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Multi-movie Avatar deal lands in NZ, production could see 25% in rebates

Rumours can be laid to rest that James Cameron is taking his Avatar movies offshore.

This morning John Key confirmed the next three Avatar movies will be filmed here and the movies’ productions, with a combined budget of at least $NZ500 million, could see up to 25% in rebates on production expenditure.

The government has signed a memorandum of understanding with Lightstorm Entertainment and Twentieth Century Fox Film Corp.

The Avatar sequels will provide hundreds of jobs and thousands of hours of work, Economic Development minister Steven Joyce says in a press release. About 90% of the live action crew are expected to be New Zealanders, according to the statement.

The companies plan to spend at least $NZ500 million in New Zealand including most of the live action shooting and visual effects. 

The memo follows the separate announcement today by the government that it is boosting screen production incentives for both overseas and New Zealand productions to encourage more film and TV to be made in New Zealand.

Incentives call for raising the baseline rebate from 15% to 20%. Productions will get points for specific benefits to New Zealand, which may entitle some to an additional 5% rebate.

If the upcoming Avatar films fulfil the requirements set out in the memorandum, they could qualify for a total rebate of 25%.

The memo outlines an agreement between the Crown, Lightstorm and Twentieth Century Fox to foster a long-term relationship to build the screen sector in the country.

It calls for New Zealand to host at least one official red carpet premiere and featurette on New Zealand to be included included in DVD and Blu-Ray editions.

Mr Cameron and Jon Landau could also serve as founding members of a new screen advisory board, which will provide advice and guidance to New Zealand screen and film makers looking to make their marks internationally.

NZ Game Developers Association CEO Stephen Knightly tells NBR the government missed a trick by not by not including an Avatar video game in the deal.

"The new scheme places great emphasis on New Zealanders developing and owning their own IP, exporting it and being open to new digital distribution platforms.  These are exactly the ingredients that fueled the growth in the local video games industry. It will give local screen producers more commercial leverage when they seek global deals," Mr Knightly says.

"International best practice when you're exploiting your IP is to include video games in the mix. It's just a no-brainer. Today's announcement is a philosophical step in that direction but it's a missed opportunity for the wider screen sector that they haven't addressed gaming yet.

"All the countries a cabinet paper compared New Zealand's film incentives to also integrate digital gaming into their screen strategies."

Mr Cameron, soon to be a New Zealand resident, told a briefing in Wellington the producers would have had to look offshore if incentives weren't sweetened.

"I'm glad it never came to that," Mr Cameron says.

RAW DATA: Memorandum of Understanding New Avatar Films114.25 KB

Comments and questions

How much of NZ's GDP was generated by the local ITC industry? About 5%.

How many new permeant Information Technology and Communication jobs where created in 2012? About 1630 new full time jobs.

Where is the 25% rebate for people who contribute year in and year out to the New Zealand economy? Nowhere...

Money to the film industry is a one off bribe to get a one off piece of work completed in a specified location. There is minimal long term benefit to New Zealand with the film industry turning the rebate system globally into some tax payer funded global arms race. Any payment today will not generate any long term guarantee of future work for New Zealand and when some other country is convinced to rebate 30% we will have 1000's of kiwi's who have invested in training and infrastructure to make films here saddled with debt and no incomes.

All that glitters is not gold, when it involves film makers from tinseltown...

Tell that to the tourism industry.

Indeed, but at least the tourism sector gets its 5 minutes in the sun as Stuff reports one of the requirements to get the rebate is "... and a featurette on New Zealand being included in DVDs and Blu Rays." Hopefully Cameron will use NZ ICT geeks.

Subsidies to gypsy businesses like that do not achieve any public good, The topic has been studies exhaustively around cities and counties in the USA (where some States are passing laws to ban tinpot Mayors from bribing private businesses to relocate). All that happens in the long run is that wealthy people grow wealthier at the expense of taxpayers, The only motivation to keep doing it seems to be the vanity of politicians,

If that's right, how about you ask the tourist industry to subsidise the movie makers?

They are - along with the rest of us.

The yardstick by which the Lord of the Rings brought tourists to New Zealand can simply not be extrapolated out to every other film project. That body of work was very unique, the landscape became as much a part of the films as the characters and story. The movie was an outlier given the size of the budget and the trust Hollywood bestowed on a director otherwise unknown to the mainstream. Sir Peter and the Weta guys and girls received accolades for their personal achievements and these accolades featured their kiwi heritage and ingenuity which brought tremendous exposure to New Zealand.

In 2003 the Tom Cruise movie, The Last Samurai was made in New Zealand. Tourism impact zero. Take also the 2005 film The Lion the Witch and the Wardrobe with NZ director Andrew Adamson. Tourism impact zero. Virtually nobody outside the industry even knew that a heap of the digital fx and principal live photography in the original Avatar was done in Wellington. Again tourism impact zero.

Tax payer subsidies to be paid to big budget film studios so they can make a film they are going to make anyway, with contract only labour and to which the eventual profits will be shifted outside the jurisdiction of the NZ income tax is a travesty.

What would the long term benefit be if instead of giving $125m tax payers subsidy to billionaire James Cameron the NZ government invested $125m in education scholarships for advanced science and medicine to people who guarantee to stay and work in New Zealand for a minimum of 5-10 years and global IP rights being held by NZ people, companies or institutions?

Cash payments to movie billionaires for short term movie projects in order to help employment opportunities for New Zealanders is like taking a paracetamol to treat a broken arm. Short term help if you are lucky but fails to address the underlying issues.

We should be investing in technology and science development that will benefit the country long past a wrap party or movie premier.

Written like it is straight out of those pimpled faced Treasury analysts who have no idea whatsoever about spin-off effects of taxation, social benefits, recreational benefits, inspirational benefits etc etc to New Zealand.

The film industry needs tax payer subsidies because it makes us feel warm and fuzzy?

By that logic we should rebate 25% from the NZ Wine Industry too. A bottle of Sauvignon Blanc from Marlborough, New Zealand or Pinot Noir from Central Otago, New Zealand has huge positive exposure globally to high income consumers, plus it makes you warm and fuzzy after you responsibly enjoy a bottle or two... Lets drop the excise on New Zealand wine and bring in 25% rebates to the wine industry for excellence in exposing our great little country to affluent potential tourists!

so by one off im guessing your referring to the three films that are being made, im also guessing your not aware of the amount if infrastructure that goes behind a film of the magnitude including you I.T jobs. Also just food for thought why dont you have a chat to any business in Wellington, and ask them how there business increased after Lord of the rings began shooting till now.

LOTR was shot in the boom days before the Global Financial Crisis. A direct comparison to todays economy is misguided.

I'm not arguing that there is no spin on benefits from making movies in New Zealand. I am arguing that the special treatment that Hollywood gets is unjustified and unsustainable long term. The rebate system has become an international arms race with billion dollar movie backers laughing all the way to the bank.

No other industry is offered these same subsidies so why is it acceptable to give them to Hollywood? Take the current Trans-Pacific Partnership negotiations that are going on. In every other industry like farming and food production the world is trying to ban subsidies as subsidies are not sustainable methods of economic production. Exactly how every other industry under TPP gets subsidies cut but Hollywood gets to keep their subsidies while at the same time pass the the burden of policing copyright violation on to tax payers through criminalisation of traditional civil issues simply blows my mind.

These guys get to have their cake and eat it too because weak minded politicians and public officials get blinded by the flashing lights of tinseltown. I do take my hat off to the effectiveness of their lobbyists, they are going a great job for their clients at the expense of every day tax payers who are footing the bill for their excess.

How do these rebates work? Is it simply the govt. handing over 20 to 25% of the total spend, or is it more complex than that?

It's audited and paid after the money has been spent in NZ apparently. The product has already been been sold and financed before production starts too.

Also, for NZ productions in $15m-$50m range the government will take equity not a grant.

Therefore it is not a rebate. A rebate is a refund from payee to payer. This is simply the govt. making an incentive payment..

Shouldn't be long before Labour and the Greens promise to put an end to this madness.

Jacinda has been actively campaigning for more support so difficult for her to back track. To her credit, she has come out in support, but obviously claimed the credit.

Tend to agree with you Rob - its all very sparkly and glittery now but what does indeed happen when country X offers 30% - sadly it is a no brainer.

An aspect of this business that often gets overlooked is 'creative IP' and capital raising. People often complain about our shallow capital markets in general, and how hard it is to raise capital for plant let along startup IP or R&D IP. Creative IP funding is even harder to come by in NZ. Yet, as the success of the likes of Avatar show some great returns are possible. The govt grant/equity stake will help NZ producers own some of that IP and have a better bargaining position. The real goal is a NZ-owned Avatar or Hobbit. It's a bit like NZVIF but for creative industries.

Perhaps the govt could take a cut of the box office in return for the rebate. 25% rebate on production costs, and then 10% back as a cut of earnings at the box office for instance. NZ on Air could be given that 10% of the box office of any film made in NZ as its funding model. That should boost the funds available to the NZ industry.

This might work if the NZ Government got a percent of the Gross Revenue. Hollywood has a tradition of paying out minimal or zero to beneficiaries supposed to share in the Net Receipts. Google "Hollywood Accounting" and see how block buster hits like Forrest Gump never made any money and the original author of the work was left feeling he was cheated out of getting any money.

Hi Rob, I know of the Hollywood accounting model, but PJ managed to corral his share from his movies. I'm sure it could be negotiated to both parties benefit. The point being to get something more postive back from the support (largess) given by government.
I think too that we should not lose sight of the long term beneficial clauses that Steven Joyce has engineered. The patsy one of the Tourism featurette film, but then there is "an agreement between the Crown, Lightstorm and Twentieth Century Fox to foster a long-term relationship to build the screen sector in the country" + Mr Cameron and Jon Landau could also serve as founding members of a new screen advisory board, + "new scheme places great emphasis on New Zealanders developing and owning their own IP, etc"
I think these elements are where the real long term value of this deal lies.
It's time we grew up and sowed the seeds of our long term future in this industry.

The Joyce clause is this the same as the deal done with Right Hemisphere. Build an industry - largely failed and the US investor would look at other deals. All care no responsibility. Will come to nothing.

The industry was supposed to be developed over the past decade. Same deal with the NZ Venture fund and Incubators but they just become dependent children requiring more money to stay alive but always with the promise we will get it right next time.

Sounds like more "corporate welfare" to my ears...

If Chorus got a 25% rebate on expenditure to solve its funding shortfall there would be outrage.