Yesterday’s big winner at the Oscars was Chinese-American director Chloe Zhao and her film Nomadland…. And Weta Digital happens to be listed here
among the post-production facilities that have been working on Zhao’s next film, the mega-budget Marvel blockbuster Eternals, due to be released on November 5, 2021. ( More on that below.) That news is just another useful reminder of how New
Zealand’s 20 year history of film subsidies has laid a strong foundation for the industry. As a consequence, our FX
houses are now capable of freely competing for work on the global stage, within the most technologically advanced realm
of the entertainment industry.
Now that you’d know it, given the recent negative coverage here of the subsidies likely to be paid to Amazon for its
decision to shoot its mega - budget Lord of the Rings television series in this country. Repeatedly, the subsidy scheme for major film and TV projects has been portrayed as
a handout by the NZ taxpayer, this time to one of the biggest companies in the world etc etc. Well, it isn’t a giveaway.
It is a hard won bargain for reasons I’ve explained at length here before
Much of it comes down to a matter of simple arithmetic. At most, the taxpayer pays back 25% of the production costs already spent in this country. As a rebate, it differs significantly from the classic tax incentives that underpinned the LOTR films.
And it also means that we get 75% of the gigantic spend on the Lord of the Rings TV production upfront. That’s before we factor in the multiplier benefits that the production will offer us in terms of
job creation, upskilling, technological innovation, and increased tourism. No wonder there is intense competition
between countries, as they vie to attract such projects to their shores.
It might also be worth keeping in mind that New Zealand’s film subsidies are pitched at the low end of the global deals
on offer. We offer only a 20% basic production cost rebate on projects up to $NZ500 million, with an extra 5% for
productions of exceptional value to the NZ economy. Compare this to the section 481 tax breaks offered to film and TV
productions by Ireland, a country of comparable size.
Since 2008, Ireland has steadily raised
its offerings from 28% to 32% to the current 37% incentive
, on productions that need to spend at least 250,000 euros within Ireland, or just under $NZ420,000. Ireland stipulates
a maximum payout of 70 million euros (roughly $NZ120 million) per project, and as an added enticement, it is even
willing to offer a 90% subsidy up front, as an interim payment. Yet clearly, Ireland still thinks it is getting a really
good deal, because it has kept on raising the level of its incentives. In states like South Australia, Australia’s film
incentives are also considerably larger than what New Zealand has on offer.
How come we continue to succeed, regardless? Put it down to our track record. New Zealand has created a reasonable but
not fulsome rate of subsidies, has expert crews, offers stellar post-production and props facilities, and can point to a
variety of striking locations within easy reach. So would major productions come here without the subsidies? No, they
wouldn’t. Moreover, the OIA discoveries initiated by Stuff’s Thomas Coughlan
suggest that New Zealand has driven a hard bargain with Amazon on the Lord of the Rings television series. For example :in order to secure the maximum tourism benefits, we have pressed Amazon to concede that New Zealand
will provide the only locations used by the production to represent Middle Earth:
There would effectively be two deals: one for the series as a whole, and one for each season that was produced in New
Zealand. A decision paper….shows officials were worried about losing New Zealand’s “exclusivity”. If other countries
were used as locations for the series, could New Zealand lose its claim to be the real world Middle-Earth?
For those who have complained in the past that these major film production deals have unduly favoured Wellington, this
one looks geographically diverse, and will be offering regional benefits to our struggling tourism sector:
Waikato, Queenstown, and West Auckland were considered for locations, the [MBIE ]paper said. About 51,000 hotels or
apartments would be used during the production, 76,000 cars would be hired and about 90 per cent of the crew would come
from New Zealand, and 20 per cent of the lead and supporting cast.
All of which sounds like a truly terrible “giveaway” huh? Yeah right. To the diehard critics of the film subsidy scheme
though, we shouldn’t on principle be using the tax system to help our struggling tourism sector – even though that’s exactly what government has done
since Covid first hit…This began with (but was not limited to) a $400 million plus package for tourism in last year’s
Budget, which got rolled out in the shape of grant schemes not dissimilar to the film production grants – in that they
will go to those recipients that can prove major and sustainable economic benefits. Amusingly, the government has been
lambasted for not doing more of this sort of thing to help out our tourism operators. Such assistance, it seems, becomes sinful only when it comes
in the shape of film production rebates rather than as straight tourism handouts.Other fish to fry
The MBIE negotiators on the Amazon deal did not stop at the tourism spinoffs. Thankfully, and in the subsequent light of
what Covid has done to tourism, MBIE had already sought access to Amazon’s expertise in other areas as well:
…Officials wanted something different. They wanted a foot in the door with not just Amazon Studios, the TV and film arm,
but other Amazon companies, particularly in the tech side of things.
Access to some of Amazon’s tech secrets? Sounds great! Such examples of reciprocity, I suggest, are of more consequence
to this country than whether a couple of Amazon executives got taken out to dinner at fancy restaurants in Auckland, or
whether MBIE Minister Stuart Nash did or didn’t read beforehand Treasury’s reliably antiquated ideas about how film
subsidies are wrong in principle, no matter how well they work in the real world. What Treasury thinks of such schemes
is entirely predictable. As we saw in 2018 (see the Werewolf link above) no amount of independent peer reviews of the value of film subsides will convince Treasury otherwise. Not
surprisingly, no one seems to have even bothered to ask Treasury this time for its views on the merits of the Amazon
Footnote One: The LOTR television deal with Amazon could well be worth “hundreds of millions of dollars of dollars to one of the
world’s biggest companies” But that would be the outcome only if the series runs – as expected – for several seasons, and only if Amazon steadily pumps close to a billion dollars into
the New Zealand economy. IMO, such an outcome would not be a Very Bad Thing. The rebates would be also sustainable,
since they would be spread over several years. When the grants are paid out over the course of several years, as I
pointed out in 2018, the large project film subsidy scheme ends up costing roughly what we spend annually on high
If, as recently mooted….in the NZ Herald, the grant scheme involved has cost New Zealand $NZ575 million in subsidies
paid out over the past eight years (my emphasis) (a) to Hollywood and (b) to “the Wellington-dominated film industry”
then IMO this still looks like a real bargain. It is for instance, considerably less than the $NZ639 million we’ve just
spent on the temporary refit of two of our ANZAC frigates. Also, we spent $NZ700 million over the same period purely on
Sport New Zealand, as Deborah Hill Cone pointed out this week in the same newspaper
, and have just allocated $NZ100 million to the  America’s Cup defence. At a rate of $70 million a year over the
past eight years, the film subsidies barely exceed the $62 million annually that we spend on subsidizing high
performance sport. Will those sports subsidies deliver comparable economic benefits and skills transfers? Probably not.
Footnote Two: Unfortunately, the film subsidy scheme has evolved into the laziest target of “investigative” journalism. Cite the gross
figure, portray it as a give-away to fat cats, ignore the reciprocal benefits to this country, claim (with no supporting
evidence) that other sectors similarly favoured would magically deliver the same results, and then portray the poor
taxpayer as the loser thanks to the government being taken to the cleaners. Hardly any of which is true. Yet it is an
attractive fantasy. Boo to the fat cats, yay for the little guy. Plus Hollywood. Unbeatable.
Meanwhile, other countries look on enviously at our skills (a) in attracting these major projects, with lesser subsidies
than they offer, and (b) in spreading the largesse around. Here’s Ireland lamenting their lot in this 2016 paper
, back when they were offering 32% subsidies on production costs, a rate they’ve since upped by an extra five percent:
Ireland is currently not fully capitalising on the tourism opportunity presented by film and television. Many examples
exist internationally in which film producers and tourism agencies form symbiotic relationships in which both industries
benefit, the most notable example being New Zealand.
Footnote Three: Should we simply scrap the film subsidies and see what happens? Three years ago and now, that approach is still somehow
being mooted by the likes of economist Eric Crampton:
The past fortnight has seen a fresh round of mutterings that the production grants that currently underpin the New
Zealand film industry are a sin against market purity that we can do, and should do, without. Besides, the subsidies can
be made to look not all that rewarding, provided you tweak the economic models hard enough.
It isn’t hard to spot the aspirational goal involved. On market principle, shouldn’t New Zealand go cold turkey, axe the
film subsidies on offer to Hollywood studios and see what happens next? Even if, on the available evidence, what would
happen next would be a smoking crater where our film industry used to be? That wouldn’t make a lot of sense, given that
we simultaneously say we’re trying to foster a modern, IP-driven, value-added digital economy. For the past decade, the
film industry has been one of the few success stories along that path. No doubt, scrapping the film subsidies would
create a level playing field for everyone. Problem being, that field would be barren.
Footnote Four: Blah blah blah. Hey, what we really want to know is what Chloe Zhao’s next film is all about. Well, just as Amazon’s LOTR TV series is set in an era that predates the characters and the events that we know from The
War of the Ring, the storyline of Eternals predates much of what we know of the Marvel Cinematic Universe, aka the MCU.
Basically, the Eternals are god-like beings that since the mists of time, have been locked in battle with a race of
monstrous Deviants who have evolved from their creators, the Celestials. At any one time, 100 immortal Eternals are
embedded in human civilisation, which they protect (usually incognito) from the Deviants. Oddly, the gifts and the
burdens of immortality play out in the tales that comprise both the early Silmarillion phases of LOTR, and in this ancient corner of the MCU.
How will these early events/conflicts relate to subsequent MCU myth cycles, and especially to the likes of Thor and
Loki, who seem to have been the only early MCU characters left standing after Avengers: Endgame. In both Eternals and the LOTR TV series, the reliance on Norse mythology for the storylines and general ambience looks
like becoming increasingly obvious. While I don’t claim any knowledge of the intricacies of the MCU, Chloe Zhao is going
to have her work cut out.
Why? Sure, she has been hired to tweak the MCU with her own artistic sensibility (much as Taika Waititi was with his
Thor movie) and reportedly, she is a Marvel geek from way back. Yet even so, Zhao will still have to satisfy the
fanboy/genre expectations that permeate the MCU, for better and for worse. Famously a couple of years ago, Martin
Scorsese expressed a very dim view
of the MCU. In his opinion, the MCU films were more like amusement parks than like movies as he had always known them.
According to Scorsese, the MCI multiplex blockbusters were also feeding a downward spiral in movie attendance for
anything other than MCU films.
On the Eternals project, Zhao has relinquished several of the tasks – from the screenplay to the editing – that she strictly controlled
on The Rider and on Nomadland, which was admittedly, an adapted screenplay. Zhao has now belatedly added herself to the script-writing team on this
new movie. It will be interesting to see just how much of her singular vision survives the experience. Like Terrence
Malick did, Zhao has made her name with two excellent and utterly distinctive early features. Malick then went into
self-imposed exile for 20 years. Rather than repeat herself, Zhao has dived into the MCU instead. We can only wish her
the best of luck.