Past our peak

By Geoff Cumming

Just as a new movie about Sir Edmund Hillary heads to the world stage, the Auckland film industry is being starved of oxygen

NZ film Beyond the Edge has received high praise but the local film industry is heading downhill.
NZ film Beyond the Edge has received high praise but the local film industry is heading downhill.

Visual effects company Digipost should now be readying itself for the parties, praise and political hangers-on that come with any substantial film launch, the culmination of a great creative collaboration.

Its work on Beyond the Edge, the Hillary-conquest-of-Everest film that premieres at the Toronto Film Festival next week, is already earning accolades (feedback from the critics' preview this week has only heightened the excitement).

"It's the first stereoscopic 3D movie made in New Zealand," says proud managing director Garry Little.

Instead, the post-production company - whose recent work includes Spartacus, Evil Dead and 30 Days of Night - is wondering where its next big project will come from.

Twenty-four hours after hearing of the Toronto critics' 3.5 stars out of 4 verdict, Little said goodbye to a senior visual effects artist he brought out from Britain five years ago.

The high-tech effects whiz has headed back to the booming UK film industry to find work while his wife and young child remain in Auckland.

"The lack of confirmed future international projects has forced the company to break up its highly skilled permanent workforce assembled over 23 years," Little told the Weekend Herald. Most are looking for work to tide them over. The risk is that when business picks up again, they may no longer be around, he says.

The company has employed up to 40 staff, as well as freelancers to help through peaks. While there's commercials and low-budget NZ film and television work to bid for, it's what's known as international service work that has allowed Auckland's screen production sector to flourish over the past 20 years, Little says.

"The politicians are quick to jump on the bandwagon of feature films but this Government just doesn't seem to have a vision for the future of the industry."

While Wellywood has deservedly drawn the spotlight for its blockbuster feature films, Auckland's less-glamorous television-focused activity is the industry's engine room in terms of jobs and revenue generation. About 4,000 are currently employed directly and, despite, the sudden descent from the heights, the industry still pumps $2.2 billion into the local economy, the benefits of a big production flowing as far as caterers and vehicle-hire firms.

Spartacus, which ended last October, was the last in a steady stream of long-run TV series and movies, leaving Nickelodeon's Power Rangers as the biggest single source of work. Whether it returns for another season in Auckland (the last finished in May) is now in doubt.

Distance, the high exchange rate and a shortage of suitable studio spaces are cited as factors in Hollywood "runaway" productions bypassing Auckland. But most agree the biggest factor is that NZ has failed to keep up in the game of incentives - grants and rebates Governments use to attract major productions, confident that the money will be repaid many times over.

NZ's principal grant for large-budget productions was raised to 15 per cent in 2007 and has stayed there ever since. But rivals, including Australia, South Africa, Canada and Britain, have raised their incentives. The UK boosted its grant for TV productions to 25 per cent, as did some Canadian and US states.

A Government review of our large-budget grant scheme began nearly two years ago. Last November, Prime Minister John Key's visit to Hollywood heightened expectations of a boost for the industry, which ticks all the right boxes for an economy desperate to diversify into high-value, high-tech industries and grow its skills base.

The review's outcome last month shattered such hopes. Rejecting industry advice (including from Film NZ) to raise the grant to 20 per cent, the review held the rebate at 15 per cent, instead lowering the threshold budget level to allow lower-budget productions to qualify. These typically do not require the same inputs of expertise and equipment as the large-budget work around which the Auckland industry has developed.

The decision has prompted fevered lobbying and meetings with Economic Development Minister Steven Joyce - not expecting a backdown but seeking interim measures to help the industry to "transition". While indicating there are other ways the Government can help, Joyce has ruled out more money and batted the idea of raising the grant towards the Auckland Council.

Industry leaders are scathing of the review underpinning the decision. Led by the Ministry for Business, Innovation and Employment with significant Treasury input, it estimated the net economic benefit of the incentive to be "in a range of plus $56.3 million to minus $29 million, at a midpoint of $13.6 million".

The true figure is way higher, representatives argue. "The Government made decisions with facts that were out of date and it was too little too late," says Pete Rive, chairman of the Film Auckland advisory board.

They cite the impact of Spartacus, which over four years attracted grants of $30 million and returned $170 million to the economy in wages, post-production work, equipment hire, leases, accommodation, travel and legal fees. Spartacus was the most recent in a string of long-run TV series brought here by Hollywood producer Rob Tapert, husband of Lucy Lawless. The series, which began with Hercules in 1994, is credited with pumping $800 million into the local industry.

Joyce says the Government was wary of entering a "race to the bottom". The scheme since 2004 has supported 35 major films or TV productions that got $267 million in rebates for qualifying expenditure of nearly $2 billion. The biggest recipient was Sir Peter Jackson's King Kong, which got $48.6 million to offset production costs of $389 million.

The review document admits to having only a limited picture of how many jobs the industry is responsible for. Worse, say critics, it avoided using a "multiplier" to measure indirect and flow-on benefits to the economy.

Pieter Holl, tax adviser to the industry, contrasts the NZ approach to that in the UK, where the multiplier effect influenced the decision to raise its incentive to 25 per cent for television productions. "Productions that are filmed here are paying the cast and crew but they are also paying other suppliers," says Holl. "And they haven't taken into account the tax paid by other businesses." He believes the review also under-estimates the tax benefits. "I did a conservative calculation and came up with another $50 million."

Grant Baker of post-production firm Images and Sound suspects the public backlash over Key's change to employment laws to satisfy Warner Bros' demands for The Hobbit may have clouded Government thinking. Baker says the Treasury was clearly wary of the open-ended potential of the grant, the report noting that $121 million was paid out in 2010/11. He says the challenge now is for the industry to adjust. "Everyone is desperately hoping another Spartacus will come along. It's less and less likely.

"Auckland has built up a really good reputation internationally and a lot of expertise. The worry is if we lose the capability and manage to win a show in six months' time, there won't be enough skilled people to make it work."

StudioWest co-owner David Rowell, a film production accountant, says raising the rebate by even 5 percentage points would have helped considerably. "In the US, they go to where the bottom line is. You look at projects being done around the world that could be done here and we are just not on the radar."

Without a competitive incentive scheme, the big productions won't be coming back - leaving those who have borrowed heavily to build capability in the lurch.

"I think the Government's really got it wrong here. I think their outcome was pre-determined - there are clear flaws and misinterpretations and parts of it all also very dated."

Prominent producer Chloe Smith says the work that came here because of the grant, launched in 2003, encouraged the development of the industry in Auckland. "We were challenged by an incentive to grow."

She says the current crisis suggests the sector has failed to promote its significance or to communicate well and needs to look at its leadership.

Others point to Film NZ's apparent failure to promote the capabilities of the Auckland-based industry to foreign production houses.

Producer Murray Francis agrees the industry is in crisis but disagrees that incentives are the sole cause. "We just need some infrastructure. People want to come here but they don't want to go to a tin roof warehouse - they want a big shed that looks like a studio."

Contacted in Los Angeles, Tapert says times are tough generally and he can understand the Government not wanting to go further. He supports the idea of more regional support, as happens with state Governments in Australia and Canada. Auckland also needs to improve its studio spaces "but I'm not sure the Government should be building stages".

Felicity Letcher of leading props and prosthetics maker Main Reactor says the industry knew a downturn was approaching as Spartacus wound up but the drawn-out review worsened the crisis.

"We are not asking for special treatment - we're asking to be able to play in the global marketplace.

"It just feels like we built up this momentum and this great skill base and now we are just unable to be in it.

"People think we are handing money to giant studios and they are making money. It's not about that - they come here with their budget and they spend it all here. A lot of countries clearly see the benefit."

- NZ Herald

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