Australia


The Game Developers Association of Australia (GDAA) have had their request for tax rebates for the film industry to be extended to investment in games developing rejected by Federal Government Communications IT and Arts Minister Senator Coonan.

In a previous entry, >>Howard Government to ‘bring Hollywood home’ through tax breaks<< I mentioned the new package the federal government was providing the film industry to ‘bring Hollywood home’ which included a 40 percent refundable tax rebates for film production.

The entry was also critical of the package and its ambitious goal:

…on first glance the tax incentives appear somewhat short-sighted or parochial on the policymakers front by exacerbating an artificial division between supporting “Australian stories” and allowing international films to use local locations and talent.

Quoted on Builder AU news, the Minister said in a written response to the GDAA:

“The Screen Media Support Package announced in the Budget has the potential to benefit screen content producers of all kinds. While games will not be eligible for the tax offsets announced as part of the Package, the introduction of a Location Offset is expected to have positive indirect flow-on effects for screen businesses, as digital and visual companies develop larger and more skilled workforces.”

Builder AU quotes GDAA CEO Greg Bondar saying the introduction of a rebate would have led to an additional AU$25 million in new investment into Australian-developed titles.

Raising the game developers’ interest in receiving government support to encourage investment, the aforementioned DISCONTENTS entry asked the question “why film and not games?”

On the game / film divide, one could argue that the film industry still has the justification of “culture” on its side, having enjoyed a long history of support from a cultural policy approach. Film and television policy has long supported the production of “Australian” programs to ‘protect our culture and national identity.’ Like nobody would watch Australian programs if there was not a 50 percent local content quota on free-to-air broadcasts? Games in contrast are rarely distinguishable as ‘Australian’ (and probably export better than films for that very reason!)

But if the goal of the film industry package is to increase economic growth, then games developers have a very cogent argument for the package being extended to them.

Undoubtedly, the Minister, and Treasury, would be anxious about extending tax incentives beyond the industry that the policy was originally designed for. Fears that such a move would open the flood gates to lobbying from any number of industry bodies claiming that they are no different to the industry sector receiving benefits. With this in mind, it is not all together likely that the tax incentives will be extended to the games sector if Labor wins office this election, despite their being “very sympathetic”.

It is an indictment on industry [industrial] policy that an industry should need to show it is in danger of dying – that capital will dry up and jobs will be lost, before a government offers any kind of support. One has to wonder whether if the Minister’s response would be any different if the GDAA showed that they were being undercut by programmers and developers in China and were set to lose x number of jobs without government intervention. That is not meant to be a statement advocating the propping up ailing industries, nor one that supports the indiscriminate provision of tax dollars to high-growth industries.

One does wonder though, whether the recent ‘lull’ in industry policy in Australia is not so much a sleeper as it is the conservative continuation of prevailing protection for inefficient industries.

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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.

News Release by the Media Development Authority on a joint agreement with the Australian Film Commission to explore a co-production agreement between Singapore and Australia.

Queensland Business Review article announces the launch of Queensland Government Creative Industries 2007-2008 Program.

Minister for State Development John Mickel says Queensland has the fastest growing creative sector in Australia.

Since 2004, employment in our creative industries sector has grown from 28,000 to 67,000, significantly surpassing the national growth rate.

“Today Queensland’s creative industries are worth $3.4 billion annually and generate $1.1 billion in annual exports.”

“We’ll continue with our highly successful export initiatives, that have resulted in more than $2 million in commercial deals in the USA for Queensland writers and musicians, and continue to develop the business skills of the sector,” he says.

Mickel says that the initiative will also result in a database that will contain information on businesses including employment growth, profits, turnover, supply chains, and export sales.

In this article in The Age, ‘Less Kulcha More Creativity’, Steve Dow raises the issue of what image the Australian government is willing to promote overseas, how much funding they are giving to (or cutting from) arts and cultural industries in their diplomatic representations overseas.

The article criticises the Australian Government for being too interested in economic relations and cutting the funding for cultural counsellors in diplomatic posts around the world that can guide interested parties to Australian culture and creatives, as well as promote the image of Australia as a sophisticated and cultured on the international stage.

Could the creation of an Australian arts advocacy body for the dissemination of Australian culture internationally give our image and culture a broader, more sophisticated focus? Models being considered include France’s Alliance Francaise, Germany’s Goethe-Institut, China’s Confucious Council and the British Council.

While the mix of sources combined in the article does not quite attain what one would called balanced, what the article does raise is to what extent a government should or even can control the image that content and other creative products create of a nation. The article cites an incident where the Department of Foreign Affairs pulled funding from the Jakarta International Film Festival because the ‘Australian films selected for screening would not promote “greater mutual understanding between the people of Australia and Indonesia” ‘.

On the ‘can’ side of the coin, consider the Japanese Government (particularly the Ministry for Foreign Affairs and its minister Aso) hopes for Japanese content to be a(n) (in)tangible but cogent source of soft power, allowing neighbouring nations to see Japan in a positive light. As mentioned in previous posts (and in a forthcoming book chapter), there is nothing to say that private companies will produce works that the government will be proud to peddle overseas or hold up as examples of national pride. If the ‘textbook issue’ (issued by a private publisher) in recent years is not example enough, a certain amount of animation that is produced in Japan services a ‘specific market’ that the Government of Japan might not be happy to announce that exists let alone be excited about using these products as representative works of Japan’s national image.

As anecdotal as these might be, they provide an interesting contrast of a government trying to alter the representation of the nation, and a government being unable (?) to control the image that private citizens and industry may be carving on their own.

An article today Other states embarrass NSW funding (Brisbane Times online Fairfax publication) suggests that funding for the arts and creative sectors in Australia’s most populous State has plateaued or even declined whereas states to the north (Queensland), South (Victoria), and west (South Australia) have boosted funding efforts.Quoting drama producer Brett Poppplewell:

“Over the last five or six years,” he says, “I’ve probably done over $US200 million [$238 million] of production and not one of them has been in NSW.”

Speak to people in certain sectors of the creative or content industries sectors such as games and animation and they will almost invariably tell you the same: Melbourne and Brisbane are the places to be – specifically due to favourable regulatory environments and specific industry policy support from the Victorian and Queensland Governments respectively.

A quick question (or five) to ponder for now:

  1. To what extent do subsidies, tax concessions, and grants from state governments lead to location tournaments between states where investors can ‘pick and choose’?
  2. How much do Queensland and Victoria feel the need (and New South Wales does not) to actively attract investment away from NSW given that Sydney is the biggest city and will tend to attract the most domestic and inward foreign direct investment? Similarly, on the arts front for example, does the NSW art scene benefit from larger donations from private sector patrons and sponsors?
  3. How much does production location actually matter in the creative industries? Of course, theatrical performances, ballet, and other live productions need to be performed locally, but does producing a movie in one location necessarily mean that the most valuable rents accrue to that region? Are we not in an age where post-production for example, can be done anywhere?
  4. How much emphasis is placed on the trickier and far more ‘slippery’ notion of attracting the activities that mean the IP and rights reside locally rather than just the jurisdiction being used for location shooting and supplying lower-end services?

Certainly, much contemporary thinking recognises the vital role played by the cultural industries in contributing to a thriving creative sector; a sector that the influential economist Richard Florida has argued is essential to a thriving economy.

Which brings me to a 5th and final question (for now): Isn’t one of the key takeaways from Florida’s work that a region’s lifestyle and importantly openness to new ideas is key to it attracting creatives (rather than giving tax concessions to investors and propping up local creative industries)?

A post regarding a piece of Australian federal budget news on film investment policy – which points to a whole set of questions about the political economy of investment attraction and (sustainable) industry development.

The following Sydney Morning Herald article indicates that the Australian Government is planning to increase the refundable tax rebate for local film and television production as part of a A$283 million package.

Domestic film productions will receive a 40 percent rebate, other productions (eg television) will receive 20, while international films will attract a 15 percent rebate (up from the current 12.5%).

On the one hand, providing tax concessions may be a necessity for Australia to continue attracting international productions if it wishes to stay competitive and attractive in the face of many other international locations. This is particularly so when considering the effort some nations in the region are expending to promote their local industries.

But on the other hand, the question needs to be asked: is promoting the use of Australia as a site for location shooting and other production the most sustainable way to grow the industry? How much of the foreign investment that is attracted in this way will be used on “fee-for-service” work that does not provide local industry players with ownership of copyrights? In theory, “service work” provides locals with income and international exposure (provided a local subsidiary is not being used for the work). Yet without owning any of the property’s rights, firms have little in the way of reusable assets.

Singapore’s Media Development Authority (MDA), for example, gives very little consideration for where the production of projects it supports, such as animated TV series, are taking place. The most important factor for the MDA is that Singaporean firms are engaged in the high-end creative work and are retaining at least part of the rights to the content that is being produced.

In contrast, the Australian Federal Government’s 2007-08 budget seems to suggest that Australian policymakers are still too interested in attracting foreign capital and creativity to utilise the services of Australian talent. Given, the production process of an animated TV series is different to a live-action feature. Yet on first glance the tax incentives appear somewhat short-sighted or parochial on the policymakers front by exacerbating an artificial division between supporting “Australian stories” and allowing international films to use local locations and talent.

The differential tax treatment between local and foreign productions if its aim is to encourage foreign investors to put their money into productions that classify as “Australian” by employing a certain number of key cast and crew. Still, the question remains whether productions that the government has classified as “Australian” will be saleable in the international market.

Why is the government keen to promote the industry? And just what is the notion with ‘bringing Hollywood home’ (was Hollywood ever in Australia to begin with)? Are we witnessing a case of government pandering to lobbying from the local film industry? Australian games developers, for example, are eager to gain access to these funds that are only available to film, television, and documentary properties. While the games developers, who predominantly develop games for overseas publishers, would naturally be eager to access such lucrative tax rebates, it begs the question why does the film industry and not other ‘content’ industries receive such government support?

Should support be provided to the local games industry for the creation of ‘original’ IP rather than service work for international publishers?

See also SMH article ‘Filmmakers get…’

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