September 2007


Nova Scotia’s film industry is to get the tax incentives it sought (see previous DISCONTENTS entry).

A news release from the Premier’s office on 13 September indicates that the industry will receive its requested 50 percent tax credits for films shot in Halifax, and a 60 percent tax credit on films shot in rural areas. Any company who films 3 or more films in a year will receive an extra 5 percent on top of the applicable rate.

The tax credits, calculated on the number of local residents employed, is aimed at boosting employment in the industry. According to the press release however, it is not just the tax credits that make the province attractive for filmmakers:

Nova Scotia is known for many positive attributes that help attract film production including experienced film production crews, talented actors, impressive locations and a solid infrastructure.

The release also quotes Ann Mackenzie’s analysis of the need for government assistance:

“A number of factors are coming into play this year including a short ACTRA strike, a stronger Canadian dollar, and more attractive incentives in other jurisdictions. We do not want to lose our position as the fourth largest film centre in the country, a position we have held for the past ten years.

David MacLeod, chair of the Nova Scotia Motion Picture Industry Association believes the increased tax credits will allow the film and television industry to be “intensely competitive and ensure employment for hundreds of Nova Scotians.”

There is no mention of making ‘Canadian films’, no policy drive for local companies to retain the copyrights for the productions being made. Are there any data on the numbers of foreign (including U.S.) versus Canadian productions shot in Canada disaggregated to the provincial level?

Tax credits for labour might keep a certain number of locals employed and technically trained, but just how sustainable is that? Does it encourage or enable these employees to eventually make their own commercially viable productions? Or does the model lock the industry into a fee-for-service model indefinitely?

Advertisements

This one from the Chronicle Herald on 12 September.

Nova Scotia film makers point out that tax credits and ‘infrastructure support’ are better in other provinces, and argue that this is leading businesses away from investing in the far eastern province.

Inter-provincial or regional competition can be healthy if it means that residents and businesses have choice of service provision, rather than being faced with a virtual monopoly.

The provision of incentives such as tax concessions to attract investment however, can be a different game to ensuring effective and efficient services. To what extent are these incentives in place to attract sustainable investment, and how much of these policies merely pander to local rent seekers?

In this case, criticism of the government comes in varying shades. Some are aimed at municipal governments, others at the Nova Scotia provincial governments.

“MacKenzie (CEO of provincial film fund) pleaded with Halifax Regional Municipality to up the ante on its contribution to film production, …[stressing] the importance of tax incentives, free rent on municipal buildings used for filming and even discounts on goods and services.”

“Like the industry association, MacKenzie wants the Nova Scotia tax credit raised to 50 per cent from 35 per cent.”

Others indicate the frustration filmmakers feel in less subtle tones.

“We are going to lose a lot of people in the industry if the government maintains its current policy of inaction. I’m really pissed off by the half-assed action of the government,”

“We are losing millions, a lot of talent is dropping out of the industry or moving away and we can’t get that back overnight. My two films speak to the fact that . . . we can create higher-profile film projects out of the region. It’s a show of hope for others in the region.”

– Nova Scotia filmmaker Chaz Thorne

 

One question that comes to mind is, if Thorne’s films are indicative of the high-profile films that can be made in the province, why can it not be done in the current environment?

 

Nevertheless, this plea still follows the ‘rent seekers rule’ of demonstrating how valuable the industry is, then showing close the industry is to being wiped out, and all that economic value with it.

As with most ‘perks’ in life, aren’t financial incentives really a way of encouraging people to choose an option they would normally judge as sub-optimal? In this vein of thought, the larger the incentive, the greater the signaling effect of the option’s underlying demerits should be.

But when it comes to location shooting, production certainly seems to follow the money, and hence the incentives that are being offered in various jurisdictions around the world. But just how sustainable a policy is that? Location shooting is one of the most mobile forms of investment there are, but it possibly looks good for politicians as it almost definitely means local jobs.

But do such policies allow for the development of local talent through knowledge spillovers? Do these financial incentives become catalysts for further investment? Or does it result in local focus pullers and gaffers waiting around until producers can convince investors that the state will offer them adequate tax credits to make their investment viable?

Korean content producers, supported by government, are looking to extend their reach further into international markets, beyond Asia.

An article in Variety

  • Korea’s content industries are likely to produce ‘more nuanced’ properties rather than relying heavily on the local star system, . Big names appear not to be getting the pre-sales that they were overseas.
  • Film commissions in Seoul and Busan are becoming more aggressive at establishing Korea as a viable shooting location.
  • The film industry is looking to the US and Hollywood both for distribution and co-production opportunities
  • The technological savvy of local firms is helping to give Korea a leg up in certain sectors like special effects and new media.
  • Korean animators, who have gained technical expertise through years of outsourced U.S. work, are becoming strong contributors. KOCCA and other government organisations provide significant funding for training in the industry.

My question though, is how developed their storytelling ability has become, and to what extent government policies are aiming to develop these non-technical creative skills.

An article in the Bangkok Post has quoted industry figures in Thailand saying that the animation and graphics ‘industry’ needs government support.

”Policymakers should realise that animation and the CG industry could generate lucrative income to the country,”
”It is a value-creation industry, which needs only ideas and creativity. It is not harmful to anybody and does not cause global warming,”

….Santi Laohaburanakit, the vice-chairman of the Thailand Animation and Computer Graphics Association told investors and fund managers at the Thailand Focus 2007 investor conference yesterday.

Calls for government assistance come despite the fact that the industry has grown by 40 percent in the last year.

It may seem strange for a high growth industry to be asking for government support, but it not all that uncommon. Industries – particularly newer industries – lobbying for assistance generally first need to show politicians how ‘valuable’ their industry is in terms of how much it contributes to the economy (income and jobs), and what its growth potential is. The second prong is then to identify that growth could be much higher if certain policy provisions were implemented. Here, it is also important to mention the potential for increased exports. A common strategy is to point out a similar industry that is receiving favourable conditions and argue that one’s own industry is facing discrimination. Finally, lobbyists will invariably point to other nations in the region indicating to their own government that foreign states are providing more favourable environments and may well gain a competitive advantage over the home country.

”Unfortunately, many Thai policymakers have not seen this opportunity, unlike [those in] South Korea or Singapore,”

”Without a national policy, Thailand can lag behind Singapore and Malaysia.”

”I would say that the value could multiply by 10 times over the next five years if we receive a strong commitment from the government,” Mr Santi said.

…which is a monstrous target. Digital Content industry players in Australia were aiming to double industry size in 10 years (7% growth per year) but then that all is relative to the respective starting size and maturity of the industries.

Finally the author of the article has added some supporting statistics:

Based on a Kenan Institute report, South Korea’s online game industry is now worth more than $4 billion. The global market is estimated at $101 billion, more than 80% of which is controlled by American and Japanese companies.

According to the association, animation and computer graphics in Thailand can be categorised into three segments: animation for TV and cinemas, valued at $41 million last year; digital gaming worth $41 million; and visual effects and computer graphics worth $33 million.

An article in ABC opinion by Scott Prasser, ‘Smart State or Dumb Distraction’ examines the emergence of the ‘Smart State’ policy in Queensland, to what extent it resulted in policy change rather than rebadging , and its future after the resignation of Premier Peter Beattie.

Prasser points out:

Smart State seems reasonable, sensible and most all economically needed. Of course politically it has unbalanced the Opposition as it is a hard policy to criticise. Also, as the strategy is pro-business and pro-development it has seized the Coalition’s traditional territory and allowed considerable funds to be provided to business and has been a great way to win votes.

Furthermore, the smart state project has meant considerable funds to universities, especially the University of Queensland, and probably explains its vice chancellor’s high praise for the Beattie Government.

Ask Vice-Chancellors from outside of Queensland however, and they would be certain to label the generous funding the University of Queensland received from the State Government as protectionism. The university has managed to attract a number of academics and researchers away from key ‘competitor’ institutions.

And when it comes to investment attraction, Queensland is the only State that has not signed a memorandum of understanding not to poach investment from other states by offering more incentives.

The Queensland Government is quick to advertise its low taxes and business-friendly climate. But State policies are not all about allowing the economy to function freely, as Prasser indicates.

However, the Beattie Government’s rejection of Commerce Queensland’s The Role of Government in Queensland report to further free up the economy to the private sector and market forces, suggests that the smart state strategy has been more about old style handouts by governments to particular interest groups than about developing an innovative economic and business culture.

An article in the Taipei Times that argues when it comes to creativity, size isn’t all that it is cracked up to be.

A large volume of work in economics and industrial organisation has looked at how small firms may be more innovative in certain areas than larger firms. Yet this article is referring to the relevance of a nation’s size and economic might.

It is not unpredictable for a Taiwanese source to drum up support, both domestically and abroad, for the viability of small nations, particularly given the their political relations with the ever-expanding economic juggernaut China (PRC).

Yet the article points to the high rankings of Norway, Iceland, and Ireland on the Human Development Index, of Denmark, Switzerland, and Austria in a ‘happiness’ study, of Singapore, Hong Kong, and New Zealand in an International Finance Corp. study on ease of doing business, and of Denmark, Finlan, and Sweden as being high on the 2005 Globalization Index.

For medium-sized countries such as Taiwan, the article recommends:

Taiwan’s policies for development should concentrate on opening up to globalization, and creating a globalized society with Taiwanese characteristics.

An economy of creativity is the most important type of economy in the 21st century. Taiwan has a diverse culture and a climate of unlimited creativity. It should study examples like Ireland and the Boston area in the US and establish a social framework for creativity, to let Taiwan develop a unique position and advantages.

This framework includes three things: First, a good framework for creative industry, like improved financial systems, higher budgets for research and related organizations. Second, a general creative operation models, including creative work environments and flexible production methods. Third, a geographical, cultural and social environment that gives full play to creativity.

There is a mounting body of evidence that suggests a policy framework should include measure to promote both economic freedom as well as political freedom if a nation is to encourage the development of the ‘creative economy’. Providing an solid institutional framework for financial and legal systems, together with investment in education, research, and artistic endeavour appear to be key fundamentals in happy, creative, affluent nations.

Perhaps we should consider a viable and equitable health system and aim for healthy residents as well?

From Nikkei BP’s Tech-On site. A group of ‘cultural organisations’ including JASRAC, Japan Writers Association, Japan Artists Association, and Japan Cartoonists Association among other organisations have announced plans to create a website that will enable searches of copyright information on literature, photos and music via the Internet.

Aiming to launch the site in January 2009, the site intends to allow anybody to easily search copyright-related information such as copyright terms and right holders.

JASRAC and the group support (or rather are the proponents) of a movement for the extension of the posthumous protection term from 50 years to 70 years in Japan. The website no doubt is to show policymakers that the group is providing access to copyright information for those wishing to locate right holders of particular properties, which warrants extended protection of copyrighted term.

The Keidanren’s Japan Content Showcase may be linked to the site.

The group may have differing opinions with Keidanren about the future of copyrights and how legislation should be amended to aid either the protection or exploitation of copyrighted properties. (see previous posts)

The Keidanren Chairman Mita contests the claim of ‘high costs’ of using properties where right holders cannot be located: “I have received indications that it currently costs much to use works for which right holders are unknown,”