Creating a Model Film Incentive Program

Creating a Model Film Incentive Program

from: Stop-Runaway-Production.com

In an ideal world, like the one that existed before 1997 (when Canada created the modern film incentive), no state or nation would be foolish enough to offer a film incentive.  Movies and television shows would still get made, but decisions on where to film them would be based on creative needs and things like infrastructure, skill of the labor and natural costs (not the artificially low costs film incentives create).

But since film incentives don’t appear to be going away anytime soon, it’s time to put forth some ideas and proposals for what a model film incentive might include.  Following up on yesterday’s post about the proposals to improve Alaska’s film incentive, this is the first of many posts offering ideas and proposals for creating a model film incentive….

1.  Film Incentives as Tool to Increase Tourism:

Unless a state film incentive requires projects to be set in that state, film backers should be banned from making arguments about positive & free publicity and the potential for film tourism.  In 2010, Louisiana spent over $100 million on just four films.  None of them were set in Louisiana:

For Battle: Los Angeles, which is completed and released, the total budget was $68.8 million, the Louisiana spend was $45.2 million, and the tax credits certified were $13.6 million.  Set in Los Angeles.

For Green Lantern, the estimated total budget is $118 million, and the Louisiana spend is forecast to be $114 million, and the tax credits expected to be issued are $34.2 million. Set in another galaxy and fictional Coast City, California.

Battleship reported an estimated total budget of $215 million; Louisiana spend is forecast to be $68 million, and the tax credits expected to be issued are $20.4 million.Set in Hawaii.

For Twilight, the estimated total budget is $247 million, the Louisiana spend is $98 million, and the tax credits expected to be issued are $33.15 millionSet in Washington State.

None of these films, which are representative of the bulk of activity in Louisiana, accomplish the goal of promoting the state or encouraging film tourism to Louisiana.  Washington, California and Hawaii are getting the free publicity from these Louisiana-filmed projects, not Louisiana itself.  Thesame argument was made for Michigan and applies in any film incentive state.  In fact, most film offices tout their locations to Hollywood producers as having the ability to stand in as “Anytown USA”.  In the same breath, film office officials tell lawmakers the state will benefit from film tourism as audiences see their state on the big screen.  This nonsense needs to stop.

PROPOSAL FOR MODEL FILM INCENTIVE:

If film tourism and publicity for the state is one of the major motivations for offering a film incentive, the program should require a certain amount of the projects using the incentive to set the story in that location.  By requiring 85% of all projects to be set in the state, the remaining 15% could go to projects regardless of setting, which should satisfy film backers who claim such a requirement would make the state uncompetitive.

2.  Using Film Incentives to Market the State In the Credits:

In yesterday’s post about Alaska, I mentioned the state’s missed opportunity for including a requirement to market the state:

“Film backers in Alaska contend the incentive is a valuable marketing tool for the state.  If true, the proposed law is making a HUGE mistake with the following requirement:

To qualify for the tax credit under AS 43.98.030, a producer shall include:

(1) in the end credits of each qualified film, the film office logo designed under AS 44.25.105(b) and the words, “Filmed in Alaska with the Support of the State of Alaska”; or

(2) on each DVD or other media produced for distribution, a short
Alaska promotional video or advertisement approved by the Alaska Film Incentive
Review Commission.

First, Alaska should replace the “or” with “and”.  The DVD requirement is an excellent idea and of much more value to the state than having Alaska mentioned at the end of the credits.  Producers will never choose the second option and will ALWAYS to the cheaper easier option of adding Alaska to the end of the credits, which no one ever sees.

Second, Alaska should require the “Filmed in Alaska” language to come before the movie even starts.  Since the state is effectively helping produce the project, it should be recognized up front with the rest of the producers.  If nothing else, require the mention to come at the top of the credits rather than the end.  It troubles me that I have to even point this out, as these seem like no-brainier improvements.”

PROPOSAL FOR MODEL FILM INCENTIVE:

All projects shooting in the state must include an acknowledgment (specific language and/or state logo) in the opening credits.  Since state money is used to finance 25-40%+ of the budget, the state is well within its rights to demand credited along with every other producer or production company.  For projects that do not have opening credits, the state mention should come at the top of the end credits with the names of other producers on the project.  For the massive amount of free money states are giving Hollywood, producers will not hesitate to comply with such a requirement.

3.  Recouping Costs from Film Incentive:

In the last ten years, the economic impact of film incentive programs and the impact to the state treasury in money paid out vs. new taxes collected has been carefully and comprehensively studied by many independent think tanks, scholars and state & federal agencies.  The overwhelming consensus (if not unanimous) is that film incentives, given their size and cost, DO NOT PAY FOR THEMSELVES.

Save for California and New York (which have massive infrastructures and modest incentives), state film incentives do not even come close to breaking even.  The evidence (contained in the numerous reports available in the Report Library) shows that for each dollar spent on a film incentive, the average return to the state in new tax revenue is between 10-30 cents.  In short, for each public dollar “invested”, the loss on investment is 70-90%!

It is true that each dollar spent on a film incentive will generate between $3-$6 in economic activity, but this is a private benefit for a public cost.  The public cost for the film incentive must be measured with a ROI of public benefit, not the private impact.  A public benefit would be the new tax revenue generated by production activity from the incentive.

This is not a case of “he said, she said”.  Those who continue to insist film incentives do not cost the state taxpayers money are wrong.  In some cases, they are misinformed and sometimes they are willfully lying.  The issue of cost is no longer subject for debate.  The math is now clear: 2+2=4; film backers want you to think it’s 5.  Arguments for having a film incentive can still be made, but making money for the state coffers cannot be one of them.

Once state lawmakers are clear about the public cost vs. the public benefit and fully aware film incentives are a net revenue cost to the state, the focus should be on ways to help recoup costs.  The Chamber of Commerce in Alaska offered the following proposal:

To be clear, producers and studios are rolling the dice when they make film or TV projects.  They hope a project will make a profit, but they have no idea if it will or not.  Since they can’t predict profitability, neither should state film offices.  However, when a film produced with state film incentive money has the good fortune of becoming profitable, the state has as much right to a share of those profits as the other investors.

PROPOSAL FOR MODEL FILM INCENTIVE:

For films that receive state incentive money and released for theatrical exhibition, the state can require a performance-based repayment on a share of the box office earnings.  For example, if a $50 million film produced with state film incentive money earns twice that cost at the box office ($100 million), the producers are required to return 5% of each additional dollar earned at the box office to the state for an amount no greater than the cost of the incentive granted.  If the film earns $150 million at the box office, the amount owed to the state would be $2.5 million (ie 5% of each dollar earned after $100 million).

The exact numbers can be higher or lower.  The amounts listed above are for example purposes only.

In the coming days, I will add a “Model Film Incentive” page to this site, which will include the three proposals above.  Each new proposal made in future posts will also be added to the Model Film Incentive Page.  Feedback and suggestions are welcomed and encouraged.

Film Works LA      Like Film This! on Facebook