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Government offers a bit of Christmas cheer

The gist of today’s announcement, made at the NZFC, is that headline incentive rates will go up for both inbound production and NZ TV production. There’s a considerable amount of detail to come, which will either confirm initial joy or tweak expectations.

The one bad thing was the launch itself. Advised at short notice as an online event via TV3’s news, the announced stream didn’t stream this morning. A colour bar and annoying beep played in the stream’s place, until they both disappeared.

The old saw has it that first impressions are important, and the first impression of the announcement was of a fail. Had it actually happened, was it delayed … who knew?

However, once that fine example of NZ’s internet capacity had been addressed by dispatching carrier pigeons, information began to percolate through the industry and to the people much of it was really designed for – the public. The changes to incentives and a lot of detail doesn’t help the public understand, so it was wrapped up in a nice simple box. James Cameron and John Key announced three more Avatar movies would be made here.

Desert Road’s Steven O’Meagher called it “great news”, saying, “It’s a shot in the arm for New Zealand’s international profile and for local crews. The more world-class filmmakers we can get in the New Zealand, the better.”

SPP’s John Barnett called the incentives announcement “holistic, a terrific suite” of changes.

The press release, accompanied by the Cabinet Minute and Paper, did deliver a much-wanted change to the baseline incentive rate for inbound productions – to 20%.

That was indeed good news, even if the waters were somewhat muddied by changing this, that and the other, and announcing a whole bunch of fairly important stuff still to be agreed.

The unhappy people today were at Treasury, whose statement on the whole business (contained in the Cabinet paper) was:

”Treasury does not support any further subsidies for the film industry … Further subsidies will only increase costs and offer weak benefits … The current regime is also estimated to have had an overall negative fiscal impact of $168m once tax revenue that would have been earned anyway is taken into account.”

The validity of Treasury’s methodology was widely disputed in view of international reports, especially a UK one by Oxford Economics, which came to the opposite conclusion ahead of recently-announced improvements to the UK’s incentive schemes.

In some ways the proposed changes here mirror those announced in the UK, but there are a number of issues still to be clarified.

20 – 25%
The baseline rate under the LBSPG of 15% will rise to 20% on 1 April. That’s good news for industry, which argued for at least amount that during the Screen Sector Review.

O’Meagher observed, “It’s great the rate has been increased. It gets us back in the game internationally.”

For some productions, it will get better than 20%. The announcement offers the carrot of up to 25%, saying

To gain an additional 5 per cent rebate, applicants will need to meet a points test relating to significant economic benefits.

As part of the change, additional support announced prior to The Hobbit is gone. Intended to reward the highest of high-budget productions ($200 million+), it failed to attract anything other than the Hobbit titles around which it was designed.

One scheme to rule them all
Also gone are SPIF and the the LBSPG.

They’ll be replaced by the New Zealand Screen Production Grant (NZSPG) but … the NZSPG will be divided (mostly by budget level) into areas of qualification that might have been more easily understood if they’d remained as separate entities.

In theory, it’s good news that SPIF has gone because (unlike the LBSPG) the amount of money available under it was capped. The new NZSPG will not be capped. However, as the SPIF cap was never reached, this in itself won’t make much change.

What could make more of a change is the upping of TV support under the new SPIF-equivalent part of the NZSPG.

40% for TV
There’s long been criticism of the lower (20%) rate for TV under SPIF, against film’s 40%. That disappears for New Zealand film and television productions of up to $15 million, although the New Zealand content points remains. The rebate, as presently, will continue to be payable as a grant.

The second major change is for NZ film and television productions between $15-50 million. The points test will cover both business and cultural factors. Taxpayer dollars awarded to productions in this budget bracket will no longer be a grant, but an equity share.

“This is a significant and aspirational opportunity for NZ producers, screen companies can now have higher budget ambitions and are incentivised to create and develop NZ owned film and television IP that they can exploit internationally” said SPADA President Fletcher in a release welcoming the news.

John Barnett echoed the point, saying, “The challenge is for NZ producers to get off their arses.” He added that SPP had seen a couple of projects in recent months that had been assessed as financially challenging, which might be more viable under the new arrangements.

However, the $!5 million+ production arrangements are one of the areas where the absence of detail is confusing. Will the NZSPG for $15-50 million productions be paid as a grant up to $15 million and then taken as an equity position above that amount? Or will it be a 40% equity stake in the total amount? That does make a difference for producers.

Still the same
Thresholds remain pretty much intact. The NZSPG’s LBSPG equivalent will still kick in at $15 million of qualifying NZ spend. Ditto for the PDV’s threshold of $1 million and TV’s $4 million.

Government has announced that all the information will be available on the NZFC website on 1 April, following consultation with industry on various aspects of the detail including tweaks to the points test. Government has already indicated this won’t be absolute, as it intends to retain discretionary ability to count productions in or out of the NZ route to qualification.

The media release is here.

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