MPAA legal gaffe gives hope to struggling U.S. industry
Midday drizzle provided some relief from California’s parching drought but it was the Golden State’s withering visual effects industry in focus as visual effects artists took to the streets of Hollywood Sunday.
It was the second consecutive year the green-clad protestors massed at Hollywood and Vine hours before the Oscars to draw attention to the ills afflicting their business. This year’s head count was higher than last year at more than 540.
But unlike last year, this time they had a concrete goal: to call attention to the push to use existing trade agreements to level the playing field for American visual effects suppliers.
The protestors also have some for optimism thanks to what appears to be a legal gaffe by the MPAA that finds the majors’ lobbying arm bolstering a key part of the artists’ argument.
The march, organized by the Association of Digital Artists, Professionals and Technicians (A.D.A.P.T.), began at 1:00 p.m. and drew 510 protestors before it ended, surpassing last year’s total even though many vfx workers have since emigrated to keep their jobs.
Protestors included both vfx pros and their supporters from around the industry.
Nicholas Zimmerman, a filmmaker who does not work in vfx, took photos and lent his support. “I think we need to keep more production in L.A.,” said Zimmerman. “If we’re left with anything, it’s pretty much financing headquartered here in L.A.”
“I don’t think the visual effects industry gets the respect it deserves,” said Zimmerman, citing the Oscarcast bringing up music on last year’s vfx acceptance speech sooner than any other category — during winner Bill Westenhofer’s plea about the state of his company and the business in general.
The protest focused on the effort to impose taxes on visual effects that are imported into the U.S. from companies that receive subsidies from their governments.
Under World Trade Organization rules, a member government must impose “countervailing duties” (CVDs) when it is found that foreign governments have subsidized their own producers and caused injury, or threaten to injure, domestic producers. Such injury can include loss of jobs.
Lay engaged a law firm to pursue that remedy, and that effort has become a focus of U.S. artists.
On its face, the situation of the U.S. vfx industry seems a perfect fit for triggering CVDs. The U.K., Canada, New Zealand and other countries have contributed massive subsidies to lure vfx work to its companies, and U.S. vfx studios have collapsed as a result, leading to migration of vfx jobs out of the country.
However, the WTO rules have never been applied to digital products, so getting such protection for digital images that are imported into the U.S. by Internet would require a significant precedent.
Frank Muller, a swiss native who has worked in Los Angeles for 11 years, was one of several marchers who brought his children. “I’ve felt for a long time that subsidies are hurting our industry,” said Muller “I don’t know if this will work but to get a little bit more of an even playing field would help us.”
Muller said he has been asked by Sony Imageworks to move to Vancouver, but doesn’t know yet if he will do so.
Also out with his family was Daman Milman, who works at Digital Domain. Milman said DD has already moved all shot production to Vancouver, and Milman says employees have been told “subsidies are here to stay, there’s no fighting it and this is the new normal.”
“It’s hard to compete with 60% subsidies,” said Milman. I don’t see California going down that road.”
The vfx artists are walking a lonely road, since there seem to be no large companies with deep pockets and political influence on their side.
The U.S. vfx industry the artists are trying to save is already decimated. Digital Domain and Rhythm & Hues both have been through bankruptcy; DD is now Chinese-owned and R&H, owned by Prana Studios, is still struggling to re-establish itself.
Two other major U.S. vfx studios, Industrial Light & Magic and Sony Pictures Imageworks, are owned by major studios and therefore unlikely to lend their support to the effort.
However, as first reported by Pando Daily, the MPAA, the major studios’ own lobbying arm, seems to have inadvertently backed the vfx artists’ fundamental argument.
In a case involving 3D printing, MPAA has filed a brief with the U.S. International Trade Commission arguing that electronic transmissions are “articles” covered by the Tariff Act of 1930. The filing specifically responds to Google’s arguments the other way.
“To effectuate Congressional intent to protect domestic industries, the Commission can and must construe the term ‘articles’ to include imported electronic transmissions…” wrote the MPAA filing, which goes on to cite “the ITC, U.S. Customs and Border Protection, the HTSUS and the U.S. Court of International Trade” as bodies that have “consistently interpreted” the word “articles” to include electronic transmissions.
The filing concludes “For the foregoing reasons, the Commission should construe the term ‘articles’ … to give the ITC broad jurisdiction over unfair acts in international trade including, but not limited to, electronic transmissions.” It is signed by MPAA senior VP and associate general counsel Dan Robbins.
“I don’t think they knew that duties could be applied to these imports,” Lay told Variety. “But the same laws that they are using for anti-piracy enforcement are used for anti-subsidy enforcement.”
Dave Rand, one of the leaders of the vfx artists movement, told Variety that when he heard of the filing, “my first reaction was ‘that’s the third hurdle we needed to leap over,'” after proving the American vfx industry has suffered damage, and that 25% or more of American vfx artists and companies feel this is a valid issue.
Perhaps chagrinned that its filing puts it in the position of supporting new taxes on imported visual effects that could deprive its member companies of their beloved subsidies, the MPAA issued a statement arguing that visual effects are services, not “goods.”
That puts the MPAA in the position of arguing that motion pictures are “articles” or “goods” covered by trade laws and treaties when they are released, but digital images created by artists and animators for inclusion in those motion pictures are not.
Lay also says Google’s argument is weak, because it asserts that the Tariff Act of 1930 doesn’t apply to electronic transmissions because they didn’t exist at the time.
Last year’s protest by visual effects artists was hastily arranged after Rhythm & Hues Studios declared bankruptcy even as it seemed poised to win an Academy Award for its work on “Life of Pi.” The 2013 protest had nothing specific to support, and covered a wide range of issues.
“Life of Pi” did indeed win the Oscar, but the vfx presentation was mishandled so badly the worldwide vfx community was left infuriated. (The Academy has indicated the category will get better treatment in 2014.)
“Life After Pi,” a short documentary about the plight of the vfx industry and the collapse of Rhythm & Hues in general, was released online last week. One part of the doc lays out the role of foreign subsidies in the decline of the American visual effects industry.
A.D.A.P.T.’s push for CVDs may be the only hope American visual effects industry has, at least for the foreseeable future, and the MPAA’s inadvertent help may be a crucial boost to that push.
But the outlook among the protestors was as gloomy as the skies.
Asked whether he thought CVDs might reverse the migration of vfx work abroad, Milman said simply “If it works.”