Subsidising Pandora’s box-office

Written By: - Date published: 11:46 am, January 25th, 2010 - 43 comments
Categories: business, Media - Tags:

 Gerry Brownlee is defending the $45 million tax break the Government gave the makers of Avatar to do most of their special effects work here.

“Attracting large budget film productions here offers wider benefits to the economy, including increased opportunities for New Zealanders as well as tourism benefits from having New Zealand locations shown to an international audience”

Yeah, Gerry. The scenes set on Pandora were shot just out of Gore, weren’t they?

I’m not against some tax attractions for movies. I know we have to compete because everyone gives film tax breaks and it can move countries much more easily than other businesses but it just seems excessive.

It is assumed that the Large Budget Screen Production Grant helped Weta to become the world-leader in special effects that it is and brought lots of business here . But it turns out it is far from clear that the benefits to the country outweigh the cost becuase the films would have come to Weta anyway – it’s not like James Cameron was spoilt for choices of companies that can do cutting edge special effects. At any rate, I would have thought Weta was now in a position where it could largely stand on its own two feet. 

At least, the hand-out from the taxpayer could be smaller. I mean, they spend $300 million here and we give them a 15% kickback? Gee, I’m sure some New Zealand exporters would love that kind of assistance. Or, perhaps, there could be some percentage deal to recoup some of the money from the film’s box-office takings if it exceeds a certain amount. It seems pretty crazy that a film which has grossed $2 billion in five weeks got money from any government.

PS. Where’s James of Editing the Herald when you need him: “Avatar recently won big at the Golden Globe awards and is on track to be the biggest grossing movie of all time, having sold more than $1.6 billion of tax credits.” It has said that for 22 hours at the time of writing. Does no-one from the Herald read the Herald?

43 comments on “Subsidising Pandora’s box-office ”

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  2. tc 2
    25 January 2010 at 12:14 pm

    Trev continues to show everyone that he passed his ‘use by’ date during their last term in power……..RWC Stadium was a chance to redem himself……..FAIL.

    I hope he’s packaged off along with King as the albatrosses they will be in 2011.

  3. Lanthanide 3
    25 January 2010 at 12:21 pm

    “Yeah, Gerry. The scenes set on Pandora were shot just out of Gore, weren’t they?”

    Obviously Gerry was talking about big-budget films in general, not Avatar specifically.

  4. The Baron 4
    25 January 2010 at 12:40 pm

    I don’t get you, Eddie – this is all about creating and supporting a new, high-tech, clean and green, well paid and lucrative industry for the country. It builds off the support that the Labour government extended toward the Lord of the Rings trilogy, and has further enhanced our national image in this regard.

    $45m for those sort of benefits seems like a pretty good return to me. So, ah, whats the problem?

    • Eddie 4.1
      25 January 2010 at 8:58 pm

      The argument is that the benefits could have come with a smaller or no subsidy. Not hard to understand.

      You should check out the MED doc I linked to

  5. burt 5
    25 January 2010 at 12:40 pm

    Eddie

    I agree there are some issues to discuss here. There are up sides and down sides to govt picking the winners and losers for tax breaks and an open discussion needs to be had about it.

    I would also like to point out that this is not new under National so perhaps there are some people in your camp that could shine some light on why it was a good thing when The Lord Of the Rings was being made; I suspect the same reasoning that was applied then is probably applicable now.

    see: The Lord of the Rings: The Return of the King

    The amount of money that New Line reclaimed in tax breaks on the 3 “Lord of the Rings” films was ten times more than the entire annual budget of the New Zealand Film Commission, which funds local film-making.

  6. BLiP 6
    25 January 2010 at 12:46 pm

    I wonder how many parents could have tended to their disabled children for $45 million. Still, with National Ltd® its priorities, eh?

    • Disengaged 6.1
      25 January 2010 at 3:11 pm

      I wonder how many people have sustainable careers now because of the $300m in benefits New Zealand received from this film and the New Zealand film industry in general? It’s good to see National carrying on with a forward thinking scheme established by labour.

      • BLiP 6.1.1
        25 January 2010 at 3:22 pm

        Given National Ltd®”s inability to understand its own figures, are you able, please, to provide a source for your $300 million. I’d be interested to see the data set, consider the assumptions and test the conclusions.

        • spot 6.1.1.1
          25 January 2010 at 3:34 pm

          Presumably qualifying production costs = some $300m if the grant comes in at $44m and LBSPG rate is 15%.

          Or thereabouts.

        • Disengaged 6.1.1.2
          25 January 2010 at 4:47 pm

          Well to receive the grant the film company has to provide audited figures outlining their eligible expenditure in New Zealand. This is then verified by the IRD before payment. So unless you think that the NZ Film Commission, MED and the IRD are all in some secret collusion with John Key and the VRWC then I’m willing to believe the figures released.

          I’m sure it also used the same method for calculating the $363 million direct cash injection into the New Zealand economy, additional economic activity of $119 to $227 million; and indirect benefits ranging from $10 million to $34 million from the production of Narnia here.

          Source: http://www.med.govt.nz/templates/Page____17609.aspx

          • BLiP 6.1.1.2.1
            25 January 2010 at 8:07 pm

            Ta.

          • Eddie 6.1.1.2.2
            25 January 2010 at 8:46 pm

            disengaged, read a little lower:

            “Overall the economic evaluation released today estimates the net economic impact of the scheme lies between a $33 million net gain and a $38 million net loss.”

            The grant rate is 12.5%, btw

            • BLiP 6.1.1.2.2.1
              25 January 2010 at 9:18 pm

              As I thought . . . more Tory bollocks.

            • Disengaged 6.1.1.2.2.2
              25 January 2010 at 9:53 pm

              Read even lower Eddie:

              “”However as the evaluation notes, some benefits and spin-offs have not been quantified, the sample size is small, and timeframe for the evaluation was only two years, which suggests the evaluation should be treated with caution,” Trevor Mallard said.

              “The fact these benefits were not quantified indicates that the economic evaluation is conservative and probably underestimates the overall benefits of large budget productions to New Zealand.”

              Benefits that were not quantified included the goodwill the scheme generates with screen producers, and the value of the international reputation New Zealand is developing because of its success with large-scale productions.

              The evaluation did not quantify the value of additional infrastructure and industry development and spin-offs such as set construction, transport logistics, graphic design, accommodation and catering.

              “In addition, the benefits of film productions can spill over into other sectors, for instance with the up-skilling of the digital sector, and the growth in tourism that we have seen as a result of the Lord of the Rings trilogy.

              “Such benefits cannot be readily quantified, but would increase the net economic benefits of the grant.

              “I am confident that there is enough evidence to suggest the grant is an effective tool in attracting large screen productions to New Zealand, and that the benefits outweigh the costs. As a result the government has decided to continue the grant in its present form, with on-going monitoring.”

              Oh, and the Grant was increased from 12.5% to 15% in 2007 according to Film New Zealand
              http://www.filmnz.com/production-guide/incentives/large-budget-screen-production-grant-scheme.html

  7. Scott 7
    25 January 2010 at 1:09 pm

    It sucks having to subsidise Hollywood, but the other option is to not do so and not get the big films.

    The film industry is thriving in this country because of these big budget films. And other countries have tax incentives. If we withdrew ours we’d probably see much fewer of these films being made in NZ. If you look at the amounts spent in NZ to make these films and then factor in the benefits to NZ that are harder to measure (e.g. tourism, the growth of high tech industries), I think it’s still a good deal

    We can all think of other things we’d like to do with the $45m, but I’m not sure removing or reducing the tax incentive will make us better off as a nation.

  8. Chess Player 8
    25 January 2010 at 3:52 pm

    Sorry, I can’t see what the problem is.

    • burt 8.1
      25 January 2010 at 8:30 pm

      The problem is – Eddie got his fingers on the keyboard before he checked his history or his facts pertaining to special tax treatment of the film industry in NZ.

      • Eddie 8.1.1
        25 January 2010 at 8:48 pm

        burt. you’re wearing out my patience fast. Either make some substantive criticism or go and make your vile misogynist and homophobic comments at Kiwiblog like this one:

        burt (3794) Says:
        January 11th, 2010 at 12:53 pm
        Has that guy who use to be PM ever been a Nelson MP?
        I heard his voice on the radio many times and saw pictures of his younger sister on billboards during elections what was his name, it was a girls name if I recall correctly but one look at his gay husband quickly made you aware he just liked to dress a tiny bit feminine . Henry Clark or something like that ?????

      • burt 8.1.2
        25 January 2010 at 9:09 pm

        Eddie

        That is really funny.

  9. Nick C 9
    25 January 2010 at 5:17 pm

    Its really a subtle form of protectionism, as money made by weta workshops from the people who bankrolled production of the movie would count as export revenue.

  10. Rex Widerstrom 10
    25 January 2010 at 6:24 pm

    Unlike LOTR, there hasn’t been much effort on the part of Cameron to publicise the fact that the basis for Pandora is in fact NZ.

    Considering people are reportedly becoming clincially depressed upon realising Pandora doesn’t exist, the poential tourist return from Avatar might potentially exceed that from LOTR if Cameron did more to make it known.

    But I doubt he will, because he wants the emphasis to be on the CGI, not the underlying reality.

    Perhaps future deals need to include an agreed promotional component for NZ, to be undertaken by the filmmakers, in return for such a generous handout.

    • felix 10.1
      25 January 2010 at 6:54 pm

      “…people are reportedly becoming clincially depressed upon realising Pandora doesn’t exist…”

      For serial? If so, do we really want to encourage people that stupid to come here?

      “Perhaps future deals need to include an agreed promotional component for NZ, to be undertaken by the filmmakers, in return for such a generous handout.”

      Agree 100%. Otherwise we’re just racing to the bottom. We have to get more out of it than just the work or we’re just an upmarket Economic Processing Zone.

      • Rex Widerstrom 10.1.1
        26 January 2010 at 5:16 am

        For serial?

        Sadly. yes.

        do we really want to encourage people that stupid to come here?

        To quote Mulder, they are already amongst us, Felix. The trick is not to interbreed 😉

  11. illuminatedtiger 11
    25 January 2010 at 8:37 pm

    Topped Titanic today in terms of box office earnings 🙂 .

    • Eddie 11.1
      25 January 2010 at 8:49 pm

      yeah. I hear it’s an awesome film. Still waiting to see it. No chance of getting a decent seat in a 3d screen at the moment

      • quenchino 11.1.1
        25 January 2010 at 11:00 pm

        What does us tell us? The two biggest earning movies of all time, Avatar and Titanic… both directed by the same man … an amazing achievment.

        Both films broke arresting new visual ground and are deeply engaging. Both have an interesting, potentially challenging messages, heavily overlain with thick layers of mawkish sentimental emotions. And while both could have been greater movies in so many ways, Cameron took no commercial risks and aimed straight for the collective wallet of the masses.

        You have to say that the man knows how to make hugely successful movies. His formula for success is at it’s heart very simple.. emotion overides reason every time.

  12. Adrian 12
    25 January 2010 at 10:37 pm

    The wine industry is struggling at the moment but it still earns the country over 1 billion dollars in exports, it pays $2.50+ in excise duty on every bottle sold in NZ ,thats about $250 million and another $125 mill in GST and doesn’t get the steam off a turd from the government. Where’s the bloody equity?

  13. peterquixote 13
    26 January 2010 at 9:19 pm

    We NZ used to have special tax concession for the agricuklture industry and exporters, but we gave it up because it was inequity, and led to distortions.
    I can’t see why tax is payable by some and not others.

  14. Steve 14
    27 January 2010 at 8:57 am

    What is it with the Film Industry that gives it some divine right to have these tax breaks over more deserving industries in NZL? We are mermerised by the supposed glamour and celebrity. In fact the obsession we have with celebrity in this country is astounding and it comes right from the top with our “Letterman”PM showing how agog he is with getting the right photo op. Yep, loved the shot of him sucking on a bottle which no doubt the Brit papers have had a few people shaking their heads asking what was he thinking of!

    • Chess Player 14.1
      27 January 2010 at 9:31 am

      Well, what other industry do we have in NZ that is essentially creative, knowledge-based, very low poluting, foreign exchange earning, potentially an employer of a reasonable number of people, and can sometimes showcase the beautiful scenery we pitch to the tourist market?

      If there are more industries in NZ that meet this criteria, I reckon we should be supporting those industries as well.

  15. Steve 15
    27 January 2010 at 9:45 am

    Yes, the pyrotechnics, helicopters, large trucks, mobile canteens, … all low pollutants from the film industry versus shall we say Air NZ’s innovation released yesterday which is world leading, the tourism industry which employs 1 in 4 in this country and is the largest foreign exchange earner for the country with no tax breaks although the IRD nearly wiped out many of their key distributors with unclear GST rulings last year. That’s a few billions and .5m jobs to kick off with and I think it puts the miserable $400m from the film industry into perspective. They are just another contributor with no right to anything more than the other great businesses we have in NZ.

    • Chess Player 15.1
      27 January 2010 at 10:01 am

      Steve, you seem to have a chip on your shoulder about this.

      Are you suggesting that with the govt having funded international advertising campaigns to promote Tourism for many decades, and then having to financially bail out Air NZ, that the Tourism industry has had nothing at all?

      Govt assistance can take many different forms….

  16. Steve 16
    27 January 2010 at 11:05 am

    I think you need to check the difference between chips and facts.
    With the exception of the Aussie campaign of the past 12months, give me an example of where the government has directly funded tourism campaigns internationally. The govt has underfunded tourism for years. The industry itself has done this through contributions to major campaigns, particularly Air NZ which has always been the largest contributor to tourism promotion internationally – and that’s unequivocally accepted by the tourism industry at large. The Govt chipped (there’s a good use of that word) in funding for an Australian campaign last year as I said but has not done so to any great degree over the past 20years.
    Air NZ was invested in by the govt (not “bailed out” as you say with a hint of cynicism and a couple of metres of timber particles on your epaulettes) 9 yrs ago but within 2 yrs was returning a huge dividend which continues to this day.

    Sure govt funding takes many forms but it needs to be fair and the massive tax break to the film industry is lob sided.