Europe Proposes Film Subsidy Cap

A few weeks ago I did a post on the film subsidy race in Europe which got ZERO comments. Well perhaps this post might oblige your response.

Variety broke a potentially huge article that the European Union is proposing new guidelines for subsidies in Europe that will limit them for many US studio productions to 10%:

aid for foreign films with budgets between $13 million and $26 million would fall to 30%, and drop to just 10% for films budgeted above $26 million.

You can read the whole proposal here.

Film Works LA Campaign Manager and lawyer Adrian MacDonald puts it quite succinctly:

In effect, the proposals would not outlaw incentives for US productions entirely, but it would make the rate more and more regressive the bigger the project’s budget is.  At 10% for films over $26 million, this would effectively nullify their draw for the US productions.

Why is this huge news for the VFX industry? US Studios send a lot of VFX work to the UK to take advantage of artificial pricing because of a 25% government rebate. Animation studios like Illumination Entertainment send their work to France to take advantage of a 20% rebate.

Now this is a proposal that isn’t set in stone and won’t go into effect until 2015. However studios have to plan in advance where post-production work will be done  and this will probably be taken into account.

If it does, mark my words: watch how fast the VFX industry leaves. When huge subsidies were passed in Canada and the UK it was as though projects were lost overnight in California. The studios will place pressure on the UK facilities to send work to locations that offer huge subsidies like Canada or perhaps even Louisiana. I’m not sure if this event is related but I did hear word of a UK facility that has already started the process of sending more work to a satellite office in the US.

As you know on my blog I rail against all film subsidies, even the ones offered by various states in the US. It artificializes the price of VFX and forces VFX professionals and their families to bounce around the globe as they live out of their suitcase chasing a job.

Even if the UK can continue the 25% subsidy, it’s still under the huge pressure that Imageworks New Mexico faced: The state offered a 25% rebate and it was shut down because studio clients preferred a 46% subsidy in Vancouver!

Ironically this event may be a catalyst for unity between Californian VFX professionals and UK VFX professionals. We are both in relatively big media markets that are at a disadvantage to various state and provincial subsidies.

In the coming weeks I’ll be putting a proposal up on my blog to get your reaction on how to stop these subsidies. The concern I have is whether I will get an educated response or the usual complete apathy. If it’s apathy and the subsidies in the UK are capped, you will learn what I really mean when I say:

Soldier On.

23 Responses to Europe Proposes Film Subsidy Cap

  1. fizz says:

    I wouldn’t get too excited just yet. First off, it’s still only a proposal from the European Commission, it still has to be passed into law by the European Council and Parliament – nothing happens quickly in those places ascent is by no means a sure thing. Secondly, the UK government has made the UK film industry – and VFX in particular – a centerpiece of it’s efforts to “rebalance the economy”. If you follow international news you’ll know that the UK gov essentially isolated itself from EU economic policy a couple of months ago when it pulled out of EU-wide reforms of the financial markets as it felt that it would harm the City of London. If they were prepared to do that on something which goes to the heart of the Union then there’s every indication that they’d raise the middle finger on this one. The current UK gov *hates* the EU and much of the cabinet would quite happily withdraw from it entirely.

    It’s also worth looking closely at the small print. One of the key parts of the proposal is to eliminate territorialization, where national govs demand a minimum percentage spend in their country. The proposal suggests that this is killing international co-productions. If this part of the proposal makes it through to law then this would extend tax relief even to shows that shoot in the US but which don’t make the current minimum of 25% UK spend. For many movies the VFX budget is under that 25% – I know a number of US producers who regularly moan that their budget breakdown doesn’t let them put work into the UK. A possible outcome of the proposal’s passage through the EU parliament is that territorialization is removed but the subsidy cap isn’t applied. The EU parliament has powers over direct subsidies, but it’s ability to affect member states national tax policy is limited. This is why there isn’t a unified sales tax across Europe.

  2. Dave Rand says:

    …then again if the evidence was abundantly clear regarding the benefits of this stimulus there would probably be no reason and therefore no discussion of any caps. Does not look like our current administration (USA) is crazy about market socialism either, and then there’s that World Trade Agreement thingy. I will be interesting to see how it all plays out. I would not be surprised if some good old fashioned corruption were uncovered in some spots. In Montreal the rate of shops going under and artists not getting paid was greater than that of unsubsidized areas . This made me wonder where all the money was really going and now we learn it’s the studios who reap all the rewards. That would not happen if some of the locals in power either got paid off or actually could cite real benefits to the economy. I’ve recently heard that when Lumiere collapsed screwing the same Meteor artists that got robbed in the same location, they were all given 3k each from a new fund that the labor dept evolved for the purpose of providing a safety net and to pacify them. Is that a new type of subsidy? If anyone knows more about that please post something.

    I’m no expert on this and these are just my observations. It seems like others are beginning to make their own.

    • Dave Rand says:

      ..also if I work on foreign soil and have 30 to 40% of my pay go to the local government. A government that in turn gives a chunk of my money back to the production along with the locals money should we all not have some ownership of the product? Seems like the rest of the financiers do. I wonder if anyone sees a kickback in that equation, even a hidden one.

    • fizz says:

      The discussion of the caps is motivated by exactly the same reasoning that drives your argument for taking the issue to the WTO, the difference being that it is within the context of the European Union rather than the WTO signatories. The intention of the suggestions in the proposal is to level out the playing field within the EU and to encourage greater cooperation across European national borders.

      I fail to see how the proposals of the European Commission have any connection to bad business practices in Quebec, unless you’re suggesting that it’s all part of some shady globe-spanning conspiracy of corrupt communist filmmakers. You do realize that despite bits of it speaking French, Canada isn’t actually part of the EU?

  3. scott haung says:

    yeah . but U know : Dreamworks & DD were already to set new studio in china , and more fast to come is R&H will hire 200 people only for taiwanese in taiwan . they’ll expand , because there is a lot CG graduates cant find a CG job cocerned..they want jump the pool , the training schools amount more than u can imagine~~~

    and most important : aisa cger always get low paid , even very telant guy…because they havent choice to make more great work due to the chinese client’s taste is mostly BAD …

  4. scott haung says:

    subsidies?ahahaha, chinese gov is very the benefit of this exchaged…u have no idea the gov officials take how much easy money to their pocket….

  5. SteveJ says:

    Some of the new EU rules will actually nurture smaller shops around Europe, spreading the wealth now concentrated in larger vfx shops. The proposal allows better subsidization for smaller allotments of vfx work, encouraging smaller shops to negotiate with Hollywood studios instead of waiting for farm out work from larger shops.

    This will likely not slow the outsourcing, but will likely allow smaller shops in the EU with little overhead to attract better talent and grow, bigger shops with high overhead will lose some footing by having to bid on small jobs – it will create competition within the EU.

    It’s not likely that studios will turn their nose up at a 50% subsidy because they can’t get all the work done at their favorite French vfx studio. That won’t drive them to entertain full price bids from Hollywood vfx shops. They’ll just ask the smaller shops in the EU to underbid.

  6. Actually according to the EU docs this is something that is supposed to replace the current rules at the *end of this year*.

    I don’t know how that interacts with the current UK law, which was extended to 2015, but it’ll be interesting to see what happens.

    • VFX Soldier says:

      You are correct. This is why the uk quickly renewed their film subsidy program until 2014: the EU was going to issue new rules at the end of this year. Had the uk waited, the new eu rules would take precedence. To be clear, this is just a proposal. Nothing official yet.

  7. hfaeuilheauilafeageag says:

    If you have a good solution, bring it on. Enough of us will be onboard.

    It might be worthwhile to publish some contact info for people that make these decisions so we can try giving them feedback and support?

  8. JTJR says:

    Taxpayer subsidies to Hollywood studios are a terrible thing. It’s as simple as that. In the end, it only benefits the major studios and hurts both the local taxpayers and VFX workers.

    Industries should thrive where they can be self-sustainable. Politicians love to throw around other people’s money to make themselves look good and big studios can’t help but take advantage.

    Just let the free market work.

  9. VFX Jimbo says:

    This is all about competitive tax rates.

    The film industry like any other private sector industry is in a globalised economy and in a global economy countries compete for investment and business by offering competitive tax rates. It goes on in the automobile industry, the airline industry, finance/banking etc etc.

    You will never get rid of this problem….. unless we had one tax system throughout the entire world which was enforced by a global police state lol. Good luck!!!🙂

    So say the European Union decides to make Europe even more unfriendly to film makers by increasing the tax on productions. Productions will move to where ever it’s cheaper to produce. This is what businesses do, to make a profit.

    Vfx Soldier it seems like you are living in the 1950’s!!! There is no such thing as a safe secure job anymore. You won’t work at one company your whole life with a pension at the end and your employer looking after you. This is the 21st century. You have to compete with countries all over the world now. I’m sorry that California is suffering but it’s the reality of the world we live in.

    We have to constantly adapt.

    • nathan says:

      So true! Only last night we had a friend over who now retired and living in florida is living off a uk ibm pension and a us one having done 10 yrs in florida for the last stint of his working life – he is of a very lucky generation that no longer exists! It was sickening listening to what he gets and all from one employer throught out his career.

  10. Raphael Protti says:

    Could this explain the surge to Canada? Seems everyone is moving there. At any rate, they’ll find another honey pot… There’s still an untapped rebate haven… South Africa. They give a rebate for productions over 20m$… I was there a year ago, fun place to work too.

  11. […] Europe Proposes Film Subsidy Cap […]

  12. […] Below is a statement I have sent to the European Commission which will be making a decision on film subsidies in Europe. […]

  13. […] VFX Soldier – Europe Proposes Film Subsidy Cap […]

  14. nathan says:

    You are simply bitter that the once strong vfx industry in the US is now international and going strong. Take away subsidies in all countries and what you think that only the US will create all the cool vfx we see on screen today? Grow up and realise that change has set in… its no longer just a hollywood game. Once you’ve realised this, you can instead put your efforts into helping the US sustain good vfx shops that people would want to use rebates or no.

    P.S. London is currently seeing a really quiet period – not everything is so peachy here mate!! Happens to be a recesion on and the vfx industry has been stung this year.

    • Ashes says:

      Apparently you haven’t actually bothered to read this site fully. VFX Soldier has, repetitively, stated that he feels ALL tax incentives are bad. This includes the ones in the US as well. No where has he ever stated that he thinks all vfx work should be in the US. The industry is a global one and no one has a problem with that. They do have a problem with tax incentives that violate the WTO and hurt our indistry.

      Tax incentives hurt everyone, it devalues all our work, causes underbidding, and leaves the vfx industry in a weaken condition when dealing with the film studios.

  15. […] regulated by international trade agreements. As you know the European Commission has proposed capping film subsidies for EU members and they responded positively to my support for ending the subsidies. Could it be that the recent […]

  16. […] At the same time, the European Commission, which regulates many international policies for EU members, was in the process of opening consultations on it’s proposal to mitigate subsidies for the film industry. […]

  17. […] 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 reported. Furthermore, the EU actually responded to a statement I sent to them […]

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