UK film production in 2009, and US tax incentives in passing

In addition to publication last week of the UK’s annual box office and admissions totals, the UK Film Council released a slew of production data for 2009.

The press release accompanying the report (Film production in the UK – Full Year 2009 Report) carries the words ‘mixed’ and ‘fortunes’ in the title, which seems about right.

For while the UK benefited from £752.7 million of inward investment feature spend in 2009, pushing total spend for the year to £956.9 million (up 56% on 2008’s total), domestic feature and co-production activity was far less impressive.

The production of domestic features contributed £169.2 million to the total spend for the year, down from £207.2 million in 2008 (Figure 1). Meanwhile spend on UK co-productions amounted to a miserly £35 million, barely enough to pay for half an hour of Avatar’s runtime. UK 'co-producers', a species under threat, must surely know how the Na’vi feel.

Figure 1: UK spend of features produced in the UK, 2003 - 2009, £ millions

Source: UK Film Council

The overall number of UK productions has been remarkably consistent over the last three years. 125 features with budgets over £500k were made in 2009, compared with 126 in 2008 and 127 in 2007. But it’s a far cry from the heady days on 2003, when cameras rolled on 196 productions, over half of which were co-productions (Figure 2).

Figure 2: Number of features produced in the UK, 2003 - 2009

Source: UK Film Council

Although the number of co-productions held steady at 22 in 2009, the level remains at a historic low, ‘a function of the one flaw in the otherwise excellent film tax credit’, according to the UK Film Council, ‘which disincentivises UK participation in co-productions by focusing tax relief on production spend made on the ground in the UK.’

This idea of the unintended (and unwelcome) consequences of fiscal policy also surfaces in a ‘Special Report’ on US movie production incentives (MPIs) issued earlier this month by the Tax Foundation, a US-based ‘nonpartisan educational organization’.

The Foundation favours broad-based, low level taxation and is firmly opposed to tax credits and incentives for particular industries. So the report’s indictment of MPIs (described in the title as ‘Blockbuster Support for Lackluster Policy’) is hardly surprising. ‘While broad-based tax competition often benefits consumers and spurs economic growth and development’, writes report author William Luther, ‘industry-specific tax competition transfers wealth from the many to the few. Movie production incentives are costly and fail to live up to their promises’.

For me, the more startling realisation is that MPIs are now so widespread in the US. In Europe, and in many other parts of the world where home markets are dominated by US studio product, we’re quite used to public money supporting the local industry. But I had no idea of the number of US states offering tax and other incentives for feature production. Back in 2002 only five states offered MPIs. Since then, 39 other states have joined the party (in what Luther terms the ‘arms race of incentives’), including Hollywood’s home state of California.

Interestingly enough, FilmLA has recently credited the California Film and Television Tax Credit with easing the annual rate of decline in location shoots in the state. According to numbers released last week, on-location feature film production in Los Angeles fell by 29.9% in 2009, ‘the steepest year- over-year decline since tracking began in 1993’, although production activity rose in the final quarter of the year thanks to ‘incentive-driven production’ (the film incentive scheme came on stream in July 2009). In light of data such as these, the scrabble for production dollars is only likely to intensify and MPIs are bound to figure prominently for some time to come.

Comments

[Jonathan Polansky]

For another bit of unintended fallout from US film incentives — equally applicable to Canadian, UK and other countries' tax credit schemes, see this startling public health report (!) from the University of California, San Francisco. (It also has lots of detail on US states' tax incentives)...

http://escholarship.org/uc/item/8nc8422j

The movie smoking link may seem far-fetched, but it's actually backed up by years of research in the US, Germany, Mexico, Australia, New Zealand, etc. The World Health Organization is also pushing to get smoking out of kid-rated films worldwide. Could public subsidies for kids' films with smoking put ALL film incentives at risk, if not fixed?