Thursday, March 20, 2014

"Considering VFX"

There's another report out about how California's entertainment industry is currently starved for oxygen and thus eating it.

The section on page 15 (linked above) caught my attention. It's nice to see that some people have a clue.

... As larger budget films become more visual, dramatic and technological in their effects, the portion of the production budget spent on visual effects has increased commensurately. Yet in spite of the growth of the industry resulting from visual effects being increasingly integrated into films, employment in the industry in California has been stagnant over the past decade as outsourcing of services to facilities outside of the nation continues, drawn by generous subsidies and lower-cost labor.

California is one of only a handful of locations that does not have subsidy programs specifically targeting visual effects. As a result, even California-based companies are opening offices in Canada, the United Kingdom and in Asia to qualify for tax incentives offered in those locations.

For the special effects industry, even more so than film and television production, the work can be done anywhere by qualified labor. It is a lucrative business, with a high-skilled, highly-technical workforce that can produce quality product using personal computers across the globe. As such, the threat to this industry’s long-term survival in California is real.

Consequently, a provision specifically aimed at allowing visual effects providers to access tax credits may be considered.

The credit level applied to visual effects should be determined based on (a) the acceptable level of ROI and (b) the expected percentage of California expenditures that qualify for inclusion. If the acceptable level of ROI is 1.00, and assuming all visual effects expenditures in California qualify, then using the relationship between the two variables found in Exhibit 5-1 the maximum credit incentive level would be 12.5 percent. It is not known whether this would be sufficient to make the domestic industry competitive. ...

If AB 1839, the legislation to expand California movie and television tax credits that is now under consideration in Sacramento, gets passed, it would be good if there were benefits to the Golden State's visual effects businesses, since they are

a) high wage employers,
b) high tech business that are a big plus for the state, and
c) a growing and vibrant part of the motion picture business, so to exclude them from the bill doesn't make a huge amount of sense.

There will be a number of amendments to the AB 1839 (and its Senate counterpart) over the next few months, so visual effects might be brought under the law's umbrella before the bill is voted up or down. The report from California's governments simply spells out the obvious: It's not a swift idea to not have a growing, cutting-edge sector of the movie business left out of the bill, but politicians (have you noticed?) march to their own drummer lobbyist.


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