NZ a star paying to act in a supporting role

16:00, Jan 18 2013
BACK AGAIN: Martin Freeman is heading back to New Zealand in May to film scenes for The Hobbit trilogy.

New Zealand taxpayers have helped Hollywood make billions. The Government poured $52 million into Avatar - which earned nearly $3.5 billion worldwide and is the highest-earning film in history.

Aotearoa spent $77m on The Hobbit, which up to this week had earned more than $1b at the box office. Taxpayers gave nearly $49m towards the making of King Kong, which grossed about $654m.

Altogether, New Zealand taxpayers have spent nearly half a billion dollars on Hollywood blockbusters and television series.

Public money has been turned into enormous private profit, not just from films but from the huge quantities earned from merchandising products that accompany them.

Is it time to ask for some of our money back?

This week NZ First leader Winston Peters called for subsidies to be repaid if the films we help fund turn into blockbusters. Mr Peters is not alone in the call. Overseas there has been a mounting backlash against state aid for Hollywood.


Nations compete for Babylon's favours, the critics say, in a ruinous "race to the bottom".

Hollywood wins from the bidding war between countries, but everyone else loses.

Columbia University academic Joe Karaganis likens Hollywood to a hostage-taker whose demands never stop rising. "You don't win by providing the studios with what they want," he said.

"You simply defer the next round of hostage-taking."

Is it the role of taxpayers, Mr Peters asks, "to make a fortune for these international wide boys from Hollywood and then not expect anything back?"

The Key Government claims New Zealand gets a big payoff through increased tourism and jobs at home, Mr Peters says, "but they're not happening".

The money given to The Hobbit should have been a conditional loan, repayable if the film made money. Mr Peters does not believe Warner Bros would simply have taken the film to another country where subsidies were not repayable.

"I don't believe we would have lost The Hobbit," he says.

"Because I do not think that anybody engaged in this business is not capable of understanding what a fair go looks like. That's my point."

Subsidies for Hollywood films "were banana-republic-scandalous from the word go. The idea that Hollywood was going to be promoting New Zealand internationally - these sorts of things are ridiculous."

Mr Peters says other countries offer help for films as conditional loans.

Governments could legitimately aid start-up businesses to help them through the difficult early years. But then the enterprise should stand on its own two feet, "not come back time after time [seeking more help]. This is what is happening here".

Economic Development Minister Steven Joyce says turning taxpayer grants into conditional loans wouldn't work. No other country offers film subsidies in that form. If New Zealand did so, the studios would go elsewhere.

The idea "just ignores the competitive situation that the film industry operates in around the world".

Some argue that director Sir Peter Jackson, one of Hollywood's most powerful players, would have had the clout to insist that The Hobbit be filmed in New Zealand without a subsidy. But Mr Joyce says it would be "a big call" to suppose that Warner Bros would agree to do so without a grant.

The studio's investment in The Hobbit trilogy was "massive by worldwide standards" and the costs enormous.

"I think it would be a mistake to assume that these are not finely balanced things in terms of whether they actually go ahead and proceed."

The biggest benefit from film subsidies is the promotion of New Zealand internationally, Mr Joyce says.

"Effectively we've had through The Hobbits and the Lord of the Rings and so on, we've had a massive product placement of our country. And it's the sort of product placement that you could not afford to purchase."

Mr Joyce says "We would all prefer every industry stood on its own two feet. But in the case of the film industry, from New Zealand's perspective, there's an external benefit which is pretty obvious, if a little bit hard to substantiate in terms of the actual amount."

The film industry is different from others "because of the benefit for New Zealand in terms of the marketing of New Zealand". This did not apply in any other industry.

Mr Joyce says he expects The Hobbit will help boost tourism, but agrees it is "a very hard thing to finally substantiate in terms of the actual numbers".

People come to New Zealand for many reasons. Some Hobbit followers would come to visit Hobbiton near Matamata to see the film set.

Others come to New Zealand for a variety of reasons and The Hobbit movies were "one catalyst in doing so".

The longer-term effect is to promote New Zealand and make people aware of it. This could help the country in various ways, including boosting demand for its education and in helping Kiwi businesses abroad.

Mr Joyce offers an anecdote to illustrate his argument: in a visit to India last year, he found "everybody was talking about how massively beautiful New Zealand was".

When he asked about this they told him, "Oh, these two Bollywood movies that were done in New Zealand, it's just lifted the profile of New Zealand so magnificently in India."

The other main thing boosting New Zealand's profile, he found, "and it's perhaps not timely to say this", was the Black Caps cricket team.

Everyone agrees that the long-term benefits to New Zealand are impossible to measure. Labour's economic development spokesman, David Parker, says the effect of the film subsidy is "to promote New Zealand in some way. I wouldn't deny that. I wouldn't want to overstate that".

It was because of the promotional effect, and the economic benefit of extra film spending in New Zealand, that the Helen Clark Labour-led government had approved subsidies for LOTR and set up the main subsidy, the Large Budget Screen Production Grant.

Critics, however, point out that many of the films subsidised by New Zealand have no obvious New Zealand content. Avatar, for instance, was a futuristic science fiction fantasy in which the New Zealand landscape never appeared.

The same goes for King Kong, Tintin, and the two fantasy films Prince Caspian and The Lion, The Witch and the Wardrobe. These films together received almost $150m in New Zealand subsidies.

It would be hard to detect any tourism or "product placement" benefit from them.

Columbia University's Joe Karaganis says a lot of the argument for film subsidies in New Zealand rests on the idea that the country is "indelibly associated with Middle- earth". This was likely to be "a very fragile association".

"Lots of things that require dramatic landscapes this year will be done entirely on computers in five years. When The Hobbit movies are finished, will the demand to film the New Zealand landscape fall away? What happens then to the argument about "product placement"?

The Government says the country also benefits from the money Hollywood and other overseas film interests spend here.

While the film-makers received $267m of subsidies between 2004 and 2011, they spent more than $1.9b in New Zealand, according to the Ministry of Business, Innovation and Employment. This includes spending on staff, catering, flights and hotel accommodation.

"These productions grow the talent and skill of our local film industry and provide spill-over benefits to the wider economy, including the ICT and tourism sectors," said a ministry spokesman.

Exactly how much New Zealand gains from all this is now being fiercely debated.

The Government claimed, on the basis of information from a Peter Jackson staffer, that the subsidy for The Hobbit produced about 3000 jobs. Mr Peters disputes this, saying the figures were "plucked out of the air" and were certainly not permanent jobs.

So far, governments of both types have decided that the subsidy is worth spending, both for its promotion of New Zealand and for the extra spending it brings to the country. One economist said the 15 per cent grant for qualifying film spending was like reimbursing tourists for GST.

This was widely practised around the world, he said. Tourists spent money the country would otherwise miss out on and rarely made a claim on government services such as health and social welfare.

Mr Joyce says the return on taxpayers' money was "slightly positive" in terms of a direct return to the government. The extra spending in New Zealand generated slightly more tax revenue than the subsidies cost.

"We got back more than we put in."

How do we know this? From work being done as part of the Government's review of the film tax subsidy. Mr Joyce declined to issue the officials' reports, saying they are part of a package soon to go to Cabinet.

Although Hollywood and Jackson have asked for increased subsidies in New Zealand, Mr Joyce says "we don't see a need at this stage to increase" them.

The situation worldwide with subsidies, he says, is fluid.

"Some are trying harder, if you like to use the term, and others are actually backing away from the subsidies. We think we've positioned it about right."

New Zealand was not the most generous in the world, but was competitive.

Just where to set the subsidies, he says, is a judgment call. There is certainly no point in joining the "race to the bottom".

Will the subsidies keep Hollywood coming back to New Zealand? Or will the studios demand more help from the New Zealand taxpayer?

Wait for the sequel.

The Dominion Post