At the close of last week, Sony Pictures Imageworks (SPI) announced it would be moving its headquarters from Los Angeles to Vancouver. While inevitable to many visual effects industry observers who understand the role of subsidies in moving VFX work away from California and the U.S., this certainly marks watershed moment, as none of the “big eight” studios is now located in southern California.
For some time there have been fewer than ten big studios responsible for the vast majority of feature film visual effects work. Of those, three were located in the Los Angeles region: Rhythm & Hues, Digital Domain, and SPI. With all three now gone from California, their staffs have either moved with those companies where possible, or left the business altogether. Digital Domain, like SPI, is now Vancouver-based. Rhythm & Hues no longer operates.
The problem for workers in the field of feature film visual effects is that the move is not the result of a new talent pool arising in places such as Vancouver to compete with California, but rather the relocation of workers formerly in the U.S. to foreign countries who are able to lure Hollywood productions using subsidies. Those do not for the most benefit visual effects companies but instead the Hollywood studios who are their clientele. These companies are compelled (forced, you could say) to move headquarters to wherever the most generous subsidy is offered or lose the job to a studio that is willing to do so.
In part one of my interview with Scott Ross, we discussed the commodification of individual roles within the industry. For part two, the topic is an effort by members of the VFX community to challenge the legality of foreign subsidies. In other industries just as critical to the U.S. economy as entertainment, foreign subsidies that cost jobs in the U.S. while benefitting U.S. companies have been found to be in violation of World Trade Organization (WTO) rules.
When such a violation of WTO rules is ruled to have occurred, “countervailing duties” (aka CVDs) are the mechanism by which the situation is remedied. In the case of Hollywood and the visual effects business, the question is whether footage produced by foreign facilities should be subject to import duty when it is delivered to American studios.
The effort to assert that Hollywood should indeed have to pay CVDs, and would in fact be liable for substantial duties for the entire period during which it has sought and gained subsidies from foreign competitors to U.S. effects facilities, is being led by Daniel Lay, a.k.a. “VFX Soldier.” Our conversation picks up where the last one ended, and took place prior to last Friday’s announcement by Sony.
Mark: Your perspective is provocative as usual.
Scott: That’s why they keep me boxed up and don’t let me near Hollywood anymore! Neither side likes to hear it like it is though. I could be wrong, but it seems like the logical progression. The only hope that I see is what Daniel Lay and the Association of Digital Artists, Professionals and Technicians (ADAPT) is trying to do with CVDs.
The CVDs are non political. It either is or it isn’t. You either pass the litmus test or you don’t and it’s not a decision that could be overturned by a senator, governor or president. It’s a non-political issue. It’s a digital issue. You either qualify or you don’t. And those decisions aren’t made on a political basis. So if in fact Daniel Lay and ADAPT and my compatriots can prove that the United States visual effects industry has been harmed, and it’s been harmed by unfair duties and tax subsidies from foreign nations, then the United States, by law, needs to levy duties those that are taking advantage of it and harming this domestic industry. And if that’s the case, if that case prevails, I think the motion picture studios are going to pay some very large sums, and it’s retroactive too, so whatever harm they’re liable for over the past few years or decade will also have to be paid. And that would be some serious money.
…if the case prevails, I think the motion picture studios are going to pay some very large sums…
Mark: It’s punishing, but it doesn’t help the victims of the policy directly, other than to change the policy. I have to think this would be tied up for years in the courts though.
Scott: It’s really an “on” or “off” thing. The question is, do you qualify, do you have the number of people, can you show the industry been harmed, can you represent this group of people legally? I think the legal counsel that is working for ADAPT is telling them that it’s going to be a year and a half to two years. That it’s not longer than that. There are precedents, whether it was in the shrimping industry or the lumber industry or whatever else. That’s the length of time the investigation took.
One other thing to look at too is what’s happening in the climate as well. Since the time of Life of Pi, the march on the Oscars and the piece of the pi day, there have been additional VFX companies that have gone bankrupt, and all of the subsidies and counties that were participating in this has gone up.
Every once in awhile there’s a story like, Detroit has done some analysis and realized that for every dollar spent in a tax-subsidy film incentive, they wind up having a .60 cents on the dollar return. So it’s a losing proposition. I think Carolina did it, Louisiana did it and they’re even talking about it in California. There’s information that’s coming out that substantiates that film-tax subsidies paid for by the tax payer is not a good thing. But even while that’s happening, we’re seeing a bill that’s being introduced to the state legislature in California which is asking for more tax-subsisdes for the film industry! It’s being sponsored by Democrats, and I’m a left-leaning person, and they’re saying they’re helping the worker. But they’re helping the 1% because those subsidies are going to the studios and those subsidies are being offset by shooting in LA. The VFX component is minimal though.
It’s crazy, because California is a state where roads are falling apart, teachers are paid awfully, police and firemen are getting laid off…and the legislature is saying “let’s give more money to Dreamworks.” Give me a break.
It does help production, but at the end, these things finance the mismanagement of studios with their inability to control costs and inability to make good product. So if you’re Paramount management you need to either get a whole lot smarter, make better movies and run the studio like an actual business…or, rely on taxpayers money to pay for their foibles, mistakes and stupidity. There’s some trickle down, where there will be more films shot in California. But in reality, that means everyone else just ups their ante, so the only people who come out on top are the people who run the studios and are making millions a year and flying all over the world in their jets. It’s the ultimate crony capitalism. Democrats are trying to convince the populace that these are good things because they’re giving money to the gaffers and grips. But it’s clear where that money is really going.
Click here to check out Part 1 of the discussion