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'''Runaway production''' is a ]<ref name="DGAMonitorReport">{{cite web |url=http://www.dga.org/news/pr_runaway.pdf |title=U.S. Runaway Film and Television Study Report |accessdate=2007-01-25 |author=Monitor Company |date= |year=1999 |month= |format=PDF |publisher=Director's Guild of America/Screen Actors Guild |pages=29}}</ref><ref name="AustralianBook">{{cite book|title=Chasing the Runaways: Foreign Film Production and Film Studio Development in Australia 1988-2002|last=Herd|first=Nick|location=Strawberry Hills|publisher=Currency Press|date=2004|id= ISBN 0958121338}}</ref><ref name="CanadianUseofTerm">{{cite news|url=http://www.friends.ca/News/Friends_News/archives/articles07060301.asp|title=Toronto TV production is fading to black|last=Felstead|first=Debra|publisher=Media Monitor Digest|date=Jul 06, 2003|accessdate=2007-01-27}}</ref> term used to define ] productions and ] shows that according to one study are "intended for initial release/exhibition or television broadcast in the '''Runaway production''' is a ]<ref name="DGAMonitorReport">{{cite web |url=http://www.dga.org/news/pr_runaway.pdf |title=U.S. Runaway Film and Television Study Report |accessdate=2007-01-25 |author=Monitor Company |date= |year=1999 |month= |format=PDF |publisher=Director's Guild of America/Screen Actors Guild |pages=29}}</ref><ref name="AustralianBook">{{cite book|title=Chasing the Runaways: Foreign Film Production and Film Studio Development in Australia 1988-2002|last=Herd|first=Nick|location=Strawberry Hills|publisher=Currency Press|date=2004|id= ISBN 0958121338}}</ref><ref name="CanadianUseofTerm">{{cite news|url=http://www.friends.ca/News/Friends_News/archives/articles07060301.asp|title=Toronto TV production is fading to black|last=Felstead|first=Debra|publisher=Media Monitor Digest|date=Jul 06, 2003|accessdate=2007-01-27}}</ref> term used to define ] productions and ] shows that according to one study are "intended for initial release/exhibition or television broadcast in the
], but are actually filmed in another country."<ref name="DGAMonitorReport"/> These productions are specifically relocated to other countries for economic or creative reasons. ], but are actually filmed in another country."<ref name="DGAMonitorReport"/> These productions are specifically relocated to other countries for economic or creative reasons.

Revision as of 00:19, 7 February 2007

Runaway production is a film industry term used to define motion picture productions and television shows that according to one study are "intended for initial release/exhibition or television broadcast in the U.S., but are actually filmed in another country." These productions are specifically relocated to other countries for economic or creative reasons. But according to The Center for Entertainment Industry Data and Research (CEIDR) 2005 Production Report, the trend of "runaway production" is more frequently linked to American films and television productions that are being lured away from traditional U.S. locations to foreign locations offering substantial foreign government subsidies. According to the CEIDR report, "The analysis reveals that, while there are certainly general economic factors at play, such as relative labor and exchange rates, the data over the past several years strongly suggests that proliferation of production subsidies around the globe has been one of the most significant factors affecting the choice of production venues for a significant volume of production." "Filming that used to be done almost exclusively in California is now seeing competition from outside the state, where filmmakers enjoy government subsidies, tax credits and other incentives."

The non-profit group The Film and Television Action Committee (FTAC) reports that the problem of runaway production is "not based upon rational economic factors such as productive “A” list crews, infrastructure and the availability of (foreign) production facilities but on the basis of how much (foreign) governments offer to pay the 6 major studios and media corporations in the form of subsidies and other economic tax based incentives." FTAC studies state that "in just the past six years, the film production subsidies ranging as high as 44% of payroll, have removed three quarters of U.S. long form television production and one quarter of U.S. feature film production from our (U.S.) shores. These films are now shooting in the 19 foreign countries that offer these subsidies. The economic impact of this crisis has been devastating to the 250,000 (American) film workers, and the 10,000 small businesses that derive their income from the production of American filmed entertainment products."

Overview

A report commissioned by the Directors Guild of America (DGA) defined two classes of runaway productions. "Creative runaways" are film and television projects that are produced outside of the United States (in part or in whole) based on requirements of the script or the setting, or due to preferences of the actors or director. "Economic runaways", on the other hand, are productions that are primarily produced in other countries to reduce costs. This type of production typically involves films that are set (written to be shot) in the United States but which have instead been outsourced to other countries such as Canada, which according to CEIDR receives 90% of the runaway productions and offers the bulk of the subsidies. A subsidy is defined as financial contributions or kickbacks where "government revenue that is otherwise due is foregone or not collected" according to GATT - General Agreement on Tariffs and Trade.

Other countries that have jumped into or out of the subsidies game may include: Australia, Fiji, Germany, Hungary, Ireland, New Zealand, South Africa, and the United Kingdom. Traditionally these productions would have been produced in established U.S. film industry locations such as Hollywood, New York City and Chicago.

History

Over the past decade, the Canadian government introduced an aggressive labor subsidy program to lure away U.S. film and television productions. The U.S. film industry has voiced concerns over an increase in the number of runaway film and television productions, a trend which began in the mid to late 1990s. The most contentious issue has been the availability of subsidies, specifically foreign government "rebates" and/or tax incentives to lure American productions to relocate to other production locales.

According to the 2005 report by CEIDR, "the connection between the advent of Canadian Production subsidies in late 1998 and the dramatic increase in production that occurred in the following year (as reflected by the 144% increase in dollar volume for the 2000 release year films) appears unassailable as there were no appreciable changes in exchange rates or labor rates to justify this dramatic shift from one year to the next, other than the subsidy programs"

At least $13 billion is doled out annually in corporate welfare to the business sector in combined Canadian federal and provincial subsidies and tax breaks, according to the Canadian Taxpayers Federation (CTF), a conservative tax watchdog. The CTF released a report saying that from 1982 to 1997, the Canadian federal government handed out $11 billion in 32,969 grants and loans to the provinces earmarked as business subsidies or directly to corporations. "Walter Robinson, the CTF's federal director, says the government should not be spending public monies in this manner. "We just don't believe in the government playing venture capitalist or financier for any industry," he says. "Either leave that money in taxpayers' pockets or, if you are hell-bent on spending it, spend it on social infrastructure -- put it into hospital beds, into university transfers or the pensions of seniors."

A DGA study notes that "the Canadian government has engaged in a comprehensive and aggressive, long-term strategic campaign to attract U.S. producers." The report estimates that runaway productions cost the United States over 50,000 jobs and at least US$10 billion in production monies annually. According to a 2001 U.S. Department of Commerce report by Commerce Secretary, Norman Mineta, "Runaway film production' has affected thousands of (U.S.) workers in industries ranging from computer graphic to construction workers and caterers. These losses threaten to disrupt important parts of a vital American industry."

Canada: A Program of Aggressive Labor Subsidies and Corporate Welfare

Corporate welfare is defined as any action by local, provincial or federal government that gives a corporation or an entire industry a benefit not offered to others. It can be an outright subsidy, a grant, real estate, a low-interest loan, government service or a tax break.

"In a broader sense, corporate welfare has probably reached its worst point," says Peter Bleyer, executive director of the Council of Canadians. "It's no longer just about subsidies, but access to resources and influence. It's really more about shifting power overall than it is about money changing hands." "There isn't any question that tax incentives are absolutely the equivalent of a government writing these folks a cheque," says Neil Brooks, a professor of tax law and policy at Osgoode Hall Law School. "It's correct to call it corporate welfare."

Over the past decade, the Canadian government introduced an aggressive labor subsidy program to lure away U.S. film and television productions. The U.S. film industry has voiced concerns over an increase in the number of runaway film and television productions, a trend which began in the mid to late 1990s.

The most contentious issue has been the availability of subsidies, specifically foreign government "rebates" and/or tax incentives to lure American productions to relocate to other production locales. According to the 2005 report by CEIDR, "the connection between the advent of Canadian Production subsidies in late 1998 and the dramatic increase in production that occurred in the following year (as reflected by the 144% increase in dollar volume for the 2000 release year films) appears unassailable as there were no appreciable changes in exchange rates or labor rates to justify this dramatic shift from one year to the next, other than the subsidy programs"

At least $13 billion is doled out annually in corporate welfare to the business sector in combined Canadian federal and provincial subsidies and tax breaks, according to the Canadian Taxpayers Federation (CTF), a conservative tax watchdog. The CTF released a report saying that from 1982 to 1997, the Canadian federal government handed out $11 billion in 32,969 grants and loans to the provinces earmarked as business subsidies or directly to corporations. "Walter Robinson, the CTF's federal director, says the government should not be spending public monies in this manner. "We just don't believe in the government playing venture capitalist or financier for any industry," he says. "Either leave that money in taxpayers' pockets or, if you are hell-bent on spending it, spend it on social infrastructure -- put it into hospital beds, into university transfers or the pensions of seniors."

A Directors Guild of America (DGA)-funded study notes that "the Canadian government has engaged in a comprehensive and aggressive, long-term strategic campaign to attract U.S. producers." The report estimates that runaway productions cost the United States over 50,000 jobs and at least US$10 billion in production monies annually. According to a 2001 U.S. Department of Commerce report by Commerce Secretary, Norman Mineta, "Runaway film production' has affected thousands of (U.S.) workers in industries ranging from computer graphic to construction workers and caterers. These losses threaten to disrupt important parts of a vital American industry."

Competing subsidies

Canada's TV production industry is like a house of cards -- "a rickety structure made up of regulatory protection, cable subsidy and taxpayer support – all of which could come tumbling down with just a huff or a puff."

“Who is representing the interests of taxpayers here?” asked CTF Saskatchewan director David MacLean. “The film industry is playing the Saskatchewan government like a worn-out movie script, drawing them into bidding war with other provinces. It’s a race to the bottom where nobody wins except film producers.”

When faced with the prospect of a worldwide subsidy war, Ron Haney, executive director of the Directors Guild of Canada is quoted as saying, "Everybody can compete with tax credits now…. It's absolutely frightening." This is ironic because it was Canada that first started doling out the subsidies in the first place.

According to a study by the Canadian government, productions are beginning to "run away" from Canada as well. Productions are now going to countries that have introduced competing and/or counter-incentives and/or subsidies. Many productions are starting to return to the United States due to recent legislation to counteract runaway production.

Several Canadian companies are also pulling their support for Canadian Television Fund (CTF) because, "(It) was never intended as a permanent source of funding" to subsidize broadcasters and programmers. One Candian company stated that, "Our understanding was that after the initial five-year period, the fund would be self-sustaining and self-financing from a return on investment in successful productions."

"The Vancouver Sun’s Michael McCullough points out that California not only has the world’s highest production costs it also has no tax credits. How do they do it? That’s the question BC’s film industry should be asking, rather than looking to taxpayers to buck up... The tit for tat tax credit game is one with only one loser, the taxpayer. There will always be other jurisdictions that will out-subsidize BC. Louisiana offers a straight 20% subsidy for production costs, is that the next industry demand? It is not the job of the government to keep up with incentives but the industry’s role to remain competitive."

The U.S. Fights to Retain Cultural Legacy and to Keep U.S. Film Industry Jobs

Runaway production is largely still an issue of fair trade, and one that continues to cost the U.S. jobs and lost revenues, in addition to doing serious long-term damage to America's filmmaking culture and tradition. The potential loss of a hundred-year old industry and the siphoning of U.S. jobs has not gone unnoticed in the U.S. filmmaking community. This has led to the formation of non-profit U.S. industry groups, such as the Film and Television Action Committee (FTAC) as well as other groups such as the Directors Guild of America (DGA), the Screen Actors Guild (SAG) and others, who have been lobbying state and federal governments to introduce American legislation and counter-incentive programs. Due to the attention put onto the subject matter, numerous studies have proven that foreign government subsidies for film and television production put American film industry workers and companies at an extreme disadvantage.

FTAC believes that foreign government subsidies such as those Canada uses to support its film industry labor are in violation of World Trade Organization (WTO) rules restricting or prohibiting the use of government subsidies to prop up previously undeveloped industries (such as the Canadian film industry).

In recent years, the U.S. Congress has attempted to counter the runaway production situation with counter-incentives -- although few bills have passed. Local and state governments have also implemented counter-incentive programs in an effort to encourage domestic film productions to remain in the United States and the federal government has attempted to reign in all outsourcing with legislation to support and defend American jobs from unfair foreign competition.

The Jobs Creation Act of 2004 was just such legislation. The language in the bill allows U.S. producers of films with budgets under $15 million ($20 million if shot in a low-income neighborhood) to immediately write off their costs in a single year (if 75% of their principal costs are incurred via shooting in the U.S.) It also allows producers to be taxed at a capital gains rate of 15% (rather than at the higher 35% personal income tax rate). Previously producers had to amortize those costs over several years. It is not a cost "subsidy" program, but an indirect benefit by cutting down the red tape and taxes to encourage American film and television productions.

Industry trends

While the problem of runaway production has not gone away, there have been recent "acts of God" that have helped keep American film productions at home in the U.S.

The SARS "Scare"

Severe Acute Respiratory Syndrome (SARS) originated in southern China in November 2002. By March 2003 cases were seen in people returning to Canada from Hong Kong, particularly in Toronto - a major runaway production location. According to the World Health Organization (WHO), at the time there were 774 worldwide deaths related to SARS and Canada saw 438 probable SARS cases, with 44 deaths. According to Rhonda Silverstone, Toronto's film commissioner, Canadian production suffered a drastic downturn as American productions stayed home or located elsewhere. SARS scare aside, according to the Center for Entertainment Industry Data and Research, if it weren't for large subsidies, most U.S. producers prefer to stay home and shoot in the United States anyway.

Canadian Labor Disputes

Disputes between Quebec labor groups and American film productions have led to what Variety called, "a bitter fight that erupted... between Hollywood producers and Quebec producers over working conditions."

More recently American productions have faced a strike since January 8th, 2007 by the Canadian actors group, ACTRA, representing about 21,000 Canadian performers, which has been making "tough demands." The month-long strike appears no closer to an agreement than the day the strike began. At issue are wages and compensation for Internet use, the strikers demanding as much as a 50% increase in payments for new media.

Walt Disney Motion Pictures Group had decided against shooting in Montreal and Toronto, "for fear of a strike or lockout," and allegedly they had threatened to shift those shoots back to the U.S. According to the Canadian Film and Television Production Association, at least three large scale U.S. productions have canceled plans to shoot runaway productions in Canada because of the prospect of a long strike and the lack of predictability of Canadian labor which hinders producers.

"It's an absolute disaster," said Paul Bronfman, chairman and CEO of the Comweb Group, a leading supplier of film services and equipment in Canada, "Our industry is in deep, deep s---." According to a National Post article, "Mr. Bronfman said the strike could kill Toronto's once-bustling film industry, already suffering after 9/11, SARS, the rising dollar and growing international competition. I am currently in Los Angeles making the rounds with major and independent studios, and everyone is giving the same message: You guys are not competitive anymore, (and) your actor strike is the final nail in the coffin for avoiding Canada like the plague," Mr. Bronfman said."

The September 11th, 2001 attacks and Aftermath

In an attempt to reconstruct the film industry in New York after 9-11, many new ""Made in NY" counter-incentives have been developed to lure film productions back to the "Big Apple". According to the film industry trade magazine Variety, after installing counter-incentives New York City hit a record high for production, re-upping its number of shooting days 10% from 2005. Inspired by the success of New York's campaign to regain lost jobs, Los Angeles Mayor Antonio Villaraigosa is hoping to initiate counter-incentives to lure film productions back to Los Angeles.

The reality television boom

Although feature filmmaking in Los Angeles is still negatively affected by runaway production, the Reality TV boom has meant that many U.S. television productions are more likely to be shot where they are situated, in the United States.

References

  1. ^ Monitor Company (1999). "U.S. Runaway Film and Television Study Report" (PDF). Director's Guild of America/Screen Actors Guild. p. 29. Retrieved 2007-01-25. {{cite web}}: Cite has empty unknown parameter: |month= (help)
  2. Herd, Nick (2004). Chasing the Runaways: Foreign Film Production and Film Studio Development in Australia 1988-2002. Strawberry Hills: Currency Press. ISBN 0958121338.
  3. Felstead, Debra (Jul 06, 2003). "Toronto TV production is fading to black". Media Monitor Digest. Retrieved 2007-01-27. {{cite news}}: Check date values in: |date= (help)
  4. ^ The Center for Entertainment Industry Data and Research - Year 2005 Production Report
  5. Los Angeles Times January 22, 2007 "L.A. airports fly high with film shoots" By Tony Barboza, Times Staff Writer
  6. ^ "FTAC Home". Film and Television Action Committee. Retrieved 2007-01-25.
  7. [ http://209.85.165.104/search?q=cache:4q1Acwd5xWcJ:www.bcstats.gov.bc.ca/pubs/exp/exp0112.pdf+Canada+government+subsidy+film+industry&hl=en&ct=clnk&cd=75&gl=us&ie=UTF-8] Gatt definition of subsidy
  8. ^ "The Decline of Foreign Location Production in Canada". Government of Canada. 2005-05-24. Retrieved 2007-01-25.
  9. ^ Eye Weekly - 11/11/99 - "The great Canadian pig-out: Some of Canada's biggest and most profitable corporations are also our biggest welfare bums" by Bruce Livesey
  10. ^ "Total Economic Impact Of U.S. Economic Runaway Production". Directors Guild of America. 2000. Retrieved 2007-01-25.
  11. ^ "Impact of the Migration of U.S. Film and Television Production". United States Department of Commerce. 2001. Retrieved 2007-01-25.
  12. ^ "Shaw could kill TV fund" by Antonia Zerbisias Jan 23, 2007
  13. Canadian Taxpayers Federation "Corporate welfare too much for Saskatchewan taxpayers" - November 03, 2005
  14. Verrier, Richard (October 23, 2005). "Canada rolls credits on a slump". Los Angeles Times. Retrieved 2007-01-25.
  15. "Film Credit Follies" January 18, 2005
  16. Berman, Howard (February 12, 2003). "Bipartisan Bill Aims to Keep Movie and TV Production Jobs in the USA". U.S. House of Representatives. Retrieved 2007-01-27.
  17. ^ "SARS (Severe Acute Respiratory Syndrome)". CanWest MediaWorks Publications Inc. Retrieved 2007-01-27.
  18. Vlessing, Etan (January 30, 2004). "Canada indies 'all hurting' as market goes downhill by Etan Vlessing". FRIENDS of Canadian Broadcasting. Retrieved 2007-01-27.
  19. Kelly, Brendan (Feb. 26, 2004). "Montreal malaise". Variety, Reed Elsevier Inc. Retrieved 2007-01-27. {{cite news}}: Check date values in: |date= (help)
  20. The Rocord.com - Insider - "Another Twist in ACTRA Strike Drama" (Feb 2, 2007)
  21. Jan 04, 2007 - Backstage - "Canadian Actors Could Picket Movie Shoots" - By Etan Vlessing
  22. ^ National Post "Strike devastating film industry: Producers say job action has cost city about $400M" by Sarah Matthews February 01, 2007
  23. Reuters - Canada "Court orders arbitration in Canadian actors' strike" Wed Jan 31, 2007
  24. CNW Telbec
  25. 1/19/2007 - "Shooting hits record high in Gotham" Variety (subscription)
  26. 11/6/2006 - "Reality boom boosts TV prod'n" -by Dave McNary, Variety (subscription)

See also

External links

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