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The Film Subsidy Rat Race

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Domenic Romano

Founder & Managing Partner

Visual effects (“VFX”) artists are speaking out against film subsidies.  On the day of the 2014 Academy Awards, the VFX community rallied in Hollywood to voice their concerns over the negative impact they say film subsides are having on the industry.

These individuals are forming a trade group called the Association of Digital Artists, Professionals and Technicians (“ADAPT”), which is dedicated to the business interests of VFX workers.  Their current efforts are focused on legal issues surrounding film subsidies.  With a spotlight on the VFX community, can ADAPT pull the red carpet out from under the feet of film subsidy beneficiaries?  

What is a Film Subsidy?

At least 43 states, hoping to increase economic activity and create job opportunities within their borders, have offered incentives to attract film and television production companies.  Film subsidies, also known as “production incentives,” vary from state to state but typically take the form of state tax credits or cash rebates for qualifying production expenditures.  All 9 films nominated for the Best Picture Oscar this year took advantage of film subsidies (7 in the United States and 2 in the UK).

For example, the State of New York allocates $420 million per year to production incentives.  Film producers receive a 30% tax credit on qualifying costs involved with the production of feature films, as well as TV series, pilots and made-for-TV movies.  The New York State Governor’s Office for Motion Picture and Television Development promotes New York’s tax credits and sales tax exemptions as some of the most successful, stable and attractive in the world.

New York City’s newly elected Mayor Bill de Blasio also supports film and TV subsidies, describing how “until recent years, too many films and television shows set in New York were filmed in Toronto or on sound stages in Los Angeles.  New Yorkers have begun to change this with the help of a state tax credit.”  Mayor de Blasio believes that the preferential tax treatment creates jobs and opportunities for New Yorkers and draws more tourists and aspiring artists to the area.  In addition to state tax subsidies, the “Made in NY” Initiative of the NYC Mayor’s Office of Film, Theatre and Broadcasting offers a variety of incentives for production companies searching for a set.

How do film subsidies affect the VFX community?

VFX artists created the documentary Life After Pi, which tells the story of the VFX and animation company Rhythm & Hues.  The company thrived for 25 years and was honored with the 2013 Oscar for Best Visual Effects for its work on the film Life of Pi—just two weeks after Rhythm & Hues filed for bankruptcy.  Many other VFX workers are also unhappy with the current state of the industry and attribute many of these problems to constantly changing film subsidies.

Like any business venture, production companies are always on the lookout for cost-cutting opportunities.  According to ADAPT, when studios chase film subsidies across the country, VFX artists often find themselves with no choice but to follow the production companies (and subsidies) like nomads.  As ADAPT observes, “Many businesses have had to close or move to subsidized locations.”

At this month’s rally, Daniel Lay, a co-founder of ADAPT and blogger for VFX rights under the moniker “VFX Soldier,” urged states to stop one-upping one another with ever-growing subsidies.  For California to compete with other jurisdictions like British Columbia, where producers receive rebates as high as 60% on VFX workers’ salaries, Lay estimated that it would cost the state an additional $400–500 million per year.

ADAPT’s plan of attack against international film subsidies

ADAPT would like to see the film subsidy eliminated altogether, which it describes as “a form of corporate welfare used by Hollywood producers to game various governments against each other.”  The burgeoning trade group hopes “to challenge subsidies in the U.S. Court of International Trade and ask that a mandatory duty be levied against producers who utilize subsidies.”  While Lay’s attorneys have advised that applying international trade laws to digital artistry faces significant hurdles, Lay believes the complications can be overcome.

What do you think?  Are film subsidies benefitting state economies and taxpayers?  Is the VFX community getting the short end of the stick? Are filmmakers actually benefitting?

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