John Barnett: Let's keep more big movie IP here

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John Barnett, chairman of South Pacific Pictures, defends grants to attract big film productions to NZ, but says change is needed to keep more intellectual property here.
John Barnett of South Pacific Pictures. Photo / David White
John Barnett of South Pacific Pictures. Photo / David White

While the local film industry continues to lobby Government to raise the Large Budget Screen Rebate above 15 per cent, the UK Government has just announced it will lift its tax relief on high budget films from 20 per cent to 25 per cent, and will introduce further measures to make the relief more readily available with the aim of stimulating more film activity in the UK.

New Zealand would be the ideal place to make movies if no other territory offered incentives to lure production to their country - but 32 countries, 42 US States, every Canadian Province, all Australian States and a host of European regions, all offer incentives which compete with New Zealand as it attempts to attract off-shore production here.

Why are Governments around the world creating and enhancing initiatives to attract more screen production activity to their jurisdictions? And why is this sector getting preference over so many others?

Attracting offshore Screen Production brings economic benefits that few other sectors can match.

In no particular order, here are some of those benefits:

- Production and therefore actual expenditure can occur within weeks of a decision.

- There are no factories to build, no resource consents, the art department and locations personnel hit the ground and spend money.

- Most rebate schemes are post facto, so 100 per cent of the money flows into the country and providing it meets the appropriate criteria, the rebate occurs after the money is spent, and after the production has been audited by Government agencies.

- Most other industries make product which is sold after it has been made - but any incoming screen production has already been sold and financed, and so there is no seller risk left in the country.

- The use of rebates ensures Governments can assess and audit every aspect of the activity - so again, there is no financial risk to Government.

- The impact of a production on a region like Queenstown or Taranaki, is really significant. A large film crew in one of those centres may be based in the area for 3 months or more. That creates the equivalent of up to 10 busloads of tourists coming in every day for that 3 or 4 months.

- And film crews spend - they don't stay in budget accommodation, they don't eat at takeaway bars. They work 12 hour days, 5 or 6 days a week, so they need appropriate accommodation and feeding.

- Screen Production creates no environmental issues. A manufacturing plant requires buildings, waste disposal, access/egress, permanent infrastructure and if the business folds, the residue remains.

- Screen Production employs lots of people in lots of areas - not just actors and extras, but builders, electricians, set designers, wardrobe staff, technical personnel, accountants, admin staff, catering, drivers, as well as skilled cinematographers, editors, musicians, make-up artists, stunt players and hundreds more. And New Zealand's skills in special FX and Visual Effects as shown by WETA Digital means more and more companies want to access those skills.

- Screen Production creates tourism spinoff in a way that no other industry can - including the Tourism industry itself. Films have reach and impact that no amount of paid advertising achieves. $40 million spent on The Hobbit rebate delivered much, much more in tourism terms than $36 million spent on America's Cup.

The Government has recognised this with Lord of the Rings and Hobbit, but Whale Rider brings tourists to the East Cape and Xena brought tourists just to see Lucy Lawless on stage. No car industry, nor dairy factory has that ancillary impact.

For those reasons alone, countries and individual provinces and states fight to attract production to their location.

So what's gone wrong here?

Well for one thing, we've had almost a complete absence of cohesion and leadership in making a rational case to Government.

There are several agencies fighting among themselves to be in charge and in the meantime, they have done little to ease the concerns of the local crews and cast.

Film New Zealand is an "independent industry led organisation, governed by a Board of Trustees representing industry and business". And it receives most of its funding from the Government.

So, at times like this when a considerable and vocal sector wants action from Government, Film New Zealand may not wish to bite the hand that feeds it.

Throughout New Zealand, there are a number of regional Film Offices: Auckland, Taranaki, Hawkes Bay, Wellington, Dunedin and Otago/Southland. They are often at odds with Film New Zealand, scrapping over potential projects and access to offshore producers.

In most cases these Regional Film Offices are funded by Local Councils - each of whom is cognisant of the benefits outlined above.

In Auckland "Film Auckland" is an incorporated society, but it runs "operationally out of ATEED and is funded by ATEED".

And there is the New Zealand Film Commission, which administers the Large Budget Screen Grant, and is currently engaged in discussions with Government on these issues.

The Government has said it wants to see less of a "service" industry and have more IP, (intellectual property) and ownership remain in New Zealand. There is a solution and it's one that is a win/win. It empowers local producers, diminishes bureaucratic overheads, and provides a solution to the issue that Steven Joyce raises about "generating IP" for New Zealand.

Under the existing New Zealand legislation the rebate is available to a New Zealand domiciled entity, but that entity can be 100 per cent overseas owned.

3 Foot 7 Ltd, the New Zealand production company for The Hobbit Trilogy is 100 per cent owned by Warner Bros, and all its Directors are LA based. Any offshore company can establish a fully owned subsidiary here and access the full benefit of the rebate.

In the case of The Hobbit, Peter Jackson has significant control over the actual production and undoubtedly owns a piece of the benefits, but for The Last Samurai or 10,000 Years BC or Yogi Bear no New Zealand IP was created or retained.

But the Government could take a leaf out of the Australian/German/Canadian incentive schemes, where a portion of the incentive is only available to an actual locally domiciled producer.

This creates local IP, and it also pushes local producers into the front line and turns them into sales people for New Zealand, not as price takers, but with a real tool in their kitbags.

That producer comes to the negotiating table with the strength of being the conduit through which the rebate funding flows.

This is a very strong hand and it means IP remains in New Zealand with that New Zealand domiciled producer. Once upon a time it may have been folly to suggest this, but given the reputation of our leading producers' the ability to bring money (the Rebate) in exchange for a piece of the profit, is not unrealistic.

A shift in the grant conditions could enable creative producers to emerge who could compete to sell their services, and because they are domiciled here, their focus would be on bringing work here, which would lead to more continual employment for local filmmakers, and through their efforts, the rewards that arise from successful screen production would be retained in New Zealand.

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