FXGuide’s Jeff Heusser conducted an interview with PKR attorney David Yocis. You can listen to it here. They go over last week’s release of the feasibility study which is their prescription on how to fix the problems caused by VFX subsidies. To reiterate:
- International subsidies that injure domestic industries can be challenged in the International Trade Court.
- The injured domestic industry must organize to advise the law firm.
- If the court finds the domestic industry is proven to be injured and has standing, they are obligated to allow the use of countervailing duties on the imports to discipline the subsidies.
- A countervailing duty is a payment made by the producer who received a subsidy. It is meant to offset and nullify the use of market distorting subsidies.
Now that’s a simple overview and as David Yocis explains in the podcast, there are challenges to doing this, but they are not insurmountable.
David will also be Skyping into a Siggraph panel on the state of the VFX industry to answer any questions that you may have.
http://s2013.siggraph.org/attendees/panels
The State of the Visual Effects Industry
THURSDAY, 25 JULY 2:00 PM – 3:30 PM PST | Anaheim Convention Center, Ballroom AB
The panel will be moderated by Jim Hillin and attended by Dave Rand, Scott Squires, Scott Ross, and Steve Kaplan.
Soldier On.
VFX Soldier 
Who is the recipient of the countervailing duty?
The United States government.
Duties are basically like a tax so they will go to the US govt to offset the amount other governments pay to subsidize US studios.
How will that work when the US itself has large subsidies and NY just increased theirs?
Just curious how easy it will be to prove since other Countries can them do the se to the US. While Canada will be hurt by this and our box office is nothing so who cares….What about China. Does this not open the flood gates up to them to them do the same to US movies?
i see, that clears it up for me. thanks!
There are a few things I still don’t understand about the CVDs and that I fear may be fundamental flaws:
1. If a VFX company has locations in California AND in a subsidized location and does some work in each place, does that count as an import? Can a company’s internal work count as imports? Can you import something to yourself? If the company’s headquarters is in the US and it delivers final product to a US studio client, is the work delivered to the client an import?
2. If the film studio client has offices in many countries (as they all do, as big international media conglomerates), can they trivially avoid the CVDs by simply having one of their foreign offices or subsidiaries be the one who contracts the VFX work? That would make the VFX — both buyer and seller — entirely outside the US.
They seem so obvious, I would like to think that the lawyers have already taken this into consideration and know the answers. Have you already discussed this with them?
Very good questions/observations Larry. I wonder about these points as well.
That is a good question! At some point the vfx company does have to account for the amount of the work they did in the subsidized location in order for their client to receive the subsidy check, so perhaps that same mechanism can be used to determine how much of the end product is considered an import, even if it gets delivered by the US location.
1) A good chunk of the study talks about this issue. What the law firm shows is that there are many legal cases that show digital media being treated as an import.
2) The issue of circumvention of CVDs is quite common. That’s why in the study the law firm talks about an annual review: the domestic group can ask commerce to review the subsidies received for a certain product causing injury. They would be obligated to pay those subsidies back.
Thanks for responding, Solider, but I’m not sure you got my questions, exactly. I’m presuming for the moment that digital media can be imports.
The question is who, if anyone, is importing it if the subsidy-gathering work is entirely the internal work product of a company spread over multiple locations, or if the film studio is operating in the foreign territory.
To clarify, I totally understand how the CVD would apply to a US studio hiring a UK VFX facility to do work and send them the results. But it would not apply to a US studio hiring a US VFX house, or, presumably, a UK studio hiring a UK VFX house (even if the final film was eventually distributed in the US).
My concern is that the studio, or the VFX facility, or both, may be spread over multiple locales in such a way that they could trivially make it look like the whole transaction took place entirely inside, or entirely outside, the USA, thus avoiding the CVD.
Larry,
I believe their are clauses based on location. For example for Pixar to qualify for a BC grant…it must perform a certain % of VFX in Canada….to get money from Canada.
That amount can be researched under the BC subsidy codes…..and can be used as the CVD “injury” penalty in the complaint.
Also the exact language of the complaint also has alot to do with it. The complaint can be broad or narrow in its definition. We have to decide the nature of the penalty and what is the “final product” definition.
Alot of this is discussed in the podcast at the end.
Larry,
Also the big 6 studios are US. If they use a VFX house in a country with subsidies..they are committing “injury”.
we could also potentially file a complaint against the US VFX house who is setting up a foreign satelite company taking subsidy as “injury” as well.
We can also file as many separate complaints as we want.
The big studios are huge international conglomerates, with subsidiaries all over the world and who are very good at, for example, attributing different activities to different countries for the purposes of tax evasion, so you’d think the wheels are already greased for setting it up to appear that it’s not the US division that’s buying VFX from elsewhere. The CVD effort would need to be set up from the start anticipating and being impervious to those kinds of shell games, or they won’t work. I haven’t heard this addressed head-on in any of the materials I’ve seen so far.
great comments,
I too can see studios doing work from there foriegn sub offices . It is simlar to Apple recently avoiding tax on earnings outside of the US by holding income earned in those countries.
If it benefits studios they will leave the US asmost of there income is from outside the USA.
@Larry:
Let’s say Sony Pictures wants Imageworks to do VFX work on the next Spider-man. Imageworks sends the work to Vancouver and Sony gets the benefits of a 60% rebate.
If we successfully get a CVD against those subsidies in Canada, it would be expected that Sony put a cash deposit down upon importation of that digital media from Canada.
However as you mentioned, they maybe able to avoid payment given that Imageworks is based in the US: Culver City. What would probably happen in this case is our domestic group would ask Commerce to do an annual review on Sony.
Commerce has the authority to find out how much in subsidies they received for Spider-man. Once that is revealed, Commerce will look to see if they paid any duties. Since they didn’t they will be expected to pay back the amount they received in subsidies.
@Larry & Tim:
Both of you are concerned about the issue of circumvention: Using shell companies or proxy countries to avoid payments of duties.
Attempts to do such things is trade fraud and can lead to federal charges and huge fines.
Just to give an example, one of the big trade fraud cases out there is an elaborate scheme setup by honey producers that wanted to import honey made in China. They set up shell companies and also imported the honey through Russia and other countries to avoid duties. They have been charged by customs and will probably pay huge fines. A producer would have to consider the consequences of trying to avoid paying back a subsidy they receive.
http://www.foodsafetynews.com/2013/02/honeygate-sting-leads-to-charges-for-illegal-chinese-honey-importation/#.UeYV1hZ3Y00
Also the comparison with Apple and their tax avoidance scheme is very different than trying to avoid payment of a duty. When you are trying to avoid payment of the duty, the importation of the good still occurs. Sony can have shells anywhere they like and buy VFX from outside the country. The minute that digital media enters the US, it’s an import and would be dutiable either upon entry or most likely under annual review.
Secondly, Apple uses the same trade laws to prevent the importation of products that violate their intellectual property (ie Samsung).
Soldier,
question for you: will a basic conference (Exhibits Only) pass allow to attend? If not, what is the cheapest pass to attend with?
Thank you
Unfortunately, the panels are for Full Conference only, so not very many artists will be able to attend. However, if you happen to be unemployed right now, this year Siggraph is allowing you to register for Student prices. Check it out here:
http://s2013.siggraph.org/attendees/unemployed-discount-registration
One note about that program is that you must be a member of ACM or ACM Siggraph to be eligible for that discount, so you would probably have to join first.
Damn that means almost $ 1,000.00….
I sadly must pass then. I hope they record the conference so we can watch it online sometime after…
Now fork over $500-$1000 to hear about the future of your industry, you little unemployed bitches. Nice. =(
Dante not sure about this one. I asked the Siggraph panel about this an waiting on a response.
to VFX soldier:
1. What is the game plan to formulate “organization” that will behind the names on the complaint? (if you can discuss it at this time)
2. Do we have a tentative schedule for filing the complaint? Just to confirm it could take a year to prep the complaint, a year to get a ruling on the complaint once its filed, and a year to assess the fine after the ruling……correct?
3. What is the definition of “injury” from subsidys…to invoke the CVD law?
4. Who is going to track and research the annual subsidy data…that would be needed to assess the fine on subsidys?
In regards to question 4, I already track it. I have been for years and now it’s a major part of my job.
Adrian thanks for all you do. I owe you a very large Martini one day.
*blushes*. Thank you. I was doing this for years when I started writing about the topic in law school. Now I get paid to do it. Gotta love that. Make mine an Old Fashioned instead and we are on.
I think this is the wrong route. Subsidies – and demonising Canadians, China, India, UK, Aus, New Zealand – everywhere else is a very bad move.
Trent,
If your company’s business model can’t survive with out government bribes….and you can’t make a product for cost….than you don’t belong in business.
And how is leveling the playing field demonizing anyone? (have to explain that one to me)
they are not “bribes”
One countries bribes is another countries subsidy….
Funny how Canada has its own CVD laws too! Talk about glass houses….
http://www.steelorbis.com/steel-news/latest-news/canada-releases-details-of-adcvd-case-on-welded-steel-pipe-688639.htm
????? I’m not Canadian!
trent says:
July 17, 2013 at 4:44 am
they are not “bribes”
——————————————
I agree- they are not “bribes”.
A bribe, criminal as it is, does at least imply some kind of concrete quid pro quo between predator and victim.
Since the local taxpayer monies diverted into the coffers of U.S. corporations result in no tangible benefit to the local taxpayers themselves, it cant really be said that there’s an actual transaction occurring here in the case of these subsidies-
-even on the low bar base level of a craven and criminal “bribe”.
I know a lot of words but I’m coming up empty trying find something that describes the level of human decadence we find here.
Maybe someone with and MBA could chime in with the proper technical term?
BRIBE [brahyb] noun,
1.
money or any other valuable consideration given or promised with a view to corrupting the behavior of a person, especially in that person’s performance as an athlete, public official, etc.:
KICKBACK [kik-bak] noun
1.
a percentage of income given to a person in a position of power or influence as payment for having made the income possible: usually considered improper or unethical.
2.
a rebate, usually given secretively by a seller to a buyer or to one who influenced the buyer.
3.
the practice of an employer or a person in a supervisory position of taking back a portion of the wages due workers.
Just because its Canadian public policy stops subsidies from being a bribe. If the BC gov doesn’t have a vfx film business they pay % “kick-backs” to the studio heads to import jobs at the expense of their own country.
Mobsters have turned into lobbyists and Corporations act like organized crime these days. (Just look at the oil companies and banks) Just because the Canadians are on the receiving end…please don’t sugar coat things. Surely you don’t need a freaking MBA to understand this?
And when the Dept. of Commerce gets done reviewing the CVD case…..im sure “injury” to US VFX artists will be found as well.
Hang on, can’t California do the same thing to attract jobs to California? Oh that’s right, the state is basically bankrupt.
Trent,
Every country has subsidys…they are still bribes by the government. And If you read this blog alot. Most of us are
ANTI-Subsidys…..even when the VES society wrote a letter to Jerry Brown to institute California subsidys after the academy award protest. All Los Angeles workers want is an even playing field.
Pfft. ‘even playing field’ is such a overused term on this blog. California can compete – as other oversea areas do. Subsidies exist in a number of American industries – $24bn subsidy for its cotton farmers? Don’t see the cry to ‘level the playing field’ there.
Trent,
I don’t know what studios you work for but we assess the shot..do what needs to be done…get it finaled…get paid..go home…and we do it on time with as little revisions as possible.
We don’t need no stinking subsidy money to run a VFX house.
great.
And Trent, the whole “California is bankrupt” line is way more tired than the “level playing field” desire you bemoan.
For the record, California actually is running a revenue surplus right now, but the fiscal hole it’s in has clearly been dire for a while. Also in bad fiscal shape are…almost every US state and the Canadian provinces like BC and Ontario. Perhaps California can’t afford to lure jobs with whatever program…..but who exactly can?
Invade Canada, take hostages– that was plan A, but we could not get the funding subsidized.
Subsidies do exist in many industries. But this a blog about the VFX sector of the film industry. And, as others have mentioned, Soldier and the majority of regular commenters are opposed to subsidies in other areas as well.
Ideally, you could take your concern about cotton subsides to the “Cotton Soldier” blog. If such a blog existed, they would probably point out to you that US cotton subsidies range between $1 billion to $4 billion, not $24 billion–as you claimed. Further, Brazil filed a trade action with the WTO against the US cotton subsidies and they won (and won the subsequent appeals). Thus, by mentioning the cotton subsidy, you lended support to Soldier’s position and the strategy laid out in the legal memo.
Sadly, the US (for political reasons/insanity) chose to ignore the WTO rulings, which promoted Brazil to threaten the US with an import tariff on cotton products unless the US sent a delegation to Brazil to negotiate an agreement. The US blinked and, in bonehead fashion, agreed to annual payments to Brazil’s cotton farmers. In return, Brazil dropped its plan to impose the import tariff (which it had the right to do because it won the WTO dispute).
However imperfect, the subsidy you complained about was addressed and remedied with the very international trade law solutions that Soldier’s law firm discussed in the study.
Of all the subsides you could have mentioned, Cotton subsides actually defeat your point. Beyond that, your fact checking (or total lack thereof) on the cost of the cotton subsidy also undermines whatever point you were trying to make.
Brazil’s cotton farmers wanted to level the playing field with the US. They used international trade law remedies and did, in fact, level the field (again, imperfectly). VFX workers want the same thing.
Sorry if you think “even playing field” is an overused term. It’s only used so much on this site because film subsides massively distort the playing field with artificial price suppression. Eliminate film incentives and the playing field is level. Are you seriously taking the anti-level playing field position?
Incorrect. It is 24 billion as reported. http://www.guardian.co.uk/global-development/poverty-matters/2011/may/24/american-cotton-subsidies-illegal-obama-must-act
Trent,
You really should go back an re-read all the articles on this website. I picked one out just for you….
Framestore CEO Claims Up To 75% Work Lost Without Subsidies
Fine, over ten years. Since you didn’t specify, I assumed you meant annual.
I like how this takes a lot of pro subsidy Canadians’ own advice.
“Petition your own governments to get involved in subsidies to compete”
I see that smug advice quite a bit on this site.
Well … looks like thats the plan except that they will be “getting involved” by intercepting them at the border.
You can find info on the currently enacted CVDs here. It comes under the jurisdiction of US Customs and Border Protection.
http://www.cbp.gov/xp/cgov/trade/priority_trade/add_cvd/adcvd_data/
Does anyone know – in cases where CVDs are currently in place e.g. imported shrimp, imported steel etc. – who ends up paying the CVD in those particular cases?
It would be the studio (the receiver of goods and benifactor of the subsidy)…..that would pay the fine to the US gov….
a couple of good links…I believe it has instructions to go to the dept of commerce website to find out more…..
Shrimp CVD:
http://www.shrimpnews.com/FreeReportsFolder/NewsReportsFolder/USAshrimpIndustriesSeeksRelief.html
I believe it targeted the Vietnamese importers..
Steel CVD:
http://www.wileyrein.com/newsroom.cfm?sp=newsreleases&id=487
targets China steel.
Here is a funny one this is a CVD steel case from CANADA! Funny all the BC people bitching about this CVD move and Canada has its own version!
http://www.steelorbis.com/steel-news/latest-news/canada-releases-details-of-adcvd-case-on-welded-steel-pipe-688639.htm
That’s not what I’m asking: I’m asking who pays the CVD on the imported shrimp and steel etc. that are currently the subject of actual CVDs that are in force now.
If we are expecting the US studios to pay a CVD, then in theory there are US companies currently paying CVD on imported shrimp and steel, I would have thought. Are there?
The importers of the shrimp pay the duty.
Yes there are several cases in progress……with rulings that find imposed duty from the US. The ITC so far has taken action eight times this year against China alone.
The CVD is pretty active in the courts. The international Trade Asociation’s “Import Association” are the guys who do the investigating….here are list of the 17 case they nailed this year alone…ranging from Steel to Fish fillets..to tomatoes…The following archive of cases go way back……alot of fines went out, which makes me more than hopeful for our case. Got to say after reading the case archives…..VFX soldier and the lawyers did a really great job on this method of attack…..
DVD Case Archive:
http://ia.ita.doc.gov/ia-highlights-and-news.html
IMPORT ADMINISTRATION webpage:
http://www.trade.gov/ia/index.asp
For shrimp:
The articles I found on the shrimp case don’t mention a company specifically and only mention the countries under investigation. China, Ecuador, India, Indonesia, Malaysia, Thailand, and Vietnam. In one article Seafood Exporters Association of India was quoted as being affected. Looks like there was ruling in favor of US imposed duty on all countries under investigation.
http://www.business-standard.com/article/markets/us-slaps-5-91-import-duty-on-indian-shrimp-113053001122_1.html
as far steel..
this case is for steel wire hangers….
There is huge list of companies in the following link….the case has the Commerce Dept found evidence of Dumping and Subsidization of Imports of Steel Wire Garment Hangers from the Vietnam….
Click to access factsheet_vietnam-swgh-adcvd-final-20121218.pdf
This case was steel pipes from China. Im sure you can track down all the companies in the public records at
http://www.mcclatchydc.com/2010/04/09/91936/commerce-department-china-dumped.html#.Ueb9So2fjgc
The following link is an archive (2013-2002) of current CVD cases and rulings being conducted by the I.T.A Import Administration:
http://ia.ita.doc.gov/ia-highlights-and-news.html
I have a question.
Attorney David Yocis says an independent panel has to also deem that subsidies are damaging the domestic industry in question.
Do they delineate the fx industry from the film industry as a whole?
It can be argued foreign subsidies are helping the US film industry overall because US studios are reaping huge financial benefits. But it is clearly hurting the US vfx industry.
Is there any precedent to observe subsets of broader industries vs. ignoring subsets as long as a broader industry benefits?
Perhaps it has to be shown that any broader benefit results in more domestic business in total which doesnt seem to be the case as $100s of millions in business is being sent to other countries.
Or maybe it doesnt matter as long as any industry is deemed injured?
I heard him speak about solar panels in China. I suppose a parallel can be drawn in that subsidized solar panels from China might help the overall solar installation industry, but move solar panel production to foreign countries. Maybe I just answered my own question.
Anyone have any opinions about that?
You are correct:
Just because the domestically based US studios benefit from international subsidies does not mean they can injure the domestically based VFX industry.
In fact this was one of the main reasons I chose PKR: they’ve had a history of working with smaller domestic industries that were being harmed by subsidies being utilized by larger domestic injuries.
For example PKR works with the domestic shrimping industry. They were being injured by domestic grocery chains that preferred subsidized shrimp from overseas.
The same goes for lumber. PKR has worked with the domestic lumber industry that was being harmed by domestic home builders who preferred subsidized lumber from Canada.
Thx for clearing that up soldier.
Before you agree to move up take a look at what you are signing for: http://thevfxwatchers.com/
In a word: WOW. I’m impressed. Thank you to everyone involved in this. I may have a fair chance at a future in the industry in the U.K. if this goes through, depending on how the relationship with Europe continues.
???
if the subsidies go away the uk vfx industry dies
No I doubt that…..before Harry Potter there was like 50 VFX workers in London After…..like 5000. I think London will always be a VFX “hub”. London services alot of countries commercial VFX and draws alot of Europe’s top talent. Right now London is loosing some work to Vancouver. Europe TV and movies are enough of an economic powerhouse where London VFX wont die. (you might have to movie to Germany LOL)
D-Neg just wont have 9 fucking movies at once….
Exactly. About a year ago dneg was on its knees and making mass lay offs. Then the usual round of subsidy can rattling to the government resulted in a raft of new incenstives and gifts. Combined with moving to cheaper premises and diversifying into more tax payer funded bbc television work, they took on a whole bunch of projects and trawled the canadian and euroland labor markets for a bunch of new office temps. Without state assistance and displaced international waif and stray artists, its very possible they would not be here now. And if you are a small business, how do you compete with that? It comes down to who has the best lobying contacts and and who can run rings around visa allications for susbidy displaced international workers.
Dear oh dear, you really are being a bit hysterical. Dneg let go of around 80 people out of a London staff of 1000, most of whom got rehired – they must have around 1100 people in London right now. The new building took two years to build, cost a fucking fortune and it’s spectacular. They did open a TV division but they’re not doing *any* BBC TV work at all – nada. They did however win massive chunks of Man of Steel, Catching Fire, Godzilla and more, all without any subsidy assistance. Explain that.
If you keep portraying yourself as the victim then you’re just going to keep on losing.
not to mention Dneg took on a 20 year lease on the new building:
http://www.gpe.co.uk/investors/regulatory-news/feed/4218722-great-portland-announces-west-end-pre-letting.aspx?year=2011&page=4&keyword=
hardly the move of a company in financial dire straits.
From my experience, Dneg are the best out of all the London companies. They actually make an effort to treat you as a human being, and have been known for keeping people there for years and years.
mattD, if you are looking to badmouth companies for their hire and fire practices, I suggest you start elsewhere, as there are a LOT worse offenders.
Quote: “They did however win massive chunks of Man of Steel, Catching Fire, Godzilla and more, all without any subsidy assistance.”
I highly doubt film productions don’t get ANY form of subsidy or incentive by awarding DNeg with there work. DNeg is a awesome company but you can be sure they will feel the impact if subsidies do stop.
Yes but Dneg (and most London studios) pay absolute shit. London workers, like their Canadian counterparts, work for peanuts. They are subsidized cheap labor in an expensive city.
I’m curious, Big $exy. You seem to be highly knowledgeable about the wages in London and Canada. Have you ever worked in any of these locations? What do you consider to be a ‘decent wage’? If you could talk figures for say, junior, mid and senior CG/comp and lead/supervisor roles, then perhaps we could elevate the discussion from simple insult hurling to actual trading of knowledge that would benefit us globally. I’ll be happy to share the same figures for London, if you go first.
Actually, scrap the trading of numbers. We have vfx wages for that. Just let us know, have you ever worked in London and/or Canada? Do you speak with actual knowledge of facts or based on hearsay?
“They did however win massive chunks of Man of Steel, Catching Fire, Godzilla and more, all without any subsidy assistance. Explain that.”
Simple explanation: they did get subsidy assistance. And the aren’t shy about admitting it either: http://www.televisual.com/blog-detail/Interview-Double-Negatives-Alex-Hope_bid-439.html
The shows listed don’t qualify for the UK rebate. That’s a fact. The price they charge is the price the big six has to pay – no government kickback. The only conclusion is that they won the work based on cost/quality, overcoming any issue with being in London as opposed to LA/BC.
It’s a list of three films. And I will take your word they didn’t get the credit. Let’s look at a much larger list for Dneg. Looks like no less than half of the projects listed for the past few years got the subsidy. Could D-neg have kept full employment if those had those projects not received the subsidy and had the work done somewhere else? http://www.dneg.com/projects/projects_list.html
Perhaps not – maybe they’d be about half the size, around 500 people. The point is that all we hear on this blog is how *none* of that work would be outside of LA if it weren’t for subsidies – but that doesn’t appear to be the case, which suggests LA’s problems are deeper and more systemic.
Where did I say NONE? I said most of the work goes to the UK and other locations because of subsidies.
If you don’t think subsidies are the issue then you should be okay with a CVD on them. No harm no foul?
“LA’s problems are deeper and more systemic” … A lot of people like to suggest this, but never to the extent that they promote lifting the subsidies to see what happens.
Because NOTHING is stopping the US from offering incentives too!!!
A CVD won’t bring the work back to LA. It will have one key effect which is that the big six will actively promote low-cost non-subsidised territories as places to do VFX. Don’t believe me? In the late 90s WB got fed up with paying California’s prices and set about actively developing London as an alternative center for VFX work. By the time they got to the 5th Harry Potter film London was in a position to do the majority of the work after six solid years of being pumped up by WB, Par, U and Fox. The only thing that will change is instead of companies being told to go to BC, Montreal or London for subsidies they’ll be pressured to open up in China, Thailand, India where cost bases are lower and regulation is next to non-existent.
I believe CVDs would level the playing field. I don’t understand why work leaving one first world country for another first world country is okay regardless of the means.
Yet if it goes to Asia, that’s bad.
The cost of doing work in Asia is still cheaper than subsidized Canada and UK. Yet studios still demand work get done in Canada.
Why? because your premise is false. Asia really hasn’t come through… And it’s getting more expensive to do work there.
I know you get upset about this but here’s the truth: The CVD is an incredibly cost effective tool for countering subsidies.
I’m not upset about it at all – I don’t think it’ll make a scrap of difference to me or my life – but I do think your belief in the power of the CVD to bring about the outcome you desire is naive. The big six have an obvious counter to it: move the work to a place where the cost base is lower and tell the VFX vendors to make it work. You’re right, Asia hasn’t come through – yet. But you sound *exactly* like all the guys who hung out at SIGGRAPH 20 years ago who maintained that the rest of the world would never catch up with Californian VFX, that no one would ever rival the likes of ILM and DD. But it still happened because a bunch of people in the big six actively promoted overseas VFX centers who jumped at the opportunity. Sit in an LA bar with a VFX studio exec and they’ll happily tell you how they “broke the LA monopoly on VFX” and brought down the cost of doing business. When faced with the prospect of production costs going up by tens of millions of dollars per movie do you really think they’ll just roll over and accept it?
3 years ago I had a fellow VFX artist tell me about a film called Alpha and Omega – A feature animated film by crest animation in India. He said once it comes out it will all go to India. Crest Animation closed over the weekend.
15 years ago R+H opened in India for cheap labor and yet today they’ve gone bankrupt laying off many in Asia.
5 years ago Sony Imageworks opened in India. Ask anyone at Imageworks how much work gets done there. Not much.
India’s Reliance media works has lost millions every quarter. It never made a profit with all that cheap labor.
India’s Prime Focus almost ran out of cash this past December. They’ve denied that they are for sale.
All this time I kept hearing the same thing: “EVENTUALLY all the work will go there.”
it’s been 15 years. I’m still waiting.
Crest Animation, India’s Reliance media, Prime Focus failed/are failing because the managements of those companies were/are abysmal with a poor understanding of the market place in which they work. R&H India and Imageworks India are/were sops to the idea of lowering costs through offshoring and primarily there to prop up inefficient American parent organisations – there was never the commitment to make them work properly. However, it’s worth noting that R&H India still appears to be functioning, whilst its shrivelled former parent in Playa Del Rey doesn’t look like it’ll see out the year’s end. But you can take this to the bank: put a gun against the heads of the London VFX management and they will have a plan for shifting their entire operation overseas within a month. Your CVD is the bullet in the chamber. Problem is, when you’ve fired it you’ll discover that you’ve blown off your own foot along with everyone else’s.
I can tell you VFX soldier you are wrong about your info in Imageworks india. The departments that are there are pumping out work for its offices in LA and Vancouver. MM, Roto and prep are in full swing currently on 2 shows.
Not to mention MPC shifting paint, roto and assets to Bangalore, ILM outsourcing to Base FX in Beijing, ILM and Dneg’s setups in Singapore, Centro/Deluxe in Hong Kong, etc. There is quite a lot of high quality work coming out of Asia these days.
Not to say that ALL the work is going there, but there certainly is high quality work being shifted there, and the cost difference is still abysmal, even if wages might be going up, they’re still a fraction of 1st world wages.
I’m afraid that LA Skyline might be onto something.
Yes he’s exactly right. Soldier’s anti subsidy argument is based on the idea that if the subsidies go away studios will fill the resulting multimillion $$ hole in their budget by paying MORE for their vfx! You dont need a harvard mba to see how much water that holds.
I believe once the subsidy goes away studios will have to do a better job of planning VFX work or else be exposed to the true cost of “fixing it in post”.
By the way, notice how how riled up commenters are about this? If subsidies really were the red herring that these commenters say they are?
Why are they trying so hard to stop us?
? Because the basic premise of the idea – anti subsidy argument – is incorrect.
@vfxsoldier in all your dealings with the studios what experience makes you believe that they will do that and not just make it the facilitys problem and so make everything worse than it already is?
In all your dealings with life what makes you think that doing nothing leads to something better?
Not crossing the road into heavy traffic is the first example I can think of straight away. Why don’t you answer the question?
Elimination of the subsidies removes market distortion. Companies that exist purely because of market distortion will not be able to compete under a level playing field. This eliminates the over saturation in the industry and allows for a trade organization to negotiate standards for the VFX industry.
If I understand it correctly you are not fighting US based subsidies only foreign subsidies under what you plan on doing correct? So if New York ups its subsidies what ail you do then ?
I address this question in the last two paragraphs of this post:
…nothing. and this blog will go very quiet, very quickly.
@to be clear
The lawyer explains that a CVD can also be initiated by other fellow WTO nations against the US for any state subsidies.
They have to show that they are injuring local industry.
Not sure they are having much of an effect on the vfx industry as I think most are geared towards productions. But if they are injuring their local industry, a CVD can be imposed upon import to their country as well.
“By the way, notice how how riled up commenters are about this? If subsidies really were the red herring that these commenters say they are?
Why are they trying so hard to stop us?”
Confirmation bias if ever I saw it: “they don’t agree with me, it must because I’m right!”
I am not making *any* effort to stop you because you won’t succeed in your stated goal of bringing the work back to LA – your CVD might well screw with the status quo, but it will fail to restore LA VFX to the glory days of the early 2000s. But I do fear for those who currently still have work in LA and other western VFX centers as your campaign will inevitably result in the majority of VFX work being shifted to territories with low cost bases. If you take away the studios’ access to lower costs in the the subsidized areas of the US, Europe, Canada, BC etc then the same execs who currently push to put the work into those areas will pressure the vendors to do business wherever the work can be had for less. The vendors – many of whom have been around since before most on this blog were out of high school – will do whatever it takes to preserve the businesses that they have built. The one thing that will never happen is a return to the shot cost averages of pre-2008, which is the only way the work would come back to LA in any significant quantity. This is a problem for *everyone* in VFX, using legislation to raise effectively raise the cost of business in one specific location won’t solve that.
LAskyline you continue to claim work will move there but you also continue to ignore the obvious counter to that claim. And that is, it is already cheaper to go to those labor markets even with subsidies in 1st world countries in place. Why do you think studios can just move work to China or India if they havent already?
@LAskyline
Nice try but DNEG did not buy that building or pay for the refurbishments. The building is owned and was developed by Great Portland Estates. They hawked it around for a while to Bank trading firms and IT companies before they struck a deal with DNEG after the building had been vacant for quite a while. They are in a lease term agreement – they can bailout with notice. Might also be an issue as their other buildings were in the soho-proper creative community so would be more expensive and less likely to be so flexible in getting out of the lease if the company hits troubles again. And it is a statement of sorts to move from soho proper to noho and out of the creative community area.
When you say 80 people, that is probably half the company numbers of full-time, proper contract staff. In a london vfx company of 1,000, you will have 200 at most on proper contracts, everyone else a temp or freelancer. And most of that number will be management, acountants, buildings services and IT support as the core company staff, not people producing the end product and service for sale. So 80 is gutting the core. When you end freelance or temp contracts early, it doesn’t count as laying people off. That is why most of the people producing the end product will be freelance. Of course, to the press releases and governement subsidy bureacrats, the figure of 1,000 will be quoted as to imply they are all proper jobs, not all temps.
So, perhaps vfxsoldier should have another round of fund raising for the law firm and make a full on frontal to the three biggest CVD offenders DNEG, MPC and Framestore? Writing as well to the IRS and congress could also help, wording in terms of tax avoidance by companies. Running rings around trade agreements and not paying into the system. Getting Customs and IRS on board would be a great boon in the effort.
Its also double standard. The UK absolutely hollowed out its industry years ago – detroit style – for things like ship building, steel making, car production, mining, all in the name of anti-subsidy and international trade. Yet here we have a company CEO openly stating that they rely on subsidies to survive. How can you possibly match up these two situations?!?!? Someone in the UK trade boards needs to be asked this question.
For some of the commentators who say the US should start jumping into the subsidy competition game between governments, you need to read why the WTO exists in the first place. Believe me, I think it would be great if we could get rid of it, but since we are stuck with it, if some are going to adhere to it and others not, it makes a whole mockery of international trade agreements. They exist apparently because never ending trade wars using subsidies in different countries led to military wars in the end, two world wars and a worldwide economic depression between 1913-1945. It was after this period that there was the Bretton Woods agreements on international trade, after world war 2, in order to stop a repeat of gloabl economic depressions and wars caused by government manipulation of trade. Thats the reason WTO and trade agreements today exist in the forms they have reached between different countries. Histroy lesson over. I don’t neccessarily agree with the rationale but there it is. Some stick a finger up to these trade agreements.
And do you really believe the big US studios will all up sticks to china or somewhere? The US is the biggest consumer market in the world with a common language and common culture, self sustaining after hundreds of years. China and India are an experiment in trying to flood money printing into nations in just one generation to try and recreate the same thing. It hasn’t worked. There is no middle-class core or self sustainability. The economies are in big trouble already after 30 years of the expriment. Do US studios wasnt to be looking outside in at the core US market because a few London and asian vfx companies have to pay a bit extra in import duties and tax? Of course not! Play their bluff.
Preach! Testify! Amen! 🙂
Sorry but I agree with LAskyline. It won’t come back to LA heydays. That bird has flown.
Sure, the industry is mature and the heyday gone. So what has anyone got to lose then? At least if these subsidy trade-dumping firms are made to pay up for the trade violations, the municipal and federal governments may have more money coming in to fund services. Either way you win.
@StudioSpotter “Why do you think studios can just move work to China or India if they havent already?” because none of them actively wants to move there – they might be able to make a bit more money out of the business if they moved now, but most of them quite like living in London/Vancouver/Montreal/Wellington just as the people who run the remaining LA facilities quite like living there. But given no option you’ll find there’s a a significant majority who will do whatever – and go wherever – it takes to stay in business.
@MattD re: Dneg. Do you work there?
come on matt..
I think their new premises are actually a lot better. I would say it looks a lot more expensive and now they are all under one roof. Great Portland Street is hardly a cheap area. They are probably the most fair in London when it comes to wages (out of the big companies). I work there and its definitely not for peanuts
That’s their reputation. MPC on the other hand…
Would the Investor State Dispute provisions in the upcoming Trans-Pacific Partnership (TPP) international trade agreement possibly prevent the practical application of such tariffs?
While I understand that this blog is against all tax-credit programs including those in the U.S. How will adding a import tax be possible when you have New york doing what they are doing?
http://www.hollywoodreporter.com/news/new-york-attempts-lure-hollywood-tax-credit-354893
Or has something changed and has Newyork pulled back those plans?
As for those questioning this route it is because so far it appears to only be supported by workers and no VFX houses and no studios. I see that as being a major road block. Even if you are able to get an initial ruling what is to stop the studios from lobbying the U.S. government hard to prevent this from happening? Basically my question is has any industry ever gotten a CVD passed without major support from companies in the industry or even unions in the industry? Do you have any of the major unions or Guilds supporting your fight publicly?
The other issue I have is trying to sell this solution as fixing all the work related issues for VFX workers cause I doubt it will. This type of ruling will not help VFX artists get paid on time, paid OT, reasonable work hours, health care etc. It will do none of that.
I am also curious how this plan will work when films are true co-productions?
Nobody at the studios wants to pay more for VFX. The one thing they are all focussed on at the moment is paying less for all aspects of film production. So the one thing that won’t happen should this ever be implemented is that the studios will say “OK. Hands up. You’re right we’ll stump up another 20% of our budget for VFX and let’s give the work to those guys in LA who just cost us a bazillion dollars in import duties”.
The only viable way of bringing more VFX work to LA is for the US Government to offer similar subsidies.
Or place defensive taxes on the current subsidies…
Keep in mind the big six studios are American companies and the current subsidies is %30 + bonus on top of what it costs…your math is off..
Again with the subsidies nonsense. Yes they no doubt play a part in making it harder for work to be won in LA but seriously you are all missing the damn point.
The industry will only return to the glory days when demand and supply are back in equilibrium!
There are too many damn artists. A union? when I started in this industry there weren’t enough of us to fill a user group. Now there are millions of us. More and more being spat out every day.
You are all deluded in thinking you can legislate against an industry that has gotten so full of its self; fat with expectation, while replicating an army of agent smith style vfx nerds. The studios dont need us all… that is until you piss them off so much with your ludicrous CVD’s and they simply setup shop in house with a handful these little agent smiths. Oh but they wont be able to do that… They wont know how to run such a venture… They are doing it now!
The smart ones among you will start approaching the studios to do it in house and set it up for them. The rest of you should become ‘professors’ cause those guys are raking it in.
After reading the repot and listening to the podcast a few things stick out.
1. Doing the CVD will be very expensive.
2. It will be hard to get off the ground without the unions.
On the plus side I like the idea of the CVD causing Countries to come together to modify how tax credits work and hopefully lower all of them back to a level that is profitable for the province or state they are in. I would love to see any major blockbuster sequals not qualify for any large amount or only receive the tax credit if it preformed badly in gross box office.
However the biggest risk is because this process does not touch the US tax credit programs it puts the US at risk of having their products getting a CVD put on them as they enter other Countries. In Canada the amount of CVD Canada could receive would be greater then the US since 80% or more of our prime time content on TV and 90% of our movies are from the US.
So what you’re saying is, Canada would be better off spending it’s subsidy dollars in country, generating locally produced content?
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[…] Our legal challenge made recommendations on how to discipline and mitigate the distortive and volatile effect of VFX subsidies. Rather than lobby politicians to pass a law, we would go directly to federal trade court where if we prove injury from international subsidies, a duty would be levied against US studios for the amount of subsidies they receive. The investigation and ruling would take a little more than a year and it would be far more cost effective than the current $100 Million currently spent by California. The CVD effort also gives the trade organization we are forming something else too: Leverage with the US Studios to negotiate sustainable practices in the VFX industry. […]
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Regarding Kushner News – Was this guy (Taylor Amarel) the source? His 4/8Chan posts and emails dumps looks like it.