Hon Steven Joyce
Minister for Economic Development

Hon Christopher Finlayson
Minister for Arts, Culture and Heritage

31 July 2013

Changes to screen incentives to encourage more investment, jobs & growth

The Government today announced changes to incentive schemes to encourage more television production being made in New Zealand and build on our world-class reputation for high-quality post production work, and innovative digital and visual effects.

It follows a comprehensive review of New Zealand's screen sector by the Ministry of Business, Innovation and Employment and the Ministry for Culture and Heritage.

The review focused on the Large Budget Screen Production Grant, the Screen Production Incentive Fund, Film New Zealand’s functions, international co-production agreements, skill development, coordinating promotion and marketing of the domestic screen industry and collaboration between the New Zealand Film Commission and NZ On Air. It involved workshops with domestic and overseas stakeholders, as well as a large number of individual interviews.

The Large Budget Screen Production Grant, established in 2003, provides a 15 per cent rebate on productions with at least $15 million qualifying New Zealand production expenditure. An additional 15 per cent rebate, capped at $9.75 million, is for expenditure in New Zealand in excess of $200 million.

The Screen Production Incentive Fund provides a rebate on qualifying New Zealand production expenditure of 40 per cent for feature films and 20 per cent for TV with New Zealand content.

The Screen Sector review, which covered the period 2010-2011, found the two incentive schemes have been successful in bringing films, TV and post-production work to New Zealand and that changes could be made to them to further grow the screen sector industry.

The review period did not include The Hobbit films which have qualified for funding under the Large Budget Screen Production Grant. These films have created an estimated 3000 jobs, boosted tourism, and pumped millions of dollars of additional spending into the wider New Zealand economy.

“The incentives have ensured New Zealand’s screen industry has continued to grow and employ thousands of New Zealanders despite challenging global economic conditions,” Mr Joyce says.

“The production and post-production sectors alone contributed $638 million to gross domestic product in 2011, up from $313 million in 2005. Total gross revenue for the entire screen industry was $3 billion in 2012, up from $2.6 billion in 2005. This shows New Zealand's screen industry is making steady gains, and is competing on the world stage.

“To encourage more TV programmes being made here, we are lowering the qualifying production expenditure threshold for TV productions under the Large Budget Screen Production Grant from $15 million to $4 million from 1 October this year.

“Attracting more TV production and investment in New Zealand will boost the economy and provide greater continuity of work for Kiwis and their families.

“We also want to build on our growing strength in high-value post production, digital and visual effects, and enable smaller New Zealand companies to be more successful in attracting work to New Zealand. Accordingly, the qualifying expenditure threshold for the Post, Digital and Visual Grant will also drop from $3 million to $1 million.”

Mr Finlayson says the screen incentives are essential to the on-going development of the arts in New Zealand.

“Without the Large Budget Screen Production Grant most of the 35 major screen productions such as Avatar and King Kong that received rebates would not have come here. The Screen Production Incentive Fund also contributed to medium and larger-scale New Zealand productions, such as Boy and Top of the Lake, two excellent examples of New Zealand culture reaching broad audiences here and overseas,” Mr Finlayson says.

“Industry sustainability is what’s driving these changes. We want more international screen productions to come to New Zealand and utilise our world-class expertise and scenery.

“The changes could also mean more local film and TV producers are able to make content that is attractive to overseas markets.”

There will be further work later this year as a result of the review focussing on skills development, and determining a co-ordinated strategy to ensure effective international marketing and promotion of the domestic screen industry.

More information, including reports and cabinet paper, is available at http://www.med.govt.nz/sectors-industries/screen-industry and http:///www.mch.govt.nz/screensector-review.

Question & Answers

What did the Screen Industry Review cover?
The review covered:

• two of the government’s major screen industry incentive schemes – the Large Budget Screen Production Grant and the Screen Production Incentive Fund
• how to attract more international TV productions to New Zealand
• the role of government-funded screen agencies
• international co-production agreements
• training and professional development
• support for Māori film makers

It built on an earlier review of the New Zealand Film Commission by Sir Peter Jackson and David Court, combined with scheduled reviews of the Large Budget Screen Production Grant and Screen Production Incentive Fund.

How do the Large Budget Screen Production Grant and Screen Production Incentive Fund work?
The Large Budget Screen Production Grant is an on-demand, uncapped, financial incentive established in 2003 to support the production of large budget film and television productions in New Zealand. The grant provides a 15 per cent rebate on productions with at least $15 million qualifying New Zealand production expenditure. Post, Digital and Visual Effects (PDV) Grant is a subset of the Large Budget Screen Grant. An additional 15 per cent rebate, capped at $9.75 million, is available as a part of the grant for expenditure in New Zealand in excess of $200 million.

The Screen Production Incentive Fund is a capped financial incentive that aims to encourage development of the New Zealand screen industry and to help ensure New Zealand stories are told. It provides a rebate on qualifying New Zealand production expenditure of 40 per cent for feature films and 20 per cent for television or other format productions.

What changes are being made to these incentives following the review?
The main changes to the Large Budget Screen Production Grant are:

• the qualifying expenditure threshold for the Post, Digital and Visual Effects Grant will be lowered from $3 million to $1 million. This change applies to eligible productions which start principal photography and/or key animation on or after 1 August 2013

• the period for completing principal photography and/or key animation on bundled productions will be extended from 24 to 36 months. This change applies to eligible productions which start principal photography and/or key animation on or after 1 August 2013

• a lower qualifying production expenditure threshold of $4 million for TV productions. This change will apply to eligible TV productions which start principal photography and/or key animation on or after 1 October 2013. Details of the criteria for this incentive will be published by 1 October 2013.

The main changes to the Screen Production Incentive Fund are:
• to require applicants to find more of their budget from sources other than government (10 per cent for feature films; 25 per cent for TV and other formats)

• to lower the production budget qualifying threshold for short animation productions from $1.0 million to $0.4 million per hour

• to allow joint access to the Screen Production Incentive Fund, NZ On Air and Te Mangai Paho funding for animation productions.

The changes will apply from 1 August 2013. However, some productions already under development will be assessed under the existing Screen Production Incentive Fund criteria. Detailed information about the Screen Production Incentive Fund and Large Budget Screen Production Grant criteria will be published by the NZ Film Commission by 15 August 2013.

How effective have the incentives been?
The review found the Large Budget Screen Production Grant attracted screen production and post-production work to New Zealand. Without the Large Budget Screen Production Grant most of the 35 major productions that received grants between July 2004 and June 2011 would not have come here and the industry would not have the scale and capabilities it has today.

The grant generated positive economic benefits of $281.9 million during the same period, including $100 million additional tax revenue, at a net cost to the government of $168.2 million. This does not include intangible benefits such as reputational effects and skills and technology transfers.

The review found that the Screen Production Incentive Fund helped increase production of medium and larger scale New Zealand screen content. Between 2008/9 and 2010/11 it funded nine feature films, including Boy, with box office receipts of $9.3 million, and four television series. In the previous comparative period only four similar sized feature films were produced with box office receipts of $1.25 million.

The Large Budget Screen Production Grant and the Screen Production Incentive Fund will be reviewed again in three years’ time.

How much taxpayer money has been spent on the Large Budget Screen Production Grant?
From 2004-2011 the Evaluation of the Large Budget Screen Production Grant 2004-2011 found that productions generated NZ$1,937 million in qualifying production expenditure. This is the amount studios have spent in New Zealand for 35 major productions which accessed the grant between 2004 and 2011. The total grant approved over this period was NZ$268.3 million.

What other changes will occur following the review?
Other changes from the review include:
• developing a strategy to prioritise efforts in negotiating new international co-production agreements and to further capitalise on existing agreements

• working with industry to develop a co-ordinated approach to skill development in the screen industry

• developing a coordinated strategy to ensure effective international promotion and marketing of the domestic screen industry The New Zealand Film Commission and NZ On Air will continue to seek opportunities for collaboration where they provide benefits. NZ On Air is from this week based in the same building as the NZFC and both organisations are about to consider applications to the first year of their joint documentary fund

• Introducing requirements for screen incentive recipients to acknowledge the government’s investment and proved materials for marketing and promotions of New Zealand (details will be published by 1 October 2013).

What about the television sector?
We are creating a new TV-specific production incentive with a qualifying New Zealand expenditure (QNZPE) threshold of $4 million (previous $15 million) and a rebate rate of 15 per cent on all QNZPE.

This reflects the TV production business model and will allow for studios producing television series pilot episodes, made-for-TV movies and mini-series to apply for the grant. Local TV productions will also be eligible for funding.

The new criteria will include broadening the eligibility formats of TV production. Full details will be approved by the Minister for Economic Development and published on the Film New Zealand and New Zealand Film Commission websites by 1 October 2013.

New Zealand also offers other advantages for TV production including competitive labour costs, the expertise of the screen production workforce, our ease of doing business, and our scenery.

What did the Film New Zealand Review find?
Film NZ is the national film office. Its two primary functions are to market and promote New Zealand’s screen production industry in the international marketplace, and provide a location enquiry/facilitation service.

The review found:
• Film NZ’s services are valued by its international clients
• the domestic film industry considers Film NZ’s primary functions are critical for attracting and facilitating large budget screen productions
• Film NZ’s activities are a factor in attracting international productions
• establishing a Los Angeles office in 2011 in partnership with Park Road Post Production was an astute use of public and private resources
• Film NZ makes a valuable contribution to government policy formulation and implementation. It is viewed as a reliable conduit of industry feedback.

Film NZ has an established reputation as the international marketer of New Zealand as a screen production destination. The review found its performance is of a high standard and that it has carried out its primary functions well. The Film NZ appropriation has been extended for a further three years. Some areas for further focus were identified. These will be picked up in discussions on the Film NZ Funding Agreement 2013-2014 with MBIE.

Were recommendations made by Sir Peter Jackson about the NZ Film Commission taken into account?
All of the major recommendations in the Sir Peter Jackson/David Court review of the New Zealand Film Commission have been addressed. As a result of the screen sector review, the New Zealand Film Commission and Film NZ will work together to promote the New Zealand screen sector overseas. It will continue to administer and help negotiate co-production treaties, certify New Zealand films, and administer the Large Budget Screen Production Grant and Screen Production Incentive Fund alongside its investments in New Zealand films and developing talent and capability within the New Zealand screen industry.

How successful have New Zealand’s international co-production treaties been?
New Zealand has treaty level co-production agreements with 13 countries covering film and TV. The agreements give an approved film or TV project access to the benefits accorded to similar projects in each country, including financial incentives. The greatest benefit of agreements is the ability to access much larger markets, some of which are otherwise restricted. For example, an official China-New Zealand co-production qualifies as “Chinese” and is not subject to local quotas on foreign film productions.

In recent years New Zealand has signed treaties with major markets including China (2010, film) and India (2011, film and TV). New Zealand is negotiating treaties with a number of other countries, including extending the China co-production agreement to include TV.

A review of co-production agreements found that official New Zealand feature film co-productions had higher average budgets and revenue than New Zealand feature films, and also attracted higher amounts of offshore funding.

ENDS

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