As CA Film Subsidy Passes, MPAA Prepares To Raise Stakes

mpaa

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.

Soldier On.

33 Responses to As CA Film Subsidy Passes, MPAA Prepares To Raise Stakes

  1. Tyler says:

    The Disney conversation is inaccurate about NY. NY requires only 25% VFX work be done in state. 75% is for all other post work (non-VFX) and they are tracked separately.

    Now I’m going to board my flight to NY because of said subsidy🙂

    • VFX Soldier says:

      Correct but at the time NY required 75% of the VFX done in NY to qualify. Now it’s been modified but VFX is capped at $25M which is why it’s been so ineffective in luring work compared to Vancouver.

      Sent from my iPhone

      >

      • Andreas jablonka says:

        In all fairness it has lured lots of TV and commercials just not features. Seeing how “smaller” shops are what NYC has it makes sense not to go for big features.

  2. minoton says:

    This tells me the MPAA and studios see the CVD as a serious threat in succeeding, and thus preparing a safety net among state subsidies.
    I expect the meeting to go something like this:

    • Image Ghost says:

      CVD’s are a two way street no? If US goes after Canada or UK and succeeds then Canada or UK goes after US states through same mechanism. Which I am sure many on this site ultimately wouldn’t mind.

      • minoton says:

        I’m not really sure how that would work? You would have to generate work for the states to subsidize (lure away). But since Canada and UK are subsidizing to get that work in the first place . . . ???

      • matteobject says:

        The UK & Canada don’t really have domestic film industries, they’re essentially just subsidized vendors servicing the US film industry, so while they might enact retaliatory CVDs, it’d hurt them more than it would hurt us.

        Might not be bad though, would let them focus on building their own industries instead of just poaching foreign jobs, more actual customers (read: movie studios) would be better for all of us.

      • Steve says:

        “Might not be bad though, would let them focus on building their own industries instead of just poaching foreign jobs”

        Canada can’t. Under the MPAA and NAFTA, Jack Valenti and Ronald Reagan successfully dismantled the Canadian film industry, and it’s still law today. No sizeable domestic Canadian film industry is really possible.

      • minoton says:

        Too bad laws are carved in stone and people can’t fight to get them changed. (Hint: Reagan and Valenti are dead.)

      • Steve says:

        The industry has already been dismantled. The Americans won that war, that’s why Canada instead fought back with a battle it could win, on production. Isn’t that what this blog is about?

      • minoton says:

        @Steve, so the Americans are fighting back in a battle it can win. So where’s the problem? Canada can rebuild it’s film industry, if it has the belly to.

      • Steve says:

        Maybe it doesn’t want to.

      • minoton says:

        Then they really shouldn’t whine about CVDs, competing subsidies, and people who do want to have their own industry.

  3. Chuck says:

    To clarify, when the bill says “qualified motion picture” that includes TV Shows, Independent Films and Pilots. Does not include animation or commercials as you mentioned. Entire bill is based on 75% of primary photography shot in CA.

  4. Jonathan says:

    So subsidies are bad and evil, unless it benifits CA?

    You ask all VFX workers around the world to support your cause, but your cause is to support California’s industry exclusively.

    Makes sens…

    • VFX Soldier says:

      Might be worth googling around about me. I was against subsidies in AB1839 and always have been.

      Sent from my iPhone

      >

      • Jonathan says:

        Migth be worth reading your article. The only thing you are against concerning AB1839 is that subsidies are not big enough.

      • vfxmafia says:

        @jon

        No VFXsoldier has been REALLY adamant against any subsidies. Because they distort the market and cause migration.

      • Studio_Spotter says:

        Deducing that a subsidy is not large enough to compete with other larger subsidies is not the same as wishing they were larger. His point is that competing subsidies are so large, even this bill wont accomplish what it intends to do. It is therefore not even worth competing with them, especially when we have an alternative (CVD) option that costs a fraction of the price.

      • Steve says:

        “No VFXsoldier has been REALLY adamant against any subsidies. Because they distort the market and cause migration.”

        You know what the funniest thing is about that logic is? So does NOT having subsidies.

      • minoton says:

        Yes, but that migration is based on the desires of what individuals choose to do, not what other governments choose to do against them. Or do you not believe in the freedom of individuals to make their own life decisions?

      • Mike Chapman says:

        Steve – I can think of better places to spend CA tax dollars, although those details are best reserved for another conversation. Hollywood films should NOT be on that list. Subsidies will not bring jobs back to LA, or CA, but, time will tell… result will probably only benefit a minority of LA/CA based workers. Solution? Find another line of work perhaps (not being sarcastic or ironic with my last statement).

      • minoton says:

        I can think of better places to spend Canadian, UK, or NZ tax dollars as well. As someone else said, at least CA is now in the game, for better or worse.

    • VFX_Boom says:

      Jonathan, you seem to be missing the bigger picture………..ALL subsidies around the globe DO benefit California. How so you ask? Because the checks that are written by all the governments around the globe are in fact deposited into banks in Los Angeles, California, U.S of A.

      • fixed bid says:

        Really they all bank in LA.

        So Sony, Dreamworks, Fox, WB are not just subsidiary companies of there parent companies who’s head quarters are no based in LA. Remember the Parent actually holds the bank account not the child.

  5. Man I wish this Summit was in LA, we could picket the hell out if it…

  6. Darren says:

    Here’s a question. If this is a race to the bottom, as VFX Soldier said it was: what happens when we get to that bottom?

    • We all wonder why the hell we’re still here?

    • Earl Grey says:

      If this is a race to the bottom, as VFX Soldier said it was: what happens when we get to that bottom?

      Maybe we could start by looking at the top in the 90’s. Then, the number of jobs outweighed the number of artists. Studios held onto artists between projects, and it was possible for a VFX artist to make a lot of money in a year. VFX artists often had health insurance and 401(k) options on top of generous salaries. In 2004, I heard about a top dynamics artist at Sony Imageworks making $9000/week.

      In 2009, I overhead two supervisors sifting through 150 applications for a single character animation job. Modern VFX jobs often let go of artists after projects end, and too many VFX artists I know live from paycheck to paycheck. That’s what’s happening right now.

      I suppose the next step is for VFX artists to subsist upon minimum wage and food stamps, like Walmart employees. We already have at least one homeless VFX artist working 100-hour weeks.

      After that, perhaps VFX artists could pay Warner Bros for the privilege and prestige of working on the next GREEN LANTERN film. Gnomon, Digital Domain and the Academy of Art attempted to exploit student labor in the past. One day it could become standard practice.

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