European Union Reviews Film Subsidies For US Studios

Last March I posted on how the UK film subsidies are scheduled to end next year. It should be no surprise the the EU will be reviewing film subsidy policy with the following question in mind:

does a subsidy race to attract major US productions undermine the effectiveness of aid to support smaller European films?

Absolutely. You can look no further than the recent best picture winner The Kings Speech. Here is a legitimately British film that was heavily funded by small London studios and government money by the UK Film Council.

As the UK government engaged in austerity cuts, it chose to axe the film council and not the tax rebate program that is heavily used by US studios.

Last year I pointed out a bogus report by the UK Film Council supported by many Soho vfx facilities that tried to claim how “UK Films” were making huge money. If you look at the films listed, the vast majority of them are films by US Studios like The Dark Knight which was able to pass vague cultural tests like having a British butler that make it a “British Film”.

Will independent European filmmakers be able to make the case to the EU? I doubt it. If anything, the US studios and UK subcontractors will heavily lobby to continue the status quo.

However, the EU might be concerned about subsidies because of the recent brawl between US and European aircraft makers Boeing and Airbus. Airbus was able to lure US defense contracts with artificially cheaper bids that were indirectly subsidized by European governments. Boeing took their case to the WTO and forced the EU to comply with international trade law.

This very same dynamic is the cause of the recent volatility in the VFX industry. US studios are lured to take VFX work to locales where foreign governments offer lucrative free money in the form of taxpayer rebates. I’ve argued that this is a violation of WTO trade rules.

The EU might also be interested in the review many US states and economists have taken on the issue of subsidies for films.

The Economist reports:

All this is silly. First, as Joseph Henchman at the Tax Foundation, a non-partisan think-tank, puts it, even when a state succeeds in luring film crews, they rarely boost the economy or tax revenues enough to justify the costs of the incentives. Film companies usually import their staff (stars, stuntmen, etc) and export them again when the shoot is over. The local jobs they create (hairdressers, sound technicians, pizza deliverers) are mostly temporary.

The Tax Foundation also notes that state subsidies are starting to decline:

[W]hile film incentive programs were once universally applauded as great economic development tools and tourism boosters, their merits are now being rigorously debated. At a minimum, film incentive programs should be required to report how many dollars in incentives were provided per each Full-Time Equivalent (FTE) job created by qualified productions. Programs should be reviewed periodically for their effectiveness by legislative oversight or a third party.

Soldier On.

13 Responses to European Union Reviews Film Subsidies For US Studios

  1. nha says:

    I’m betting this was was never a problem to you when there was less work in Soho and more in the USA – now that the USA has had ten years of ‘good times’ and the uk gov with its subsidies, you suddenly fear for you job. If it does a 360, the problem still exists, all the work returns to the USA and Europe loses out. Subsidies are what they are, its business, the fact still remains, the uk can produce great vfx and that is a threat to the US vfx industry. Natural progression of a young industry. Shall we all complain at how many films the USA are making, flooding the international market with hollywood tripe thus squashing all chances of more independent european films from making a success? Where are you going with this?? You sound desperate.

    • VFX Soldier says:

      That’s actually not true.

      I’ve consistently railed against subsidies in the US and right here in California. It artificializes the price of film work.

      Also, it’s not like this stand against subsidies is something new. There have been organizations for more than a decade dedicated to stop film subsidies: http://www.ftac.net/ This was started by VFXer Gene Warren Jr.

      You should re-read my article as I take a stand against US studios squashing independent european films. The irony here is that the intent of these subsidies is to help these indie local producers. It’s doing the opposite, US studios are getting them.

    • VFXPeon says:

      If the work in the UK is so great, it shouldn’t need subsidies in the first place. If I lived in Britain I wouldn’t want my tax dollars going to American companies so they can make entertainment. It isn’t just “just business” it’s corporate welfare.

      As for American films “flooding” the market, if you don’t like them, don’t watch them. It’s called voting with your wallet. If people want British movies they will go to the theater and buy tickets for them.

      • nha says:

        Do you honestly think USA would reach out as far as europe if the subsidies weren’t there? Fact is that right now in this current time, Hollywood is the greatest force in film making and thus we must make it our business to attract the work. We’re all doing very well here – there’s lots of work on offer and the studios are growing so clearly no one is worried about tax going to the american producers!

        I agree with what you say in your reply vfx soldier, the fact is that the rest of the world has to in some form make it attractive for Hollywood to consider using us at all and not just staying local!

      • vfxguy says:

        The reason subsidies are required by centres of film production outside of california is because without them no-one would leave Hollywood. Not because of work quality, but because of laziness.

      • VFXPeon says:

        @nha: do i believe that the work would be going to all these other countries if subsidies were not in place? no. i feel like my previous comment made that obvious.

        do i think tax money should be going towards entertainment? no. do i think that governments should artificially lower the price of vfx in order to drag jobs away from other countries instead of actually CREATING jobs? no.

        i mean, where does it end? you think the jobs will all just get sucked into london? the london companies like dneg and mpc have recently opened divisions in places like singapore and india and other companies will do the same. slowly but surely the london gigs will drain away towards asia because the subsidies and prices are better there. then you’ll be pissed off at getting outsourced and wonder if all that money your country spent over the last few years actually benefitted you guys in the long run.

  2. Dave Rand says:

    I’ve been writing about this for some time now and recently here on Soldier :

    “…….t’s my belief that countries like India and China, who’s middle classes each are bigger than that of all of North American, will one day soon be busy making their own stunning digital imagery (and meant to be consumed by their own masses). It won’t be long before distribution, content, and the fat box office takes will be “outsourced” as well and everyone will be looking for a better and smarter way to do things.”

    To me it’s inevitable that the film industry decentralizes from Hollywood and not because other countries are breaking WTO regs by offering subsidies to American projects, but simply because it’s a great business. The strong hold on distribution is waining and the world’s taste’s are widening.

    On my last crossing to Vancouver the guard denied me a work permit at first. This was shocking and I felt stunned as my whole life was sitting in the car outside. She accused me of stealing Canadian jobs because my country “was in such a mess”. She was using the phony list of job titles as the main excuse to deny me…job titles that don’t even exist in our industry…like Adobe Premier FX Editor which did not appear on my resume…or anyone’s for that matter.

    I told her I was chasing my own job up here, that I was working for an American company on an American Project that’s creating tons of jobs for Canadian artists as well. Then the conversation turned to my last job permit for Journey to the Center of the Earth and she, being madly in love with Brendan Fraser (a Canadian she pointed out) , asked me if I knew him so I told her to Google my name and his together. After that exercise she decided I was a “good” American and gave me 6 months. With relief a got into my car and it started to snow like crazy..they told me it never snowed up this way, and I soon got stranded at an Indian Casino for the night. -That is a true story.

    Now I’ve heard the US border guards are just as “civil” to Canadians crossing over to work in the states.

    Like many, I would really like to see this evolve into something better world wide. Great books come from all cultures, greater movies can also. Digital imagery opens the visual vocabulary and provides limitless story telling and the communication of ideas. No one country should have the lock and the key for that.

    • meh says:

      Nice! I said the same thing several months ago on this blog and was chastised for being a Hollywood “hater”. It’s no coincidence that Web 2.0 distribution, declining copyright enforcement, growing Asian middle class, china in the WTO and aging western populations is putting pressure on the studio content factory. They’ve had their monopoly for too long and not even itunes will save the declining domination of the inane celebrity driven US media culture.
      13. ENFORCE TRADE LAWS
      We lost manufacturing jobs in every one of the eight years after I left office. One of the reasons is that enforcement of our trade laws dropped sharply. Contrary to popular belief, the World Trade Organization and our trade agreements do not require unilateral disarmament. They’re designed to increase the volume of two-way trade on terms that are mutually beneficial. My administration negotiated 300 trade agreements, but we enforced them, too. Enforcement dropped so much in the last decade because we borrowed more and more money from the countries that had big trade surpluses with us, especially China and Japan, to pay for government spending. Since they are now our bankers, it’s hard to be tough on their unfair trading practices. This happened because we abandoned the path of balanced budgets 10 years ago, choosing instead large tax cuts especially for higher-income people like me, along with two wars and the senior citizens’ drug benefit. In the history of our republic, it’s the first time we ever cut taxes while going to war.
      http://www.newsweek.com/2011/06/19/it-s-still-the-economy-stupid.print.html

  3. yeah says:

    “Absolutely. You can look no further than the recent best picture winner The Kings Speech. Here is a legitimately British film that was heavily funded by small London studios and government money by the UK Film Council.

    As the UK government engaged in austerity cuts, it chose to axe the film council and not the tax rebate program that is heavily used by US studios.”

    I think it got 1 million GBP from the Film Council, the rest from private investors. (out of a 8million GBP budget).
    Further, the government is *still* funding films. What got axed was the NGO, the UK Film Council that was handling the funding and while I certainly disagree with that decision, because they were doing a good job, the funding was not cut, although it escapes me who is now handling it.

    • fizz says:

      The UK gov axed the UKFC describing it as “poor value” (several execs on its board were earning more than the Prime Minister) but the fund still exists. It is now being administered by the British Film Institute (BFI) which runs the national film archive amongst other things – the BFI is seen as being more cost effective, though they’ve never been involved in the business of making films, just curating archives, cinemas and the academic study of film. The fund isn’t a subsidy in the true sense – it’s invested in films that might not otherwise get made (The King’s Speech, for example, was turned away by the BBC, Channel 4 etc) but if the movie makes money then the investment has to be repaid with interest – the UKFC got a very healthy return on its stake in The King’s Speech.

      The tax rebate is a totally separate thing and – in general – is only available to films that shoot within in the UK spending more than a certain percentage of their total budget in the country (the total budget needs to be US$80million minimum to be eligible in the first place). It’s scheduled to end next year in as much as it’s up for review but the UK gov has already committed to extending the scheme for at least the duration of the current parliament (2015).

      The biggest threat to UK VFX companies at the moment is the lack of skilled staff. The UK gov has clamped down on non-EU immigration into the country making it difficult for the London VFX houses to recruit enough people – the European community is pretty much tapped out. This, surprisingly, is the primary motivation for opening up shops in Singapore, India etc, though it doesn’t hurt that SG is one of the few places that will actually directly subsidise VFX work (to the tune of 25%).

  4. […] not just the US that is interested in this issue. The European Union is taking a look at the film subsidies with this question in mind: does a subsidy race to attract […]

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  6. […] advantage is the UK avoids having their film subsidies reviewed by the EU every few years which is a requirement. A few years ago the EU actually proposed capping the film subsidies in the UK as this blog […]

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