UK VFX Artist and blogger David Stripinis and I were sharing a few tweets about some articles about VFX in the UK which he felt were some choice words by British Film Commissioner Iain Smith:
“London is now probably the world’s leading centre for visual effects houses. They’ve taken the lion’s share of major work away from Los Angeles. Ten years of Harry Potter has helped them with forward planning. With the creation of the franchise, houses like Framestore and Double Negative have been able to plough capital back into their companies and compete in the international market.”
That’s a pretty peculiar admission by the film commissioner. As you know I argue, and David Stripinis agrees, that the reason so much VFX work is done in international locations is because of the film subsidies.
Film commissions that administer the subsidies usually claim that they are CREATING jobs. However in this case they admit they are TAKING jobs away.
But so what? Who cares?
Well the problem is the UK, US, and most countries have signed to join the World Trade Organization. It’s job is to encourage free trade by eliminating tariffs and subsidies. At the same time, it also has remedies to protect domestic industries where workers are being adversely affected by another countries subsidies.
It’s 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 major US productions undermine the effectiveness of aid to support smaller European films?
Instead of encouraging creation of their own films, US studios have squeezed out UK films for their own. Even one article written today entitled “Did Harry Potter Save or Destroy the British Film Industry” asks the same question:
One reason Hollywood likes filming in Britain is that the government offers generous tax credits to foreign companies shooting there as long as they put a sufficient percentage of Britons on the payroll. So those tax incentives (as well as the films’ profits) represent money not being plowed back into the local economy.
Still making strictly British films are independent production companies like Working Title, but otherwise, there’s no counterpart to the Hollywood studio system. As a result, only a few dozen British movies are made each year.
I’m pretty sure the UK will be fine but for the VFX artists in the US, this should be one of the catalysts for organization. While we bicker about things that I feel are distactions: For example, where the union stands on piracy.
We should be organizing and working with the US Trade Representative and going after these subsidies for what they really are: Illegal.
Just as a note – even though I’m UK based, I’m ‘Merikan!
they took our jerrrbbss
They took err jerbs!
vfxsoldier, I just want to point out a major incongruity in your conclusion. You say that fighting the subsidies should serve as a “catalyst for organization” in the US, while the union’s stand on other issues such as piracy (IA’s support of the IP Act) should be put aside. Then you call for: “We should be organizing and working with the US Trade Representative and going after these subsidies for what they really are: Illegal.”
Trouble is, as you know that IA everywhere is in fact not only supporting the tax subsidies in principle but actively lobbies the governments to instate them.
I admittedly have a problem with how you present the issue of subsidies. You tend to oversimplify it and skip many of the details to arrive at your preferred conclusion that: subsidies are flat out illegal. As you know, it isn’t so cut and dry but you do not admit that on your blog.
Moreso, you take the WTO and the Free Trade as your yard stick to what is “normal” way to engage in international trade. Upon this basis you conclude that subsidies which are not entirely *forbidden* but *regulated* (significant difference) – are illegal. You omit completely the analysis of what the WTO is as an organization and what are the effects of Free Trade on the global community. The fallout effects of NAFTA for example implemented in the 90’s have fully manifested themselves by now. The damage is born not only by Mexico but also the US and Canada.
You also seem to be unaware that Labour movement is generally positioned to oppose those Free Trade Agreements. Right now for example Unions in Canada are opposing CETA (Canada-EU agreement).
Perhaps it is time to look at this issue not only in narrow terms of vfx industry and realize that our industry is *only one of many* that are weathering the storm of the neoliberal economy the is sweeping the world. The massive movements in Greece and Spain, the impressive protests and acts of courage and civil disobedience are: precisely about THAT.
It frustrates me immensely that our debate is so narrow: “Will vfx jobs leave to India?”. “Will all the good work stay?”. The problem vfx industry is facing in the US, the offshoot effects in the UK, New Zealand, Canada and Asia must be looked at in context of current day international economic policies. C’mon peeps, our struggle does not exist in a vacuum, let’s take a broader look and we’ll gain better insight, I guarantee.
Yes the IA lobbies for rebates, so do the facilities here in California. I think thats a bad long term solution.
You are correct, not all subsidies are illegal but in the case of the film industry, they are. Again, read Claire Wright’s piece:
Click to access wright1.pdf
Yes, I know… Claire Wright. I am probably the only one who read that lengthy PDF. My opinion on Claire Wright and her research is in your comments somewhere, I won’t belabor that.
More importantly however, if you correctly identified the WTO and Free Trade as the core problem behind the backlash phenomenon of subsidies – you’d have no conflict with the IA.
Subsidies are not unlike Genetic Engineering – it is devastating when abused by the kind of Monstanto Inc. Yet it is a very effective way to treat cancer. Understanding that nuance makes all the difference.
Granted subsidies can have horrible consequences locally and internationally, like in the case of Agricultural subsidies in the US, but does that make *ALL* subsidies “bad”?
When countries disadvantaged in a given sector (like Canada or EU in case of vfx) resort to subsidy implementation – they are fighting what otherwise would be a California State VFX Worldwide Monopoly (now, I know that you would not mind that, but 90% of the rest of the wanna be vfx artists around the world do) and attempt to pull the blanket back on to their feet in an unleveled landscape defined by, precisely – the Free Trade Agreements and the WTO.
Conveniently for us and this particular debate, the UK is phasing out the vfx subsidies. Let’s wait a few years and see how the vfx industry fares in Britain before we throw in the verdict on efficacy or lack thereof of subsidies in the VFX industry.
The UK isn’t phasing out VFX subsidies as there weren’t any in the first place. The tax rebate/subsidy is paid directly to the movie producers. To qualify for the rebate your movie must be shot at least partly in the UK (you have to hit a minimum number of days filming) and you must be spending at least 25% of your total budget in the country. There are also various other cultural tests such as the nationality of the crew, the characters, themes etc. which you have to get past. The total budget must be at least $80million. Of that 25% “good spend” in the UK 80% of it is rebateable to a level of 20%.
I’m not sure where this idea of the UK phasing out the rebate comes from. It’s been renewed through to the end of this parliament (2015 earliest) and further extension would appear to be a formality. I’d be surprised if it changed significantly before 2020. Perhaps people are getting confused about the demise of the UK Film Council?
I recall when the first Harry Potter project started and companies were bidding on it. Then it was disclosed that 75% (?) of the vfx would have to be done in the UK to qualify for tax incentives. It wasn’t simply that the director/producer selected companies based on basic bids or quality, it was determined based solely on tax incentives. Only companies in the UK would be considered for the lions share. That was one of the first time I recall tax incentives being pushed for vfx on a large picture.
I thought it odd at the time and certainly it has enabled the UK vfx industry to leverage it to the full extent they could. What I find odd is many of those in the UK try to ignore that bit of history but there’s no denying that while there were vfx companies before Potter, they were smaller and working on UK projects and the occasional US project. The tax incentives gave them a huge boost and allowed them to grow to a size that would have been impossible without the tax incentives.
What proportion of UK vfx artists are American ex-patriots? I keep meeting up with American artists who are packing up and moving to London. Now that Harry Potter is over, will they be coming back?
A rough guess would be around 5% max of the UK VFX workforce are US ex-pats. This isn’t growing as the UK gov is making it increasingly difficult to bring in non-EU overseas staff. London’s VFX houses are fully booked for the foreseeable future (at least two years) which is putting pressure on the UK facilities to ship work out to places where they can hire the staff such as Singapore (and where they are directly subsidised).
You lost me at “David Stripinis” that dumb f*ck has no place in any studio. Damn surprised he’s working anywhere.
Fizz, I got that info from who-else but our host vfxsoldier: https://vfxsoldier.wordpress.com/2011/03/08/uk-vfx-subsidies-to-end-next-year/
Is that not accurate? Admittedly I did not follow up on the links included. I will do so now, to make sure I have the correct understanding. Please link us to other sources if you have any.
And one more fairly recently:
It’s possible that the EU might kill off the UK film production tax shelter – the UK system is set up inside the framework provided for by the EU – but it seems unlikely seeing as the French provide huge subsidies (and quotas) for indigenous production. As a result the quid-pro-quo of the EU means that the UK has a great deal of leverage to keep their system going.
The date of March 31st 2012 is just the end of the UK tax year – the tax shelter is renewed on that date every year. It doesn’t automatically mean that it’s “scheduled to end” any more than a yearly contract is scheduled to end.
The previous Labour government were very pro the tax shelter and the current lot seem to be maintaining that position. They feel that the shelter is a cost-effective revenue generator.
Then again, they’re doing a lot of stuff that they said they wouldn’t when they were running for election so who knows?
You’re not taking anything soldier writes as gospel now are you?
Fizz is correct. UK subsidies aren’t going anywhere for a while. Apart from anything else, if the current administration was going to ax them they would have done so in the post-election budget cuts.
Just curious but has London or Vancouver experienced production “gaps”? Is there work all year round or do you have to play the studio shuffle game every few months / years ?
London has gaps, same as anywhere else, but they tend to be lulls rather than complete droughts. The last time that happened was in 2002 when everything stopped (except Potter) for around six months. Then it went crazy and has stayed pretty much that way ever since.
In Vancouver the standard tends to be 3-6 months contracts depending on your experience and area of expertise. The more experienced artists can negotiate a 1 year deal. Very often the companies do not honour the full length of the contracts rendering the length of contracts almost meaningless. As non union artists we are at full whim and mercy of our employers, we work when they need us, and we are the first ones to go when they want to cut costs.
At the moment there is more studios in Vancouver looking for artists then the local talent pool can supply. There is a great influx of new people from Montreal, Toronto, California and even as far as far as the EU. At one point however the balance will equalize or change altogether and artists will be forced to spend increasingly longer periods out of work in between projects.That is what I feel we need to prepare for. A union offers artists an increased leverage and bargaining power as a group and by extension as individuals. The time to act is now.
Umh – stupid wordpress autofill. Canthave = Rolling Red. Cheers you guys.
What hasn’t really been brought up here, is that the work goes where the biggest talent pool is, primarily. Then as a second the subsidies come in. England has a ton of traditionally trained artists, as England has always kept the old crafts and knowledge alive, more so than other countries. I think there are more realistic painters and sculptors in the London area working in film, than in other vfx hot spot around the world, and that shows in the quality and speed of what is done there. England has made movies for a long time. And as far as I can see, we are image makers using computers, not the other way around.
So I’m suspecting that the main reason that so much work goes to England is that they have a talent pool that can get good work done fast. And I also suspect that more and more work will keep going there.
(I’m not English, btw)
No, the studios do not award projects to where talent is. They award based on a number of factors but having the most workers in a geographic location is never one of them.
The studios didn’t suddenly discover a large number of talented and experienced vfx artists hidden away in London and decide that they should simply start sending all of their work there.
Obviously they have to make sure the company can produce a base level of work required. Quality vs costs is always an issue and studios have to determine what makes sense. Subsidies and lower cost of living in some areas plays a role in this.
The UK does have a large number of talented vfx people but you have to remember that the reason why vfx has grown so large and rapidly there was due in large part to initial and long term tax incentives. Without those there still would have been growth but not nearly the same level as we’re seeing now.
It was Hollywood, aided with the incentives, that helped to raise the size and quality of the London vfx companies. VFX companies in California had the advantage of being close to Hollywood in the pre-digital days and the number of projects spurred the growth of ILM and other vfx companies.
The number of working artists in an area is determined by the amount of money and projects coming into that area. That’s why Hollywood was the capital for movie making for a long time. It wasn’t that this was the place that already happened to have actors, directors, writers and others. If London didn’t have the projects then artists from all over the UK (and Europe) wouldn’t be moving to London and they wouldn’t be employed there.
Now that the vfx industry has matured in London work obviously continues to flow there but what if all the incentives stopped tomorrow and the cost of doing shots there ran much higher than elsewhere? Once again the studios would have to balance where to go while weighing costs and quality.
As always I think the UK vfx artists are doing great work just like a number of vfx artists in the world are doing great work. I just want people to be aware of the business side of film making and what it actually means to all artists. We create many things but the recall of the history of vfx and the reasons are not the things we should be creating.
When studios look for vfx vendors, they line up companies that can deliver the quality on time first, and then they look for the lowest bid. There are tons of vfx vendors around the world that work for less than the companies in London and LA, but they don’t get the work. So my point is, yes, the talent pool is a factor, as the majority of artists don’t hop continents.
In my opinion, London has got an exceptional talent pool due to his dense population and the traditions I pointed out. No need to point out that a number of vfx artists in the world are doing great work, I didn’t say they didn’t.
That’s why I think a lot of work goes there, not just because of the incentives. London has had its facilities since a long time. They weren’t built by Hollywood. But they sure were inflated by it.
The work for the ‘Lord of the Rings’ films was not awarded to WETA because of large talent base. At the time, WETA’s largest project was ‘The Frighteners’, and even then, artists had to be borrowed from America to get it finished. The work was awarded because WETA was who the director wanted to work with, and the monetary exchange rate plus incentives made it attractive to the studio/prod. co. It was up to Jackson to lure a talent base to NZ to make much of those films.
Actually Ymir is correct. The London facilities pretty much owe their existence to the Harry Potter films. Without that revenue stream combined with the resulting exposure they could never have grown to the size that they are now, or attracted the talent pool that they have (much of the workforce is European, rather than just English).
So, if there are two places, and one of the places has already a talent pool, the other one hasn’t, but both have tax incentives, and the look of the location is not an issue (e.g.Jackson choosing New Zealand for its looks as a shooting location) where will the work go more likely?
My guess would be to the one with the talent pool. Or not?
Move the talent.
vfxguy, Ymir, I did not say that the Lpndon facilities could have grown that fast without the HP movies and incentives, but that there were other factors in play that facilitated to bring work to London SPECIFICALLY, and not Switzerland and Belgium, e.g.
I’m talking about the talent who has been living in London since before Harry Potter, whatever nationality. From what I’ve seen (in my almost 50 years of life), London has always had a high number of classical trained artists, that do very well in visual effects. Many artists of my generation in Europe went to England to get a classic art education, which was hard or impossible to get at the other places in Europe in the last 40 years (by classic I mean learning to create realistic imagery). A classic training helps get visuals done faster (= cheaper) and better, and we are in the business of image making.
That’s why I think London is (ALONG with the tax breaks) a lure for vfx work. And London had the Shepperton Studios, Pinewood etc, where they did effects, before Harry Potter.
Yes, of course there is now also a commute from the rest of Europe to London, as the workload is increasing, and the commutes are short (and cheap). Aspect ratio of Brits vs other Europeans, how much exactly?
Sorry, I’m still not convinced that all work created and education is equal and that money solely and randomly is the only factor and the only entity with gravitas.
“move the talent”?
Why, if the location is not an issue?
Studios obviously have to go to places that have large and established vfx companies if they want to focus most of the work in a few places. While the education system in the UK may emphasis artistry more than some other areas I don’t think there’s magical water there that produces a huge percent of more artists.
And while there were vfx companies before Potter (CFC, Peerless, etc) it was the incentives and the decision to put the 8 Potter films in London that established them as a tour deforce. Now the companies were able to ramp up reasonably in the multi-year time frame. It’s just none of that would have happened without the tax incentives to start with. Sure, they would have continued to make more progress but at a fraction of the rate. The studios never looked at London for vfx and said, hey, we should go there for the best work, they have more artists per capita working there.
It’s the projects and the additional education that resulted from the projects that helped create the talent pool that exists. Many people want to be involved in the arts but trying to earn a living is difficult and many of them drop out or move on to other things. Look at LA. In this case there were openings and opportunities based on incentives and projects that caused a surge in artists in that one location. The first Potter film as I recall had to be divided among the 4 major companies at that time and with ILM doing as much as they could (25%?) of some of the more difficult tasks. As the companies ramped up and hired more people, they grew and built a talented staff.
If tomorrow there was a huge incentive to do all vfx work in LA there would be a similar surge in companies and artists. Obviously it would be difficult to build up large vfx companies in very small towns in the middle of no where but if you start with a large diverse city and shower it with projects and jobs it will grow.
Man in LA, prior to the Harry Potter films, the feature vfx work produced in the UK was primarily of the traditional miniatures, motion control, and opticals techniques. Good examples would be Derek Meddings work in the Bond films. Digital work was primarily in small format, such as ‘Walking with Dinosaurs’. It wasn’t until the UKFC was formed in 2000 that more feature vfx work in American studio films was attracted to the UK. In the first Potter film, Sony Imageworks was the primary US house with ILM doing the released snake and the UK houses picking up the less prominent work. For ‘Chamber of Secrets’, ILM became the lead US house and more hero work going to UK houses, such as the basilisk and the spiders. The same was for ‘Azkaban’, except what caught everyone’s eye was Buckbeak, the hippogriff. I think it was the work on that main digital character/creature that pointed out that the UK houses were ready to take on the lead digital fx duties for the Potter films. I could be wrong, but I believe it was the Potter films that spearheaded the growth of the UK digital fx talent base to what it is today, much the same way the ‘Lord of the Rings’ built the NZ talent base. The incentives put in place attracted the work. It was then that the effects houses said “now we have to pull this off” and started hiring more digitally savvy effects artists, both local and and from abroad. The same could be said for Vancouver. First there was the work, then the facilities had to figure out how to pullit all off. From there, the talent pools grew organically, utilizing both local and immigrant hires, to where they have a large experienced pool of talent to pull from. UKFC created in 2000, first Harry Potter film released in 2001. Things built from there.
@scottsquires – “but what if all the incentives stopped tomorrow and the cost of doing shots there ran much higher than elsewhere?”
The cost wouldn’t run any higher than elsewhere, but the inconvenience certainly would (if the production wasn’t already shooting in the UK/NZ/Aus. etc.)
And you know this because…?
Can you provide an example of how the cost wouldn’t be much more than others?
1 British pound sterling is 1.61 us dollars.
…and your point is? You do know that 1 GBP goes a lot further than 1 USD, right? Approximately one and a half times as far in fact…
Soldier, I know you’ve never left Cali but I’m not going to start explaining exchange rates for you.
That’s true if you are a uk studio looking to do work elsewhere. Not so for us studios. The reason australia had to increase Its subsidy was because the aud was a record high against the us dollar.
Well VFX Wonk, since you’re so happy to hide behind an anonymous mask for no reason, I’ll give your comment all the thought and value it’s worth.
In regards to Claire Wrights law review article….
It was persuasive and compelling when she wrote it. But it didn’t make her right. She is a law professor, not a judge, not the US trade representative and certainly not part of the WTO governing body that rules on such issues. When the argument against incentives in Canada was at its strongest, back in 2006/7, the FTAC filed the appropriate action. IT LOST.
The article is less persuasive and much less authoritative now, in 2011. Almost every state has an incentive. Canada has incentives. The provinces in Canada have incentives (in effect, they are competing with each other and hurting each other). And dozens and dozens of nations have incentives. They are here. They are real. And, for now, they are very very very legal.
Perhaps the EU action going on now will eventually lead to some banishment of the incentives for foreign productions within the EU (and only applicable to the EU nations, not Canada or the US or anywhere else). But this will take many many many years. It will not be quick and may, in fact, lead to no change at all. If it does, however, many years from now, then maybe this issue can be examined again and the argument will become more persuasive. BUT UNTIL THAT DAY…..
We all seem to know incentives are the weapon being used to kill us. Like it or not, they are the only defense we have left now. And they are a very effective defense. California has proven it does not need to win the race to the bottom. With its 20% incentive (which has an effective rate closer to 10-12% because it only applies to below the line costs), producers have shown they would rather stay here despite the availability of much larger incentives elsewhere. Backing this cheaper, saner and more rational incentive is the only tool you have if you want to stop the bleeding. I hate that this is the case more than anyone, but IT IS REALITY.
Please stop preaching about the legality of incentives and convincing people to reject the one thing that will actually help save their jobs and this industry. It’s one of the few great things America has left and we need to protect it. I beg you to admit temporary defeat and embrace a pragmatic approach that, frankly, is the only way forward…unless you would prefer more people to lose their jobs to other states and nations.
The WTO has never ruled on the issue so how can you say its “very very very very legal”?
Secondly, the FTAC petition was flawed. It was withdrawn because they wanted countervailing duties that customs could not enforce on films.
The USTR should go to the WTO and simply ask “hey are these subsidies which you enforce legal?” I doubt it.
But lets go back to what you and the other filmla representate are saying: I should give up the cause because it FAILED FAILED FAILED.
Have you checked how film subsidies are working in other states? failures all around. Yet you want us to take money from schools and healthcare to fund the rich studios?
How about doing this instead: Lobby the state of California to implement a countervailing tax duty on the studios. If they get $50 million dollars in subsidies there then they pay $50 million dollars in taxes.
If you are talking about a ruling on film incentives, then no, the WTO has not ruled on them. A no ruling status is closer to legal and it certainly does not make them illegal. Further, since the state incentives have, in effect, given the US a de-facto national incentive, the gains Canada got after its first incentive in 1997 are now back down to 1997 levels. The incentives here, if nothing else, brought huge chunks of the work home. I have been tracking this annually and this is not speculative. I can forward the data to you if you like, but it is available on my site (stoprunawayproduction.com)
The FTAC filed two actions. One, you are right, was withdrawn. The 301(a) petition, however, was not flawed. It presented a good case, but it was REJECTED. How many times do I need to repeat this? We are all upset with this ruling, but it happened. We lost.
The subsidies in California, unlike every other state, are actually a tax break. Since the studios do pay taxes here, they have a tax liability and the California incentive issues tax credits that are used to reduce the tax burden. In California, they cannot be transferred. In other states, however, they are transferable or refundable because otherwise they are useless to the studios because they have almost no tax liabilities in these states. So, in effect, they are subsidies outside of California because the productions can quickly monetize the tax credits into cash, usually by selling to a broker or in-state tax payer. At best, this makes them quasi-subsidies.
But here, they are the mythical tax break we always hear the politicians speak of “let’s give tax breaks to companies that create jobs here rather than ship them somewhere else”. Since the way to earn the tax credit in California is from the wages paid to the people who make movies, this tax cut does, in fact, create jobs. It does not depend on a mythical trickle down effect.
Film incentives are failures in ALMOST every state, but not California (and arguably not NY). They are having their intended effect. They prevented the worst year on record for filming ever and were DIRECTLY responsible for the first increase in years. Oh, and they employed tens of thousands of Californians who can pay taxes to keep schools open and police paid. The effective rate on the credit means they do, essentially, break even. At worst, they recover 75-cents on the dollar. The cost per job is under $10,000, and that assumes we make no money at all to recover or offset costs (thankfully, we do). But even if we didn’t, that’s a bargain.
Corporate welfare for corporations that take the money and don’t create jobs sucks. The California film incentive is not that. They only get a reduction on their taxes after they hire tons of people here and spend lots of money. Why is that bad for us? Not ideal, but a trade-off I am willing to work with for now.
No one is telling you to give up. Not at all. Far from it. I am just asking you to redirect your fight. There is no reason we can’t support the California film incentive and push for an end to all incentives eventually. But so long as they are used as weapons, we need them as a defense. And the fact of the matter is, they work at doing that. Incentives may not grow an industry, as you point out in states that are failing to do this…..but they can protect one. They can, do and are helping protect California (and NY).
And for the record, most at FilmL.A. hate subsidies as much as you do. But we live in the real world and are trying to be pragmatic. I think the current California incentive is pragmatic. If it covered above the line talent or was 35-40% of all costs, I would oppose it as outrageous and unsustainable. I am not a lackey for the industry. I piss the MPAA off on a weekly basis. I just want to protect the film industry in the US and save the jobs in the place it, for now, calls home: California. I know you want the same thing and this is why I make the appeal. We have to fight this fight with the tools we have right now (and I mean right now this second). The California film incentive is that tool. It’s the only one we have left, so lets not act in a way to get it taken away.
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