Film subsidies

Matt Nippert reported:

The New Zealand taxpayer has forked out nearly $600 million to Hollywood producers since 2010 to support the Wellington-dominated , and despite commissioning numerous studies the Government is unclear whether this represents money well spent.

I’ve got mixed feelings on film subsidies.

Films are unlike most other economic activity because they are truly globally mobile, and are for limited duration. So decisions on where to film do get impacted by local subsidies.

It’s not like deciding where to build a factory that will be there for 30 years. And there are no issues such as goods being produced and freighted etc.

So there is a significant economic benefit to a local economy by having films and TV shows produced here. Locals gain work, there is increased tax revenue, there are tourism benefits.

However film studios are very ruthless and can and will play countries and even cities off against each other, trying to get bigger and bigger subsidies. And if no-one played the game, it would be good. Eventually the marginal return on any subsidy is small, if they keep growing.

Parker said, given the escalating costs of the scheme, he was now considering advice from Treasury about limiting the amount the Government would spend each year.

“We certainly haven’t made a decision to axe the subsidies. One of the questions that has been raised with officials with Treasury is whether you can somehow cap it,” he said.

Parker said he was open to such a move, but mindful of competing advice from the Ministry of Business, Innovation and Employment it could create uncertainty making New Zealand a less attractive filming destination

The Sapere review said while the industry was growing strongly – faster than the rest of the economy – it had lost the competitive advantage enjoyed a decade ago with innovations forged during filming Lord of the Rings and was now effectively part of a commodity industry competing on price.

As I said, this is a tough issue. If we no longer have a competitive advantage, then merely competing on a subsidised price might not be beneficial.

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