If you read through the posts on this blog about film subsidies one trend should be abundantly clear:
Hollywood studios will take one government’s offer and game it against others in the hopes of increasing and maximizing the total amount of free taxpayer money available. So no sooner than a few days after film and VFX workers celebrated the passage of CA film subsidy bill AB1839, the MPAA will be looking to meet with other states to increase the stakes:
Well, that’s certainly looks like a kick in the teeth to the home of Hollywood. Just days after the state Senate voted overwhelming to increase and expand California’s $100 million Film and TV Tax Credit Program to $330 million for the next five years, the MPAA has announced it is hosting a shindig in the nation’s capitol to help other states compete.
You’d think the state of Louisiana which offers a 30% film subsidy would be on solid ground but even they lose out as studios will take their offer and game them against international governments agreeing to give even more free money. Can you see how this is a race to the bottom? In order to win you have to be willing to be the biggest loser and even then, it’s expected that you keep raising the stakes. It’s also not cheap as the LA Times questions the cost effectiveness of these programs.
Of course the big hope for VFX workers is that AB1839 would do something to lure work that has gone to locations that offer huge VFX subsidies like Canada. As I said last week I think it’s great to see the legislature write a trade provision supporting our legal effort. AB1839 actually offers a subsidy for VFX but as you look into the details, you’ll quickly see why I don’t think it will do much to put a dent into stopping work from going to Canada.
AB1839 offers a 25% subsidy on VFX costs that occurs in CA for a feature film but here’s the catch: 75% of the principal photography for the film must occur in the state (so no VFX for animated films, commercials, or games qualify). Each film is limited to claiming a total $100M in production costs, the program is capped at giving out $115M a year in total for features, and expires in 2020.
Compare that to British Columbia’s subsidy for VFX: A subsidy of 58.4% of the resident VFX labor costs. No caps, no limits on the amount a film can claim and it’s applicable to animated, live-action, and television shows. Put yourself in a VFX producer’s shoes planning the VFX for a major feature film. Even if you wanted to do the VFX in CA for the subsidy there isn’t really any way for you to accurately predict how much money will be left in the program or the logistics of checking with the live action unit to see if they will do 75% of their principal photography in CA. Why wait for all these planets to align when you can get a much larger amount in Canada?
That’s why it’s no surprise that while this bill was being negotiated many VFX facilities didn’t bother to stay and wait. There is demonstrable evidence that VFX producers will avoid the CA VFX subsidy because of the restrictions. FXGuide reported the reaction from Mary Ann Hughes, Vice President, Film and Television Production Planning at Disney on similar restrictions in other states:
An active Q&A followed which brought up issues like the Illinois tax credit which has a one day principal photography requirement, which effectively eliminates it from consideration. Some states have minimums that must be spent to access credits. The only state that has stand alone visual effects tax credits (30%) is New York but they tied it to a requirement that you spend 75% of your vfx budget in NY. On that Hughes said, “who here is willing to say I guarantee that there are enough houses available in New York that I can guarantee 75% of visual effects to New York knowing that if you hit 74%, you fail the test and you get none of it?”
Furthermore, one state did offer a 25% subsidy with little to no restrictions for VFX: New Mexico. Looks like we’ve all been bamboozled.