The Hobbit Took $120M From Kiwi Taxpayers – Maybe They Should Own The Rights

from the we-wants-it-back dept

Yesterday, we wrote about how US taxpayers were handing over approximately $1.5 billion to Hollywood to get them to film movies in certain locations — and how little of that money actually generated jobs (though, lots of it flowed into the pockets of Hollywood studio execs). Even worse, the story highlighted how there’s a nasty “race to the bottom,” where Hollywood demands increasing subsidies from different locations, with promises to only film movies in the locations with those subsidies. That means more and more taxpayer money going to Hollywood, for the sake of a temporary production, which often brings in workers from LA, and has only a brief, marginal impact on the local economy — usually much, much less than the subsidy in question.

While the NY Times article explored how this was happening in the US, a new article at Bloomberg highlights how this is happening around the globe, using key examples from the subsidies around The Hobbit and Harry Potter — both of which involved massive subsidies in response to Hollywood threats to film elsewhere.

How much taxpayer money can Warner Bros. demand from the government of New Zealand to keep production there (rather than, say, in Australia or the Czech Republic)? That answer turns out to be about $120 million, plus the revision of New Zealand’s labor laws to forbid collective bargaining among film-production contractors, plus the passage of three-strikes Internet-disconnection laws for online copyright infringement, plus enthusiastic and, it turns out, illegal cooperation in the shutdown of the pirate-friendly digital storage site Megaupload and the arrest of its owner, Kim Dotcom.

[…] The U.K. government found this out in 2005, when Warner Bros. threatened to move “Harry Potter” productions to the Czech Republic. The government of Gordon Brown caved in to studio demands and passed new subsidies. In 2009, New Zealand also gave in and now faces demands for more.

Again, if this actually created the economic activity that Hollywood claims it does, perhaps it would be worth it. But both articles highlight how this isn’t true at all. It just shifts money from local taxpayers to Hollywood execs.

The worst part is that, for most of the wannabe Hollywoods, it’s bad economic policy on every level. The productions bring in mostly low-end, temporary jobs, while the high-end jobs remain in Hollywood or New York. Call it the Curse of Harry Potter.

That article, authored by Joe Karaganis, who has been studying this issue for quite some time, suggests that if the public is financing these movies, then perhaps the movies should belong to the public if the studios can’t pay back the loans. The suggestion is a really creative one. If the movie actually makes money, then the studios can pay back the loans. If it’s a flop, then let the movie go to the public via a Creative Commons license, and let the public do something with it.

One way to break the curse is to route public money through what we might call an Expecto Patronum license — named after the powerful defensive charm in the Potter series. Under the license, public money takes the form of a conditional loan rather than a grant or tax break. After five years, producers have a choice: Pay back the loan or re-release the film under a Creative Commons attribution license, which would allow it to be shown freely.

If a film is among the few that have longer-term commercial value, its producers can choose the first path. If it isn’t, they lose nothing by taking the second route. The license thus underwrites creative risk-taking without squandering public money on blockbusters. It also ensures that public investment generates public culture — not works controlled by the studios for the next 95 years.

It’s such a reasonable idea that you know that Hollywood would freak out at any legitimate push to use it. In true “entitlement mentality,” they believe such taxpayer-funded subsidies are their right, and that localities that won’t pay up are missing out. Yet, as the data clearly shows, most locations would be much better off saying “no,” as the benefit is minimal. Or, at the very least, they should make the terms similar to what the article suggests. If you want the public to finance the movie, then make it conditional. In the end, you pay back the loan or the public gets the movie.

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Comments on “The Hobbit Took $120M From Kiwi Taxpayers – Maybe They Should Own The Rights”

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gorehound (profile) says:

Re: Open leter to the people of New Zealand

And eventually we are going to utterly Destroy that Industry.the shit MAFIAA must be hacked and their Dirty Laundry must be Wikileaked for the whole World to see.
You want to stop MAFIAA and get rid of these greedbag bloodsuckers somehow those who have that special IT knowledge must Wikileak their stuff.
Show it all to the Mainstream and Educate them so they will know the truth.

Anonymous Coward says:

That means more and more taxpayer money going to Hollywood, for the sake of a temporary production, which often brings in workers from LA, and has only a brief, marginal impact on the local economy — usually much, much less than the subsidy in question.

Maybe you should actually read the laws governing production tax rebates. Then you’d learn how closely the incentives are tied to the hiring of local residents and dollars spent at local suppliers. I know that doesn’t fit your anti-Hollywood narrative, but your claims are blatantly, laughably false….. again.

anon says:

Re: Re:

SO someone investigates and finds Hollywood is at it again and screwing the people who are actually funding them, and you come on here and say the people who investigated it do not know what they are talking about, Great we have someone with more information, lets see it now, not in a few weeks when Hollywood comes out with there lies, show me how this article is wrong , you cant because you are insignificant and know nothing.

The Real Michael says:

Re: Re: Re: Re:

Hollywood is infamous for this style of fraud and tax-evasion. Amazing that a little girl attempting to download a song on her Winnie The Pooh laptop prompts the feds to raid her home, yet these Hollywood criminals blatantly cheat the system and are not only given a free pass but are actively protected by the government on the taxpayer’s dime. The mind boggles at the level of incompetency and sheer bias of our “justice” system.

Mesonoxian Eve (profile) says:

That sound you just heard was Chris Dodd hitting the floor, both laughing his ass off on the reasonable compromise as well as crying someone figured out another “business model” he fears will generate SOPA-like outrage.

Too bad he didn’t hit his head on the way down.

Expect the MPAA blog to counter this “false and misleading” information.

Anonymous Coward says:

Re: Re: Re:

That’s not going to happen. The reason these things work and are so popular is that the states have little involvement beyond initial certification and final audit. If the tax rebate is 20% and I’m producing a $10,000,000 movie. I pre-sell my $2,000,000 tax credit to a company who needs to reduce taxes for $.85 on the dollar. I get $1,700,000 up front to make my movie and the company gets a 15% reduction on its tax bill. The government doesn’t have to administer loans and has little actual work to do as a result.

Anonymous Coward says:

Re: Re: Re:2 Re:

I suggest you contact the film commissions of Louisiana, New Mexico and Georgia and ask how it’s working for them. Tyler Perry Studios (Atlanta) alone employs several hundred GA residents. There’s a studio complex in Peachtree City and a $100 million+ soundstage on the board for Atlanta and a smaller one slated for Savannah. The Georgia political/fiscal scene couldn’t be more conservative. All signs point to you talking out of your ass…. again.

Arsik Vek (profile) says:

Re: Re: Re:3 Re:

I suggest you contact the film commissions of Louisiana, New Mexico and Georgia and ask how it’s working for them. Tyler Perry Studios (Atlanta) alone employs several hundred GA residents. There’s a studio complex in Peachtree City and a $100 million+ soundstage on the board for Atlanta and a smaller one slated for Savannah. The Georgia political/fiscal scene couldn’t be more conservative. All signs point to you talking out of your ass…. again.

Are these temporary offsite or remote filming locations like what’s going on in New Zealand, or are these permanent or semi-permanent operating facilities, ala Hollywood studios?

Anonymous Coward says:

Re: Re: Re:6 Re:

No, though that is generally the way things start in states with newly created incentives. Twenty years ago, Louisiana was seeing 2-3 films per year. Former Film Commissioner, Mark Smith was the “inventor” modern day state film credits and really got thing going in LA. Today, their market is worth $2 billion per year and the number of local crew, actors, etc has gone up 1000% since the incentives became law.

Anonymous Coward says:

Re: Re: Re:2 Re:

Perhaps you should read a similar analysis by Ernst & Young regarding the New Mexico incentive. They reached the opposite conclusion. Also, this study is dated in terms of local crew and infrastructure in states with mature incentives. That makes a tremendous difference in the economic impact.

Mike Masnick (profile) says:

Re: Re: Re:3 Re:

Perhaps you should read a similar analysis by Ernst & Young regarding the New Mexico incentive. They reached the opposite conclusion.

My link actually discusses the E&Y study (funded by the film office….) and explains all it’s many faults. And it points to the study that looks at the REAL results, which show they’re a disaster.

Anonymous Coward says:

Re: Re: Re:4 Re:

And who funded this other study? As I said, the study you cited failed to account for the meteoric rise of local crew in mature incentive states. That matters when evaluating results. If you think about it, it makes no sense that the hardcore Republican states like GA, LA, SC, NC, etc would be lavishing on taxpayer subsidies on the Hollywood liberals they absolutely hate. Unless, of course they’re making money on them. And since the film industry is union top to bottom, it’s doubly hard to conceive these conservative, Republican bastions providing union workers with taxpayer subsidies. You’ve this one wrong (again).

John Fenderson (profile) says:

Re: Re:

Yes, and it’s a real mystery why they don’t do this more often (it does happen). This isn’t limited to movies, either.

In my town, the government gave lucrative tax breaks and other perks (footing the bill to create new infrastructure, etc.) in exchange for a major company to set up business. All the usual promises were made (economic benefits, jobs, etc.) and, as usual, they didn’t materialize (all but a handful of jobs were filled be existing company people, using nonlocal suppliers, etc.). The business did well for a few years, then left just as the major time-limited perks expired. The community suffered a net loss.

I can see this happening once. But this happened three times, the third time with everyone full well knowing what was going to happen. But big business can buy its way into anything.

Wally (profile) says:

Re: Re: Re:

Also depends on the studio a bit…not many people know that the street shots you see in “The Avengers” is a matted out layout of Cleveland. The state of Ohio put a small tax break on filming in the state because some studios actually pay us in permits and street shut-downs. Mind you that’s how Disney handles infrastructures and they do everything else on their own…WB is much more pervasive in that regard because it makes it so the state pays for the film they shoot.

However, when you see what’s going on in NZ, I think it’s becoming a problem where the connections to the MPAA are stronger.

out_of_the_blue says:

You simply don't understand corporations, Mike.

You have such foolish expectations for amoral entities — besides your notions of “libertarian free-market capitalism” — that you constantly show yourself baffled and flabbergasted by the actualities of plutocracy such as them happily taking taxpayer money and exercising influence over gov’t for private ends. Geez, grow up, kid.

ARE we all in this together? Or is 1% Ivy League Mike actually a corporate shill putting out silly notions in order to discredit them and to bring out the obvious arguments against? — But doesn’t have to be a fool or knave question: he can be both!

Is anyone here really certain that Mike “Streisand Effect” Masnick…
Doesn’t get a little thrill every time I post this link?

RD says:

Re: You simply don't understand corporations, Mike. MIKE IS A 1%'er??!!??

“ARE we all in this together? Or is 1% Ivy League Mike actually a corporate shill putting out silly notions in order to discredit them and to bring out the obvious arguments against? — But doesn’t have to be a fool or knave question: he can be both!”

Mike is a 1%’er now?


(takes deep breath)


Wow, you just took the cake and completely invalidated any opinion you might ever put forth.

Mike is a 1%’er….wow. Do you ever even think before you type, or do you just not care how foolish you look? Do you ever think before you type how you are undermining any point you are trying to make by making such ridiculous and way, WAY outside the box attacks like this?

It’s auto-report for your comments from here on out, as you obviously have nothing relevant to add to any topic here, you just have a massive hard-on for attacking Mike in any manner possible.

Lonyo (profile) says:


While it is quite a lot, and they might not get that much return immediately, you can’t really argue with the idea that the LOTR films helped promote New Zealand as a tourist destination, and The Hobbit will probably do the same.

“After the Lord Of The Rings films came out a Tourism New Zealand survey showed 6% of visitors came mainly as a result of having seen the movies. They added around 250m annually to the country’s income. “

Spend $120m, get some of it back in tax/etc, and then get 250m (NZD?) annually for a couple of years? That’s not a particularly bad investment.

There’s more than just the jobs created here. For the US it might be difference, since lots of US cities are not appealing even after a film has been made there, but for somewhere like NZ, it can be quite different.

anon says:

Re: Tourism

Rubbish, people going to NZ will go there with or without the movie being shot there, now if they had to leave some of the sets up and NZ could do some something with them then maybe, but this does not and I doubt will ever happen, Taxes are not there to pay for a movies funding, the NZ people are not in the business of funding movies made in Hollywood and then cost a fortune to see or buy a few years later.

People are paying a lot of money to see movies, now that the cat is out of the bag and we suddenly see that Hollywood is not even funding them well I feel sharing is even more relevant and acceptable than previously, especially in places that has funded movies, many movies.

akp (profile) says:

Re: Tourism

I think LotR is a special case. In the movies, “Middle Earth” is almost its own character, and New Zealand (IIRC) did a lot to preserve the iconic places where the movie was shot, and encouraged LotR tours especially. “Hobbiton” is on private land, isn’t it? I thought I read that the owner left all the sets in place…

Not every country, region or town is able to do so. I’ve seen all the Harry Potter movies, Star Wars, etc. Not one of them did I ever think “I should go visit where they shot this!” I’ve thought that about New Zealand.

I’ll say it again: Lord of the Rings/The Hobbit is a special case where NZ is able and willing to BE Middle Earth. Not every movie/location can say the same.

anon says:


I cannot believe what they are getting away with seriously, yes it would be nice to have a movie recorded in your area but this is going into the side of corruption here, maybe people should be demanding investigations into why taxpayers money are being used to fund a movie that in no way will ever make the taxpayer better off. If this is all true and there is no reason not to believe it is not,then the people need to demand an investigation into why this is being done, who is responsible and have they received any monies to influence them in any way.
This is just another reason that Hollywood should be giving there movies away free to the public. And this is not in any way acceptable in any country. Demand an investigation NZ, demand they pay there debts or give up the copyright to the people who have paid for the movie to be made.

Wally (profile) says:

Re: Hollywood Just Can't Catch a Break

“Mike, what you’re missing is that the filthy pirates are now managing to leach all the value out of a film before it’s even done being filmed!”

You know it’s funny how you mention that without expecting a bit of truth from your sarcasm 🙂 I honestly think you shortened the entire explanation of the article. It’s not the film they are devaluing, it’s NZ itself so they can try to gain a “stronger foothold” on a country.

Honestly this makes me think about many possible connections between what the MPAA is doing here and their attempt to completely derail MegaUpload.

Andrew D. Todd (user link) says:

Just Like Last Time

This sort of thing happened with light manufacturing industry, in places like Alabama and Mississippi, circa 1960-1980. The industry came, milked the subsidies for a while, and then moved on to Mexico, and then to China.

See William M. Adler, _Mollie’s Job_

This is a book about how a job making small electric components traveled, from New Jersey, to Mississippi and Arkansas, to Mexico, and eventually overseas. It deals with such side issues as Wall Street financiers, corrupt labor unions (the Teamsters), and the New Jersey Mafia, complete with cement overcoats. Suffice it to say that the financiers eventually betrayed everyone they ever dealt with, without any exceptions.

Anonymous Coward says:

The reason Karaganis’s proposal “sounds so reasonable” is because it’s how copyright law is supposed to work.
We’ll subsidise your creative risk-taking by giving you an intellectual monopoly for fourteen years. In exchange, when that time is up, your output becomes public domain.

Of course, the length of that subsidy has already become so long that it’s not much of a bargaining chip for Hollywood to get it extended in exchange for the film location, so now they’ve just resorted to directly demanding money.

Anonymous Coward says:

Re: Re:

I think Ayn Rand is one of the main culprits here:

“In the case of copyrights, the most rational solution is Great Britain?s Copyright Act of 1911, which established the copyright of books, paintings, movies, etc. for the lifetime of the author and fifty years thereafter…”

Thanks miss, but no thanks. The justification for the “and 50 years” lacks any rationalisation or evidence. Even the lifetime bit is questionable in terms of comparative advantages. So much for objectivism…

Wally (profile) says:

Re: Re: Re:

It’s viable when balkanced out correctly. The idea is actually no different from filming at Pinewood Studios. The point I have is that the NZ government made a VERY bad decision in what it did by taking a subsidized loan from the MPAA to shoot on their own territory and given that “The Hobbit” had been shot there along with LOTR and 2 Narnia movies…they would not be making disincentives by adding a way to increase revenu rather than use tax payer money to shoot in their territory.

John85851 (profile) says:

Paying the loan back?

The problem with this suggestion is that Hollywood studios have used “creative accounting” for years, usually to hide the profits from people (stars, investors, etc) who get a percentage of the revenue. How will a studio pay back its loans if the movie didn’t make a profit?

This goes back to the issue of how can this happen in the first place- how can a movie be #1 at the box office, take in millions of dollars and the studio claims it lost money? If all these movies actually lost money, how is the studio still in business?

cosmicrat (profile) says:

Your (state's) mileage may vary.

I see a lot of anecdotes about how one state lost money on the deal, another benefited in the long run and so on. What you need to remember is that each film incentive program is structured differently. Each state, province or country has a different offer. Michigan’s was a disaster in 2010 because it was way too much and didn’t say anything about requiring local hires. Georgia and South Carolina seem to be much better written and are worth it to those states for what they give back. Louisiana has spent a huge amount of money and they have a more or less permanent industry there now. Was it worth it? I don’t know. But I do know lots of industries benefit from government subsidies of some sort.

I think some jurisdictions already have experimented with the idea of the public partially owning the film. I think British Columbia’s has an optional clause like that.

And anyone who has the idea that all film crews come from Hollywood, Los Angeles is truly talking out their ass. I’ve made a living in this business for 15 years and you know how many days I’ve worked in L.A.? One. I live and work in a mid size city. Stop lumping us in with L.A., you undermine your credibility when you do that (and I need you to stay credible). Every once in a while, when we are filming on location, some dumbass will drive by, flip us the bird and yell “Go back to L.A.” or equivalent, not realizing that 85% of the crew working there permanently live, work and support families in this city.

I’m generally against corporate welfare. But when the incentive program is up for renewal in my state I’ll support it. It’s the difference between having production in your state or not. For the studios it’s just a business decision. They don’t care about the scenery or anything else. It’s all about the money. Corporations have no soul. I’ve always said that if you want to get rid of these incentives, you have to get all the states (and the Canadian provinces) to do it at once. Put everyone on a level playing field. (The L.A. union locals would love that!)

New Zealand. $120mil for one production. Wow. True it’s a multi year production that could drop close to a billion, but still. Lot of dough.

I tell you what those of us who make a living at this really got to worry about: China. Production companies don’t like to go to China for a variety of reasons but the winds are changing. They’re becoming more responsive to outside business interests and with their artificially devalued currency they could offer the mother of all incentive programs. Slave labor available too.

David Meech says:

Open Letter to the People of Muppet Land down under

Atkray thank-you for your comments and yes there a quite a few of us down here who have never bought into the bombastic bucket of balderdash (and I can’t use the term I would like to use here)that Peter Jackson has sold to us. Many of us actually think it pathetic and just a little bit colonial that we are so desperate to appear as the backdrop for someone else’s story by someone else’s author in someone else’s film. Why not just make our own films, on a smaller scale and reap those befits?
The idea that people watch a movie and then suddenly spring out of their chair ready to tour the film backdrop is kind of stupid, even moronic and frankly all of the so called statistics are supervised by the political party that bought the snake oil. I would like to inform you all that in terms of tourism this place is deserted. In terms of financila returns they all long dissappeared with the planeloads of British actors after they had wlaked the red carpets and polished off the champagne.
The truth is we will never know the truth about these shady deals. The financials produced would be as mythical as Mordor.
The Kiwis are just the sad muppets who made the sandwiches and served the beer and paid out the hard earned tax subsidies. We got nothing! And no hard feelings with the U.S. whatsoever we love tourists from up there and want to see more. The blame lies solidly with our Prime Minister (who incidently owns a retirement home in Hawaii) and the dwarf like muppets who accept this crap as truthful.
Kia Ora!

A Dude says:

The Prime Minister of NZ wants a green card.

John Key owns a mansion in Hawaii. His plan is to retire there once he’s out of NZ politics after the next NZ general election.

After all the kickbacks his business cronies have received, he’ll be on the boards of many large companies, being paid a huge salary to sit in a deck chair and phone in appearances at meetings once or twice a year.

Doing the bidding of the MPAA and RIAA ensures his well-funded retirement plans go off without a hitch.

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