California Not Benefiting from Post Production on Big Budget Runaways

Posted on April 29, 2011 by

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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 billion 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?

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Posted in: Economic Data