In the US there’s a famous saying in politics:
“It’s the economy, stupid.”
Everything is about the economy and for New Zealand, the reason why The Hobbit may have left is not because of unions, but because it’s more expensive for a US company to export work there. Much of that has to do with economic subsidies and currencies in various countries.
However NZ PM John Key has announced an agreement:
The government will pay up to US$25 million and make legislative changes negotiated with Warner Bros. Prime Minister also announces a ‘long-term strategic partnership’ with studio.
WB is prepared to spend US$ 500M on The Hobbit. Let’s assume for simplicity’s sake they will spend that total budget in the country they are prepared to make the film in.
How much is US$ 500M in the various currencies of the countries competing to get The Hobbit?:
- New Zealand: NZ$ 668M
- England: GBP$ 316M
- Canada: CAD$ 512M
However, each government offers a direct rebate for the money you spent there. Generally speaking, these are the percentages they are willing to subsidize for a production:
- New Zealand: 15%
- England: 20%
- Canada: 33%
When you factor in those respective subsidies and convert the totals back to $US, this is the total amount WB can expect to spend on a $US 500M production of the Hobbit in each country:
- New Zealand: US$ 425 M
- England: US$ 400M
- Canada: US$ 343
In other words, while NZ is offering $75M to do The Hobbit there, Canada is offering almost $160M to do it there. That’s more than twice as much! That’s almost $214,000,000 in NZ Dollars. I suspect these are the kind of numbers being shown to NZ Prime Minister John Key who has been meeting with WB executives to negotiate keeping the film in NZ:
Asked about the size of the gap between what New Zealand taxpayers were putting up and other governments were offering Mr Key answered: “It’s not in the tens of millions, put it that way. There’s a lot of noughts.”
NZ$ 214,000,000 isn’t tens of millions, but it does have a lot of noughts.
Would WB actually have the audacity to ask for more money after already being given US$ 75M for just showing up? You betcha:
It’s no coincidence either that WB has mentioned it would be uneconomic to do the film in New Zealand if the NZ Dollar went above 50 US cents:
Why 50 cents? Because at that level the $US 500M production would come down to $US 400M in New Zealand. That’s exactly the same amount the next bidder England would be offering. Welcome to the race to the bottom.
You have to give credit where credit is due though. Warner Bros. was able to show up in one day and get US$ 25M on top of the US$ 75 M to match what England was already offering and a change in national labor laws.
Ironically a report was released today showing that New Zealand tied for number 1 as “least corrupt” country. Timing is everything.