“It would have been a real shame if we had lost any of that talent and they had to move to follow the films,” says Wellington Mayor Celia Wade-Brown.
Driving the trend are powerful global forces squeezing the entertainment industry. Falling DVD sales are putting pressure on movie-making budgets, while the demand for ever-more-amazing special effects grows. The spread of technology and skills around the world is creating a huge number of special effects suppliers — some using cheaper labor than can be found in Hollywood.
Government largesse has helped create mini-moguldoms in Vancouver, Montreal, London, New York and Wellington, all of which are aggressively one-upping each other to become the next new hotbed of activity. As the work spreads, branch offices of visual effects companies have opened up in new locations. Even though digital work is borderless, workers must live and be paid locally to generate the income taxes and spending that governments seek.
The tax incentives race is destined to accelerate next year. State incentives in California — home to “Star Wars” pioneer Industrial Light & Magic — are too small to accommodate big-budget movies. Democratic Assembly member Raul Bocanegra is preparing a bill to expand their scope, but it could take months to get through committees, says his chief of staff, Ben Golombek.
And the U.S. federal incentive, an arguably difficult-to-use tax deduction of up to $20 million per film or TV episode, is set to expire at the end of 2013.
“Once our federal incentive ends in two weeks, you’re going to have a lot of people who are going to go elsewhere,” says Hal “Corky” Kessler, a tax incentives lawyer with Chicago-based Deutsch, Levy & Engel.
Industry business leaders say they’re simply following the money.
“This is no different than any other multinational business,” says Sir William Sargent, co-founder and CEO of Framestore, a London-based special effects business that worked on likely Oscar-contender, “Gravity,” and has offices in Montreal, New York and Los Angeles. “We’re just going to where our customers are.”