Foreign Incentives Help Crush Once-Booming F/X Biz in U.S.

'Lord of the Rings'

While L.A.'s visual effects business may not be entirely lifeless, it's certainly bleeding out

At the recent Siggraph conference in Anaheim, there were not one but two panels on the state of the vfx industry. Word on the street was that feature effects production is dead in L.A., so at times those sessions felt like a public inquest into a murder.

While the city’s vfx business may not be entirely lifeless, it’s certainly bleeding out. It was severely wounded by several factors: failure to organize when it could; globalization; low labor costs abroad; and most of all, foreign subsidies. Chances are it will survive only as a much-weakened remnant.

It’s easy to blame the invisible hand of the market and the creative destruction that is capitalism. But markets are influenced by government policies both abroad and at home.

Overseas, government tax incentives and subsidies have distorted the playing field, propping up companies that wouldn’t have been able to compete without government help and imposing strains on American firms whose governments don’t offer the same support.

At home, decades of economic policy influenced by acolytes of Ayn Rand’s fantasy novels — from Alan Greenspan to Paul Ryan — produced booms, bubbles and busts that delivered high unemployment and record corporate profits — a perfect climate for reducing the clout of labor and workers.

SEE ALSO: Where in the World Will the New ‘Star Wars’ Films Shoot?

Visual effects is the one key piece of filmed-entertainment production that operates under the Randian free-for-all that those economic sages prescribe for America’s greater prosperity. Until around 10 years ago, vfx artists and their skills were relatively scarce, so their jobs tended to be permanent and lucrative. When IATSE tried to organize Sony Imageworks in the boom years, almost none of the company’s employees voted to unionize. That mindset held across the industry — and proved short-sighted. The major studios never had to become guild signatories for visual effects artists as they are for actors, directors and other specialties. They remained free to use f/x made anywhere, under any working conditions. And so they do. As a result, downwardly mobile SoCal vfx artists — the canary in the coal mine for the rest of L.A.’s production pros — are learning to their terror just how much they have in common with laid-off machinists in Milwaukee.

L.A. vfx companies and artists were once protected by the high barriers of entry to their field. But those barriers fell, and then government subsidies abroad set the Los Angeles vfx industry on a path to ruin. With the help of local incentives, New Zealand-based Weta Digital produced the award-winning vfx for New Line’s “Lord of the Rings” trilogy. New Line’s parent, Warner Bros., took its tentpole movie vfx work to the U.K. to cash in on local incentives. Warner’s spending built London into the global capital for vfx in just a few years.

SEE ALSO: L.A. Mayor Declares State of ‘Emergency’ as Movie, TV Production Flees Hollywood

Other territories enacted their own tax incentives. Some repealed them after they proved to be of no benefit to the local economy, but studio lobbyists always seem to be able to find pols who can be seduced by the promise of high-tech jobs with a sheen of Hollywood glamour.

One of the two Siggraph panels focused on unionization, the other on the idea of using World Trade Organization treaties to impose duties on vfx created abroad and “imported” back into the U.S. Both paths appear slow, perilous and uncertain, but feature vfx pros in Hollywood know the prize is already lost, and winning it back will take time, toil and sweat.

(Pictured: New Zealand taxpayers helped pay for vfx for “The Lord of the Rings.”)

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  1. minoton says:

    http://variety.com/2013/biz/news/star-wars-deal-marks-latest-coup-for-the-u-k-1200590259/

    “Blighty’s tax credit of 25% of qualifying production expenses for films that spend up to £20 million ($31 million), and 20% for films that spend over that total was recently added to the TV and animation sectors. There are rumblings that a standalone VFX incentive may be in the works as well, as Soho is flush with top pros and looking for post-“Harry Potter” biz.”

  2. minoton says:

    For anybody (other than the heads of the six major studios) who thinks film subsidies is a viable live action or visual effects business model, please read the following blog post by Scott Squires. It has been updated as new information and stats have come to pass. Please read it from top to bottom, and explore all the sourced links for supporting data. Much of it in the subsidizing government leaders’ own words.

    http://effectscorner.blogspot.com/2012/08/visual-effects-tax-incentives.html#.Uh0o7xYjB9U

  3. James Rickter says:

    I hate seeing most of American films and film work being shipped off to places like Europe. They already have such a rich cultural and historic heritage. The film industry was one of our only world renowned American enterprises, we were building our piece of history as great story tellers. Something we were praised for and well known for, a good mark for our young country…but now, we are giving it all away.

    The American culture as become the worst kind of harlot, the kind who sells pieces of their soul and foundation for profit.

  4. Frank W says:

    One thing I have never heard mentioned in the Digital Domain implosion is the loss to the city of Port Saint Lucie, Florida, which put up a few million in incentives for DD to build their studio in PSL’s new suburb and the tie-in with the local college which was to feed DD with workers.

    Move back to practical effects because all that great talent is in LA.

  5. Focusing on foreign subsidies is such a big mistake.

    Actually, the studios put in competition the VFX houses which are under biding.
    1 . That leads them to die
    2 . Studios ( from LA ) never been so rich !! No need to look overseas, the money is still in Hollywood.

    • vfx2be says:

      Man… Why on earth are you so aggressive…
      Are you unable to get into a discussion where somebody disagree with you ?
      We obviously work for the same industry and want the best for it. So even we don’t have the same solution you shouldn’t be so arrogant and turn that into a fight. Grow up !

      Again, American money spent on American firms. Not Canadian money spent on American firms. If BC has that long history, why isn’t the BC government spending subsidies to shore up their own industry instead of sending it to America?

      Canada subsidies are for local economy. It’s not about where does the company come from at the origins. Like Ford or GM where assembling parts of a car coming from all over the world and even foreigners employees were working for them in USA. Don’t put Canada and USA in competitions and blame foreigners.
      If the studios FROM hollywood weren’t playing the underbiding game this situation would have never happen that fast. The problem is at your door, not Canadian ones.

      With well over 25 years in the vfx business, I understand more than you give me credit for. Rango, fully done in Singapore? Probably the most ludicrous statement you’ve made. Half of Transformers 3, or half of ILM’s work on Transformers 3? Don’t break your arm patting yourself on your back.

      I’m sorry you don’t know where those movies has been done. Especially with 25 years of experience. I think it’s easy to find the informations a bit everywhere…

      Everywhere I’ve been, work from overseas branches has to be corrected or redone by the US artists. That is fact.

      Ohh… And how stupids are your employers they keep spending money overseas to redo the job locally.
      Rango and Transformers has been redone in San Francisco ? Please, be serious…
      I don’t want to sound racist, but please.. No USA is not the center of the world where people are the only ones to make movie quality.
      Take Pixar.. More than half of foreigners there…

      Everybody, everywhere has possibility to achieve the best vfx.
      How long does it take to be mid level or senior 4 to 6 years ( more often even less ).
      Do you think the work overseas has started today ? No of course.
      All those guys working on blockbuster are now experienced, talented and they will soon also be able to be vfx supervisor which is the only position which has been fully kept in Hollywood so far.

      Imagine NO big fat tax incentives for anybody, and we’d still be playing on a level playing field. Tax payers could get to keep their tax money local, spent on health care, education, low income housing, rather than on Beverly Hills and Malibu mansions of the studio fat cats. You advocate government waste. Why spend money you shouldn’t have to? I just hope you’re not depending on a subsidy for your job, because as soon as some country tops yours, you’re out of a job.

      No tax incentive and the competitors won’t be Canada and London but China and India ( as it already started ).
      And we cannot win this fight.. Cheap labor will be a bigger kick in our ass than subsidies.

      I do depend on subsidies, I am a french artist who had to work where the movie were in production.
      Australia, United Kingdom, Canada.
      If you are 25 years experienced, you should know better than me than those studios are filled with people like me. Skilled foreigners going from a country to another.
      And I see no problem with that, as the whole cinema industry has always been that way from day 1.

      • minoton says:

        “VFX Soldier make people out of USA pretty upset because they are just looking at protecting Californian seats. I see you are not aware of it so I inform you”

        Yes, Californians are interested in protecting their seats, but are willing to compete in fair competition of services for price paid. Subsidies distort this model and basically forces the client to send the work not to where they will get the best value for their money, but where they are going to get biggest government kickback. On a level playing field, Californians can compete with the best out there. Why are the people in subsidized locations so worried about their subsidies going away? Doesn’t seem like they want to compete on a level playing field. Doesn’t seem like they have the confidence in their own market to be able to do so without their government buying their jobs. Informed? :)

        “About Squires, I don’t hate the man, but all you wrote about him is achievement about his personnal carrier as TD/Sup/Coder. Not what I call an entrepreneur, sorry.”

        Obviously you are unwilling to do your own bit of research, so I’ll do it for you:
        http://squiresstudios.com/bio/bio.html

        “Are you ready to pay a DVD player or your Iphone 5 times his price to see it built in USA ?
        Every single industry goes where it’s cheaper. Fighting subsidies is well intended but ridiculous compare to cheap labor.”

        Again, if it was about cheap labor, the work would already be there. Read the Variety article again. Where is the work going? Not the cheap labor locations but to the subsidized locations. That is why the fight is not ridiculous. It’s the main fight at the present time.

        “Now 25% of Rango and Transformers is being done in Singapore…
        Dreamworks do the same in India, successfully..
        I mean, is it that difficult to see it ? It is not about subsidies but cheap labor.”

        Again with the cheap labor. It’s just a deflecting tactic to divert attention from what the article is about.

        “How do you force a foreign country to stop tax incentive ?”

        Take them up against the WTO in court. Show what they are doing is illegal. Put pressure on their political leaders by their constituents once they find out how much of their money is being wasted.

        “How do you force a studio not to choose a foreign vfx house ?”

        Remove the free money kickback and let everybody compete on work quality per price.

        “How do you force a local US vfx house not to open a branch in a foreign country ?”

        They would have little need to if not dictated by the studios chasing foreign country subsidy money.

        “You see, even you right and I’m wrong.”

        Thank you. :)

        “We live in a global world, global economy, most of this economy rely on cruel capitalistic rule ( which mean minimum laws to define economic condition).”

        How is government purchasing an industry through subsidies capitalistic? Seems pretty socialistic if you ask me. Government choosing which industries are going to get the financial benefits at the expense of others.

        “My point of view is, knowing that we can’t fight actual globalization and his fair part of unfairness, going to The Source.
        The studios.
        And ask them to support people and companies who helped them being rich : the vfx houses.”

        That’s an admirable desire, but to be honest, the studios couldn’t care less. Heard the famous producer quote who said he wasn’t doing his job unless he put a vfx company out of business on every show? It’s the same type of people who cut off Bill Westenhofer’s Oscar acceptance speech for ‘Life of Pi’.

        “I don’t want to support and condemn subsidies, I just see it wouldn’t change anything.”

        I urge you to spend some time going through Squires’ blog, exploring all the links to studies, videos, news articles, etc., and then see if you feel if it wouldn’t change anything. If you think so, and still condemn subsidies, then maybe you’ll join the movement to bring balance to the visual effects industry. You’ll see it’s not just about CA vs BC in the larger scheme of things. This just seems to be the first battle in the overall war of stabilizing the effects industry where every artist and every vfx studio are competing in a respectful way because we all know we are competing on the same playing field, where no one is given head starts or advanced any points on the scoreboard.

        “We can’t let BuenaVista telling us that we have to make this movies for 1 billion ( even both parties know it will cost 1.5 billion ) or they will go to Vancouver or India.
        We can’t blame or forbid Vancouver for adding fuel in his economy and India to have low cost of life.”

        I agree with your first statement, but not with your second. I don’t blame Vancouver as a whole. I expect many Vancouverites aren’t even aware of any of this going on. I blame their politicians for starting the race to the bottom. They aren’t adding fuel to their economy, but giving it to the American studios who only give a portion of it back in return. It’s pennies on the dollar. Read the studies. As for India, the work is just not there. I don’t mean that to sound cruel, but it’s just not there. Rhythm & Hues had three facilities there. And they went bankrupt. The low cost didn’t seem to be of much help to them. With three branches there doing work they should have been financially kicking everybody’s collective asses.

      • vfx2be says:

        VFX Soldier make people out of USA pretty upset because they are just looking at protecting Californian seats. I see you are not aware of it so I inform you :)

        About Squires, I don’t hate the man, but all you wrote about him is achievement about his personnal carrier as TD/Sup/Coder. Not what I call an entrepreneur, sorry.

        I don’t care and rely on subsidies, stop insisting man :) Get out of this vicious circle you invented.
        I always been working in this industry in different coutries, most likely all of them was relying on subsidies and so what ?

        Are you ready to pay a DVD player or your Iphone 5 times his price to see it built in USA ?
        Every single industry goes where it’s cheaper. Fighting subsidies is well intended but ridiculous compare to cheap labor.

        Jurrassic Parc couldn’t have been made anywhere than USA,
        then we had New Zeland, Australia, UK….

        Now 25% of Rango and Transformers is being done in Singapore…
        Dreamworks do the same in India, successfully..
        I mean, is it that difficult to see it ? It is not about subsidies but cheap labor.

        Ok, just for the game, let’s pretend the problem is subsidies…
        Tell me :

        How do you force a foreign country to stop tax incentive ?
        How do you force a studio not to choose a foreign vfx house ?
        How do you force a local US vfx house not to open a branch in a foreign country ?

        You see, even you right and I’m wrong.
        We live in a global world, global economy, most of this economy rely on cruel capitalistic rule ( which mean minimum laws to define economic condition).

        My point of view is, knowing that we can’t fight actual globalization and his fair part of unfairness, going to The Source.
        The studios.
        And ask them to support people and companies who helped them being rich : the vfx houses.

        I don’t want to support and condemn subsidies, I just see it wouldn’t change anything.

        We can’t let BuenaVista telling us that we have to make this movies for 1 billion ( even both parties know it will cost 1.5 billion ) or they will go to Vancouver or India.
        We can’t blame or forbid Vancouver for adding fuel in his economy and India to have low cost of life.

      • minoton says:

        “I’m sad to see how mislead you are.
        VFXSoldier is a joke, just people protecting the Californian industry pretending to represent the whole vfx industry.”

        Talk about who is mislead. VFX Soldier and the people who support his/her views are trying to save the industry. They are the only ones who see how subsidies is harming the industry as a whole. It’s those who are slaves to the subsidies for their jobs who are mislead. I’m sorry you can’t see the forest for your tree.

        “Scott Ross is definitively the guy I want to support, certainly not Scott Squires who never run a company and never VFXsoldier which are just listened in the boundaries of USA.”

        Again, as with ‘Rango’ you are showing just how uninformed you are. Scott Squires was one of the co-owners/creators of Dream Quest Images (‘The Abyss’, ‘Total Recall’). He left to become a VFX Supe for ILM. He also created a software company called ‘Puffin Systems’ and wrote Commotion, ILM’s in-house roto software. You can find his bio from his blog site. The man has an incredible list of effects achievements. He’s a doer. No slight against Mr. Ross, but after selling DD, he sort of vanished on the effects scene fr a long time. Yes, he gives a good speech and knows how to make good sound bites to get people charged. But I would not put his achievements alongside Scott Squires’.

        “Ps: Mocking me, calling me digital vagabond doesn’t make your point and doesn’t make you shine.”

        Was not intended as a personal slight, but as a descriptor of the life you propose for visual effects artists, moving around chasing job for job, subsidy for subsidy. Sorry if you took it personally.

        So far you have not offered any backing to support your claims other than how it benefits your personal situation. I can understand you don’t want your subsidy to go away (just that fear should make you think twice about how tenuous your situation is) but the facts are against you. Good luck with your career and see you at the unemployment line.

      • vfx2be says:

        I’m sad to see how mislead you are.
        VFXSoldier is a joke, just people protecting the Californian industry pretending to represent the whole vfx industry.

        Scott Ross is a real leader. He never focused on subsidies knowing and declaring it is not the real issue to fight for now. He wants company to have a “gentlemen agreement” to stop underbidding and force studios to listen to them.
        Scott Ross is definitively the guy I want to support, certainly not Scott Squires who never run a company and never VFXsoldier which are just listened in the boundaries of USA.

        Ps: Mocking me, calling me digital vagabond doesn’t make your point and doesn’t make you shine.
        You just prove you are out of argument and prove that you are aggressive more than passionate :)

        Good luck facing the real world soon, looking at movies being done overseas and looking at the windows to BuenaVista counting they money because you were too busy fighting a small bubble.

      • minoton says:

        “1- We know now that movies can be done successfully in Asia.”

        Yes, ‘Crouching Tiger, Hidden Dragon’ was wonderful. And was done entirely with local money and local talent.

        “I don’t want to keep arguing with you are living in the past and refuse to see the world as it is.”

        I see the world as it should be because as it is, is not working. As it is, is screwed up. With your above logic we should just let countries keep gassing their own people.

        “2 – The money is still in USA, at the studios. And they are SO HAPPY to see you focusing on Vancouver while counting their money because they consider art as a product and try to make it the cheaper possible, forcing houses to underbid.”

        I don’t see them turning away the free money, either. Actually, I don’t like any subsidies from foreign governments manipulating US business practices, but right now Vancouver seems to be the most prosperous of this practice. So they get the first bit of attention. To eat a whole mammoth, you have go one bite at a time. Vancouver/BC is just the first bite.

        “3 – And once again, remove subsidies from BC and your fight won’t be Vancouver and London but China and India. Good luck with that !”

        Again, if this were true, it’d already be there. Why are Indian animation companies closing? Why do they treat their workers like slaves? Why do India and Chinese companies keep buying American companies like R&H and DD?

        “I’m not saying I am happy of this situation, all I’m saying is how narrow is your point of view from California.”

        For the record, I don’t live in California. But I do live in the US and would like to keep my job here instead of chasing it around the world at the whim of foreign governments wasting their tax payers’ money and studios chasing it. You think the studios care about BC? They’re already looking at Toronto and Montreal. Or in the case of ‘Fantastic Four’, Louisiana.

        “I’ve been working for 15 years in many countries for that industry and it seems to give me a better landscape of the situation than your 25 years on the same seat.”

        Exactly, the same seat. Not some digital vagabond with the studios telling me to jump, and me answering “Where to this time?” What’s your retirement looking like?

        “Problem so far is in one hand : studios.
        Let’s ask them how come they are getting richer every year even though they are supposed to depend on vfx houses to create a movie.”

        They are getting richer by pocketing your tax dollars while only investing a smaller percentage of their own money in their “art”, and then turning around and selling it to you in glorious 3D at a jacked up ticket price. So basically they’re double dipping on you and you allow it for the glory of working in visual effects.

        “But it’s fine, continue.. Boohhhh bad BC…”

        But it’s fine, continue.. Boohhhh bad subsidies. There, I fixed it for you.

        “Why don’t you ask your governor to stop helping Californian farmers ? It is so unfair…”

        If California wants to support California farmers, that’s his choice. Why doesn’t BC governor (or whatever the post is) support BC film industry, instead of supporting the American film industry by sending tax money to America? How difficult is that to understand? I have no problem with BC spending subsidies on BC people, artists, companies, studios, etc. But that’s not what’s happening.
        I could see your argument if California governor decided to relocate the Canadian maple syrup industry to California and leave Canadian syrup farmers (?) without jobs.

      • vfx2be says:

        Ok Rango wasn’t made fully in Singapore, my bad. 25% in fact according to this link :
        http://www.onscreenasia.com/article/-rango-win-a-big-nod-to-ilm-singapore/9436

        Good enough to prove my point, and those 25 % hasn’t been redone in SF.

        1- We know now that movies can be done successfully in Asia.

        I don’t want to keep arguing with you are living in the past and refuse to see the world as it is.
        The movie industry is not in crisis. The vfx houses are.

        2 – The money is still in USA, at the studios. And they are SO HAPPY to see you focusing on Vancouver while counting their money because they consider art as a product and try to make it the cheaper possible, forcing houses to underbid.

        3 – And once again, remove subsidies from BC and your fight won’t be Vancouver and London but China and India. Good luck with that !

        I’m not saying I am happy of this situation, all I’m saying is how narrow is your point of view from California.
        I’ve been working for 15 years in many countries for that industry and it seems to give me a better landscape of the situation than your 25 years on the same seat.

        USA bring capitalism he has now to face it as an adult. It is too easy to enjoy Walmart on week end and complain about competition on week days.

        Problem so far is in one hand : studios.
        Let’s ask them how come they are getting richer every year even though they are supposed to depend on vfx houses to create a movie.

        But it’s fine, continue.. Boohhhh bad BC…
        Why don’t you ask your governor to stop helping Californian farmers ? It is so unfair…

      • minoton says:

        “Man… Why on earth are you so aggressive…
        Are you unable to get into a discussion where somebody disagree with you ?”

        I thought I was having a discussion with someone who disagreed with me. Seems like you can’t stand to have somebody refute all of your claims. Aggressive? No, passionate. Passionate enough to not want to watch my industry get relocated because some foreign government decided to buy it with subsidies. The industry used to compete on a level playing field before subsidies became all the vogue in 1996 with no problem. Why don’t we go back to that model? Again, what are you afraid of? What do you have to lose?

        “Canada subsidies are for local economy.”

        If this statement were true, then why aren’t they spent in Canada?

        “Don’t put Canada and USA in competitions and blame foreigners.”

        Sorry, Canada did this when they started their subsidy programs to buy movie work.

        “If the studios FROM hollywood weren’t playing the underbiding game this situation would have never happen that fast. The problem is at your door, not Canadian ones.”

        Underbidding is only a problem when an effects company in a non-subsidized location has to bid against an effects company whose bid is augmented by their government handing back cash to the studios. How is this a good business model?

        “I’m sorry you don’t know where those movies has been done. Especially with 25 years of experience. I think it’s easy to find the informations a bit everywhere…”

        I spent close to a decade working at ILM. I pull up both those films on IMDb and look at the credits. Why do I see so many of my former American colleagues names on Rango if it was done entirely in Singapore as you claim? Maybe I should email John Knoll or Tim Alexander and ask them if Rango was done entirely in Singapore? Or any number of my American friends whose names are listed? Maybe ILM flew all of them to Singapore and I didn’t know about it . . . . .

        “Ohh… And how stupids are your employers they keep spending money overseas to redo the job locally.”

        You know, my colleagues, supervisors, and myself, ask ourselves the same question as we’re doing the work for the second time. The reason, I suspect, is the effects companies spent the money to open the offshore site and to justify the expense, keep trying to shove the square peg in the round hole to make it work. I suspect they are also blissfully unaware that the work is being redone. As a paid by the hour project artist, sometimes it’s just easier to shut up and redo the work yourself because you know your producer isn’t going to pay to send it back to India or wherever.

        “Rango and Transformers has been redone in San Francisco ? Please, be serious…”

        I’m sorry if that hurts your feelings. I can’t speak personally for those films, but I can for “Rush Hour 3” and I heard horror stories about the first “Iron Man”.

        “I don’t want to sound racist, but please.. No USA is not the center of the world where people are the only ones to make movie quality.
        Take Pixar.. More than half of foreigners there…”

        Exactly. They are working at Pixar. They are not working at cheap labor companies churning out crap. Why are they at Pixar? Because they are talented. They got out of their local markets to go where better work is being produced. It’s that simple. It’s not saying that India or China is incapable of producing talented people. You have to ask yourself why don’t those people decide to stay in India and China and work on local productions?

        “No tax incentive and the competitors won’t be Canada and London but China and India ( as it already started ).
        And we cannot win this fight.. Cheap labor will be a bigger kick in our ass than subsidies.”

        Then it would already be there. I suggest you both VFX Soldier’s and EffectsCorner blogs for far better more indepth information on this (and the subsidies) topic. There is plenty of research on those blogs that show subsidies do not pay for themselves. If you are in Vancouver (speculating), your government is paying a little over $13,000 per film worker. If all were on welfare, they’d only be paying $7,000 + per worker. Where is the rationale in that? Do you think each film worker generates $13,000 in tax revenue to offset that tax expenditure?

        “I do depend on subsidies, I am a french artist who had to work where the movie were in production.
        Australia, United Kingdom, Canada.”

        I understand you don’t want to see the subsidies go away as you recognize it’s gives your location a competitive edge in getting work. Are you willing to move when someplace else ups their subsidy percentage? Or are you just going to press your government to spend even more of your tax dollars to keep buying your job? If they choose not to, where are you going to move to chase your job around the globe? Where do you plan to set down roots, buy a house, start a family, if you haven’t already? Are you going to drag them around the globe at the whim of the movie studios who dictate where you choose to work?

        “If you are 25 years experienced, you should know better than me than those studios are filled with people like me. Skilled foreigners going from a country to another.”

        Doesn’t it get a little tiring? Wouldn’t you like a place to call ‘home’? You are merely a passenger on this race to the bottom. Where will you be when we hit it? Maybe stuck in a country you don’t really like but were there only because of a job?

        “And I see no problem with that, as the whole cinema industry has always been that way from day 1.”

        I have many international friends that I’ve met through work. Some absolutely amazingly crazy creative and talented artists. But the fact is, those artists moved to work at established companies at their base locations. They went to those companies because that’s who was doing the work.

        Look, back in the good old days, visual effects work was being done in Los Angeles and at ILM. Most of the good work went to ILM, not because Marin Country paid the studios subsidy money to lure the work there, but because ILM did the best work for a competitive price. They stood on their own two feet and won bids/work and quite a few awards as well. This is how the business should be. Yes, other locations have talent to offer and have done some amazing work. It’s time for those locations to now stand on their own two feet, without a manipulated bidding system rigged in their favor by their governments. How could that be any more reasonable?

    • minoton says:

      Subsidies is exactly the argument to be having. Wonder why so many of the Vancouver visual effects companies are branch offices of American based visual effects houses? The studios dictate that if an effects house even wants to bid on a project in the first place, they need to do the work in Vancouver. The subsidies are the driver that relocates American jobs out of the country.

      • minoton says:

        “Subsidies are to save a local economy. British columbia has a long history in TV and film making.
        If foreigners goes there then they get the jobs. Was the same for GM or Ford.”

        Again, American money spent on American firms. Not Canadian money spent on American firms. If BC has that long history, why isn’t the BC government spending subsidies to shore up their own industry instead of sending it to America?

        “ILM doesn’t have to compete with Kuala Lumpur, you don’t understand. All those VFX houses are already there. Do you know ILM movie Rango ? Fully done in Singapore. Half of Transformers 3, done in Singapore.”

        With well over 25 years in the vfx business, I understand more than you give me credit for. Rango, fully done in Singapore? Probably the most ludicrous statement you’ve made. Half of Transformers 3, or half of ILM’s work on Transformers 3? Don’t break your arm patting yourself on your back. Everywhere I’ve been, work from overseas branches has to be corrected or redone by the US artists. That is fact.

        “It’s not about tomorrow, you already there. The quality is the same done in LA or India, sorry if you don’t see it.”

        Would this be the work in Bollywood’s ‘Ra.One’? Or how about China’s ‘Empires of the Deep’? If true, then you have no need for America and should be successful in your own industry. If the quality is truly there, then you should have no problem competing on a level playing field without government funded subsidies.

        “Imagine a big fat tax incentive in California, then they wouldn’t have to go in a foreign country.
        But it is too late, subsidies just slow down the movement.”

        Imagine NO big fat tax incentives for anybody, and we’d still be playing on a level playing field. Tax payers could get to keep their tax money local, spent on health care, education, low income housing, rather than on Beverly Hills and Malibu mansions of the studio fat cats. You advocate government waste. Why spend money you shouldn’t have to? I just hope you’re not depending on a subsidy for your job, because as soon as some country tops yours, you’re out of a job.

      • vfx2be says:

        Subsidies are to save a local economy. British columbia has a long history in TV and film making.
        If foreigners goes there then they get the jobs. Was the same for GM or Ford.

        I do not want to choose pure capitalism or not. Just reminding you that USA have been doing the same for car industry, farmers, etc,…

        ILM doesn’t have to compete with Kuala Lumpur, you don’t understand. All those VFX houses are already there. Do you know ILM movie Rango ? Fully done in Singapore. Half of Transformers 3, done in Singapore.
        A enormous amount of Dreamworks feature ? Done in India…
        Same goes for Sony, DD, Framestore, DNeg, etc…
        It’s not about tomorrow, you already there. The quality is the same done in LA or India, sorry if you don’t see it.

        So what now ?
        Let’s ask Fox, BuenaVista, name it why they force vfx houses to underbid while they keep making more money each year.
        Imagine a big fat tax incentive in California, then they wouldn’t have to go in a foreign country.
        But it is too late, subsidies just slow down the movement.
        Why ? Because they are as talented, most of the time more technical, and way cheaper.

        Capitalism made us happy to have a DVD player for 60 dollars because it’s Made in China.
        Well, we should have see it coming, it is the same for VFX today.

      • minoton says:

        Which foreign country gave subsidies to GM or Ford? The subsidies you mention were from the American government to American companies; American tax dollars spent (wisely or unwisely) on American interests. Canada (and other countries) seem incapable of doing this, spending their own tax payers money to build up local businesses and help local citizens. Rather, they would ship their tax payers’ hard earned money out of their country to corporate owned, American based studios. These are companies not hurting for money.
        If Kuala Lumpur can compete with ILM on terms of quality at a better price (without government kickbacks) then they should. THAT is capitalism. But the truth is, they can’t. Neither can India or China, or the work would be there already. If you want true capitalism, drop the subsidies and let’s compete. What do you have to fear?

      • vfx2be says:

        All the big VFX houses already have a branch in Singapore, India, China, etc…
        Remove subsidies, the only break to keep jobs in western countries, and next StarWars will be done in Kuala Lumpur.

        Without subsidies, you wouldn’t have any GM or Ford since a long time, and forget the idea of a single fruits grown by a local farmer.

        That is called capitalism, USA invented it. And if it’s not subsidies, it will be cheap labor.

  6. Brian Dzyak says:

    Let’s call them what they are. Bribes handed out on the other end of extortion. Studios blackmail all governments saying “Give us $X or we’ll take our ball and play somewhere else.” Then every government in the game ante’s up with the biggest BRIBE they can afford and/or get away with.

    These are “incentives” at all. It’s just Corporations using old Mob techniques to get more taxpayer money in their pockets.

  7. minoton says:

    Subsidies also promote sloppiness in filmmaking. Say a studio has a film that could conceivably be made for $40 million. They inflate the budget to $100 million and send the film to a subsidized location like Vancouver. Filming starts, the director really doesn’t know what he wants, so-so green screens are shot, endless circles of look development on effects until something is finally settled upon, endless composite tweaks and takes, until delivery. Maybe it ends up looking like the planned $40 million movie, maybe it looks like a little more, maybe less. It doesn’t matter because the studio gets their 60% $60 million dollar kickback for sending the work there courtesy of the Vancouver tax payer. Then the studio turns around and charges the same tax payer $10-$15 each to go see what their taxes paid for. If I was a tax payer in any of these subsidized locations, I’d be outraged and demand my local politicians account for this, and end this waste.

  8. Bubba Bean says:

    Sony voted against IATSE because the union people were clueless. After 3 days of selling their vision, one of the union heads thought the company he was talking to was “Sony Pictures Images”. H/T to Joanie Karnowski for yelling out from the cheap seats “IT’S IMAGEWORKS, YOU IDIOTS”. A unionized Imageworks would not have been better off fighting against foreign subsidies.

  9. Mike says:

    If everyone really worked in “Ayn Rand” fantasy land there wouldn’t be a problem with subsidies becuse they would not exist. The problem is they do.
    The Studios and the producers are following Ayn Rands ideas more than anyone else.
    Everyone knows how shady accounting is in Hollwood.
    What I’m interested in is where does the money the studios receive from tax breaks really end up?
    In the production or in someone’s pocket?
    Why don’t you do a article on that subject and see where it leads to?

    • Easily the best comment I have seen today. And it made me crack up for how perfectly blunt and honest it was. As for where the rebate check money goes, its usually built into the budget. Studio knows it will get $5 million rebate check, so they give $5 million to filmmakers upfront to get started (you get the idea). As for states where the credits are sold, the buyers are often kept confidential. Usually it’s banks, insurance companies, brokers and high-income residents who are using the programs to get a break on their own taxes owed by using credits they paid less than full face value for (80-95 cents on the $1).

  10. cv says:

    “Overseas, government tax incentives and subsidies have distorted the playing field, propping up companies that wouldn’t have been able to compete without government help and imposing strains on American firms whose governments don’t offer the same support.”

    I think the wording here is a little important. The subsidies don’t actually contribute directly to the foreign companies. The subsidies go right to the U.S. film studios. The studios pocket that money, none goes to the foreign companies, and they also have problems with pricing to meet studio demands.

    I guess, technically, foreign subsidies are propping up the companies because they are getting work they otherwise wouldn’t be getting.

  11. Bill says:

    The snarky tone of this piece – really, “Ayn Rand’s fantasy novels” – makes it unworthy of further discussion.

    There is no reason any company would not pursue equivalent quality for less – call it smart business, call it the Wal-Martization of the market, or call it what it is – capitalism.

    If the US VFX market wants to compete they need to offer quality that matches their higher price and studios need to seek that quality.

    So if say, ILM produces the best quality VFX, will audiences care? Will they notice? Will paying 2x the price for VFX result in 4x revenues at the box office?

    More to the point, if IATSE had unionized VFX houses, the race to offshore would still have happened, only even faster.

    The other issue with VFX houses is that when they’re not working on a feature, you have talented, salaried staff and computer systems sitting around with nothing to do; imagine if the studios had full filming staffs on the payroll all year without necessarily having anything for them to shoot. I suspect they will need to move to the studio model of all employees being hired on a contract basis for just a particular project, if they haven’t already.

    As the LA and US are pricing themselves out of the marketplace, VFX and production are moving off-shore. Simple economics.

    • tazzman says:

      Bill, you seem to be suggesting the vfx market is some idealized free market paradise free of government artificial candy like subsidies and tax breaks.

      It is not.

      So your comment
      “As the LA and US are pricing themselves out of the marketplace, VFX and production are moving off-shore. Simple economics”

      is pure fantasy. Subsidies and government corporate welfare do not = free market. It’s welfare capitalism.

    • kyoseki says:

      Your argument illustrates pretty well that you don’t actually understand the problem and you’re trying to stuff it into the usual “capitalism fixes everything” box.

      The reason that movie production can hire and fire below the line staff on a project by project basis is because those staff are unionized and so have portable healthcare and benefits, so explain again why unions are the problem there?

      You can’t have regular hire and fire practices if the staff have to run around trying to find gap healthcare coverage after every project – something that again Canada and the rest of the industrialized world handles by simply having universal healthcare.

      Competing with the developing world, like India & China is fair enough, where you’re making a cost vs quality trade off, but it’s not “simple economics” when a local government (BC, Quebec, Ontario) forces their taxpayers to cover 60% of an employee’s wages, the cost vs quality balance is artificially undermined – this means that even ILM would have to do the work at a loss to even compete with a fly by night start up being financed to a huge degree by the local government, a company that simply couldn’t operate if it weren’t having most of it’s bills paid for by taxpayers.

      How do monumental government subsidies fit with the Randian idea of a level playing field?

      If these were corporations instead of countries, they’d be slapped with antitrust prosecutions faster than you can blink.

      It’s not even like the subsidies are resulting in more jobs for Canadians, because the vast majority of the people doing the work up there are the same guys who were doing the work in Los Angeles or London a year ago, they’ve simply been forced to chase their jobs to whichever region is offering the best tax incentives this month.

    • virtualbri says:

      Way to miss the entire point of the article, Bill.

      LA and US aren’t pricing themselves out; as long as places like Vancouver, London, NZ and even various US states are willing to spend the government’s money at a loss pay the Hollywood studio’s costs of film making, the markets will chase corporate welfare to the exclusion of *anything* else.

      It’s all about corporate welfare.

      • Jim,

        The got the stat slightly wrong. You are way off. In BC, the rebate is actually 58%. The 30-35% rate you mention is the base PSTC. The VFX work gets that and DAVE (not to mention the federal credit). The credits can be stacked.

        And since labor costs are 99.9% of VFX costs, $1 million spent in BC for VFX means a check to the production for $580,000. Yes, only “qualified labor”. But you do NOT need to be a Canadian citizen. You only have to reside their (6 months..it may even be 3).

        And yes, it is literally free money from the taxpayers. BCFM literally cuts a check and hands it out.

        As for people in the US screaming about subsidies, the loudest screaming in 2013 actually came from BC crying about subsidies in Ontario and NZ and Australia and the US. But when BC is pointing the finger at Ontario the most because of subsidies, please do not lecture us on competing in the global economy. Canada is at war with itself.

      • JimBrooks says:

        As someone else here said, the VFX industry has become so obsessed with the short-term issue of “work going to Vancouver”, that they’re missing the point. Stop picking on the flavor of the month because some of the major studios have expanded to Vancouver in the last few years. First of all, your facts are wrong. Studios don’t automatically get 60% back on their costs there, it’s closer to 30-35%. Secondly, it’s only for “qualified labor” which means you have to have Canadian residents, citizens, or someone who has established roots in Canada. So it’s not “free money” that taxpayers are giving out. It’s a subsidy that Taxpayers CHOOSE to pay to help an industry they want to fund that their own CITIZENS are working in. Just like New Zealand, Australia, London, and any other free market economy can do if they so choose. It’s SO short-sighted to keep picking on Canada because LA based artists are pissed off that some shows are being done there. LOTS more are being done in New Zealand and London folks. And ANYONE who is from the US and rails on about subsidies and import duties is either the biggest hypocrite alive or completely ignorant of the decades of subsidies Americans have placed on whatever industry they wanted to prop up. Don’t like it when the shoe is on the other foot huh?

        Secondly, and more importantly, as far fetched as it may be, IF you were able to drive away or tax subsidides the work is just going to India and China. It’s like the 5 year old that didn’t get his toy so he’s going to make it so that no one gets to play. At least now you have English-speaking, 1st world countries that you CAN still make a living in as a VFX Artist if you choose to. If the LA based artists have their way the only places you’ll be able to work are Singapore, India, and China, for 1/5 of your wages so you can train up their workforce. That’s what’s happening in the next 5-10 years. So quit focusing on work going to Canada and New Zealand and start competing with the GLOBAL economy or you’ve already lost the war.

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