Hard News by Russell Brown

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Hard News: Movie Disaster

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  • Russell Brown, in reply to Sacha,

    the big boys got away with not honouring that contracted commitment

    That disgusts me, Bruce.

    It's worth noting that Jackson himself had to go to court to get what he was due -- and he was reckoned to be risking his future business in so doing. It's a bloody dodgy business.

    But it does bear noting that the large majority of the people who live off these productions have no expectations of residuals. The position for actors is quite different to that of skilled tradespeople.

    Auckland • Since Nov 2006 • 22756 posts Report Reply

  • Kumara Republic, in reply to Sacha,

    And it defies logic that said "Dumb & Mad" investors will scoop up shares in ex-state monopolies like power co's - the NZX seems to be the most dependent on them compared with other stock exchanges - despite advance warning of electricity market shake-ups.

    Then again, it's not so illogical when one realises that Dumb & Mad Investors are likely the same people who haven't learned from 1987.

    The southernmost capital … • Since Nov 2006 • 5420 posts Report Reply

  • Simon Bennett,

    If we say to International Producer X: "If you spend $100 million dollars in NZ making your movie, we'll give you $30 million back", that's still a net gain of $70million that we wouldn't have otherwise.

    The argument that we should be developing and profiting from our own IP is noble and all, but the industry has been doing this for decades. It's not an either/or situation. Whale Rider is an example of this.

    In a way, the existence of international shows such as Hercules, Xena, Power Rangers, Spartacus and Legend of the Seeker, has allowed an infrastructure and pool of highly skilled individuals to devote some of their downtime to supporting the far more modestly budgeted NZ shows such as Outrageous Fortune.

    It's an ecosystem, a cottage industry with extremely high value economically and culturally. With NZ no longer being competitive as a location for international screen projects we risk losing a priceless asset in our skill base and associated infrastructure.

    Auckland • Since Nov 2006 • 170 posts Report Reply

  • Rich of Observationz, in reply to Simon Bennett,

    If you spend $100 million dollars in NZ making your movie, we'll give you $30 million back

    No more than if we gave 100 foreigners a subsidy to buy million dollar villas in Ponsonby. That'd be $100 million in "magic" foreign money.

    The money isn't a gift. The studios get value for it - $100 million of movie making work for $70 million.

    The economic value of the investment isn't the whole investment - it's the difference in production of the workforce with and without the investment, which is roughly the difference between what they would earn working on foreign blockbuster movies and doing something else. Say a set builder makes $40 grand a year on the Hobbit (ha ha), and could have made $35 a year on a building site. Then that's an economic input of $5k, not $40k. Multiply that out, and you get the real number.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Rich of Observationz,

    $36 million over seven years

    That's the most convincing argument Russell - it's only $36 million, it keeps lots of people occupied and it doesn't fuck the planet up that much. So as corporate welfare goes, it has that advantage over Solid Energy's somewhat larger indents to employ somewhat fewer people.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Stephen Knightly, in reply to Rich of Observationz,

    No more than if we gave 100 foreigners a subsidy to buy million dollar villas in Ponsonby. That’d be $100 million in “magic” foreign money.

    Apparently foreign money is magic. The government has a goal of lifting the ratio of exports to GDP from the current 30% to 40% by 2025. The export screen sector has been playing its part and are now pointing out that they won't be able to much more.

    An even better idea, investing in IP, would be like giving the $30m to New Zealanders to create something worth $70m with long-term payoffs. Heck, we even could partner with the foreigners if it de-risks the project or guarantees distribution.

    Auckland • Since Nov 2006 • 25 posts Report Reply

  • Simon Bennett, in reply to Rich of Observationz,

    I'm not entirely sure your analogy holds up. Your 100 villas are NZ assets that foreigners are being subsidised to buy. In the film industry we are talking about the capital (the project) being imported, and NZ labour and skill adding value.

    Auckland • Since Nov 2006 • 170 posts Report Reply

  • Russell Brown, in reply to Rich of Observationz,

    That’s the most convincing argument Russell – it’s only $36 million, it keeps lots of people occupied and it doesn’t fuck the planet up that much. So as corporate welfare goes, it has that advantage over Solid Energy’s somewhat larger indents to employ somewhat fewer people.

    You're not really discussing this in good faith. It's evident my point was that the net -$36 million over seven years has an impact that could only be replicated by multiples of the direct screen funding that you're more philosophically comfortable with. Without looking it up, I think NZ On Air's screen budget over that time would have been in excess of half a billion.

    Auckland • Since Nov 2006 • 22756 posts Report Reply

  • Russell Brown, in reply to Rich of Observationz,

    No more than if we gave 100 foreigners a subsidy to buy million dollar villas in Ponsonby. That’d be $100 million in “magic” foreign money.

    That’s a very poor analogy. Feel free to calculate for me how much tax the hundred lucky vendors would pay on their capital gains. Now, how much tax would be paid on the 50% of of screen production costs that would go to labour. How much of the money going to the house-sellers would be spent on productive capital, vs the small equipment-hire vendors? What would be the overall benefit to creative industries capacity for the house sales vs the foreign screen production?

    Auckland • Since Nov 2006 • 22756 posts Report Reply

  • Rich Lock, in reply to Rich of Observationz,

    What about that jetpack thing?

    Ductedfanpack thing. #engineeringpedant

    I don't think it holds up as a good example to support your argument. I don't know the specifics, but it appears to me that that company runs on, comparatively, the smell of an oily rag: 3-4 guys working out of a shed out in the wops. Even so, I'm extremely impressed they managed to get it to this stage. They must've run themselves ragged to get support and funding. They're an exception, not the rule - you don't tend to hear about the ones that fail because they just fade away as the money runs out.

    back in the mother countr… • Since Feb 2007 • 2728 posts Report Reply

  • Craig Ranapia, in reply to Simon Bennett,

    If we say to International Producer X: “If you spend $100 million dollars in NZ making your movie, we’ll give you $30 million back”, that’s still a net gain of $70million that we wouldn’t have otherwise.

    And that's fine, as far as it goes Simon. But all I'm suggesting is that we be upfront about the opportunity costs, because do we really want to try outbidding South Carolina for the next Iron Man 3?

    First, we pay cash! South Carolina sends you a check at the end of production. No bartering or fiddling around with credits or filing tax returns.

    Oy... With all due respect, I wouldn't be quite so free with the chequebook around people Peter Jackson had to sue to get just to get an independent auditor in the building to guarantee compliance with the terms of his contract.

    North Shore, Auckland • Since Nov 2006 • 12370 posts Report Reply

  • BenWilson, in reply to Rich Lock,

    They’re an exception, not the rule – you don’t tend to hear about the ones that fail because they just fade away as the money runs out.

    Also, if they do succeed, it's going to be because someone like Lockheed buys them. Good reward for their hard work, but will probably have zero impact on the local economy. I'd be surprised if they can stay in NZ at that point.

    Auckland • Since Nov 2006 • 10641 posts Report Reply

  • Phil Gregory, in reply to Rich of Observationz,

    But Rich, that's exactly the beauty of the international production, unlike the 100 million worth of villas, all he owns when he leaves is a hard drive full of movie, good or bad and at no risk to us.
    A better analogy would be Johnny Foreigner coming over doing up 100 million worth of villas, paying us to do the work and leaving with some photographs of them.
    And next week another foreigner come over and pays us to tart up them up all over again.
    I think the economic term for this is " money for old rope".

    Auckland • Since Oct 2013 • 10 posts Report Reply

  • Phil Gregory,

    I've worked on some "villas" in Ponsonby for some foreigners and thought " Jeeze I wouldn't put the bathroom there, and your not really going to paint it that colour!"
    But he's paying in green backs so what the hell, and it means I can go and work on a cottage in Glen Eden for mates rates. We all win.

    Auckland • Since Oct 2013 • 10 posts Report Reply

  • Ian Dalziel,

    So now we are 'villa-fying' Auckland and the Government?
    ;- )

    Christchurch • Since Dec 2006 • 7892 posts Report Reply

  • Tom Semmens,

    Let’s be real – the movie business is asking the government to pick winners, one of those winners being them – which is fine as far as I am concerned, in this country we have no tradition of banks funding venture capitalism and chronic lack of captial is a major problem for NZ business that has always be solved by the state.

    But I have read nothing here that persuades me that thirty million dollars of subsidies and tax breaks to a foreign owned movie making business is a better use of taxpayers money than giving thirty million dollars in tax breaks and subsidies to a local manufacturing company that actually makes and exports things from here and that is screaming for a break. And a local manufacturing company, once it gets going, almost certainly won’t come back year after year asking for a bigger and bigger taxpayer handout.

    Sevilla, Espana • Since Nov 2006 • 2213 posts Report Reply

  • Rich of Observationz, in reply to Russell Brown,

    You're not really discussing this in good faith.

    Yes I am. I'm actually convinced that if we must have corporate welfare, it ought to go to companies that at least do minimal harm.

    how much tax would be paid on the 50% of of screen production costs that would go to labour

    For employees permanently resident in NZ, that's 25% or so of the labour cost *less* the amount those people would have earned in a different, unsubsidized industry.

    For temporary overseas residents, it's their tax *less* the cost of services they consume while here. If Stephen Fry paid NZ tax on his fees, then that would be quite a lot. Bet he doesn't.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Russell Brown, in reply to Tom Semmens,

    But I have read nothing here that persuades me that thirty million dollars of subsidies and tax breaks to a foreign owned movie making business is a better use of taxpayers money than giving thirty million dollars in tax breaks and subsidies to a local manufacturing company that actually makes and exports things from here and that is screaming for a break.

    I guess the difference would be this: "Between 2004 and 2011, around 35 major productions have received a grant, and these productions have spent more than $1.9 billion in qualifying expenditure."

    It's rebating part of two billion dollars you wouldn't otherwise have had spent in the economy.

    And a local manufacturing company, once it gets going, almost certainly won’t come back year after year asking for a bigger and bigger taxpayer handout.

    And therein lies the rub, certainly. But if you look at it as the net cost of maintaining a skill and technical base, it's still a lot less than the necessary direct funding would cost you.

    Auckland • Since Nov 2006 • 22756 posts Report Reply

  • Rob Stowell, in reply to Rich of Observationz,

    For employees permanently resident in NZ, that’s 25% or so of the labour cost *less* the amount those people would have earned in a different, unsubsidized industry.

    Minus whatever they can deduct for 'legitimate expenses' ...
    PAYE was already rare in the industry, even before Mr Jackson got the govt to change legislate that almost everyone working on such projects was a contractor, regardless of how they worked.

    Whakaraupo • Since Nov 2006 • 2091 posts Report Reply

  • Rob Stowell, in reply to Russell Brown,

    the net cost of maintaining a skill and technical base,

    Hard to put this in cash terms, certainly. On some level it's 'cultural capital'.
    But it's clearly far more 'cultural capital' than local production can support. That's the rub. There were skilled folk working on local production before the current wave of subsidies. While local producers do benefit from the surplus- the breadth of skills, and the gear- on occasion, it's wrong to imply local production wouldn't exist without it- or even that it'd be significantly impaired.

    Whakaraupo • Since Nov 2006 • 2091 posts Report Reply

  • Tom Semmens,

    And therein lies the rub, certainly. But if you look at it as the net cost of maintaining a skill and technical base, it’s still a lot less than the necessary direct funding would cost you.

    But isn't it time we grew up and started looking at using scarce government seeding capital over generational time spans to build sources of income that don't rely on a boom/bust cycle that opportunistic individuals can exploit?

    Someone up the thread talked about "electing a government with 1950s attitudes" which is true, but that government attitude reflects the wider feckless Kiwi way of doing business. We are forever looking for get rich quick schemes, the next big thing to quick wealth. A yellow gold rush. Exploiting the land beyond it's carrying capacity for white gold. Drill a hole and hope for an oil bonanza without a blow out. LOTR? Cash in on the rush of work, buy a van, hire some people. Then demand government subsidies when the rush wanes. Private profit in the good times, taxpayer subsidies in the bad. Not for us the slow accumulation of capital and plant over decades, not for us a well paid job working in factories making things the world wants.

    Kiwi entrepreneurialism is defined as work hard, and build up your own little business from scratch with several hundred grands worth of capital equipment (and constant cash flow issues because you've geared up to buy investment property). Then expect that the social contract is that that business and the capital appreciation on your home will allow you to sell up and retire early to enjoy some rental income from investment properties and the beach, boat and BMW.

    Maybe the film and TV business can become something that will, eventually, stand on its own two feet and have a huge investment base and make us a fortune in I.P. But that isn't the argument I am seeing here. All I can see is people begging the government to invest not to create something permanent, but only to avoid them being left behind in a race to the bottom.

    Sevilla, Espana • Since Nov 2006 • 2213 posts Report Reply

  • Russell Brown, in reply to Rob Stowell,

    But it’s clearly far more ‘cultural capital’ than local production can support. That’s the rub. There were skilled folk working on local production before the current wave of subsidies. While local producers do benefit from the surplus- the breadth of skills, and the gear- on occasion, it’s wrong to imply local production wouldn’t exist without it- or even that it’d be significantly impaired.

    It's not as if they were working in a neutral environment before the LBSPG was introduced in 2003. The grants scheme replaced various tax breaks dating back to the early 1980s -- when it enabled a bunch of mostly shitty one-off feature films. Pacific Renaissance and then Jackson used the tax breaks in the 1990s, but the system had always been far too easy to game.

    Philosophically, you could just dispense with the LBSPG et al altogether, but that would leave you without any screen production incentives for the first time in 30 years, at a time when NZ On Air's funding has been frozen for the last six years. The Film Commission's input to what has been a multi-billion dollar sector has been about $145 million in the last 20 years. I'd be concerned if we were to find ourselves talking about how things ought to be while an entire sector went off a cliff.

    Auckland • Since Nov 2006 • 22756 posts Report Reply

  • Chris Waugh,

    I think this was the thread in which the game industry was mentioned as an example. Here's an example of how well it's going for them.

    Wellington • Since Jan 2007 • 2401 posts Report Reply

  • Kyle Matthews,

    So, just from an outside perspective, y’all are talking about subsidising exports, right? I mean, we’re exporting the production of local labour here, so that’s how I’d categorise it. Selling the production of films to foreigners.

    I wouldn't say it's subsidising exports. Because if the hobbit was never released and never sold any copies, we'd still get our money. It's subsidising investment.

    I fail to see how anyone could favour the latter proposition over the former for ideological reasons.

    I don't have ideological concerns about subsidies. I have practical concerns about subsidies but recognise that we're in a crappy international competitive subsidy market.

    My question is more about why we're subsidising movies/TV production rather than anything else. Why are we picking the winner of making movies over the winner of making computer games, software, phones, solar panels, planes, boats, cars, pogo sticks, music, custard squares or fancy children's toys.

    Particularly since our subsidy has a fixed return - for every dollar we put in we get x times the amount of investment. If we were at the IP end of the scale in some way, we might have more risk, but we'd also share the reward. For producing some very profitable movies, we've watched the vast majority of the profit flow to companies who then look to another country with a bigger subsidy next time around.

    It seems like a very tempermental industry in which the ability of the country to maintain a fairly level amount of production to keep everyone working at a reasonable level is difficult, and which every other country is in a race to the bottom of subsidies.

    Say a set builder makes $40 grand a year on the Hobbit (ha ha), and could have made $35 a year on a building site. Then that’s an economic input of $5k, not $40k. Multiply that out, and you get the real number.

    Only if you assume that every person who has a job in the film industry, once that industry collapses, can get another job for slightly less pay without displacing another person. That's clearly not the case for everyone - if the industry disappeared from NZ, we'd have more unemployed and more businesses collapsing or leaving NZ as a result.

    Since Nov 2006 • 6243 posts Report Reply

  • Russell Brown, in reply to Chris Waugh,

    I think this was the thread in which the game industry was mentioned as an example. Here’s an example of how well it’s going for them.

    Which is awesome. And that $36 million amounts to slightly over 1% of what the screen production industry was last year. There are about 450 game developers in NZ. The screen production workforce is nearer 40,000.

    This is absolutely not to minimise what the local games industry is doing, or the leadership provided by people like Stephen. But it's ambitious, to put it mildly, to talk about the two in the same breath.

    Auckland • Since Nov 2006 • 22756 posts Report Reply

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