California Not Benefiting from Post Production on Big Budget Runaways
When the recent film Battle: Los Angeles hit Los Angeles area movie theaters, much of the attention in the press focused on the fact that the film was made in Louisiana. Indeed, much of the live action and principal photography was done in Louisiana, which is also where most of the film’s budget was spent. According to a report released this week, $45.2 million of the film’s $68.8 million was spent in the Bayou State, which earned the producers a $13.6 million tax credit from the state. But if people think the rest of the $23.6 million of the film’s budget, largely for visual effects, was spent here in California, they would be mistaken. According to a report from the British Columbia Film Commission, the other place Battle: Los Angeles “filmed” was in Vancouver.
As Richard Verrier pointed out in the Los Angeles Times, the visual effects industry in California “is under siege”:
California’s visual effects industry, which pioneered the use of computers to create and manipulate images in live-action films, is under siege.
Half a dozen visual effects houses have shut their doors in the last three years, including three in Los Angeles County, pushing hundreds of visual effects artists out of high-tech and skilled jobs that pay $75,000 to $150,000 a year. Los Angeles County, where the visual effects industry has been concentrated, has seen more than 1,000 jobs in the visual effects and post-production sector vanish over the last decade, according to state employment data.
In fact, the state employment data mentioned in the Los Angeles Times article shows that the number of workers employed in the visual effects industry in Los Angeles county has declined 30% from it’s peak in 1996 to under 7,500 in 2009. Complete data for 2010 is not yet available. According to Verrier’s article, the combination of cheap labor and tax credits in other states and countries is the reason for the decline, which has not seen significant relief even with the introduction of the California Film and Television Tax Credit:
Even though demand for visual effects in movies is greater than ever thanks to spectacles such as “Avatar” and “Tron: Legacy,” several California visual effects companies are clawing for survival. The reason is a familiar one to American industry: mounting competition from foreign rivals that can do the work cheaper.
By taking advantage of tax credits in Vancouver, Canada, and London — where visual effects work for “Iron Man 2″ and “Inception” was done — or employing low-cost labor in China, Singapore and India, filmmakers are able to shave tens of millions of dollars off a movie’s production budget.
The state’s film tax credit program has brought little relief to California’s beleaguered visual effects industry because it excludes big-budget features, the principal employer of visual effects. And the state is seeing worked siphoned off to Vancouver, where a film tax credit program targets visual effects houses.
Most visual effects companies operate on narrow profit margins of 5% or less. So the loss of a single contract can be enough to push some companies over the edge.
The statistics from the British Columbia Film Commission confirm Verrier’s report. In the last three years, roughly one third of the US feature films that spent money in the province was for “VFX only”:
| Year | US Features in British Columbia |
| 2010 | 13 of 32 US features for VFX only |
| 2009 | 12 of 29 US features for VFX only |
| 2008 | 13 of 38 US features for VFX only |
So while Louisiana landed Battle: Los Angeles and the upcoming Green Lantern for the live action portion of the production, Vancouver landed the benefit of the lucrative and labor intensive visual effects work. Wouldn’t it be nice if that post-production work took place in California?
Definitely it would be great, if the post-production work took place in our Los Angeles, California instead of Louisiana and Vancouver. This would generate thousands of jobs and save so many LA companies going broke.
Director: USTravelCompanions.Com & USHollywoodBollywood.Com
That’s the just nature of competition.
If the playing field is not level, however, it’s not much of a competition. If the government in a place like Vancouver is willing to subsidize the cost of labor or production-related expenses, then a company there has an artificial advantage if competing against a company in a place like California (sans incentive). The problem with incentives is that they have the tendency to distort the market and make it appear that services or work product is superior in a place that has them (incentives) over a place that does not. On a level playing field, however, California can still be a potent competitor.
Many people say it’s too expensive to film in California, hence runaway production. Before tax incentives, however, the alleged high cost of doing business was not onerous enough to cause so much runaway production that it became an epidemic. Far from it. Louisiana does not have any notable attributes that make it cheaper than California. The only reason it’s significantly “cheaper” is because the government is footing 30-35% of the tab. If “Green Lantern” was not able to get the $34.5 million from Louisiana, they would have shot it more “costly” California (assuming other incentives elsewhere were not available). For now, film incentives are the name of the game. That said, in the 100+ years of Hollywood, the era of incentives is a blip on the radar. Before 1997, they were not an issue. The question now is, how long will they last? How long can cash-strapped governments hand out $35 million checks for a single production?
Other place give great incentives, while California charges out the wazoo for permits. The last pilot I produced, 10% of my budget went to permits. I don’t know why anyone would be surprised at Cali loosing so many industry jobs.
Um, I’m guessing 68.8 billion is a typo and should be million. Otherwise that’s the most expensive movie ever made. Ever.