Avatar snaps up $44.7m Govt grant

HIT MOVIE: News Corp's Hollywood studio business saw its operating income nearly triple to $US324 million thanks to Avatar.

Related Links

Review: Avatar: The Game Seeing Avatar in 4-D

Relevant offers

US film-makers spent $307 million in New Zealand creating blockbuster 3-D film Avatar, but $44.7m of the bill has been picked up by Kiwi taxpayers through a government grant.

The total production cost of the film has not been disclosed, with estimates ranging as high as US$500m (NZ$702.6m).

About 60 per cent of the film is comprised of visual effects, created by Wellington's Weta Digital.

Weta faces more state-sponsored competition from overseas special-effects shops in the wake of Avatar's box office success and optimism about the prospects for 3-D productions.

The size of the Large Budget Screen Production Grant (LBSPG) awarded to Avatar production company 880 Productions was revealed by Film New Zealand, a charitable trust which receives most of its funding from the Economic Development Ministry and is responsible for promoting the incentives.

Under the scheme, film producers spending more than $15m on productions are entitled to grants covering 15 per cent of qualifying costs.

In 2007, the grants were increased from 12.5 per cent of costs and extended to producers that only carried out post-production, digital and visual effects (PDV) work in New Zealand valued between $3m and $15m.

Film New Zealand acting chief executive Sue Thompson says $189.4m has been paid out under the LBSPG scheme, including three PDV grants worth $5.1m, since the grants were introduced in 2003 and their importance could not be underestimated. "Having said that, trying to compete with increases in grants or rebates by other countries is largely viewed as a downward spiral, and we have never sold New Zealand as a cheap location."

The South Korean government announced last week that it would invest US$178m in its computer-graphics industry by 2013, focusing on 3-D screen technology, in a bid to win more orders from Hollywood.

Ms Thompson says the Californian state government introduced incentives to try to retain film production work in July, with a tax credit of at least 20 per cent of qualifying expenditure.

"Each day we see a new incentive being introduced in some territory."

Reports said the South Korean funding would go on providing equipment and training to post-production companies, as well as on tax breaks for film producers.

South Korea's Culture, Tourism and Sports Ministry said major competitors in Canada, Singapore and New Zealand received "massive tax breaks" from their respective governments, putting South Korean producers at a disadvantage.

Weta Digital spokeswoman Judy Allen says the company did not receive any tax breaks.

"The only incentives offered to the industry were those provided to productions that come here from overseas and receive the well-understood package of grants that have been around since early 2000."

Ms Thompson says New Zealand's screen production industry boasted foreign earnings of $542m last year, putting it third in the world behind Canada and Britain. By comparison, the foreign earnings of the industry in Australia totalled $20m.

"We have been doing extremely well, but when you look at Australia, it shows how vulnerable we are and how nimble we must be to grow our market share. We do not want the status quo. We want growth."

Ms Thompson says studios are running at 83 per cent capacity, which is "basically full", and the industry is in dire need of more capacity.

The global competition for special-effects dollars is heating up as Avatar spawns the first of what industry supporters hope will be a new group of information-technology start-ups.

Brett O'Riley, chief executive of IT industry body the New Zealand Information and Communication Technologies Group (NZICT), says a cluster of technology businesses was created on the back of The Lord of the Rings trilogy, and Avatar is starting to have similar spinoffs.

A group of developers who worked on Avatar are behind a new 10-person start-up, The Funny Farm, which is developing short, humorous movies for mobile phones. It has formed a partnership with Danish iPhone developer Kiloo, which is considering setting up a development centre in New Zealand as its base in Asia Pacific, Mr O'Riley says.

The Funny Farm commercial manager Peter Hall says the company will target a global market of 300 million smart phones, for which there are currently few entertainment videos.

Mr O'Riley says Avatar had surpassed The Lord of the Rings as the New Zealand IT industry's biggest success. "The Lord of the Rings made us a global leader in special effects, and Avatar and [Auckland software firm] Right Hemisphere have made us a global leader in 3-D."

NZICT has lobbied for the LBSPG grants to be extended to makers of computer games.

"The fact that Avatar the movie could get the tax break but Avatar the game couldn't is a bit of an anomaly and we need to close that loop," Mr O'Riley says.

Ms Thompson says games are quickly catching up on films in terms of their economic value.

"We should encourage these industries to develop as the nature of the entertainment industry quickly evolves."

Weta Donation

Weta Digital has donated about 300 blade servers to Whitireia Community Polytechnic in Porirua which will use them to help teach students how to create 3-D animations.

The IBM servers were originally bought to produce special effects for The Lord of the Rings at a cost of more than $1 million. Weta has since replaced them with more powerful servers supplied by Hewlett-Packard.

The dean of Whitireia's business and IT school, Gerry McCullough, says a few of the polytechnic's graphics design students have gone on to work for Weta.

The servers will let it expand its graphics and information technology courses and turn out students with more experience of 3-D rendering. He says they could also be used to provide IT services to the local community.