Film Subsidy Bubbles

Film Subsidy Bubbles
Dangers to those in the subsidized areas even if they may not be aware of it.

Someone on an email group questions why subsidies for visual effects were bad and why would we want to do away with "Our subsidies".

First off they're not our subsidies. The film studios are the ones who lobbied for them. They're the ones who profit from them. Not the vfx companies, not you, the vfx worker, and not the taxpayers.

All the vfx companies obtain by moving to subsidized areas is the 'opportunity' to bid on a project. Same competition. Same need to submit a bid the studios will accept.

Subsidies aren't what fund visual effects. World wide demand is what fuels visual effects. The studios make the films for a global market and most of their profits come from visual effects films. If they wish to make tent pole films they will continue to make films with visual effects. Reduction or elimination of subsidies would not cause visual effects work to disappear. What it would do is hopefully instill some basic management and planning of the visual effects to tell stories rather than abusive and excess amount of wasteful work.

What the studios gain from subsidies is someone (the taxpayers) who will cover a sizable cost of the film. This reduces their risk and allows them to make more profits, sooner. Thanks to the generosity of unsuspecting taxpayers.

Bubbles
It's useful to think of subsidies as what they are, economic bubbles. Those who cannot remember the past are condemned to repeat it.

Housing bubble - Banks were practically giving away home mortgages with no down payments. There was so much profit to be made some bank loan officers were forging documents. There was so much profit to be made people were rushing to become contractors and real estate agents. Many were investing their life savings on a sure thing so they bought houses to 'flip'.

Things were going great until they weren't. The housing bubble popped and was one of the main causes of the world wide recession in 2008 which we will continue to struggle with for years, perhaps decades. People were wiped out out. Even those not involved in the housing market saw their house values, retirement funds and their investments drop like a rock. Unemployment skyrocketed and hundreds of thousands of homes were foreclosed, many of them illegally.

But don't worry about the banks. They're doing just fine. They made huge profits on reselling the loans and on the foreclosures. They even got mountains of money from the government.

Tech bubble - A few years earlier there was the tech or internet bubble. People were betting their life savings on this new internet thing. Startups were happening in every other house. People were rushing to be web designers. The gold rush was on. Until it wasn't. When it all imploded many lost their life's savings.

But don't worry about the banks or rich, they got in on the IPOs of the best companies. They'd be laughing their way to the bank if they weren't already sitting there.

Silver mines - In the 1800's there were a few silver mines where silver was discovered. And almost overnight towns would spring up complete with saloons, stores and churches. People moved across the country to feed on the potential money. They either became miners or sold to the miners. And then the mine would run dry and it would all stop. Many of these towns turned into ghost towns as people fled to the next place. The entire economy for them was built around the silver mines. People lost their savings and moved on.

But don't worry about the banks or the owners of the mines, they did ok.

And if you had asked any of those people involved the day before those bubbles popped, the people would have told you everything was great. They all thought it would continue. Until it didn't.

Not creating an industry 
The film lobbyists and others who would make a profit from them, convinced the politicians of Michigan that it was in their best interest to build stages. Because they would be an ongoing profit center and employ over 6000 people. After all, they were creating an entire new industry there. And the politicians in their infinite wisdom backed the cost of building the stages (and the bonds required) by using the pension funds of the police, firefighters, teachers and others.

Then they learned the hard lesson that they weren't really creating an industry. They were simply leasing it at a high cost for a very short time. They were simply paying studios to come to their location on a film by film basis. And the studios would only bring films if they provided higher and higher amounts of cash every year. They had to compete with other countries and states and the ones to win film projects were the ones who outbid others and gave the studios more free money. Both the 'winners' and the losers were losers.

Many don't seem to see the downside of subsidies, especially if they're in a subsidized area. And just like the other bubbles, these people think everything will continue to be great.

Real World Example
Let's do a review of how this works and why it's not great for those working there. In this example I'll use Vancouver but it could be anywhere in the world.

Vancouver in the days before subsidies had their share of film production. Vancouver was a city and had a number of scenic locations for shooting (ocean, harbor, mountains, forests, city streets, snow, etc) There was some work from both Canada and the US. The lower exchange rate encouraged some projects to shoot there as well. If the subsidies never happened the  film production in that area would continue to grow at a rate that matched demand. The industry would be as stable as any production hub can be. Most of those who had film jobs would likely remain reasonably employed.

When the subsidies were created in that area they created a huge pull for all productions, especially those on the west coast. Many projects went to Vancouver along with a number of the below the line jobs. According to some of the SaveBCFilm people, over 20,000 now depend on the film industry. Many of these couldn't be filled because they had not evolved over time to the new size. This was simply a politician pulling switch. That required bringing in workers from all over the world. That required training many locals in film production.

Many jobs were lost in Los Angeles and surrounding areas, places that had evolved over the last 100 years and had maintained a certain balance. Because this was where the studios with the money were located. This is where most of the writers, directors and producers made their homes. So this eco system that had developed was being drained not due to lack of demand but simply by politics.

Dangers
And in the meantime Vancouver continued to balloon. VFX companies from the US and even the UK were forced to set up shops due to the demand for this free money from the studios. This in turn required many working in the US and other countries to now move to Vancouver to continue working. The original intent for many of these film subsidies is to create more jobs for locals but in many cases the jobs are filled by foreigners. The clamor for more people and the lure of money also tends to bring out the 'for profit' schools to start pumping out even more students. So these graduates join the work force of a local industry that is already expanded beyond what it can support naturally. This while other areas are experiencing high jobless rates simply because the jobs have moved. No new jobs were created. Simply the shifting of existing jobs in most cases.

And we see this same pattern repeat itself around the world in other countries, regions and states. And the same people pushing for these in one area are in fact the same source of the funding and lobbying to push all other areas, each competing against the other but all ultimately working for the same small set of clients.

The people working in film and visual effects in areas with subsidies have now become dependent on the subsidies. They have become dependent on government handouts or welfare in a sense. The government ends up covering a sizable amount of their labor costs. And these subsidies must increase on a yearly basis and must out spend other areas competing for the same exact work.

Now you have thousands of people who's private industry jobs are in the hands of local politicians. A very large portion of the film industry (individuals, vendors, stages, sub-contractors, etc) in those areas has now expanded beyond what it would support naturally if there were no subsidies. This puts those areas in a very dangerous and fragile position. The entire structure could collapse at any moment since the politicians could pull the support, the only thing holding all of it up.

Film production and visual effects has always had ebb and flow of work so that makes it difficult but places with subsidies have additional factors to consider. If a subsidized area reduces their subsidies due to change in politics, then it will all fall down. The taxpayers in these areas won't always be so ignorant of what it's actually costing them. One day they will realize they're seeing the Emperors New Clothes re-enacted with their money. And the other thing these subsidized areas have to worry about is another location out bidding them by providing even more free money. They're competing against other locations and if they lose, they may lose big time.

Vancouver, BC has seen this in action just in the last year. Ontario and Quebec started offering more incentives and the work to Vancouver slowed down and the work in these other areas increased. Those in Vancouver also fail to see the irony when they cry foul over the subsidies when a large percentage of the work they had was based on themselves outbidding in the subsidies war. And as in all wars, there are losers.

And Vancouver and their SaveBCFilm had no control of these other political groups in other locations since they were competing with them. They had no control over their own local industry since they had built it on fictional and temporary support. They had not built a self sustaining industry with it's own content creation but rather a simple service industry greatly dependent on the good graces of local politicians (receiving money from the studio lobbyists) rather than business and talent.

And we see this repeat itself all the time. Michigan loses to Louisiana. State or area X loses to area y because of a shift in subsidies. The amount of work remains the same, it's only question is where it will go and this is now controlled by government payouts than by any other selection criteria.

So now rather than having a few healthy and stable locations for film and visual effects production, we see the work spread out to many more locations which tends to make each location weaker. Rather than a large eco system that is self sustaining, these are smaller systems which are not self sustaining. With so many new areas developing there is more competition for the exact same amount of work. And there are new areas announcing film incentives almost on a weekly basis. These areas are all fighting for anything and everything. Those jobs that were 'created' in those locations may evaporate at any time since film production is starting anew with each film and not as a permanent industry. And one thing is for sure, the work is constantly in flux and shifting around the world. No place is safe or permanent. Those on top today will likely be on the bottom tomorrow.

Awareness
And because these areas have all been expanded beyond their self supporting means, they're all in danger of popping. And so eager are they to keep the work they are willing to keep outbidding others. Those who have moved there, those who trained there, those building their own businesses there and all of those working there are in a very precarious position and yet fail to notice their local industry is supported by the least reliable support. A politician. Like those in other bubbles, they fail to notice the dangers until it happens. It obvious to those on the outside but those riding the bubble fail to see it or simply prefer not to consider the reality.

And who is pushing for subsidies in all of these cases? The studios, the only ones who gain in the end from any of these and the ones who play each location off the other. But don't worry about the studios. They'll be just fine. They'll just move to the next place after your area pops.

What's happening in LA could easily happen to Vancouver, London or any other film location. And not only is it possible to happen, it will happen at some point. There's no magic that protects your area. Studios eager to make money in the short term have no allegiances since the subsidies have merely turned the discussion into a cost issue.

No problem
There are those who think that that's the way it is now and that we should get over it. They don't see any problem moving every 3-6 months like migrant workers. They see no issue with being treated as a commoditized migrant worker and they feel the best workers will win out. Sorry for being the bearer of bad news but that's not how it will play out. Just because you're willing to move doesn't mean that you can move. Many subsidies are dependent on locals (residents who have been in a location for over a year, file income taxes there, etc) and so when given a choice between you and someone who can fulfill their subsidizing criteria, your 'qualifications' may not be enough to counter the need for a subsidized worker. Some countries are difficult to get working visas and so even if work is available and you have great qualifications, you likely won't be hired. And don't forget that each area has been expanding and expanding already. There already is an excess of visual effects and film workers due to subsidies. As the work continues to shift based on subsidies you may find yourself shut out from working, regardless of your qualifications, experience, skill level or talent. Then you might consider why subsidies aren't the best for the industry and the people who work in it. Rather than being based on  quality, efficiency and cost criteria,  subsidies are only based on which politician will provide the most money.

Summary
Many of these locations that have subsidies would continue to do work after the subsidies go away. They have now built up infrastructures and experienced and talented people. It won't be as much work but it will be more stable and more long term.

Ultimately that's what we're striving for. A healthy and stable industry where quality, efficiencies and other factors are the deciding criteria on where a production does their work. These are all in the hands of the companies and the workers in those locations. Right now your local industry is in the hands of a 3rd party that you have no control over - the politicians. That may be good for the studios but that is no good for those of us working in the business.

Related Posts
Visual Effects Tax Incentives / Subsidies
Risk and subsidies
The Impact of Visual Effects Subsidies

Visual Effects Professionals United

Visual Effects Professionals United

[Update: 4-12-2013 I've adjusted the page a bit.

The VES has a project in process and one of those has to do with the workforce. I've been tasked with trying to gather feedback from professionals about their wants and needs. Since I had already written and posted this I thought it was right in line.

I'm hoping to also do a survey in the next week.
Please take this survey regarding your working conditions
(I plan to wrap the survey during 1st week of May so be sure to fill it out now)

[Survey has been done and the results are here: Visual Effects Working Conditions Survey ]

[I've included some comments at the end of this post from some of the survey results already.]

PLEASE contribute your thoughts. People keep asking what's supposed to happen next and why isn't someone doing something. Now it's your turn to do something. Submit your ideas and thoughts.

Thanks.]


As individuals in the visual effects industry each one of us has very little control over our work experience. The choice is to talk to management and hope they will be willing to make changes or to quit and hopefully find another company that has similar views of work and life as you do.

Most companies are driven by profits and they’re driven even more these days by squeezing workers and vendors as much as possible. The visual effects companies are put in difficult situations by the studios, which in turn puts pressure on the workers to accept less than ideal working conditions.

Even when management may be trying to balance profits and worker experience, new management or an adjustment of business conditions may change that for the worse.

At this point there are visual effects professionals around the world doing great work, each of us connected by the work that we do and the love of what we do. We’re a global community. You can certainly extend that out to cover as much as you consider. (film, TV, commercials, animation, video games, motion graphics, etc)

Goal
What we need to do is unite in some form so we can work together to help stabilize and improve the visual effects industry.

One aspect of that is to come up with a work experience document. This would include working conditions and a code of conduct for workers and companies. This would make sure there is a minimum working base for all visual effects workers, including yourself, around the world. This would help to make sure no professionals have to deal with poor working conditions. This would mean if you have to go work half way around the world you won’t find yourself working under poor working conditions.

Many companies may already be doing most of these things and others may be doing very few of them.

Here’s my proposal
Consider what you would think is important at work that could be used as a basis of employment around the world. Post your notes in the comments or form groups with others from work or through the internet.

Let’s compile the list and have a group refine it and put it into written form that the majority agree on.

So what’s the purpose of this?

This would provide a goal or target of what we as professionals would like to achieve when all the current possible solutions are explored and implemented.

This document could be starting point and could reduce the research and exploration time required by some of the potential groups.

If / when there is a visual effects trade association then this could be used as a guideline for what we would expect from the companies and studios involved.

If / when there are visual effects unions, this could be used as a guideline for what we would expect from the union. Existing unions could review and see how it fits into their current structure. These are items of interest to visual effects professionals.

This would be a guide for any visual effects company about what they should be providing if they wish to retain the best workers.

Companies could volunteer to sign on to the guideline if they adhere to it. These companies would be posted on a list on the internet so workers would know which companies support this measure. Those who support it would likely get more higher level work applicants. And they would be monitored in case the company did not follow through on the guidelines.

This would provide a guideline for critiquing or rating a visual effects company on places like thevfxwatchers.com.  There's also glassdoor

Workers at a given company could consider going as a united group to their employer and discussing the differences and what could be done to accomplish the list.

You as an individual could discuss with management or include in your deal memo all or part of the guideline.  A deal memo is a written employment agreement that covers your job title, rate, start, end dates and other details. VFX Deal Memo


Global nature
I understand that some countries or areas may not require all of these things but I think we should come up with minimums that can and should be implemented world wide. Even though a country may not have any laws saying the exits must be clearly marked and doors unlocked, I think we should include such specifics. Otherwise if it simply boils down to whatever local labor and safety laws dictate then none of this means anything. Around the world those laws are being broken already.

Simply having a document that  only says follow local labor and safety laws does not accomplish anything.

Examples of some of the items that might be include (these are made up numbers. You’ll want to come up with the values)

Working conditions
Meet or exceed local health and safety laws. (This should not be required but of course companies don’t all comply even when required to. There are still fires and other tragedies around the world that happen due to companies skimping on safety or trying to save $1.)

Temperatures to be at nominal room temps in the work area. (72-80 degrees) (Once again the type of thing you may not consider but even here on the west coast at a large vfx company they have been working at 85 or hotter. Some areas are much worse.)

Ventilation – Reasonable ventilation along with heating and cooling to maintain a room temperature.

Sound – No loud noises. No workers playing any audio above x db.

Drinking water within a reasonable distance (100 feet)

Working restrooms

Ergo working space – specs of basic chair, monitor, etc. To avoid carpal tunnel and other physical ailments.

No smoke or fumes in the workplace.

Meet or exceed local labor laws. (This should not be required but of course companies don’t all comply even what they are required to. Many companies misclassify or avoid existing labor laws.)

Adhere to a timely payment in full on a weekly basis.

Correct classification of workers. (ie. not classifying workers in a way that causes them to lose government protections, to avoid overtime payments and taxes. Independent contractors, ‘staff’, ‘flat’,‘salaried’,’managers’,technicians, etc)

No unpaid interns doing production work.

No unpaid students doing production work.

Food break every 6 hours for ½ hr minimum.

15 minute break every 3 hours.

No paying to work, including paying for training.

Clear deal memo for all workers specifying pay, hours, start and end dates, etc.

No withholding of training fees, moving fees, etc.

Work shall be non-abusive (we are professionals)
No screaming
No bullying
No sexual harassment
No beatings

All hours worked (approved or requested) shall be paid by the company.

Overtime
Overtime will be paid at x rate above 8 hours, y rate above 12 hours.
(Yes, I understand that not all countries have such laws or rates in place. Let’s either try to get in some reasonable minimums or at least make this section variable with different grade levels. Grade A for the company if it complies. B if it only does for x. F if it provides no compensation for overtime.)

Ability to turn down overtime work without dismissal or retribution.

 x hours notice before being assign overtime.

Cap of x hours in a day, y hours in a week.

Turnaround time
Minimum of 12 hours from time of checking out before starting to work again.

Health care
If the local government does not supply health care coverage then the company will provide x minimum.


We can't put in things like permanent jobs.
Lets focus on the real issues.
For now let's not deal with wages themselves, let's focus on the working experience.


Please feel free to add in the comments or as I stated groups in different areas could start developing a defined list of what they feel is important. This could be an item to discuss at one of the vfx townhall meetings in the future. If a group wants to take this and run with it so much the better.

What are the things that are important to you and that all vfx professionals should have in their workplace?

What are the things you feel are missing from your workplace?

What are your hot button issues?
Not being paid OT?
Too much OT?
Not having demo material?
Being misclassified?
Forced to travel?
etc.



and write up specifics in the comments below (click on Comments link if you don't see a list of comments). You can do so anonymously.  I'm hoping to get survey results and feedback by May 1 or soon there after.

If you have ideas beyond just the workers that applies to the whole industry then consider posting comments on the  What's The Solution? post

Here's the original post about this concept:
Global VFX Workers

References
Reference for what might be included beyond what might be obvious would be to review local labor laws to see what they mandate. California Labor Laws example  World wide list of labor laws

The various film unions contracts provide good guidelines for what should be included. Many non-union productions and writers still adhere to union guidelines even when they themselves are not.
Animation Guild contracts  Film union contracts

The various organizations that deal with worker rights world wide provide a good reference.

FLA - Fair Labor Association

FLA Code of Conduct

FLA Complete code and benchmarks

Frame of reference:

FLA is in use by HP and Apple in China and other locations.

Here's their HOURS OF WORK section:
"Employers shall not require workers to work more than the regular and overtime hours allowed by the law of the country where the workers are employed. The regular work week shall not exceed 48 hours. Employers shall allow workers at least 24 consecutive hours of rest in every seven-day period. All overtime work shall be consensual. Employers shall not request overtime on a regular basis and shall compensate all overtime work at a premium rate. Other than in exceptional circumstances, the sum of regular and overtime hours in a week shall not exceed 60 hours."

"Calculation Basis for Overtime Payments

5. Employers shall compensate workers for all hours worked. 

1. C.7.1  The factory shall comply with all applicable laws, regulations and procedures governing the payment of premium rates for work on holidays, rest days, and 
   overtime. 
2. C.7.2  Employees shall be compensated for overtime hours at such premium rate as is 
   legally required in the producing country. 

C.7.2.1 In those countries where there is no legally established overtime
premium, employees shall be compensated for overtime hours at the prevailing industry premium rate or at the internationally recognized overtime rate, whichever is higher.
C.7.3 Employers shall not set production targets, piecework, or any other incentive or production system at such a level that the payment for overtime work performed is less than the premium pay required by law or the FLA Workplace Code.

8. C.8  Overtime Wage Awareness 
   Workers shall be informed, orally and in writing, in language(s) spoken by workers about overtime wage rates prior to undertaking overtime."

"Forced Overtime
The imposition of overtime where workers are unable to leave the work premises constitutes forced labor. "

[ Think of it- 60 hrs maximum in most of the world as defined by some of the largest companies.]

EICC - Electronic Industry Citizenship Coalition

EICC Code of Conduct

"Working Hours

1. Studies of business practices clearly link worker strain to reduced productivity, increased turnover and increased injury and illness. Workweeks are not to exceed the maximum set by local law. Further, a workweek should not be more than 60 hours per week, including overtime, except in emergency or unusual situations. Workers shall be allowed at least one day off per seven-day week. 
2. 4)  Wages and Benefits 
   Compensation paid to workers shall comply with all applicable wage laws, including those relating to minimum wages, overtime hours and legally mandated benefits. In compliance with local laws, workers shall be compensated for overtime at pay rates greater than regular hourly rates. Deductions from wages as a disciplinary measure shall not be permitted. The basis on which workers are being paid is to be provided in a timely manner via pay stub or similar documentation. "

Visual Effects Society Bill of Rights
VES Bill of Rights


Ergonomics and safety (see computer)

Apple Code of Conduct  (imagine if companies and studios had to follow some of these)

Overtime around the world

Kronos report on Overtime violations


"Paul DeCamp, national chair, wage and hour practice, Jackson Lewis LLP, and former Administrator of the U.S. Department of Labor's Wage and Hour Division
"Seeing that significant numbers of employees around the world believe their employers have violated overtime laws should serve as a wake-up call to employers everywhere. If your employees perceive that you are out of compliance, you are at risk for a wage-and-hour lawsuit which can be incredibly costly even if you are ultimately found to be in compliance. Investment in wage and hour compliance should be seen as part of risk management for any smart business."


For Trade Association reference
Kansas Code of Ethics for Certified Arborists

"14. I will not compete with another arborist on the basis of charges for work by underbidding through reduction of his quoted fee after being informed of the fee quoted by a competitor."

Google the topic of interest and you'll find plenty of information.



Related Posts
Global VFX Workers
Overtime

VFX World Wide Pi Talk

Last night was a great visual effects event.  Visual Effects World Wide Town Hall - Pi Day. A great many people worked incredibly hard to pull this off in the time available. (Big thank you to all of them)
We had abut 250 in Los Angeles where the event was held (Gnomon) and interconnected to New Zealand, the San Francisco Bay Area, Vancouver and Austin.

I touched on this yesterday and here's the website with more info of the things going on. See vfxsoldier and links on upper right for additional info.

Below is the script notes I started with for my talk. I wasn't able to cover everything in the time provided and since I was free speaking most of it, I probably lost a few things along the way.  

I've posted a link to the YouTube of the talks and discussions at the end.  (And thanks for all the great responses and feedback. Let's keep the discussions going and lets implement some solutions ).

Suggested music for reading
Eye of the Tiger    by Survivor
Waiting on the world to change     by Jon Mayer
Changes    by David Bowie
A change is going to come    by Sam Cooke

------
I’m Scott Squires, started on Close Encounters, started up and ran Dream Quest for a few years, was at ILM for 20 years and I run the Effects Corner blog.

I am a VES Board member but today I’m speaking as an individual,

This event is aimed at all VFX professional worldwide. Film, TV, Commercials, and similar art forms

Each year we as the vfx community pushes the boundaries of what we can do. We develop the art, skills and technology to do more and more. This last year we have seen incredible work. Our efforts have allowed filmmakers to tell any story. We have made the impossible, possible. We are involved in not only most Hollywood films but also almost every form of moving image content. All films that were up for best picture this year used visual effects. The studios are reaping large benefits from our talents. We should be celebrating instead we find ourselves scrambling for coins in the gutter.

We have allowed visual effects to NOT be considered for creativity, collaborative and quality. We have allowed the discussion to simply become a decision of costs.

Films do not hire the key creative’s based on how inexpensive they are.

With the bankruptcies of R&H and DD and closing of other companies I the last 6 months, it’s clear that our industry is out of balance.

Major Problems

Subsidies
These are basically government funded corporate subsidies for select industries in select areas. Politicians are controlling who wins and who loses. The evolution of companies is no longer based on creativity, collaboration, quality and efficiencies. No matter how great a company is they can’t compete with a 50% or more discount funded by the deep pockets of governments. Subsidies do not create jobs, they simply move them. VFX companies are forced to setup expensive branches in locations with subsidies. The vfx professional is now forced to move from place to place like a migrant worker. We still work in offices and the moves are only based on these politics.

The taxpayers in those areas are paying a high price. Louisiana recently discovered that they make less than 16 cents for every dollar spent, even factoring the intangibles and the multiplier effect. No unbiased report I’ve seen has shown any benefits to the taxpayers in those areas.

Building an industry based on subsidies means building it on a house of cards, ready to collapse when the subsides go away. And they will go away. The subsidies are one of the next bubbles to pop. They are temporarily. Film subsidies require constant feeding.

Another location will provide better subsidies or your subsidies will go away. The BC film industry is seeing that with work now going to Ontario and Quebec. UK companies are now setting up branches in Montreal.

If tomorrow Antarctica announced a 70% subsidy, the studios would be on the phone to all vfx companies and the vfx companies would be scrambling to setup in Antarctica and requiring many employees to pickup and move if they expect to keep working. 6 Months later a small island in the pacific will offer more and the cycle will repeat itself. This is ridiculous and as insane as it sounds. Yet this is what is happening. You can see a time lapse version playing out in the US. Michigan was top dog a short while ago. They are no longer top dog and now have shutters studios and businesses simply because they falsely believed they were building an industry.

Everyone in visual effects is affected by the subsidies.

Too much competition
The amount of visual effects in films and other entertainment has exploded in recent years. But there is still too much competition. The subsidies have caused a distortion in evolution. Companies are trying to get a small profit from the projects. The companies have no leverage due to this imbalance. Large companies, even in subsidize areas, are underbidding the actual cost of the projects. Anybody with common sense can see that doing projects in the red will end in the company going out of business.

Broken business model
The visual effects business model is a fixed bid. A fixed bid for a creative process that starts as simply vague writings and has a fixed deadline. We are the only industry in the world that operates this way for a process with so many unknowns and so many changes, large and small. Construction requires blueprints and selections. Any changes are billed and deadlines are extended. The fixed bid is an insane way to work and results in companies going out of business. And it should be pointed out that when these companies go out of business they leave a trail of unpaid workers. Because at the end of the day the workers bear the brunt of all of this. It’s not the studios or the companies.

Massive Overtime
Unions fought and won to help make a 40-hour week standard. Most countries have a maximum allowable number of hours a person can work. The Fair Trade Association that Apple, HP and other companies belong to that covers China and other countries has a cap of 60 hours. In visual effects many of us start at this number of hours and increase from there. As vfx professional we’ve already exceeded what both many countries and associations allow. In there UK they have a maximum hours of 48. But vfx workers are required to sign a waver when they start.  As overtime goes up, productivity goes down. There are now health studies clearly showing the impact to workers health when worked over 50 hours. Why on earth are we working the hours we’re working.

Unpaid overtime
Many putting in these hours are doing so unpaid. Many vfx companies are breaking labor laws by misclassifying people, making workers exempt from overtime and other questionable activities. In Vancouver they are classifying people as technicians to get around overtime laws. In the UK there are no requirements for overtime rates so many are simply given a standard day pay, if anything at all.

Health Care
This is the only US centric problem I will mention. Health care here is very expensive. Each new company you work for requires 3 months before coverage. If you work shorter than that then you will have to buy your own. That is one of the reasons why all other film crewmembers are union members, including writers and directors. Because they offer continuous benefits as crewmembers move between projects.

Problem Summary
There are plenty of other problems but we need to focus on these first.

The visual effects industry is like large ship that’s burning, sinking and headed towards a waterfall. It would make a great movie but we are all on it. All of us. There are some on the ship that see no problems, some that simply want to hold on and hope for the best or hope that someone else will come to the rescue, others argue about which to fix first and of course there are plenty that just complain without solutions.

Solutions
So lets talk about the possible solutions

Subsidies
Vxfsoldier has started a legal team looking at the issue of subsidies under the World Trade Organization, which technically lists these as illegal under their guidelines. But beyond this there is little we as individuals can do solve this problem due to the politics and the deep pockets of lobbyists.

Making our own content
Many have suggested that vfx companies make their own content. That this would provide an alternate revenue stream that would help cover costs. But being a content company is a different business than being a vfx service company.  Some vfx companies have attempted this with varied degrees of success. It is certainly worth exploring but bare in mind large amounts of money have to be obtained and invested. It would require companies to invest large sums themselves to create the concepts, hire writers and directors as necessary. And even once this has been done there is no guarantee of success. Even the large animation studios are not always successful at doing so. If your company was successful in create such content, would you even bother being a vfx service anymore? Especially if the vfx business was still broken.

Residuals and royalties
The other notion is that vfx company’s share back ends participation. Perhaps even the workers. If you think getting more credits is hard, try to get a valid back end. There are some vfx companies that have done so with varying success. But this usually requires the vfx company to bankroll a certain amount of their own production for which they require deep pockets. And what happens if these projects are unsuccessful or make no return on investment. How deep are the pockets of the companies, especially since they work on very low profits currently.

Keep in mind people such as writers get residuals based on their union coverage. Most film crews get residuals in the form of health and benefit fund payments. When you buy a DVD a certain % goes into that fund. So again, vfx workers are the odd man out with no participation in the profits of the projects.

Working for the studios
The studios could simply employ vfx workers directly, just like they do film crews. This is the way it used to be done. There would be a direct connection between decisions the director makes and the cost, just like there is for the rest of the movie. This isn’t as far-fetched or as impossible as it sounds. There would be some benefits to workers and could be an advantage to the studios and directors as well if it were done right. But the vfx companies today offer the studios the ability to take all risks over themselves and the vfx companies also offer doing the work below costs. Hard to convince a studio to do their own when others are more eager to fund their projects and take on the risks.

Post-production supervision
A director is given so many days to shoot live action. The producer, line producer and 1st AD all encourage and guide the director to shoot their moving in the allotted time. They have to shoot so many setups a day to meet their schedule. A director is less likely to do 100 takes or change their mind after shooting a setup or ask for a lot of reshoots because they have a limited time and they have others who keep them on track. Once into post-production there is no one working with the director to keep them on track. Because the vfx is done by an outside company that may not charge for all changes and overages, the changes continue. As these changes continue workers work more overtime and the company loses more money. If the studios had a strong post-production person and treated visual effects more like live action that would stop,

Global working conditions
Just like the Fair Trade Associations and other organizations mandate a specific code of conduct for companies; there could be a code of conduct for vfx companies to adhere to if they wished. Those who do so would be clearly listed and overtime and health benefits would be clearly defined. Should a company break any of these guidelines they would be off the list. All companies on the list would be required not to subcontract to others not on the list. And the studios could not plead ignorance.

Trade association
A trade association would be made up of vfx companies. By organizing they create a unified front, with numbers comes strength and leverage. Just like a union. Companies in the trade association couldn’t agree on pricing but they could establish standards and also define their business models. The goal of a trade association is to do what’s best for the companies involved. The film studios have their own trade association for negotiating with the unions as well as take care of issues affecting all of the studios.

The VES hosted a few meetings with some companies and Scott Ross has been trying for years to get companies on board. The larger companies and those in subsidies areas have been reluctant to even discuss the possibilities. But the vfx protest that many of you were involved in has seemed to make a bit of an impression. Scott Ross will be discussing the trade association tonight.

VFX Guild
A guild and union are one and the same. As mentioned almost all others involved in the film industry are covered under guilds. Writers, directors, production designers, cinematographers, actors, etc. Please don’t stereotype unions by what you have heard 2nd hand. And please don’t bother bringing up false notions of the auto industry. The German auto industry is doing just fine with a union work force.

The union provides protection for the worker. As an individual you have very little control at your workplace. The company could drop everyone’s pay without notice. They can do things to skirt around the labor laws. A company may not pay you for a few weeks and simply say that they will pay you soon. (Dave Rand can discuss this aspect) All of this is even more possible at a time of large unemployment. You have no say over your situation. You either keep working or you quit. Those are your two options.

The guilds goal is to do what is best for workers. Workers are involved in the management of the guild and are involved in determining what is critical. The guild sets up basic working conditions and they set minimums. Everyone is still allowed to do their own negotiating higher as they choose.

And guilds are not only here in the U.S. There are in a lot of countries including Canada, UK, New Zealand and even India. China is one of the few places where unions are not allowed by law.

Solutions summary
So those are many of the potential solutions. None of these will fix all of the problems. We have different members on the panel that can discuss different aspects of some of these possible solutions. And if other have better solutions please submit them.

Workers POV
Since this is a town hall event primarily for the workers let’s take a look at the solutions they can be involved with.

From my perspective a VFX trade association would be a very good thing and help build a more sustainable business model. I would suggest to all workers to ask management if they have an interest in a trade association and would be willing to meet about one. If not, why not?

We as workers don’t control the politicians, we don’t control the studios and we don’t control the companies so lets look at the options that are left.

1. Do nothing. Hold on and simply hope you don’t end up unemployed and/or half way around the working next year.

2. Quit the business. Some have already done so and more are more making plans.

3. Unionize. We now have a large group of motivated workers around the world.  We’ve changed our Facebook images but how do we put that into real results? For real change to take affect we will have to truly be organized in a contractual form.

I know some people say they want working conditions, they want to be paid the hours they work, they want collective bargaining to get continuous benefits but they don’t want a union. The problem is you’ve just described a union. Here in the US there are specific laws and regulations. To do those things you have to be a union otherwise you’re an organization that submits petitions in the hopes someone may read it.

Ideally a union would be global but given the range of laws in each country that’s not possible. The best option is a per country union that can be loosely connected.

Some say they wish to start a union from scratch. How much time will that take to get through all governmental approvals, to get acknowledgement from companies, studios and other unions? And in the end what do you have gained?

Now there will be those that say a union will be too expensive, that the companies can’t handle it. That all work tomorrow will go to China or the cheapest place this week.  It does the union no good to create a large added cost to the companies, which cause the companies to fail. The unions would negotiate with the companies to develop a reasonable solution for both sides.

And remember, I’m not just talking here in the US. If you wish some protection as a worker you should consider joining a union. Canada, UK, etc all have the option to unionize as well. I think that once one area unionizes the others would be more interested in following.

Nothing signals we’re tired of this and we’re not going to simply wait around for others who may not fix the problem than people joining a union. It sends a strong signal to the vfx companies that a trade association is a good idea. We as union members would be connected to all other film crewmembers.  With numbers comes the strength to do great things.


There are those who want to continue to talk about all of this for the next 2 years. I don’t know about you but I’m tired of talking. In 2 years time our ship will have burnt, sunk and gone over the waterfall.

We need to understand at the end of the day the entertainment companies need what we do. They are dependent on us.

What we need now is unity and courage by everyone. That is the only thing that is preventing us from making positive changes.



FXGuide hasVFX PI coverage.

Related Posts
Pass me a nail
Oh, what a mess we're in!
VFX Business Models

Global VFX Workers

VFX Tax Incentives / Subsidies
Risk and Subsidies

VFX Union, Take 2
VFX Trade Association
Using the nail

Other web related postings
John Parenteau's Thoughts on the VFX Industry
More than 400 VFX artists protest at the Oscars, to highlight the growing problems in the VFX industry after Oscar winning studio, Rhythm & Hues (Life of Pi) recently had to file for bankruptcy

Pi Day

In case you haven't heard the VFX Town Hall on Pi Day is being held 3.14 (Tomorrow as I write this)

It's in Los Angles but there will groups in San Francisco area, Vancouver, New Zealand and elsewhere. There will also be a live stream over youtube.

I will be speaking along with Scott Ross (Trade Association), Steve Kaplan (Unions) , Mike Chambers (VES) and Mariana Acuna (http://davfxchick.blogspot.com). (inadvertently left off Mike Chambers originally)

The state of the industry will be discussed along with possible solutions. There will be an hour of questions and answers. The various town centers on the list will be able to send in questions and discuss amongst themselves. There will be an email or twitter hashmark I believe for others to ask questions. You can also submit or post questions ahead of time. We won't have all the answers but it's time we started to make some things happen. There are interesting meetings and discussions already in progress.

We are hoping to help reach out the global world of all visual effects professionals and hope to implement some concrete steps to solutions in the upcoming weeks and months. 

For details vfxsolidarity website, vxfsolidarity - Facebook (I've spent more time in the last day on Facebook than I have in the last 5 years) 

There are other links and twitter accounts in the upper right that would be useful to follow if you haven't already.

Update 3-15-2013 My talk from Pi Day event. Includes my script and the video

The Miracle of Visual Effects, will it continue?

The Miracle of Visual Effects, will it continue?

If you had told people years ago that you could create a fake tiger with a key role as a real tiger in a film seen around the world, they would have thought you were crazy. Of course they’d say “I’d certainly be able to tell the difference of a fake tiger compared to a real tiger”. And not just look like a real tiger but act like a real tiger. Yet that is what happened. Millions of people viewed Life of Pi and had no idea almost all tiger and animal shots were hand done. I say hand done because people animated those. People painted the tiger texture. People set the fur. Not computers. The computer is a useful tool but it’s the people behind the computers that do the real work. Buy a room of computers and see how many shots they produce on their own. You don’t credit your computer for writing your report for you.

And not just the tiger, the entire ocean was added. The entire sky was added. We see miracles all the time on the screen these days but most people take it for granted. 

First image is what the visual effects crew start with

Second image is the finished image with CG tiger, ocean, sky added

First image is what the visual effects crew start with

Second image is the finished image with computer graphic tiger

Photo illustration by Todd Vaziri 

from his With and Without Rhythm & Hues post 

Visual effects are everywhere

Many films you see couldn’t have been made if it weren’t for visual effects. Would the worldwide audience pay $10 to see a rowboat in a pool with a man in a tiger suite? Could the filmmakers have shot it on a real rowboat on the real ocean with a real tiger? Any attempt to do so would have been tragic. We gave the opportunities to the filmmakers to make whatever they can imagine, whatever the story calls for and they make hundreds of millions of dollars, yet they complain about the cost.

Alice in Wonderland

Alice in Wonderland

All films up for this year for the Best Picture Oscar had visual effects. Everyone of them. Agro was able to show Iran. They were able to show trucks and a jet on a runway. They were able to create and manipulate a burning flag. Zero Dark Thirty used visual effects to create Afghanistan, flying special copters and other shots. Most of the visual effects you never noticed, that’s why you’re wondering where they were in Silver Lining playback or Amour. And most slip by visual effects artists as unnoticed as well. That’s how good we have become as artists and how far we have pushed our tools and skills.

And it’s not just these films. Almost all films out of Hollywood have visual effects. Most independent films use visual effects. Whether it’s a period film or a buddy comedy it uses visual effects somewhere. The work of visual effects professionals and our art form is everywhere. It permeates most moving media today to a far greater extent than people realize. 

Lincoln

(paraphrased comment)

The Proposal

Ted

Down with Love

Most images provided via beforevfx tumbler 

Many more examples there

Those CG animated films viewed around the world use animators, compositors, lighters and other visual effects workers. 

Once, Game of Thrones and any fantasy and science fiction television show uses them of course. And many regular shows use them.  Boardwalk Empire, Breaking Bad, Bones etc all have used visual effects.  Many backgrounds are put into scenes you had no idea were done. 
Stargate Studios Virtual Backlot Reel 2012 from Stargate Studios on Vimeo.

Virtual Backlot Demo : New York from Stargate Studios on Vimeo.

You know how much airbrushing there is in the world of magazines? Now think of movies and television in that light. How many commercials do you see that have visual effects? How many music videos have visual effects?

[Update 2/26/2014 


This Is What Movies Would Look Like Without Visual Effects  ]

And it’s not just today. Quite a few films in the past used visual effects extensively. Gone with the Wind, King Kong, WWII films, Charlie Chaplin used visual effects in his film Gold Rush. 

Clip of VFX artist, Craig Barron from Criterion Gold Rush release  for more info

Those videos games from your iPhone to your Xbox use modelers, texture artists and animators.

To all the visual effects haters out there: you've already seen thousands of shots that simply passed you by and you had no idea.

The studios and filmmakers have become addicted to the work we do. It’s impossible for them not to use them. Even if it’s just to go in to a film image and change something. The audience has gotten addicted to them as well. They expect to see the spectacular in a tent pole movie. They expect no holds barred in showing them what they need to see to tell the story.

How much money has been saved on productions by using visual effects? A lot!  Even the ability to shoot on a stage or different location for television saves an amazing amount of money.

Gone

Now imagine what would happen if there were no more visual effects. What if all visual effects artists stopped tomorrow, put down their computer pens and said, enough is enough. Workers on films, television, commercials, animation, video games, etc. 

Everything. 

Stopped.

Entertainment content companies, studios and filmmakers would be in deep trouble if that were to happen. They’d have very little content that wasn’t touched by visual effects artists. 

How much international business would My Dinner with Andre make on the Imax screen? How many variations on Honey Boo Boo would people around the world be willing to drive to the movie theaters and pay $10 to see? How many people would want to see 2 hours of the 'before' footage shown above? How many people would be willing to play Pong and not the latest and greatest graphic game?

So why are we in this mess?

Because studios push and push and push the visual effects companies. They try so hard to squeeze every penny out of the visual effects companies and workers that they try everything they can. They lobby and get huge subsidies from states and countries to pay them, the studios, to make movies there. It’s not to the taxpayers benefit in those locations. And it's decimating the visual effects industry and that short sightedness is going to bite them.

They pit visual effects companies against each other. They let change requests pile up without stop. They squeeze the amount of time to do the work. All of this pushing has resulted in a number of visual effects companies going out of business and forced visual effects artists to be unemployed or migrant workers moving from one country to the next, all so that a penny can be saved. Workers are overworked. Many with no overtime or benefits.

And now they have pushed so hard that they have left the visual effects industry in a very fragile state. The very thing that is used in all of their content. The thing that allows them to make their impossible movies. The thing that saves them money. The thing that is used in all of their profitable tent pole movies. And if they push much more they may find it starts to collapse much faster and harder than they expect. They may find that the level of visual effects they’ve been experiencing the last decade will be gone.

How will they do their films if the companies collapse and the experienced artists bail out of the industry? How long will they have to delay their films while waiting for an opening at the remaining visual effects company?

There’s a need to make this industry sustainable but the studios act like a paper company clearing huge forests without realizing they themselves will soon be left without the substance of their existence. This has the makings of killing the Golden Goose upon which they rely so heavily.

Visual Effects Worker

All this pushing has finally woken a sleeping giant. The visual effects workers. Year after year of dealing with this type of situation and the workers are getting tired of it. They work and work and produce fantastic results, which in turn makes the studios hundreds of millions of dollars. These artists make the impossible possible and allow for profits on things that couldn’t have been done without their talent and hard work. They’re tired of having no respect and for being treated as they have been. And they have begun to unite with a passion that is growing. Even visual effects workers in India are getting weary. I don't think studios want to have headlines like Apple did with Foxconn but that's where it's being pushed to. If studios and companies don’t change the artists will start making the changes for them.

What can be done?

1. Studios and filmmakers should realize what a gift visual effects has provided them. Visual effects has allowed impossible stories to be told. Visual effects have helped draw worldwide audiences to every media platform. Visual effects provide a power and finesse that has not been seen before. This has a huge impact on the creative freedom at the same time providing huge returns in the box office.

2. Studios and filmmakers should start thinking about the sustainability of the visual effects industry for which they rely on. Squeezing it more will produce nothing but dust. Constantly moving it around the world will not gain them what they desire. They're already exceeded the limits and are now seeing diminishing returns.

3. The studios and filmmakers need to embrace visual effects as part of the process. As a necessary part of the process and acknowledge it may be the reason the film can be made.

4. The studios and filmmakers can start treating visual effects as another department with key creative’s. It’s not a black box to be ignored. Visual effects is not a commodity.

5. Studios and filmmakers can work with the visual effects supervisors and producers to design the most bang for their buck. Visual effects can be designed for budget limits from the start. Visual effects artists can push the films beyond imagination.

6. Studios need to put in an effort to control post expenses from their side. They need someone to oversee post-production like they do during production. Decisions need to be made in a timely manner and endless tweaks and changes need to be controlled. Live action doesn't do infinite takes, why should it be necessary with visual effects? Studios might be surprised just how much that step alone could save them on visual effects.

7. Studios and visual effects companies need to work together to shore up the visual effects industry. They need to work together to find a new business model that works for both. They need to start thinking long term, not just this project.

8. Studios and visual effects companies need to acknowledge that ultimately they have people working for them. Those numbers on your spreadsheet are people. It’s their talents and hard work that makes any of this possible. We’re not technicians. We’re artists and craftspeople.

9. Visual effects companies need to act professional and stop underbidding and chasing the work. That's costing them and the industry. That's one of the reasons we are where we are. They need to operate as real businesses. They need to be able to say No at times.

10. Visual effects companies need to adhere to the actual labor laws. If they can’t do the work without breaking the law or treating their workers badly, then they need to re-evaluate what they're doing.

Related:
Visual Effects are inexpensive
The Value of Visual Effects

Variety article by David Cohen: Is the vfx biz in India tricking artists into working for free?
Shows some of what we as visual effects workers are up against. This will be getting worse as studios continue their assault.

Visual Effects Tax Incentives / Subsidies

Visual Effects Tax Incentives Subsidies

© Jesse Toves

 Art by Jesse Toves.  

6-5-2013 I know many don't bother reading the entire posts here so I will summarize. For those who wish the details and want want references please continue reading the rest of the post.

Summary: Subsidies are destroying the visual effects industry. Some article may call them incentives or rebates but they are in fact subsidies where governments take money from tax payers and give it to profitable studios, free and clear. Some call them kickbacks. Money that could have/should have gone to pay for things that actual area needs such as repairing bridges, education, etc.

Subsidies do not create jobs nor do they create industries. They merely move jobs from one location to another. Someone is losing when there are subsidies. The losers are everyone but the studios. The tax payers and those whose jobs have moved away because of subsidies are the losers. Even those who are in the area of the subsidies are losers because they do not have a solid industry and they will soon be unemployed.

Those workers benefiting from the subsidies will be losing their jobs as soon as their current location doesn't offer higher subsidies than anywhere else. Nor are they a way to build up a sustainable industry. Each and every film evaluates where the subsidies are. Studios have no long term stakes anywhere and quickly change to where ever the money is. When that happens the industry collapses, if the only reason it exists is because of subsidies. There is a race to the bottom as each location tries to provide more and more money every year to the profitable media companies.

(This blog covers visual effects industry but if you're interested in production film incentives subsidies just skip ahead and check out many of the links to unbiased reports and articles. Many cover states and country subsidies.)

Subsidies allows politicians to decide which companies and which industries win and which will lose. Subsidies create a very un-level playing field and distort the evolution of both companies and individuals affected. No matter how good a company is, it's impossible to compete with 50%+ subsidy from a government. There is no way to cut costs by over 50% and so even good companies are collapsing. Studios demand vfx companies setup branches anywhere and everywhere offering incentives. VFX companies have to spend $1 million or more to set up a branch or satellite location just for the privilege of bidding on show. No guarantee of being awarded a project. The vfx companies then have to request their workers move to these new locations or they have to import workers from other locations simply to fill spots that wouldn't have been there without subsidies.

Highly skilled, talented and experienced visual effects professionals now move like migrant workers. They have to leave their homes and families behind simply because a politician decided it was good idea to take government money from their own citizens and give it to the studios.

Some studios are also demanding in their contracts that visual effects companies are responsible for the studios getting their full, estimated subsidy amount. And if the studio doesn't receive the whole amount planned, the visual effects company will have to pay the difference. So even if it might be more efficient and produce better work to send some of the work out to places like Los Angeles, the visual effects company cannot because they have to operate within the restrictions of the subsidy requirements and now the contracts. This type of business approach is simply producing more inefficiencies and potentially lower quality of work.

Subsidies are causing schools to churn out many more vfx workers than there jobs available. This is happening especially in areas with subsidies which has created a very short term need for these workers. Not because there is more work but because the work has shifted. The number of visual effects workers has likely doubled from what the visual effects industry can actually support. Much of this is due to subsidies and the shifting evolution of vfx companies around the world that have nothing to do with supply and demand but rather short term political manipulation. More and more visual effects professionals are losing their jobs every year from this manipulation.

No unbiased report has ever shown any advantage to these types of subsidies. Every positive review or document has been funded by the studios, film commissions or others who benefit personally from portraying them as a winning strategy.

Studios should be looking to make the visual effects industry a healthy and sustainable industry given they rely almost a 100% on the visual effects industry to make their massive profits. But the studios would much rather focus on short term gains and are fine with decimating the industry.

Risk and Subsidies
Miracle of Visual Effects: Will it continue?

The Impact of Visual Effects Subsidies
Film Subsidy Bubbles


vfxsoldier has a legal firm looking at CVDs to counter foreign subsidies.

More details follow along with links to article after article, report after report that shows the problems with film subsidies.
--------------------------------------------------------------------------------

[Many more updates since I wrote this post. I've tried to keep up with some of the related items at the end of the post. So what do we learn from all of this? Most people are confused by tax incentives and proponents use bad math to try to hide the fact that incentives / subsidies are a losing propositions for the majority of the people in those areas.  If you are employed in a subsidized area at some point the industry will not be subsidized where you work and you may find yourself having to move. That film subsidies do not create a permanent industry and that it is a race to the bottom with only the film companies winning.  Workers and tax payers lose.]




5-22-13 Added another batch of articles. How anyone can be convinced these are good for the local areas is beyond me.

4-29-13 I now seem to be updating this almost daily as the various state and national governments continue with providing film subsidies and yet none of the reports show that they are good for the tax payers. I'll probably stop updating since it's clear that there are problems with all film subsidies. If you have a link to an unbiased report I'd be interested in seeing it. That means no report sponsored by studios, film companies,  film commissions or that contain tourism as a large return on investment. Penciled in values for 'intangibles' not permitted.

3-8-13  I can't even keep up with the sad stories and updates. I've added a few more at the end. Most US film subsidies earn back 16 cents for every dollar spent. Michigan collected almost 9 dollars from every taxpayer in Michigan to help fund OZ. Michigan backed up their film subsidies with their public employees (teachers, police, etc) pension fund! And lost. Tax payers in every state and country should be awoken to the true facts. What if this money went to fix bridges, improve education or other sustainable forms of job growth?]

3-10-13  Here's a video about Louisiana that sums up what the impact is to the tay payers in areas with film subsidies. For every $6 Louisiana spends on film incentives, they only get back $1.  What if that money was invested in real infrastructure (schools, hospitals, roads, etc) instead of paying it directly to for profit private corporations?

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This is the start of the original article
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I was contacted a few weeks ago asking for more info on tax incentives. I did a write up for them and with some of the latest information I thought I should post it here, especially after the Rhythm and Hues article on their insights.

I'm no expert on tax incentives but here's the information I've gathered.

Incentives exist in many states and in many countries. The term 'tax incentive' is a misnomer. It sounds like it's simply a special rate on sales tax or some of the potential taxable costs of doing a production. But frequently these have little do to do with the tax payments the productions would have to pay. These are incentives that specific areas offer, through local governments, to productions. The term tax may apply to a reduction in taxes but most of the time it's strictly noting where the money will come from (i.e. the tax payers). As a result it is a local government giving a production money, sometimes in advance, to encourage them to shoot and/or post in that area.

Entertainment Partners lists all film incentives worldwide. You can compare 3 different locations.

Milken Institute and others have done reports on outsourcing and runaway production.

LA Times article: Los Angeles losing the core of its TV production to other states

Recently New York state has increased their post-production tax incentives and the studios and vfx companies are already rushing to get in line.

There have been other studies and more linked on vfxsoldier. The impartial ones never find much good in them. Only the 'sponsored' ones do and that only with some 'adjustment' to numbers.

Incentives work differently depending on where they are and that's why there's a web site detailing the specifics for each area. Since the studios can save 10's of millions of dollars on tax incentives they typically have a team of people (accountant/legal) who can sift through the numbers. Any big studio vfx film has bids from a few companies. These numbers go through this department or values are assigned to calculate their final value (i.e. they may have a simple formula for Vancouver of % off )
The studios don't always go to the cheapest places. If it's a huge film they may go with the largest vfx companies anywhere in the world for key work. But the smaller the project or sequence the more likely they will take costs into consideration. In some cases it may be the largest influence, especially if that's the only way they can hit the figures allowed by the company. (i.e. we have to make this movie for $30 million)

In some cases such as Canada they're given money up front in some deals. I've also known some US companies to match UK prices with tax incentives and the studios still choosing to go to the UK because of the details of the incentive. (i.e. up front money or other factors)

A vfx shop in a place with tax incentives essentially can offer their services for their fully budgeted amount but the studio sees it as 30% off or whatever the current incentive is. It doesn't cost the vfx company in these areas anything but obviously they benefit. The vfx company doesn't receive the tax incentive money. They bill the studio for their full amount and the studio is the one that gets the incentive funds. If the government is giving everyone reduced coupons and picking up the tab, it's great for a company.

Obviously if you're in the US or some place w/o incentives then you have to do the work for less, much less. The company in the UK or Canada is still charging full price but the US company may have to shave 20% to 40% off just to match prices. And that's already on bids that have likely been trimmed for competition. And even if the US company matches pricing the studio may go back to the UK company and say "Hey, we got a US company willing to do it for the same rate of your incentives." So the UK shop will drop their price 10% and get the project.  Just like when you buy a car you may go back and forth between two dealers to try to get the best deal.

Sometimes studios get bids from multiple companies with no plans to use most of them. But they can go back to the companies they want to use and show these other bids to encourage them to lower their own bids even more. The main company of course doesn't know the studio isn't really planning to take the work elsewhere so they have to play the game and trim their prices. Some vfx companies have understandings with some studios that they will meet or beat any other bid, even if that means them losing money on the project. The people at the studios are very good at all of this since it's worth so much to them in terms of money and keeping their jobs. And every studio has a point person so they do a few of these deals every year.  Years ago producers were the ones striking the deals and they weren't as money fixated.

It works financially for the studios and it works to some degree for the companies in those areas when the incentives are working. There's still competition in those areas and underbidding even with the incentives. It doesn't work for any place w/o incentives and it doesn't work for the tax payers or governments in those areas. The local areas are not winning.

Let's suppose a state pays $10 million to a film as an incentive. Thats' $10 million less money for the state to spend on actual expenses or education or a thousand other things.
Let's suppose the state tax rate were 30% (which it's not), that would mean the studios would have to spend $30 million in local residences jobs to get that much money back into the state funds as actual taxes.

Now some of that money of course stimulates a small slice of the economy in that area for a short time.  Hotel, car rentals, local diners, etc will be earning more during those few months. And of course some of that is taxable. But that trickle back to the state doesn't work. And because productions are short durations (unlike an ongoing factory) it doesn't really employ local people for any real length of time and doesn't keep these support businesses going. They will see a spike for a short duration and then it's over. Much of the money is spent on non-residents (cast and main crew) and other expenses that don't benefit the state or country. Much of the money the state provides ends up going out of the area. In many cases it would have been more cost effective for the local government to simply give  money to people in the state or area.

And to keep getting film productions they have to be one of the top places with the highest incentives. If you're 10th on the list of incentives you may not get any productions.

Some tax incentives are transferable. So that allows a studio to transfer (sell) them to others. So if an area is structured to require a certain amount of money to actually be spent in that area, the studio can take the benefits and simply sell them to existing companies in that area. Somewhat like some of the carbon costs and issues. There's a secondary economy with people making money buying/selling tax credits.

The places doing better than most are those who keep it going for a long period of time and are able to keep productions coming back. Vancouver and London are two standouts. This has allowed them to build up their infrastructure and build multiple support companies. They have a thriving mini-industry in those areas. But if US productions stopped going there for any reason most of their local industry would implode since there's not enough 'local' productions to keep them busy.

Louisiana has been a recent hot spot for tax incentives and many studios and a few visual effects companies moved there to take advantage of them. But any place that relies on tax incentives could find the rug pulled from underneath them very easily.
New report says Louisiana film tax credits hurting state

Report suggests major changes to Louisiana's film industry tax credits

Harry Potter was filmed in England which made sense since it was it would require english actors and could use some of the UK backdrops. And also JK Rollin probably requested it. But 75% of the vfx had to be done there so they could qualify for tax incentives. At the time of the first Harry Potter most of that work would have come to vfx companies in the US. There were small but decent vfx companies in London and some work from the US was trickling in. But as soon as tax incentives hit big time then they were guaranteed all 8 Potter films which is a lot of work. All the companies were able  to grow and hire many more people. Warner Brothers had so much work being done they built a studio at an old airfield. Other productions were streaming in. They were booked up 2 or 3 years in advance just so the studios could take advantage of the money. How many US vfx companies are booked 2 years in advance? So now the size and experience of the London vfx companies is on par with many in the US. That would have never happened without tax incentives. They would have simply continued along at the rate they were. Most in the UK don't want to acknowledge that. There are good people and companies there producing great work but they were certainly received a big boost from incentives.

Part of the reason for having tax incentives is to provide employment for local people. But in the UK and Vancouver a certain % of people come from outside the country. I was told by a company in one area I could bring in whomever I wanted and as many people as I wanted. Because in some areas they simply don't have the resources or people required at the skill level required. It didn't naturally evolve, it was thrust up simply because a politician decided there were tax incentives. And every area has different arrangements and requirements for tax incentives. In Iowa a producer was buying personal cars using the money. There are other areas where it's written to be so loose there's a lot of fraud or just simply poorly written regulations that give money even if it doesn't end up helping the local economy.

Tax incentives are usually done by politicians because they are being lobbied by groups in that area that will support them ($). It sounds glamorous to people in Iowa that they can bring in movies and make money quickly. Technically these things lose money for the tax payers but as long as the politicians and their lobbyists make it happen then it continues.  It's a race to the bottom for the tax payers in those areas because there can be no winner.

Michigan offered great tax incentives at one point. Many movies switched their scripts to shoot their (Gran Torino, etc) Michigan started to build studios and vfx companies but that work went away as soon as they weren't offering the highest dollar. Look at New Mexico. Sony set up their place there and studios shot things like Book of ELi there for the tax incentives. North Carolina has stages which I think are empty most of the time. Unless an area continues the incentives for a long time they will never build up a full structure and even if they do, once that incentive money is gone the production companies don't want to be saddled with the extra costs of moving the full production there.

The Hobbit shot in New Zealand because New Zealand actually modified their laws to allow enough incentives to make it happen.  As a number of people pointed out at the time it wasn't a wise use of tax dollars but it was the pride that caused the people and politicians to agree to change their laws just so they could give the studio money.

Some places are catching on, especially areas needing to tighten their belts. Check Saskatchewan. They cut all or most of their funding. People there were up in arms because some of them worked in the film business but the politicians looked at the numbers and said it don't make any sense.

The one place that makes the most sense for tax incentives is here in California since this is where the majority of the work has been and it's the source of everything else (money, studios, directors, writers, etc)

And as Scott Ross points out it costs money to set up satellite companies.  US vfx companies are struggling but then they have to go deeper into debt to lease a building, equip it with render farms, wiring, power, etc and to hire an entire crew of people. Now they have even more overhead since they have to have management at both locations and they have equipment tied up. If they are ever slow in the new place then it's a double whammy. They feel that they have to be in places that offer these incentives just to be considered by the 6 major studios.  Because of the amount of competition in places like Vancouver I'm not sure the situation is any better. They're having to compete against all of the same competition and more. Since all of the companies there enjoy tax incentives then they compete against each other to give the best rate, possibly less than the cost. So in some cases they're back to where they started.

What happens if Vancouver tax incentives go away? All of these companies would be strapped with this extra debt and would immediately start building satellites in Montreal or Toronto or wherever the next dollar was going.

From the studios perspective this couldn't have played out better. They have state and countries all trying to offer them the very best deal to make their films there. They have the US firms building satellite companies so now they know they can get the quality they need in these tax incentive areas. So they no longer have to say should we go to Sony or a nameless place in Vancouver. The studios still work vfx companies against each other so they have that as a means of lowering their expenses no matter where it is. And many US vfx companies have set up satellite companies in low cost areas (India, China, etc).  The studios are thrilled since the US companies are literally training their replacements as far as the studios are concerned.  The studios haven't been going to these lower priced areas because they don't have the skill sets, talent and know how. Now the US companies are training and providing that. The studios couldn't have planned this better themselves. In the future they will have the option to go to the lowest cost area, whether thats through tax incentives, vfx lowering their own costs below cost or a low cost area with low standard of living. They won't have to worry about the quality of the work. The commoditzation of the work will be complete and they can simply farm it out and get the best possible deals. The studios execs don't like to fly halfway around the world, especially to a place like India, but if they can get people they trust here to cinesyc and make it happen, no problem.

From a purely business standpoint it's hard to fault the studios. Most of us like to buy goods and services for less. But it should be pointed out this is not a commoditized product that is identical no matter who you buy it from. In the case of visual effects it's ultimately a service of talent and labor. The look of the effects, the quality of the effects, the time required to do the visual effects and the interaction with the visual effects team can vary widely. And those are hard to quantify factors that need to be considered.

Personally I try to buy a reasonable amount of products locally whether it's camera accessories, books, , produce or other items. I could save a few dollars online but I try to help support locally because I know at some point I'm going to need something now (not shipped), I'm going to have to interact or look at the item in person or I'm going to need to discuss with someone who works with these items. Without support many local vendors and services will disappear.

How much will the US industry whither while trying to compete with large tax incentives? What will the studios and directors do once most of the work is elsewhere? Will directors start having to travel to other locations for months to complete their post and visual effects work? Will they simply try to do it all remote using Skype and Cinecyc? While working remotely is possible you certainly lose a  lot of the creative interaction that happens when you have a variety of people in close proximity. Imagine a live action shoot where the director, cinematographer, production designer and actors are all on Skype at different locations. It's not nearly as efficient and the results will certainly be less that what it could have been.

The cleanest solution of course is if all the incentives went away. Each company would have to compete on a level field.  How efficient they are and the quality they produce would be the criteria. If there was local production then those areas would flourish. If they were simply a man made oasis of tax incentives then those would go away. India, China and other countries would move forward at
their own rate and priority.

[Update 6-21-2013
 ILM's facility in Vancouver is only for the subsidies there.
A week ago DD announced most of their feature work was to go to Vancouver due to subsidies as well  according to sources. ]


[Update 8/20/12  A few more links:
Stop Runaway Production article  (from comments)
The Value of Movie Tax Incentives - 2010 article
Movie Production Incentives in the Last Frontier - 2012 article
Check out the comments below as well ]

[Update 10/4/2012
Framestore CEO Claims Up To 75% Work Lost Without Subsidies
Comments worth reading.

Do you want to work in an industry and area where 75% of the work could be pulled on the whim of a politician? Would you invest in such a company? ]

[Update 10/15/2012 The VES held their Production Summit this last weekend.
Among the talks was Tax Incentives Around the Globe:
The Whys and Wherefores of Domestic and International Incentives by
Mary Ann Hughes, Vice President, Film and Television Production Planning, The Walt Disney Company and Ruth Hauer, VFX Executive, The Walt Disney Company.

Jeff Heusser has written up some great coverage of the event, including this talk, at fxguide.

[Note that it was difficult at times to read the slides so it's possible I have a number wrong or in a couple of cases I have ? when I couldn't read the number)

They showed a US map of the 39 states that offered film incentives and they noted the number of companies in each state they felt had real visual effects capabilities. (They didn't define how they evaluated them)
California 70
New York  4  *
Louisiana 3  *
Illinois 2
Utah 1  *
Michigan 1  *
Massachusetts 1
* stand alone vfx incentives

Then they showed a US map of states that offered stand alone visual effects incentives. (i.e. don't require live production to take place in the state to claim incentive money)
Only 7 states offered stand alone visual effects incentives and only 4 of those states had viable vfx capabilities. New York, Louisiana, Utah and Michigan were the current states that offered some explicit vfx incentives. In many cases it was difficult to discern if there was a vfx incentive. They contacted Illinois and were told that it still would required 1 day of shooting. They pointed out that didn't make sense. (Are you expecting government politicians to make logical sense now?)

New York was somewhat problematic the way the requirements are written since it requires at least 75% of the visual effects budget to be spent in New York state.

They showed a map of the world and where the visual effects companies were located.
USA 83
Canada 35 *
UK 12
India 11
Australia ?
Germany 3 *
China 2
Hong Kong 2
Korea 2
Mexico ?
Philippines 1
New Zealand 1 *
France 1  (?)

They focused on Canada where different region have different incentives. And many of the types of incentives add up. (i.e. they may have a labor incentive, a production incentive, etc so these can be  cumulative to a large amount)

"Using the example of a $1 million dollar project – in BC a production could get back $379,000. In Ontario credits can be combined to return $437,000 and in Quebec the return rises over 50% to $572,000." (from fxguide article and my notes)

Over 50% of visual effects funding by a regional government!!

They said they would prefer to do the work in the California but California doesn't offer much incentives. They will be pushing legislators in California to increase incentives. They'll also be pushing the New York legislators to correct their terms and conditions as well as some of the other states and countries. As can be seen the studios receive an enormous amount of funding from various government agencies and the studios and MPAA lobby the politicians to provide even more money on better terms. Ultimately the studios would like 100% film incentives (or higher) if they could get it. Which area provides the highest incentive is there go to place if cost is a factor, which it is.

Scott Ross asked who receives this money. Some areas may in fact give the money to the visual effects company or the production may have the choice of themselves or the vfx company who receives the funds. If it is the visual effects company the studios will require them to deduct that amount from their bill. (i.e. the studios get the discount either way. The visual effects company gets no direct funding, only additional work).

As they pointed out cost isn't the only factor when deciding where to take the work - quality, capacity, location, etc. all play a part of the decision. But it's obvious cost is a big item and the studios put a lot of time and effort getting the very best incentives by lobbying for them and weighing in when deciding. And in speaking to others afterwards even if a company manages to match an incentive price, the work frequently still goes to the place with the incentives. In some cases the executives are only focused on the % off number and not the final number. That's like buying at a 30% sale at store even though the actual price may be cheaper than this sales price at another store.

Remember the governments have no official investments in these films and the studios have no obligations to these governments beyond their incentive requirements, which are minimal. A government may put up $50 million for a film that makes over $1 billion in profits but the governments only return will be the indirect employment and some modest taxes. Which is a loss in most places.

What corporation wouldn't want someone else to provide millions of dollars with no strings attached and no requirement to pay it back?  Film incentives are a form of Kickstarter for huge multi-billion dollar studios. The rewards are x amount of employment for every $10 million donation. ]

[Update 11/19/2012
Must read on US subsidies - State Film Subsidies: Not Much Bang For Too Many Bucks

Flawed report on the UK Incentives sponsored by the companies that benefit from the report. Read the US report above regarding flaws, including things like tourism.

Video game industry has same problems
Vancouver's Game Studio Brain Drain

RI sues Schilling over 38 Studios loan guarantee  ]


[Update 12/1/2012  The Silliness of State Tax Credits for Film Production ]
[Update 12/5/2012  Michigan Town Woos Hollywood, but Ends Up With a Bit Part

 A Behind the Scenes Look at the Making of ‘Kill the Hobbit Subsidies to Save Regular Earth’  ]

[ Update 12/7/2012  State Subsidies To Hollywood: Almost Every Program Has Been A Dismal Failure, Costing Taxpayers
vfxsoldier  Mainstream Media Focuses In On Film Subsidy Race ]

[Update 12/10/2012
The Atlantic - Useless Economic Development Incentives
VFXSoldier starts Campaign to End VFX Subsidies  ]

[Update 12/14/2012 Tax Breaks for Sale: Transferable Tax Credits Explained - How businesses, including film, cash in on tax incentives ]

[Update 1/17/2013  British Columbia film incentives may be reduced. Reality for those in subsidized areas - post on vfxsoldier with range of comments ]


[Update 1/31/2013 many more vfxsoldier posts (with comments) related to BC and other subsidies.
BC Taxpayers Lost $100 Million On Film Subsidies In 2011
Government & Media Take A Stand Against Hollywood Subsidies
BC Minister Admits: Province Loses Money On Subsidies
BC Film Employment At Lowest In 13 years
The Institutionalization of Displacement In VFX
#SaveBCFilm’s Fuzzy Math

Other items:


Save B.C. Film? Who from? What for?

We’ve seen this movie before

State Film Industry Incentives: A Growing Cronyism Fiasco
For every $1 spent on state tax incentives, the state gets back 16 cents.
“In return, they attract mostly temporary jobs that are often transplanted from other states.”


Michigan Public Employee Pension Systems Raided To Pay Film Studio Bills
"It would have always been dependent on that subsidy, which shows how unsustainable it is," Henchman said. "It would have never become an independent self-sustainable industry."

Oz The Great And Powerful Cost Michigan Taxpayers Almost $9 Each

Film Tax Credits Don't Bring Lasting Jobs or Significant Revenue Gains

"Government officials should not have the role of deciding who wins and who loses in the marketplace; they should allow businesses to succeed or to fail as a result of their own efforts, and the preferences of consumers.

Furthermore, targeted tax credits establish a system in which government favors certain businesses over others. These programs force every non-favored business to compete at a comparative disadvantage, creating inequality. "

Premier Brad Wall on the Saskatchewan Film Employment Tax Credit

 Mass. tally finds thin return from film subsidies
“If you are seeing a cost per job that is greater than the salary of those jobs, that suggests there is a pretty serious problem with the tax break,” said Noah Berger, president of the Massachusetts Budget and Policy Center, a watchdog group.

B.C. urges Ontario to harmonize film tax credits
“Calling these things ‘tax credits’ is a bit misleading ... they are subsidized incentives,” B.C. Finance Minister Mike de Jong told the Star on Tuesday.

Milke: Lights! Camera! Massive film subsidies!
"Rhys Kesselman, an economist at Simon Fraser University, recently wrote that B.C.’s subsidies amount to a taxpayer cost of $125,000 per film job."

"Besides, in a deficit environment which most governments are in, juicier film tax credits mean tax rates for other people and businesses must be kept higher to cover the lost revenue."

"...a comprehensive 2012 report from the Washington, D.C.-based Tax Foundation found just the opposite: “The best evidence shows that film incentives cost the treasury more than they recoup from taxes on induced economic activity.”

"The Tax Foundation pointed out that “aside from studies paid for by economic development authorities and the Motion Picture Association of America, an industry trade association, almost every other study has found film tax credits generate less than 30 cents for every $1 of spending.”

"Perhaps American and Canadian politicians could reach some sort of detente and kill their film subsidies all at once. That way, no politician could be accused of chasing away the film industry because incentives are more lucrative somewhere else."


How Hollywood Is Ripping Off Taxpayers

"Film tax credits don't deliver to state economies what they cost to treasuries and taxpayers."

"North Carolina's Legislative Services Office analysis shows their film credit program realizes even less impressive returns. In 2011, the state awarded $30.3 million in film credits – reimbursing productions that spent over $250,000 up to 25 percent for qualifying expenses. Yet, the program could only claim about 55 to 70 new jobs. Based on their model, the report claims that if instead North Carolina's business taxes had been reduced across the board by $30.3 million, between 340 and 450 jobs and $14 million in personal income would have materialized."


Enriched by Incentives, Major Hollywood Producer Says State Film Incentives “Need to Stop”


" I still believe that these subsidies, both in the U.S. and abroad, need to stop. They’re bad economics, they don’t make a film better (at times I think they actually make them worse, since trying to make one location look like another is never as impressive as just going to the place the movie is set), and they’re a misuse of public funds, especially during this seemingly unending recession.

Polone suggests its foolish for states to invest so much money in an industry that “is highly mobile and can quickly jump to any other state that bribes them to do so.”



The Hollywood Tax Story They Won't Tell at the Oscars

"Such state incentives are widespread, and often substantial, but they don't do much to attract jobs. About $1.5 billion in tax credits and exemptions, grants, waived fees and other financial inducements went to the film industry in 2010, according to data analyzed by the Center on Budget and Policy Priorities. Politicians like to offer this largess because they get photo-ops with celebrities, but the economic payoff is minuscule. George Mason University's Adam Thierer has called this "a growing cronyism fiasco" and noted that the number of states involved skyrocketed to 45 in 2009 from five in 2002."

"Despite tens of millions of dollars in state [Michigan] investment, the promised 3,000-plus jobs didn't appear. As the Detroit Free Press reported last year, the studio employed only 15-20 people. That isn't boffo. That's a bust."

"The $1.5 billion in subsidies that states provide, according to the Center on Budget and Policy Priorities, "would have paid for the salaries of 23,500 middle school teachers, 26,600 firefighters, and 22,800 police patrol officers." Or it could have gone to cut taxes on small businesses, which, as Ms. Longoria noted in her DNC speech, produce two out of three jobs in the economy."

STATE FILM SUBSIDIES: NOT MUCH BANG FOR TOO MANY BUCKS

"Moreover, special rules allow film companies to claim a very large credit even if they lose money— as many do."

"Jobs for in-state residents tend to be spotty, part-time, and relatively low-paying work.."

"Subsidies don’t pay for themselves."

"No state can “win” the film subsidy war."

"Supporters of subsidies rely on flawed studies."

The UK's first VFX festival hopes to raise awareness of a vital industry
"A lot of that is down to tax incentives -- currently, if at least 25 percent of a film's production costs are spent in the UK, then that film qualifies for a tax credit. Sir William Sargent of Framestore went so far as to claim that between 50 to 75 percent fewer films would come to the UK for visual effects work if that tax credit were not there. "


"Double Negative's Franklin argued: "The big thing is getting the message out there that this industry exists; that this is not just a Hollywood product. The kind of people we need are those with technical and maths skills, and creative skills. It's difficult to find those people."

[The flaw here is the industry and jobs ONLY exists while the governments continue to dole out money (taken from their other tax payers) AND if other governments don't out bid them for the work. The jobs created from subsidies are simply being moved from somewhere else. They are not 'creating jobs'. In this case they're educating more people for jobs that are not permanent. We now have too many vfx workers already. Adding new ones at each temporarily subsidized area does not help the industry or those getting jobs. And the companies and people who put their career into these areas are building it on quicksand. Should the government not continue to dole out yearly monies to the studios or another places offers a better deal, then it will collapse. Is that the way to make a sustainable industry and jobs? No.]


TV winner: tax breaks boost VFX firm Double Negative

"..which claimed they were losing out on work as other countries had better concessions. "

[What other countries? Canada? Race to the bottom and the governments are choosing the winners, not the companies]

Michigan House plan has no money for film incentives


"The Republican-led state House is looking to eliminate tax incentives that lure moviemakers to Michigan so the money instead goes toward road maintenance."

 "The film industry could still develop movies in Michigan without the subsidies, "but the playing field with other states won't be level," he said."

Subsidies For Big Hollywood Hurt Middle Class

"but analyses that find job creation through subsidizing movies almost always ignore the cost of the program. That is, where that money may have been spent otherwise, whether in the private-sector or on other more worthy government projects like roads."

" found film subsidies to be ”a classic race to the bottom” and the economic benefits “more fiction than fact.”

Filmmakers fight bill to end subsidies
"Critics of incentives – which amounted to $45 million in 2012 – say the money could be put to better use. And they point to a legislative study that found the credit itself is responsible for a fraction of the jobs the industry claims."

Read more here: http://www.charlotteobserver.com/2013/04/24/4001945/filmmakers-fight-bill-to-end-subsidies.html#storylink=cpy"

Budget 2012: Tax breaks for games industry (UK)
And guess where a large part of the money goes? See next link.

Activision CEO Bobby Kotick now one of America’s highest paid executives
Thanks tax payers! I'm sure he's laughing all the way to the bank right now.

No report needed: New Mexico’s film subsidies are a waste

"Classic economic case of concentrated benefits and dispersed costs. The film people know they are getting a sweet deal from the State and are organized to defend it (and obtain even more). Average taxpayers don’t see that they are getting hosed and are disorganized."

"Average taxpayers need to tell their elected representatives that the film program is not a good deal and hold theirRepresentatives and Senators (not to mention the Governor) accountable for their support of a program that takes tax dollars from average people and gives it to Hollywood studios."

NC House bill would change film industry credits


"I think in our case it's very clear that our clients basically run financial models on each state, and the films taking place in 'Anytown U.S.A.' can be done in multiple locations," he said. "It basically comes down to a business decision."

"A recent analysis from the General Assembly's nonpartisan research division concluded that only 55 to 70 jobs in 2011 can be directly attributed to the state's tax credits. It also argued that the money spent in 2011 would have yielded 290 to 350 more jobs if the state cut business taxes across the board by the same amount."

"The current process of picking winners at the expense of taxpayers, that's what I oppose," he said. "We're on a tight budget, and we could use some of that money for schools, infrastructure and lower taxes for everyone."

Film tax credit program has 'negative' impact for state, says audit
"..the direct cost, or fiscal impact, to state government is negative. The result is a net cost to state government of $169.8 million for calendar year 2010.”

Chancellor launches UK tax credits
"Osborne called the new tax reliefs (which follow on from the UK Film Tax Credit in 2006) as among “the most generous tax credits now available in the world.”

British film studio behind James Bond to open U.S. facility
"Dunleavy added that Georgia has "excellent fiscal incentives and a great crew base."

"While California has numerous soundstages, not many have been built in recent years as the state has been grappling with the effects of runaway production and the lagging economy. A survey last year found California lost $3 billion in wages from 2004 to 2011 because of film and TV production moving to other states and countries, according to a report in the Los Angeles Times.
Half the wages went to states like Georgia that offer tax incentives and rebates to the industry. Other states include New York, Louisiana and North Carolina."

Big growth likely for Georgia's film industry

"The industry follows the dollar," Forshee said. "They are going to go where they can do the best product for the cheapest cost. This tax credit has made Georgia a viable and lucrative place to make films."

"The economic benefits have been debated in Georgia, although the state has remained committed to the film incentives. Meanwhile, lawmakers in North Carolina are debating a plan that would place certain limitations on the state's program, with supporters of the effort saying there's no evidence the $30 million in tax breaks in 2011 matches the job growth cited by the industry. In comparison, Georgia handed out $140.6 million in tax credits in 2010."

Lights, camera … and a $69 million N.C. rebate to movie industry
 "State leaders blamed each other in October 2011 after Continental Tire chose South Carolina for a large new factory that will employ 1,600 workers.  .... That same month, Hollywood producers made a decision that cost North Carolina taxpayers millions and supported far fewer jobs – jobs that have already come and gone. They announced the filming of “Iron Man 3” in and around Wilmington."

Read more here: http://www.newsobserver.com/2013/05/01/2863585/lights-camera-and-a-69-million.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/01/2863585/lights-camera-and-a-69-million.html#storylink=cpy

"• Film subsidies are not tied to job creation. Instead, the program gives filmmakers a quarter back for every $1 they spend in the state, including wages to actors and crew members."

"The most powerful part of the film incentive program lies in a single word: “refundable.” The film incentive is officially known as a “refundable” tax credit, which allows production companies to receive checks from the state treasury, even if they owe little or no taxes.

That’s because film production companies are formed around a single project, such as a movie or commercial, and are structured to generate little actual tax liability, according to industry officials."

"The film incentives are granted no matter how much money a film makes. The popular “Hunger Games” movie, for example, was filmed in North Carolina and grossed nearly $700 million worldwide, according to tracking service Box Office Mojo.

The production company has asked North Carolina taxpayers for $13.7 million, new records show."

"It said the film incentive “created 290 to 350 fewer jobs than would have been created through an across-the-board tax reduction of the same magnitude.”

Read more here: http://www.newsobserver.com/2013/05/01/2863585/lights-camera-and-a-69-million.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/05/01/2863585/lights-camera-and-a-69-million.html#storylink=cpy

Vancouver, Canada, sees sharp drop-off in movie, TV production
"The city that pioneered the use of film incentives now finds itself struggling to compete with emerging rivals offering stronger tax credits and rebates. The industry also has been spooked by the return April 1 of a provincial sales tax that had previously exempted film productions.

As a result, film activity in Vancouver fell to its lowest level in recent memory in the first quarter, leaving many soundstages empty and thousands of crew members struggling to find work."

[Maybe film industries in areas with subsidies should realize they're not building a permanent industry?]

Five Reasons Government Subsidies For Films Are A Bad Idea
"The Michigan film subsidy program does not create jobs. 

Virtually no one who has analyzed film subsidy programs across the nation finds them to be worth the cost. 

The subsidy has led to massive investments in film studios leading to disastrous results. 

Film subsidy programs are being shut down in other states because of a multitude of problems. "

THE ECONOMIC IMPACT OF LOUISIANA'S ENTERTAINMENT TAX CREDIT PROGRAMS

"In reality, when measuring the economic impact of an activity on the state one should only include money actually spent in the state. Measuring the impacts using certified spending means including under the film production section, payments made to talent, directors, producers, and writers--- who in most cases do not live in Louisiana and are highly unlikely to spend all that money in the state. Thus the state’s return on investment is typically worse for those projects (primarily films) that involve a large proportion of multi-million dollar payments made to non-residents."

Hollywood surprised by tax from China
"China is reportedly imposing a value-added tax that would cut into film profits. If the two sides can't come to terms The Office of the U.S. Trade Representative would have to appeal to the World Trade Organization."

[Studios are fine with countries offering them free tax money and ignore the WTO but to think of actually taxing the studios is forbidden and they'll go to the WTO for protection.]

Read more here: http://www.newsobserver.com/2013/05/01/2863585/lights-camera-and-a-69-million.html#storylink=cpy

Star Wars Episode VII May Shoot And Do Visual Effects Work In London
"The move to London, as you might guess, is partly inspired by the tax breaks offered in the United Kingdom-- it's why ILM opened up an office in Vancouver last year too. These tax breaks make it a whole lot easier to outsource effects work and cause chaos in the visual effects world, but ILM is currently swearing they won't close up shop in San Francisco, so there might not be cause for alarm… yet. "

Update 5/22/2013
****** The film tax credit farce *****
"But if you really want to see who wins, look at who is pushing for the benefit. Filmmakers win. Taxpayers will be left holding the empty popcorn bag."

"When people are taxed to subsidize one industry, they have less money to spend the way they want. Some people win, but a lot of others lose. Politicians are simply picking the winners and losers."


"Proponents say that our taxes aren't really going up because the $60 million is a credit. Out-of-state film crews don't pay taxes in Pennsylvania, so enticing them here with tax credits means only that they still won't be paying taxes in Pennsylvania. But this ignores the fact that they will be using state services: police and fire protection, public schools, roads and — notably — unemployment benefits when their movies wrap up. We taxpayers will be footing the bill for these services."

"If film production is such a great cash cow, why aren't venture capitalists lining up for a piece of the action? The problem is that the film industry wants special treatment. It wants someone else to shoulder the risk of investment while it keeps the profit for itself. No investor would agree to such a deal, and that is why the film industry has turned to our state government.
Filmmakers know the state can force taxpayers to invest in something taxpayers would never choose on their own."

The Film Incentive Bill hurts you and me
"The new law is a raw deal for almost everyone involved, except, of course, those privileged few who benefit the most from the largesse and, most likely, those who could most afford to pay taxes in the first place. "

"Paul Campbell of Goose Creek "had been told producers were looking to film the series in Savannah if the law had not passed." If that sounds like extortion to you, well, it is."

"Today, South Carolina finds itself in a film incentive arms race along with North Carolina, Georgia, and Los Angeles, and at some point, there will be nothing left for our state to give. When that happens, we will be abandoned for some other state offering even better incentives."

"That any company, and especially those who dare to call themselves "American," would essentially extort bigger and better deals out of our cities, states, and the nation itself, is obscene. That our governments not only give into the extortion, but also insist that we gleefully accept the terms given to us, is a complete failure of public policy.

The continued arms race of lowering taxes to serve the wealthy needs to end, and it needs to end before we are paying corporations for the "privilege" of working for them.'

Nashville paying the price to be mini-Hollywood
"Even before the first season aired, the studio was lobbying the state to grandfather the production into a more generous incentive package than the one that cleared the legislature last year."

"All sorts of industries get special state incentives. But film might be the silliest industry for states to subsidize, because, with all these other states offering their own incentives, the price has been bid up pretty high. Josh Barro discussed this a couple of years back at Real Clear Markets:
We are in a film subsidy bubble, and states that trail Michigan and New York would be unwise to bid high enough to win film productions back. Instead, states should foster economic development by improving their infrastructure, human capital, and tax and regulatory environment. Or if they’re going to offer incentives to specific industries, they should at least pick less crowded fields than film."

La. tax breaks under scrutiny
"French said the industry wouldn’t exist in Louisiana without the tax break program."
"But the state also loses at least 85 cents in tax revenue for every $1 it spends."
"And the price tag of the tax break has been growing annually, with the state spending $800 million over five years for the movie and TV industry."

Is movie making in Cleveland worth the cost?
"That incentive is paid by state taxpayer money, but industry experts say it's a necessary part of building a full-time industry. "
[Note: You don't have and will never have a full-time industry if the government is funding it.]

Michigan's film incentive loss is Maryland's gain?
"In Michigan, we’ve been having a prolonged argument about the absolute value of film incentives, with the governor saying they’re essentially nothing, while advocates argue that they’re unlimited."

Today's Poll: Should filmmakers receive tax credits to shoot movies in New York?
[Check the comments]

Central Europe Jumps Onto Incentives Bandwagon
"In the 10 years since Hungary introduced its production incentives, it has emerged as the leading country in Central and Eastern Europe in the race to pursue Hollywood blockbusters and upscale TV series."

Louisiana Film Tax Credits: Costly Giveaways to Hollywood
“People are getting rich on this deal, and it isn’t Louisiana taxpayers,” said Jan Moller, Director of the Louisiana Budget Project. 


Disney chose the UK for blockbuster starring Angelina Jolie after pocketing a £13.6m tax break
"Briar Rose is ultimately owned by California-based Walt Disney. It is rare for the production costs of a film to be consolidated in a single private company but this makes it easier to work out entitlements under the UK’s film tax credit scheme."

In a flap over the Great Subsidy
"The total contribution to the $US190 million ($194m) film by Australian governments, when combined with state incentives, is reportedly $US80m-plus.

But during the film's global release, its studio, Warner Bros, made clear The Great Gatsby was an American film."

"Twentieth Century Fox and Hugh Jackman's X-Men spin-off, Wolverine, received a direct federal government subsidy of $13m in addition to the 16.5 per cent location offset it received on its budget. And the Gillard government allocated an extra $22m to the Walt Disney Company on top of the location offset to lure the remake of sci-fi adventure 20,000 Leagues Under the Sea to Australia. As reported previously on these pages, Disney has yet to green-light the film, which won't come here until next year, if at all.

Both payments were justified as countering our high exchange rate."

""Providing incentives to foreign companies to make films here is a little more problematic because it's harder to follow through and analyse," he says."

"But Throsby and others question the "multipliers" used by the film and tourism industries to quantify the value of one imported dollar into many dollars of subsequent expenditure. Molloy says: "There's a whole other discussion about how industries looking for assistance bandy about multiplier effects. One criticism I have is industries tend to overuse these arguments and tend to use the higher multipliers.

"To count them as an added benefit may be misleading."


IDEAS Announces Cash-Based Post Production Incentive
"As part of the incentive package, if a client signs a contract, and completes post production services (editing and post audio) for a minimum of $50,000, the client will receive 25% cash back rebate within 60 days of completion of the project and full payment made to IDEAS."

Big bucks to be made on small screen New Zealand
"Under the Screen Production Incentive Fund, television series filmed here with significant New Zealand content currently qualify for a grant of 20 per cent of the total local production cost, only half the 40 per cent rebate feature films are eligible for."

How Do Tax Incentives For Movie Productions Work? An Expert Explains It All
[Unfortunately not an expert but merely a producer. Doesn't cover who pays for it all (tax payers) and what the true return is for the tax payers.]


Hollywood Loses Blockbusters as ‘Iron Man’ Finds Subsidy
"In general, the economic development produced doesn’t justify the cost of the subsidies, he said.

“The theory is, ‘We’ll subsidize all these movies and eventually we’ll get this critical mass of industry and we won’t need to subsidize it anymore,’” Henchman said. “It’s certainly not succeeded anywhere. The films will come as long as you offer the best deal. There’s no loyalty from this industry, they’re in whatever state is cutting them the largest checks.”

“Disney and others receive millions of dollars from the state,” Luebke said in a e-mail sent from the House floor. “It is an extremely expensive subsidy.”

Hooray for Hollywood? I don't think so
"The then-state Department of Commerce found several fundamental flaws in the program:

The program’s flaws create an incentive to hire out-of-state contractors instead of Wisconsin labor.

The program is really expensive because it is a refundable tax credit program, not just a tax credit program.

The program’s cost-benefit analysis compares poorly to other programs aimed at manufacturing, technology, and agriculture.

In fact, Commerce can offer much more assistance to a film or video game than a manufacturer, a biotech start-up, or a cheese plant.

The program is an unlimited liability for Wisconsin."

Movie Production Incentives: Blockbuster Support for Lackluster Policy Tax Foundation Report
"While the imagery associated with putting the unemployed to work is quite compelling, the reality of the situation is somewhat differ- ent. Most film production jobs are filled by out-of-state residents specializing in particular areas of audio or visual production.
9 Addition- ally, producing a film is a relatively short-term venture in comparison to other investment projects. Since most of these positions are not permanent, “workers are left unemployed” after the production ends unless a steady stream of films is present.
10 In many cases, therefore, state officials are creating temporary positions with limited options for upward mobility. Of course, those visitors pay for lodging, spend their wages, and generally contribute to the economy, but that isn’t the sort of economic benefit that ordinarily makes a compelling case for a massive tax subsidy.

Read more here: http://www.newsobserver.com/2013/05/01/2863585/lights-camera-and-a-69-million.html#storylink=cpy

And of course there is fraud in some subsidized areas."

"MPIs are certainly generating wealth for one group of citizens: the movie industry. "

"Short-sighted state officials may not be ex- pected to worry too much about neighboring states’ job counts, but what goes around comes around. By committing tax dollars and state effort into securing film jobs, state officials miss the chance to use those resources instead for lowering tax burdens for all industries. Be- cause MPIs are a field crowded with state competitors, committing huge resources may have little payoff.

Officials should acknowledge that moving 100 jobs from one state to another does noth- ing for the nation’s economy except enrich the film industry at the expense of other state taxpayers."

"The flood of dollars from MPIs can induce spending on what would otherwise be considered a poor investment. At an estimated $150 million, The Curious Case of Benjamin Button was deemed “too risky” by industry giants Paramount and Warner Bros. Nonetheless, lobbying efforts and film incentives eventually landed the film in Louisiana."


5 Things to Know about Tax Credit Incentive Schemes
"A study by the Arrowhead Center at New Mexico State University argued the return on investment was only $0.14 per dollar spent, and the conservative Tax Foundation has recently issued a report opposing incentive programs at a national level, arguing the motion picture industry should not be favored over other industries, and that research on the benefits of incentive schemes is questionable."

Film Subsidies: Stimulus or Crutch?
"3. So when does that expertise become the draw, not free money? Disney turned a $1.4 billion profit last year, yet the industry expects B.C. taxpayers to increase subsidies to Once Upon A Time and other productions. It’s bad economic policy."

" In 2012, we spent $437 million on film subsidies, six times as much as in 2005, but virtually the same amount of production happened in B.C.—$1.2 billion. With every conceivable tax spinoff counted, B.C.’s treasury likely lost $220 million or more—money that should have gone to education, health care or tax cuts. [1]"

"The math is scary: B.C.’s $437-million 2012 subsidy is one-third as much as the $1.3 billion the 37 states who offer credits put in combined. [2]"

[Update 7/7/2013

DOWN THE RABBIT HOLE: THE MADNESS OF STATE FILM INCENTIVES AS A “SOLUTION” TO RUNAWAY PRODUCTION
"Canada enacted generous film incentives in the late 90s, which were quickly copied around the world & regrettably, in over 40 U.S. states"


"Film incentives were conceived as weapons to cause runaway production - the only means of defense the U.S. has available to fight back."

"..states to fight each other. Rather than fighting back with the global competition, the U.S. is effectively shooting itself in the face."

REGULATORY IMPACT ASSESSMENT FOR REFORM OF FILM TAX INCENTIVES
"The core aim of the new film tax relief is to promote the sustainable production of culturally British films."

"The existing reliefs provide poor value-for-money for the taxpaying public"

".. with location decisions influenced, amongst other factors, by the generosity of state support."

The British film and television industries—decline or opportunity?
"Despite several attempts, no British company has been able to emulate the American model of vertically-integrated companies.."

"Producers have no option but to take such incentives into account."

"..British industry is heavily dependent on inward investment, almost exclusively from the United States,.."

"Post-production work is easily tradable: firms in Soho can work for clients anywhere in the world, regardless of distance."

"..to counter the American threat, the gov has followed a largely successful policy of encouraging American co to make their films in the UK"

UK film tax credits are a waste of time .. unless you’re a UK independent producer

"The majority of Hollywood studios have already substantial amounts of money in the bank. It’s not as though they cannot afford the full cost of making a film domestically (or abroad if the requirements dictate it)."

"A massive rush to the bottom."

"So film tax subsidies don’t mitigate the risks of making films – they only increase them."

FIVE CHARGED WITH FILMS TAX FRAUD

Audit Uncovers Serious Problems with Film Incentives
" But the audit found that the state handed out more than $ 25 million dollars in expenses that didn’t qualify."

" In some cases, the companies never moved to the state or only set up empty offices. The comptroller’s report only looked at a small sample of films."

Latest articles on Subsidies


More links to subsidies in general
Choosing winners and losers: How government subsidies destroy the free market
Subsidy Insanity
WWF: subsidies destroying industry [PlanetArk]
Coalition of Gulf Shrimp Industries Files Petitions for Relief From Subsidized Shrimp Imports
New Study Reinforces USW Position that Improper Chinese Subsidies Destroy Jobs in American Paper Industry
USA Shrimp Industry Seeks Relief from Subsidized Imports
China subsidizing auto parts exporters: US industry
Solar energy firms 'bankrupted' after subsidies cut
Over Half of All U.S. Tax Subsidies Go to Four Industries. Guess Which Ones?
Germany Subsidizes China To Destroy The German Solar Industry
China Solar Subsidies Pose Dilemma For U.S. Trade
California Backfire: Energy Subsidies Destroy Economy
Put An End To Massive Logging Industry Subsidies in California

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Film Subsidy Bubbles