Movies a wise investment

Last updated 09:39 22/01/2013

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Ten years ago, Finance Minister Michael Cullen suggested that since tax breaks had helped to fund The Lord of the Rings trilogy, every New Zealander deserved a free ticket to the films.

OPINION: A similar sense of disgruntled ownership has recently emerged with respect to The Hobbit trilogy.

Last week for example, New Zealand First leader Winston Peters tapped into a rich vein of public resentment against the subsidies paid to attract major Hollywood film productions to this country. Surely with The Hobbit being so successful, Warner should pay the subsidy back?

Yes, perhaps Warner could have afforded to make The Hobbit without a subsidy, and plainly they could afford to pay back the money we offered to them.

On the other hand, the private sector routinely receives help from government.

The vast bulk of this country's research and development, for example, is carried out by the state - and many of our major companies (Telecom, Air New Zealand, Solid Energy) started out life as state enterprises.

Should some payback be required in those cases, too? Hardly. Yet the same process of public support and private gain occurred there, too - but with no similar outcry.

Not only would any alleged onus of payback for Warner be highly selective, it would be devilishly hard to create and monitor a payback system.

Should the payback requirement kick in from the very first box office dollar after the production and promotion expenses are met? Or would a reasonable profit - say 10 per cent - on the overall costs of the film be allowed before the payback criteria kicked in?

It is far easier to demand a payback than to figure out how such a system could possibly work.

In the film industry, transparency is hard to come by. Even now, the costs and the scale of benefits from The Lord of the Rings remain unknown. The film-makers insist The Lord of the Rings tax breaks were small, affordable, and delivered great rewards for New Zealand, while the government insists they were big, essential, but only marginally worthwhile.

Successive governments have kept the costs and benefits of The Lord of the Rings tax breaks a secret, even from the taxpayers who funded them.

Conveniently, the secrecy ensures that other sectors of the economy can't easily mount a case for similar treatment.

Thankfully, since they're not tax breaks, The Hobbit subsidies pose no risk to the country's revenues. Our current large budget film subsidies are grants that kick in only after the likes of Warner have spent large sums of money here, and generated economic activity, upskilling and job creation benefits along the way.

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True, Warner finally got back 15 per cent of its The Hobbit spend, but to qualify it needed to spend hundreds of millions of dollars here first.

The real damage done to New Zealand was entirely self-inflicted. The Key government freely offered to change our employment laws to make it cheaper and easier for Hollywood to hire and fire workers in our film industry.

That aside, New Zealand has tried for years to become less reliant on primary exports. Almost accidentally, film has become the "knowledge economy" sector of our dreams.

Perhaps we should be celebrating that our investment has paid off, rather than spending so much energy in begrudging the outlay, and in treating Warner as a sponger.

- Wairarapa News


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