New Zealand: Casualties Of The Film Subsidy War

The following video was created by VFXunionWTF

Over the past few months a labor dispute over filming of The Hobbit has drawn the ire of director Peter Jackson as he is prepared to move the film out of New Zealand to avoid negotiating with the unions.

If you were to believe Mr. Jackson, he claims that a $670 million investment in The Hobbit by US studio Warner Bros. is threatened by the exploding costs of granting basic union benefits to the hundreds of actors and technicians that will work on the film.

Of course if you really believe that then you might also believe that Middle Earth actually exists in New Zealand and therefore is the only location The Hobbit can be filmed.

The Real Reason The Hobbit Will Leave NZ

There are two reasons The Hobbit may not be filmed in New Zealand and they really have nothing to do with this labor dispute. I mean really, Warner Bros. has made many movies with many laborers that have collective bargaining agreements.

In fact many of the workers who are a part of various guilds have their respective agreements met even when they go film in non-union areas like New Zealand.

The real reason The Hobbit may go to places like Canada, Ireland, Scotland, and the Czech Republic is:

  1. Huge government subsidies offered by each country to do the production there.
  2. Currency fluctuations that make it cheaper to shoot outside the US.

New Zealand Subsidies Are Dwarfed By Other Desperate Countries

New Zealand has benefited from a subsidy where a producer can get a 15% kickback from whatever production costs occur in New Zealand. The subsidy was much larger back when the Rings trilogies were made in New Zealand because of a loophole. How much did the government give to New Line Cinemas to create the 3 Lord Of The Rings films?

In 2003, the Organisation for Economic Co-operation and Development criticised New Zealand’s government for providing a subsidy or tax loophole worth an estimated $300m to $400m for the three Lord of the Rings films, a loophole later closed.

While New Zealand has since tightened the size of their film subsidy, other countries and states have come to the table to throw even larger amounts of money away.

The UK is offering 20%, New Mexico 25%, Canada 35%, Michigan 42%. What’s interesting is that independent studies have shown that there has been little economic spillover from these kinds of subsidies and they have taken a toll governments that have lost a lot of money on such investments.

One of them happens to be New Zealand which found they were losing money.

Now NZ Is Engaging In Protectionism

I’ve pointed out in many articles on my blog how international subsidies have played a huge role in hurting the US vfx facilities. While it’s been humiliating for us to see US studios take work overseas, we are routinely chastised and accused of engaging in protectionism for the idea that US studios should make US films in the US. Well guess what my reaction was when I saw this video of the workers from Weta protesting in the streets of Wellington claiming that The Hobbit should be filmed in New Zealand to protect the NZ film industry.

If You’re A Sensitive Kiwi, This May Hurt

First off, I know quite a few workers from Weta who were at those protests. Many of them aren’t even Kiwis and are from the UK, US, and Canada. By the way, since when did JRR Tolkien ever mention that his inspiration for Middle Earth was the country of New Zealand? I’ve been to NZ and while it is beautiful, it is nothing compared to Canada’s Yukon Territories which would be a wonderful location for Middle Earth.

Secondly, The Hobbit is not New Zealand film. Yes, it is going to be directed by Peter Jackson who is a Kiwi, but it’s being produced by the US studio Warner Bros. The money it makes will benefit the US studio.

Finally, there is no such thing as a ‘New Zealand film industry’. What there really is is a maquiladora film industry : A film industry that exists for US studios to take advantage of free government money. Right now other countries are offering more money to do production work there and with such a huge investment by Warner Bros, it would be smart to take the production to the highest bidder whether Peter Jackson or the people of New Zealand or the carpet baggers of Weta like it or not.

New Zealand Has “Nothing To Offer”

For all it’s beauty and oscars won by Weta, there is nothing that New Zealand offers US production studios other than free government money and if you are offended by that statement you should be, but not at me.

This is essentially what Mr Peter Jackson said in a sobering account of his review of the NZ Film Industry when it was discovered that subsidies offered to US studios like Universal were big losers for the country:

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.

Even Avatar’s producer reluctantly admitted the reason why they did Avatar at Weta in New Zealand wasn’t because of their superb work, but the free government money:

Asked in December why New Zealand was chosen as the film’s production location, Avatar producer Jon Landau said: “To be honest, we went for the tax credit.”

Disney Is Also Leaving NZ Without Any Labor Dispute

If you still think the reason behind this is the labor dispute then perhaps you’d be surprised to hear how many in the media missed the other big story in New Zealand of how US Studio Disney has decided to pull out of their investment of Auckland Film Studio. No labor dispute there. Disney has been busy doing most of it’s work in Vancouver which is offering a 35% subsidy.

Casualties Of The Currency War

The other huge elephant in the room is that the cost of production in New Zealand is much higher now through no fault of New Zealand.

You can see a historical chart that graphs the exchange rate of the New Zealand Dollar to US Dollar.

During the time of filming of the Rings trilogies, Mr. Jackson not only had $300-400 million of government subsidies to lure US production to New Zealand at the time, but he also had the advantage of a historically low New Zealand Dollar which made production costs comparatively cheap for US studios.

Today, New Zealand’s Dollar is at an all time high and is expected to go up even more as the US Dollar weakens. It should be no surprise that US Studios have taken notice of this.

Last year the VES had a production summit where a Warner Bros. producer and VFX executive both admitted that a lower US dollar was keeping production in the US. I can tell you that one VFX facility in the US was awarded a film that should have gone to Weta Digital. Usually it’s a no brainer to go Weta, but with a falling dollar, US vfx facilities stand to gain.

The Terrible Irony Of Subsidies And NZ

I always have said that in the race to the bottom the biggest loser is the last person standing and with film subsidies, the last person standing is the one giving away the most free money. Ironically, one could see The Hobbit being filmed  in New Zealand if subsidies didn’t exist at all. There would be no other country that could undercut the others and therefore the choice of production location would probably be based on preference. If you live by the subsidy, you die by the subsidy and for a country like New Zealand it’s in a very tough situation since other countries are offering more money. It’s no surprise that Peter Jackson and WB are looking to take advantage of this by leveraging the NZ government to hand over more money.

Soldier On.

35 Responses to New Zealand: Casualties Of The Film Subsidy War

  1. Martin says:

    If you were to believe Mr. Jackson, he claims that a $670 million investment in The Hobbit by US studio Warner Bros. is threatened by the exploding costs of granting basic union benefits to the hundreds of actors and technicians that will work on the film.

    That’s just untrue. I think I’ve read/seen all of Jackson’s interviews & statements on the topic & he has never raised that once.

    His pitch is far more ‘a small union representing far less than 200 of NZ actors insisted it negotiate the standard contract for all NZ actors even if they chose not to be represented by that union, and then Hobbitfilms refused to do so, used the power of its Austrailan big brother to call a worldwide stoppage via affiliated unions.

    He’s simply never said that Warner Bros. is threatened by union-based cost increases.

    • Fred says:

      There is ABSOLUTELY NO REASON for a government not to offer a 100% TAX BREAK!!!!!
      The government will still earn millions for the economy,even if the studios paid no tax! This would also bring in more future films!
      They’re happy to spend millions on pointless road works pointless ‘Green’ energy projects and inflated bureaucratic salaries……

      • vfxsoldier says:

        This statement is an example of why we vfx artists and technicians have so much to learn.

      • penguintd says:

        Movie is not essential to life, while road and green energy is.

      • oscar says:

        well it really comes down to whether the ultimate spenditure of the movie will allow the govt to break even or profit. The way the tax breaks work (in aus at least) arn’t through tax deductions but quiet literally providing actual money towards the film in the form of a rebate. It is a investment for the govt. as it means that they will make money off the tax the employees get taxed and what they spend whilst in the country (if from overseas) and the tax made off those things. its not an actual tax discount like your saying otherwise a country like Dubai would be booming from this already.

  2. […] reading here: New Zealand: Casualties Of The Film Subsidy War « VFX Soldier Filed under: New […]

  3. Paul says:

    VFX Soldier,

    Once again thank you for making this clear! Let’s hope people will understand the pit falls of the subsidies war!

    Soldier on!

    P

  4. Theo says:

    subsidies are a reality of the global economy, the film industry is hardly a special case. Enjoy your subsidised corn fed diet.

  5. Kiwi Soldier says:

    Martin hit the nail on the head. Its a shame this blogger uses his voice to opine on what he *thinks* the situation is rather than being informed and reporting on what the situation *actually* is. It reads like he wants to use this situation to justify his own agenda.

    • vfxsoldier says:

      Here is the irony:

      http://www.newstalkzb.co.nz/newsdetail1.asp?storyid=184629

      It appears that instead of offering larger subsidies, the NZ govt may modify employment laws to make it even more lucrative for WB to do business in NZ.

      Weta workers really want to work on the Hobbit.. How about they pay for it by mandating OT after 80 hours instead of 60? Afterall it’s to “save the NZ Film industry”

      • No One says:

        Weta is going to do Hobbit no matter where it’s filmed. This isn’t about the Hobbit, it’s about the next film, and the one after that….

      • Kiwi Soldier says:

        Tend your own garden you ill informed little man. You are apparently a bitter VFX artist with a blog rather than a new career they still find fulfilling.

        We work as contractors here with the rates we work because we want to. Its our choice and our industry – we built it an we wont let some union shennagins take it away. You would understand this…if you educated yourself on the situation rather than trying to use this to further your own bitter little agenda.

      • Martin says:

        the NZ govt may modify employment laws…

        True

        …to make it even more lucrative for WB to do business in NZ.

        Completely unsubstantiated by that reference.

        If you’d been following the issue more closely you’d have noticed the “We are legally not allowed to negotiate with the unions in this issue” and “oh yes you can it’s perfectly legal” argument.

        The attorney general of NZ has sided with hobbitfilms on this matter, but it’s actually to do with a piece of case law (rather then primary legislation), and that is what it looking to be clarified so that all parties have clarity. Might it go the direction you are claiming? Of course, but that is not currently supported by your references.

        One this I really do hope it clarifies is that a tiny NZ union that the vast, vast majority of NZ actors have chosen not to join has no right whatsoever to insist it it negotiates the contract for those actors who have chosen not to be represented by it, and instigate a worldwide stoppage as a result of not getting it’s way.

  6. Andrew says:

    Vfxsoldier, you are full of shit. Your blog is a load of bollocks.

  7. ACME Industries says:

    Sorry, but you don’t account for some simple facts, and I just don’t think this description of events meshes with reality.

    Until the various actors unions issued an international stop work order (based on an request for an illegal agreement with producers), everything indicated that the project was going to be green lit for production in NZ. Millions of dollars had already been spent in pre-production for sets that cannot be easily shipped over seas.

    I’ll admit that it (currently) remains to be seen if additional subsidies result from the whole affair. But, I think it’s pretty TIN HAT wearing CONSPIRACY THEORIST to argue that they and anything to do with creating the situation in the first place.

  8. anon says:

    Im positive you have it wrong, the reasons for the ban and the subsequent damage done to the Hobbit production have never really been related to NZ film subsidies. I work in the VFX industry myself and its disheartening to see such a biased and uninformed commentary being taken seriously.

  9. Morgan says:

    While I’m sure there’s some truth to your analysis, I think the depressingly jaded conclusion is a little oversimplified, and you don’t give people enough credit. There’s a few things I have to disagree with:

    Say what you want about Peter Jackson, but he’s fighting hard to keep this project in his home country. He may be at the whim of Warners, but I don’t think for a second that he’ll be happy with any solution that takes the project out of NZ.

    Saying that New Zealand has nothing to offer is also a bit silly I think. If money were the only factor in every decision being made, why go through any trouble with any location at all? The New Zealand landscape proved perfect for Lord of the Rings and arguably raised the value of the film.

    Finally, you wouldn’t be able to say that there’s no such thing as a New Zealand film industry (even though you keep referring to it) if you were at the rally in Wellington yesterday. It’s exactly the kind of passionate people that make up the industry down here that have me not missing the US.

    I really hope the Hobbit stays here, for a lot of reasons, but especially if it will warm the jaded hearts of those of us who are obsessed with money and have come to believe that that’s why we all do what we do.

    So soldier on, indeed.

  10. […] really positive and uplifting. Everything that has happened with The Hobbit has inspired a lot of depressing rhetoric on the state of the industry, so it was nice to take a break from the global controversy and hear […]

  11. DILIP B VARDHAN says:

    DEAR SIR,
    OUR COMPANY REQUIRES SUBSIDY FOR FLIMS,PL GIVE THE DETAILS

    REGARDS

    DILIP VARDHAN

  12. Kiwi Soldier says:

    yer still a cunt and likely still unemployed.

    LULZ

  13. […] individual who calls himself/herself Winston Smith, or just plain thoughtful comments like these: Kiwi Soldier says: yer still a cunt and likely still […]

  14. […] all the superb work they do, and the huge government subsidies offered by the NZ government, they almost lost The Hobbit films had they not let WB shake them down for more subsidy money. The same can be said for basically […]

  15. […] for me. I was outraged by the ability of a US corporation to use another country’s sovereignty as a doormat for their own gain. New Zealand VFX blogger Morgan Loomis disagreed: I really hope the Hobbit stays here, for a lot of […]

  16. […] to use another country’s sovereignty as a doormat for their own gain. New Zealand VFX blogger Morgan Loomis disagreed: I really hope the Hobbit stays here, for a lot of reasons, but especially if it will warm the […]

  17. Sir ,
    We are new film production company , want to produce a hindi / english movie
    and want to shoot about 60 % part of the film in new zea land . what your government can help us by allowing subsidy ? As our film is a low budgt film .you are requested to provide financial subsidy detail as soon as possible and oblige . Thanking you sir ,
    yours` truely …. Kanubhai Thakker – Ahmedabad ( india )

  18. […] fact I previously pointed out that Landau ultimately chose NZ because of the subsidies: Asked in December why New Zealand was chosen as the film’s production location, Avatar […]

  19. […] If you remember, two years ago I wrote a few posts about how WB threatened to film The Hobbit elsewhere if the NZ government didn’t sweeten the incentives deals. […]

  20. […] 2 years ago I wrote about the debacle concerning the Hobbit. Most media reports focused on the premise that Peter Jackson and WB were concerned about a union group looking to organize Hobbit actors and threatened to take filming to another location. I disagreed, studios have generally dealt with unions no matter where they shoot. […]

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  22. […] New Zealand: Casualties Of The Film Subsidy War – The real reasons Peter Jackson almost took the Hobbit out of NZ. […]

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