My Letter To the European Commission

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

To: The European Commission

Recently your group has made a proposal to change policy regarding film subsidies. You encouraged the public for consultation on the matter and I would appreciate it if you took the time to read my statement.

I’m an anonymous visual effects professional from California. As you may be aware, the Hollywood film industry has been greatly injured by international and state subsidies offered to the big six studios: Warner Bros., Disney, Paramount, Fox, Sony, and Universal.

I am writing to you in the hopes that you will bring an end to the zero-sum game that is the international film subsidy race. I strongly feel that you should not only end them in Europe which US studios are taking advantage of, but also challenging subsidies in other countries (including the US) through the WTO. This would help level the playing field and remove the barrier to market economics which your organization has a responsibility to achieve.

Subsidies have made the VFX business more volatile than it has ever been before. They artificialize the price of VFX for producers and lead to a race to the bottom which I have written about on my blog for over the last 2 years. While I have seen them take a toll on the facilities we work for, I have also seen them take a toll on the people I work with.

Family members are coerced to separate as spouses must globe-trot around the world chasing work because a certain project needs to be made in a subsidized region. Some even have lost their homes as they are unable to maintain mortgage payments while paying rent in the subsidized region where they are working. For many others the prospect of maintaining a career in this industry is nullified. No matter how talented we are, no matter how efficient we are, we are at the mercy of the next government to come along that offers millions of dollars to producers looking to take advantage of free money.

However it’s not just the workers that are just realizing these problems. Even big Hollywood producers and directors recognize this. Producer Gavin Polone recently wrote:

They’re bad economics, they don’t make a film better … and they’re a misuse of public funds

Producer and Director Matthew Vaughn also wrote:

Success or failure was irrelevant because investors simply received a tax deferral, to be paid back over the life of the film lease irrespective of film performance, while the producer used his benefit from the transaction to defray the cost of production. It was a purely financial arrangement which did not achieve the policy aim of creating a sustainable business.

The subsidy race has quickly turned into a war where various regions are trying to undercut each other and US studios are happily taking advantage of it.

While the UK offers generous subsidies for the film industry, others have asked to join the race. UK-based Aardman Animation has said if the UK does not offer subsidies, they would move productions to Germany which offers tv animation subsidies. The UK games industry also made similar pleas.

On two occaisions US studio Warner Bros. threatened local governments in the UK and New Zealand to hand over more money or else they would make major films elsewhere.

Recently, the European Commission ruled that Spain must pay back over $US 345 million because their film subsidies distort competition between other European countries. It’s been suspected the complainant was a UK film studio. If this is true, it begs the question: How does the EC determine which set of members get to keep film subsidies and which members must get rid of them?. It’s clear that this is a subsidy race and it is the responsibility of the European Commission to stop it.

Thank You,

VFX Soldier

22 Responses to My Letter To the European Commission

  1. Andreas Jablonka says:

    Well written. Lets hope they read it.

  2. Concerned VFX Professional says:

    I’d say send it or a version of it to the Whitehouse or congress…. And the appropriate Canadian, Australian, New Zealand, etc…. Governments. Don’t know if it’ll help but doesn’t seem like it could hurt to try.

  3. EuropeanCommission says:

    Dear VFX Soldier,

    Please take your whiny bleating somewhere that someone gives two shits.

    Yours sincerely,

    European Commission

    • Dave Rand says:

      … maybe you should’ve added that the citizens of these nations should get executive producer credits or at least free movie tickets and a large popcorn.

  4. jez says:

    OK the group your writing a letter to is not the EU commission it’s more of a think tank group within the EU that reports to the commission. It’s goal is to come up policy/ideas and recommendations with regards to film policy (legal) within the EU which is up for renewal at the end of the year.( UK, Germany, and France have already said alot of what has been stated is already legally wrong and confusing, but agree with some statements with regards to increasing free trade within the EU, you can go on the site and check out the responses.)

    2 months ago the “EU commission” rubber stamped the uk subsidies for film to 2015, and the new games/ tv subsidies that were announced. The government at present believe it will be up and running next year (games/tv subsidies) others think not and that it will take longer.

    What is interesting is the games and tv subsidies and why they have suddenly appeared, you seem to put everything in the same basket with your letter; the commission you are writing to deal with FILM not games.

    The UK goverment at the time 2009 (Labour) went to the EU to claim that the subsidies that Canada had introduced (for the games industry) were against WTO rules. (Games at present is classed as a service industry, hate to break it but so is vfx, “FILM” is classed as a good). The EU legal said that there was no grounds to pursue as they had not broken any trade laws.

    As no case was ever brought, it is hard to find out the reasoning behind not taking the case any further. (maybe the EU didn’t want another long draw out fight with WTO?. The case with regards to Boeing has been going on for nearly 20 years and it was the EU that started it, but ever since then there has be claim, counter claim etc etc for decades and it is now hard to say what is what now, by the looks of it both countries lost out.)

    The EU is not liking subsidies, but they don’t care about vfx, they care about “FILM”, and the problem is distrubtion and getting that domiance back which most countries feel was lost over 80 years ago. I did put the Mansfield report up on this site, but it looks like no-one bothered to read it. (good report should read, very interesting, written in 2009 all about subsidies with regards to the eu and uk).

    The Matthew Vaughen quote I believe is more to do with gaining more co-production features within the EU and using the dominance that the US has with distribution to benefit EU films (without distribution no-one will see your film no matter how good it is.). As the law with subsidies stands getting co-production features is very, very hard, it is just easier to allow the hollywood studios to be the main production company and receive the tax break.

    Anyway I hope some of this info is helpful. The EU is a minefield and some statements that are in your letter like it or not have no bearings on the policies of EU FILM subsidies.

    • VFX Soldier says:

      The letter was sent to the EC in response to their request for public consultation:

      http://ec.europa.eu/competition/consultations/2012_state_aid_films/index_en.html

      Apologies for making it sound like I lumped games and tv with film. My point was to show other industries now lining up for subsidies because of a global subsidy war: games are being undercut by Canadian subsidies. Tv animation is being undercut by German and other TV related subsidies.

      Yes the UK renewed the film subsidies through 2015, thats because the currently EU policy on subsidies were going to expire at the end of 2012.

      I have spoken with trade counsel who can easily refute the service argument. Of course Ill reveal that in court🙂

      It seems pretty clear to me that the EU is heavily interested in combating film subsidies that distort competition. Why would they ask Spain to return subsidies to a film studio in the amount of $300 million? I recommend you read the report in the EU link above, they are very concerned about a subsidy race, especially one that currently benefits US studios.

      It will be interesting to see their decision.

      • jez says:

        Yep I have read it. So have a lot of governments, unions and trade organisations in the EU.

        “The response to the proposals has been so unanimously negative across Europe that even before the consultation was over the Commission was visibly back-peddling”

        You can read BECTU (the uk union) response to it here:

        http://www.bectu.org.uk/news/1572

        I’ll try and find the French film trade response, remember reading it; was typically French🙂

        The return of money with regards to Spain has also been happening in the uk. Guy Ritchie and a number of other celebrities (thankfully not Cheryl Cole) got stung with a huge tax bill due to the film subsidies. (Basically they had been double-dipping their tax reliefs using the old film tax breaks. This loop hole was closed round 2006/7 and the treasury has just got round to chasing the money as it is illegal. Many of them are now suing their accountants for wrongful advice.) Another case is a UK hedge firm that had a deal with Disney to raise money for films, they have now been hit with a huge tax bill as well.

        Though your letter was written with the best of intentions, I believe it can have no bearing on the review, as the consultation process was open to: citizen, organisation, and public authority (within the EU member states), unless of course you are an EU citizen.

  5. Craig says:

    Of course, you are absolutely right. Government subsidies are a bad idea. But alas, there are those that profit from them both monetarily and in prestige and they sound good to most people that don’t know any better.

    If anybody wants to learn the logical fallacies behind subsidies, check out the classic book “Economics in One Lesson” by Henry Hazlit. It will open your eyes.

  6. Soldier, I support your effort and your letter makes some good points that I agree with. But I honestly can’t see a government official of a foreign nation taking it seriously. Maybe I am just a pessimist.

    • VFX Soldier says:

      Oh I don’t care if it’s thrown in the trash can. Hell I don’t even know if it’ll be read. The EC asked for consultation and provided an email address. I figure why not send them my thoughts on the issue. Can’t hurt. If it leads to nothing oh well. However in that small chance that it causes something to happen then certainly the pay off is big. I’m all about small investments with big payoffs and this is one of them.

    • VFX Soldier says:

      by the way, when I started this blog 2 years ago I was wondering if it would be read by maybe a few people. 2 years later it’s read internationally and has been mentioned in the LA Times, Huffington Post and has been a source for various articles in the industry by other outlets. There’s something to be said about trying and being persistent. Hell isn’t that how we all got into this industry?

    • jonavark says:

      Respectfully.. this isn’t going to have any effect and it will be ignored. I wish you had taken the time and effort to gather a few hundred signatures from VFX professionals for this letter. Even then, it is tame and will produce no interest or results. Going it alone, anonymously isn’t actually having any effect. While this blog may be read by a lot of people there are only a tiny few actively participating in any part of it. I applaud your efforts, though I don’t agree with all of your assumptions about a solution, but I see it is ineffective.

  7. […] VFX Soldier – VFX Soldier Letter to the European Commission […]

  8. Leandro says:

    I’d suggest you to send a copy of this letter to Jagdish Baghwati – “the biggest globalization defensor”. Many argue that free trade make the international labor standards worse, but, as you wisely write, at least in the VFX industry is just the opposite that actually happens.

    Unfortunately this kind of distortion is widespread through many industries, and the problem is even bigger in VFX because of the glamour that it could bring to those cities. In the best-case scenario for you, it could even help your case, because of the publicity of the industry.

    Anyway, I’m new to the blog and don’t even belong to VFX community. I’m just a brazilian undergraduate economics student from Brazil that have a girlfried seeking to enter in this industry (thus, sorry for grammar mistakes).Nonetheless, it seems a very interesting economic situation and, well… good luck!

  9. Dear VFX Soldier

    As you know, our public consultation invited comments on this draft document: http://ec.europa.eu/competition/consultations/2012_state_aid_films/draft_communication_en.pdf.
    All the contributions we received have now been published: http://ec.europa.eu/competition/consultations/2012_state_aid_films/index_en.html#replies .

    The consultation is now closed but, as you will see, the topics raised in your letter were also reflected in other contributions. The Commission will be guided by the published contributions and the final Communication is due to be adopted by the Commission in the last quarter of 2012.

    Thank you for your interest

    Obhi Chatterjee
    (EU staff member involved in the consultation)

  10. […] Well, last week not only did the EC read the letter, they published it on their site and Obhi Chatterjee, an EU staff member involved in the consultation, posted a comment on my last post: […]

  11. […] 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 statement by Framestore’s CEO and the British Film […]

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