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Government support for films to continue

Government support for films to continue

Thursday, 2 March 2006

Government funding for large budget films and screen productions will continue following a review of the fund, Economic Development Minister Trevor Mallard announced today.

Trevor Mallard said an independent economic evaluation of the impacts of large budget screen productions such as the Chronicles of Narnia and the Hercules mini-series over the last two years showed they had generated:

- a $363 million direct cash injection into the New Zealand economy;
- additional economic activity of $119 to $227 million; and
- indirect benefits ranging from $10 million to $34 million.

"Along with our scenery and our skilled production crews, the Large Budget Screen Production Grant is a key part of the world-class package that makes New Zealand attractive to producers of large budget films.

"There is intense international competition for these productions and our key competitors offer government assistance. While we will never get all the film productions we want here, without incentives like this grant system, we wouldn't even be in the ball-game."

Five grants totalling $49.728 million have been paid from the Large Budget Screen Production Grant since it was introduced in 2003.
Overall the economic evaluation released today estimates the net economic impact of the scheme lies between a $33 million net gain and a $38 million net loss.

"However as the evaluation notes, some benefits and spin-offs have not been quantified, the sample size is small, and timeframe for the evaluation was only two years, which suggests the evaluation should be treated with caution," Trevor Mallard said.

"The fact these benefits were not quantified indicates that the economic evaluation is conservative and probably underestimates the overall benefits of large budget productions to New Zealand."

Benefits that were not quantified included the goodwill the scheme generates with screen producers, and the value of the international reputation New Zealand is developing because of its success with large-scale productions.
The evaluation did not quantify the value of additional infrastructure and industry development and spin-offs such as set construction, transport logistics, graphic design, accommodation and catering.

"In addition, the benefits of film productions can spill over into other sectors, for instance with the up-skilling of the digital sector, and the growth in tourism that we have seen as a result of the "Lord of the Rings" trilogy.

"Such benefits cannot be readily quantified, but would increase the net economic benefits of the grant.

"I am confident that there is enough evidence to suggest the grant is an effective tool in attracting large screen productions to New Zealand, and that the benefits outweigh the costs. As a result the government has decided to continue the grant in its present form, with on-going monitoring.

"A full formal review is planned in 2009, and next year (2007) there will be a review of "bundling' - the issue of whether a production company should be able to add a number of small productions together to reach the minimum expenditure threshold for the grant."

The economic evaluation of the grant was prepared for the Ministry of Economic Development by Outcome Management Services in December 2005.

A copy of the evaluation and accompanying cabinet paper is available at
www.beehive.govt.nz/mallard

Questions and Answers

Who has received these grants since they were started in 2003?
Large Budget Production Grants paid to 14 February 2006 (all figures are NZDm and are GST exclusive).

Name of Screen Production Status Grant
Power Rangers Paid - March 05 2.891
Boogeyman Paid - May 05 2.155
The Lion, the Witch and the Wardrobe Interim grant paid - July 05 15.763
King Kong Interim grant paid - July 05 25.212
Hercules mini series Grant paid - September 05 3.707
$49.728

How does the Large Budget Production Grant work?

The Large Budget Screen Production Grant provides a 12.5 percent rebate on production expenditure of more than $15 million within New Zealand as long as total expenditure in New Zealand is greater than 70 percent of the total production budget. Where production expenditure in New Zealand exceeds $50 million, the 70 percent threshold is waived.

Do you have any plans to change the format of the Grant?

The grant is likely to remain unchanged until its standard three-yearly effectiveness review in 2009. However, government will re-address the merits of bundling in late 2007.

What are some of the productions to benefit from the Grant?

King Kong, The Lion, the Witch and the Wardrobe, Without a Paddle, Hercules (a mini series), "Power Rangers' (children's TV series).

Why do you only give grants to productions exceeding $15 million?

This grant is about enticing a scale of production that typically hasn't come to New Zealand in the past. These bring leveraging opportunities that smaller productions typically do not offer. For example, New Zealand received extensive international exposure from the "Lord of the Rings' movies and "The Lion, the Witch and the Wardrobe'.

Why are you not introducing bundling?

We have decided not to allow bundling at this time because:

- There are doubts about the quality of the training opportunities offered by sub-$15 million productions; and
- The lower profile of sub $15-million productions also reduces the quality of wider economic spillovers and leveraging opportunities (tourism for example).
However, the government accepts that as more information on this subject becomes available (and other countries are currently researching the issue) and if production financing trends change, allowing bundling may be beneficial. Therefore, we will review this issue in another year.
Is there a limit to how many grants are given out in any one year?

If a production meets the grant's criteria - minimum expenditure in New Zealand of $15 million and 70 percent of their total budget being spent in New Zealand (unless they spend over $50 million), they will receive a 12.5 percent rebate on their New Zealand expenditure regardless of how many other productions have received grants in that financial year.

This certainty is a key advantage of the grant.

What support is there available for smaller film or screen productions?
The government also provides other assistance, including funding, to support local film and television production, by supporting, among others, the NZ Film Commission (which has an $8 million investment budget a year), NZ On Air and Film NZ.

See www.nzfilm.co.nz for more details.

ENDS

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