Hard News by Russell Brown

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Hard News: Movie Disaster

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  • Russell Brown, in reply to Kyle Matthews,

    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.

    Fair question. But as I noted earlier, by far our biggest industrial subsidy lies in the way we’re allowing the dairy industry to destroy our natural environment. Then, I’m guessing, the decades of cheap power, massive emissions freebie and, most recently, the $30 million in cash we’ve handed to Rio Tinto.

    Compared to those, the LBSPG looks pretty good.

    Auckland • Since Nov 2006 • 22754 posts Report Reply

  • Chris Waugh, in reply to Russell Brown,

    But it’s ambitious, to put it mildly, to talk about the two in the same breath.

    Oh, of course. I was just thinking "Hey, that's cool. Pity the screen production industry isn't facing the same difficulties".

    But I think you and several others here and in similar threads have made a pretty strong case for government intervention in the form of subsidies and rebates and public service broadcasting. Pity the government can't see past its own cow shit.

    Wellington • Since Jan 2007 • 2401 posts Report Reply

  • SteveH, in reply to Rich of Observationz,

    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.

    That's only true if the $35k per year job is also paid by foreign investment.

    Since Sep 2009 • 444 posts Report Reply

  • bmk, in reply to SteveH,

    That's only true if the $35k per year job is also paid by foreign investment.

    What about if the $35k is producing an income-substitution good/service?

    This is the problem I have with the sole-focus being on exports. Goods or services that substitute an import are just as good in that they then free up the foreign currency to purchase other imports in the same way as exports bring foreign currency in.

    A manufacturer whose goods are solely sold domestically can be just as valuable as an exporter if it's the case that if they weren't to exist that all those goods would be imported.

    Since Jun 2010 • 327 posts Report Reply

  • SteveH, in reply to bmk,

    What about if the $35k is producing an income-substitution good/service?

    What would the import-substitution good be for a set builder? Assuming there is one, the net result would be a slightly smaller economy with lower imports and exports, and slightly increased unemployment right?

    Since Sep 2009 • 444 posts Report Reply

  • bmk, in reply to SteveH,

    What would the import-substitution good be for a set builder? Assuming there is one, the net result would be a slightly smaller economy with lower imports and exports, and slightly increased unemployment right?

    Not sure - working off the premise that the 40k worker has a 35k job. I didn't come up with the example but odds are they would get another job.

    Following the assumption there would be lower imports and exports but shouldn't be slightly increased unemployment. You can have an economy with a high percentage of exports and yet still have high unemployment (imagine oil for example). Or you can have an economy that exports little, imports little and has high employment as nearly everything gets produced locally.

    I'm all in favour of trade. I just don't think that the film industry should get special treatment because it brings in export dollars. An industry that produces a good/service we would otherwise import is just as valuable.

    Coming back to the main point in the post, I just can't see it as good policy to prop up the industry. If we do it'll only need another prop in awhile and as others have mentioned it will just be a race to the bottom with every country out-bidding each other and the film studios winning.

    If we want to do it on cultural grounds then that's fine, I just don't think the economic grounds add up.

    Since Jun 2010 • 327 posts Report Reply

  • Russell Brown, in reply to bmk,

    Not sure – working off the premise that the 40k worker has a 35k job. I didn’t come up with the example but odds are they would get another job.

    We should probably debunk the idea that a set0builder would work for a year on a LOTR-type production and only earn $40,000. They're skilled workers and I would think the more accurate number would be two or three times that, given the shifts to be worked. An unskilled labouring job at $35,000 would be a significant step down.

    Auckland • Since Nov 2006 • 22754 posts Report Reply

  • Sacha, in reply to Tom Semmens,

    a well paid job working in factories

    that is China's future

    Ak • Since May 2008 • 19686 posts Report Reply

  • Russell Brown, in reply to Sacha,

    a well paid job working in factories

    that is China’s future

    Yes. The idea of manufacturing as a substitute for screen production is mad, actually.

    Auckland • Since Nov 2006 • 22754 posts Report Reply

  • Chris Waugh, in reply to Sacha,

    that is China's future

    Maybe.

    And Russell:

    The idea of manufacturing as a substitute for screen production is mad, actually.

    No argument from me. China is resource rich. And people rich. And peopleresource rich, although not especially rich in resources to people. In any case, a mad comparison. Whatever, an absolutely mad comparison, as you say. China can do any kind of manufacturing, NZ needs to focus on the niches it can do better than the rest. Screen production would seem to be one of those.

    Wellington • Since Jan 2007 • 2401 posts Report Reply

  • Kumara Republic,

    Is NZ unique in having to endure currency volatility in comparison with other nations competing for Hollywood money? Possibly not, given the rumblings the British have traditionally had about the over-strong pound sterling. Britain also has its own sizeable tradition of film & TV IP.

    The southernmost capital … • Since Nov 2006 • 5419 posts Report Reply

  • Sacha,

    our currency is one of the 10 most traded in the world. another lovely byproduct of our enthusiastic neoliberalism.

    Ak • Since May 2008 • 19686 posts Report Reply

  • BenWilson,

    There might come a day when actually we've made enough stuff. This is the hardest thing for me to get my head around in economics. It should be a good day. But the closer we get to it, the harder it seems to suck. As a species, we're all about relative wealth, not absolute. This means we inflict a rat race on ourselves, a ten-yard-fight, a struggle for survival, even if we provided for our survival in a purely technical sense a long time ago.

    Strange days.

    I think we should fund movies if it's a thing we want to do, regardless of the economics. If the very work itself is something that we, as a people, want to be doing more of, then lets do it. If market efficiency really is true, then the whole business of picking winners or not picking winners is all academic. No one has better information, all paths can make profit or take loss. Huge gambles can make fortunes or lose shirts. Conservative investment has opportunity cost that can be so significant that inflation eats the investment. The world economy could sink or swim without NZ having the slightest power to change the course. To me, the question is: Do we want to do it making shows, or making custard squares? Each to their own, privately, and the public purse should go where the public wants it to go.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • Rich Lock, in reply to Kumara Republic,

    Britain also has its own sizeable tradition of film & TV IP.

    Britain also have a sizable tradition of using film making for tax rorts. See here for an explanation, and here and here for examples.

    I’ve read probably half-a-dozen news articles on this over the last 10-15 years. It’s a perennial issue that the UK papers occasionally get their teeth into when there’s no royal weddings or similar to distract them. Although there’s been some tightening up, it’s still possible with the current UK rules to bang out a total stinker on the cheap, with no expectation of any box office, and yet make a considerable profit at the expense of the taxpayer.

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

  • SteveH, in reply to bmk,

    Not sure – working off the premise that the 40k worker has a 35k job. I didn’t come up with the example but odds are they would get another job.

    Following the assumption there would be lower imports and exports but shouldn’t be slightly increased unemployment.

    The film/TV jobs are (partly) funded by overseas investment. You're suggesting it won't hurt balance of payments if it's replaced by import-substitution work, but if that's funded by local investment then it must be at cost of that money going to other local workers. That's where the increase in unemployment would occur.

    Coming back to the main point in the post, I just can’t see it as good policy to prop up the industry. If we do it’ll only need another prop in awhile and as others have mentioned it will just be a race to the bottom with every country out-bidding each other and the film studios winning.

    Having to prop up the industry periodically isn't necessarily a bad thing if the overall benefit outweighs the cost of doing so.

    Since Sep 2009 • 444 posts Report Reply

  • bmk, in reply to SteveH,

    The film/TV jobs are (partly) funded by overseas investment. You're suggesting it won't hurt balance of payments if it's replaced by import-substitution work, but if that's funded by local investment then it must be at cost of that money going to other local workers. That's where the increase in unemployment would occur.

    Possibly but also possibly not. The investment is likely to come from banks which largely source their capital off-shore.

    Having to prop up the industry periodically isn't necessarily a bad thing if the overall benefit outweighs the cost of doing so.

    If the evidence of the benefit outweighing the cost is clear I'd accept that. At present the evidence is far from clear at best.

    Since Jun 2010 • 327 posts Report Reply

  • Bart Janssen, in reply to Russell Brown,

    industrial subsidy

    Industrial subsidies in the US have had an awful record. Cities and towns have paid enormous amounts to attract businesses to their location only to have the business move on as soon as the subsidy runs out. It doesn't seem to matter what kind of business it is either. With that history I'd want to be pretty careful about what kinds of subsidies went into the industry and I'd want to know which companies can be trusted to stay on after the subsidy so we don't make mistakes more than once - it is my money after all.

    In that sense I really don't like the idea of subsidies at all. But the point is well made that this govt loves giving subsidies out to men in suits so it's kind of difficult to understand why the film industry should be different in terms of deserving a subsidy.

    But to me there does seem to be one difference about the film industry that makes it a valid target for help from the taxpayer. It does seem to be an industry of highs and lows. If the capability is allowed to disappear during a low there is no capacity to take advantage of a peak in demand.

    It's the same logic that argues we help farmers during a drought.

    Auckland • Since Nov 2006 • 4451 posts Report Reply

  • Kumara Republic, in reply to Bart Janssen,

    Industrial subsidies in the US have had an awful record. Cities and towns have paid enormous amounts to attract businesses to their location only to have the business move on as soon as the subsidy runs out.

    Sounds like the company towns of olden times. The infamous British Leyland conglomerate is also a classic example of good money being thrown after bad, though it did have unique issues that were a bit different from the Detroit Big 3.

    The southernmost capital … • Since Nov 2006 • 5419 posts Report Reply

  • BenWilson, in reply to Bart Janssen,

    While that does make it less of a good idea in the US, I think that their federal system might make that easier to pull of than it would be here. Our cities and towns aren’t doing the subsidization, it’s the central government, and there is no state government in the mix. Only multinationals could slip in and out of here with the kind of ease that you could just changes states as a US based company. Furthermore, the waters are even more muddied in the US by having a convenient low wage economy just over the southern border, to which the threat of moving comes at a very small cost to those companies.

    ETA: I've just realized this is actually arguing against subsidizing films produced by the multinationals. Definitely they can relocate easily, and threatened exactly that over the Hobbit. Again, I come back to thinking: The reason to subsidize film isn't really to make a huge profit. It's the spin-off goods, and the simple desire of the country to be involved in this industry, that are the main arguments for it. It's something that NZers are mostly proud of, that we've built a large technical industry over the last few decades, and many hugely popular international productions are made here.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • Rich of Observationz,

    Our cities and towns aren’t doing the subsidization

    Which isn't to say that they wouldn't, almost all NZ mayoral candidates giving prominence in their platform to plans to run a half-arsed, beggar-my-neigbour "industrial policy". Fortunately it isn't a core council function and they have no budget.

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

  • Bart Janssen, in reply to BenWilson,

    Our cities and towns aren’t doing the subsidization

    Our country is smaller economically than many US cities.

    Auckland • Since Nov 2006 • 4451 posts Report Reply

  • Russell Brown, in reply to Bart Janssen,

    But to me there does seem to be one difference about the film industry that makes it a valid target for help from the taxpayer. It does seem to be an industry of highs and lows. If the capability is allowed to disappear during a low there is no capacity to take advantage of a peak in demand.

    It’s the same logic that argues we help farmers during a drought.

    I’m past the point of repeating myself now, but, yeah, I’m not comfortable with the idea of subsidies in general – the national benefit in our decades of largess towards Rio Tinto/Alcan is bloody marginal – but I can see merit in moving here, given that it’s a developed, skilled sector pretty much going over a cliff inside a year. And saying how it would be better if we developed our own IP doesn’t stop that happening.

    Then again, this isn’t the only export industry being killed by the exchange rate.

    Auckland • Since Nov 2006 • 22754 posts Report Reply

  • BenWilson, in reply to Bart Janssen,

    Our country is smaller economically than many US cities.

    Yes, 20 or so. Population wise, it's only smaller than New York, though, and Auckland is big enough to be one of the top 8 largest US cities, pipping San Diego at the post.

    But my point is that within NZ, there aren't multiple sources that can be set up to compete with each other to subsidize industries, so they can't jump around with anywhere near the ease they could in the US, especially compared to California. But mind you, that in itself is a barrier to setting up for any such industry, and the subsidy would need to be far lower to attract one.

    Auckland • Since Nov 2006 • 10633 posts Report Reply

  • SteveH, in reply to BenWilson,

    Population wise, it’s only smaller than New York, though, and Auckland is big enough to be one of the top 8 largest US cities, pipping San Diego at the post.

    Only if you use the US city definitions which are particularly narrow. Much as ours where when Auckland's population was listed as 350k. If you use the more relevant metropolitan area populations NZ would rank 13th between Detroit and Seattle. Auckland would rank about 39th with 1.5 million people in the metropolitan area.

    Since Sep 2009 • 444 posts Report Reply

  • Kyle Matthews,

    Compared to those, the LBSPG looks pretty good.

    I guess I'd like to see that comparison made. If the government feels it has X million dollars that it wants to throw into subsidising international investment, then it'd be nice to see that as a competitive exercise in which a national industry group from films/tv competes with Tindo and anyone else who wants to put a suggestion forward.

    Right now they're political footballs and some industries have strong calls to receive ongoing subsidies because they're been receiving them historically so if they stop receiving them a bunch of people are going to lose their jobs.

    Which is a valid argument, but it'd be nice to know if the subsidies are good in themselves, and at which point we are no longer happy to keep on subsidising an industry just because we've subsidised it until now.

    After all farming seems to have survived OK losing (financial) subsidies.

    Since Nov 2006 • 6243 posts Report Reply

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