has a short thread on it: http://www.veabc.ca/forum/index.php?topic=7.0

    I personally experienced it first hand. Ironically having spent years living in the US with a false sense of superiority about Canadian governance and sound business regulations in general, I arrive back to Canada to witness some of the worst labor abuses in this global industry, lack of awareness on the part of Canadian vfx arists, and an arid landscape in terms of organizational efforts. Your blog has become somewhat of a beacon as I am uncovering the local vfx scene.

  8. […] pointed out in many articles on my blog how international subsidies have played a huge role in hurting the US vfx facilities. […]

  9. Más adecuado para petite MM abajo un párrafo corto, el diseño de la chaqueta de manga corta está muy de moda, con un hermoso cinturón, parecía muy encantador. Si usted usa los pantalones estrechos de la pierna negra, el nivel de color es muy impresionante. Si la parte inferior del cuerpo con una falda de lana, que probará gran dama.

  10. […] #VFX Subsidy War Grows Into Global Trade War […]

  11. Howdy I am so delighted I found your weblog, I really found you by mistake, while I was researching on Yahoo
    for something else, Regardless I am here now and would just like
    to say cheers for a fantastic post and a all round exciting blog (I also love the theme/design), I don’t
    have time to read it all at the moment but I have bookmarked it and also included your RSS feeds,
    so when I have time I will be back to read a lot more, Please do keep up the excellent work.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: