Could failures of state film subsidy programs spread to other locations that vfx clients depend on?
Michigan Governor Rick Snyder recently waved the white flag of surrender in the subsidy war and asks Canada to disarm:
“The use of tax incentives by government, in my view, is a terrible thing,” Snyder told a conference on U.S.-Canada relations in Ottawa. “I essentially view it as the equivalent of a heroin drip for government.”
“Do the governments really win by everyone continuing to ratchet up incentives?” Snyder said in an interview with Bloomberg News, saying he wants the Canadian and Ontario governments to follow his state’s lead.
Michigan once had a very large film subsidy program until they realized how expensive it was and how small the returns were. Now that the program is capped, US studios are interested in other locations such as Canada.
The regional subsidy wars lead the players into the prisoner’s dilemma where each government is in an arms race to attract US studio film work. They have 2 options, keep increasing the amount they give to the studios or get the other players to stop.
However when you are putting your own skin into the game, the other side increases the stakes by throwing in other vital organs. It all becomes a race to the bottom. Here’s a good example:
USA’s Race To The Bottom
Last week I posted some news about Canada’s Race To The Bottom. This week Producer Jerry Bruckheimer explained why he wants New Mexico to throw more subsidy money at him:
“We found that Louisiana gave us a better tax incentive than New Mexico — that was another $8 million,” Bruckheimer was quoted as saying, referring to how he trimmed the Lone Ranger budget from around $250 million to $215 million to get a Disney green light on the project.
“We’re still shooting in New Mexico, and we might [also] go to Louisiana. We’re asking New Mexico to come closer to the Louisiana incentive,” Bruckheimer told theHollywood Reporter.
According to Forbes, Bruckheimer is worth $850 million and earned more than $100 million in the last year. Meanwhile, operating profit at Disney’s movie studio was $49 million on $1.6 billion in revenue, according to an August 2011 story in the Orlando Sentinel.
Imageworks opened a facility in New Mexico a few years ago so clients could take advantage of NM’s subsidies. Today you’ll find that the Albuquerque facility is winding down with US studios focused on Vancouver which is offering a 35% in subsidies. Even with NM offering a lucrative subsidy, it still is not enough for US Studios who have no intention on commiting to a region.
This is sort of why I’m very reluctant for California to offer these kinds of subsidies for VFX, they will just keep asking for more and it will hurt the industry of the long run. This is why Michigan’s Governor compared subsidies to a heroin drip: A good short term high with terrible long term effects.