The
Hollywood Economist
The numbers behind the industry.
Northern Exposure
Heeding
the siren call of the wild in the form of a plummeting Canadian
loony, Hollywood moved North over the last decade, outsourcing
to Canada no fewer than 1,500 movies and television productions.
Producers found Vancouver could double for middle America,
Toronto could stand in for New York City (especially if
the director avoids wide shots), and Calgary makes for a
great American West. At times, some script adjustments were
required to accommodate the cold reality of the North. For
example, in Final Destination 3 , which was filmed
in British Columbia, the climactic attack was supposed to
occur during an outdoor party on the Fourth of July but
since it was not feasible to have actors wear summery clothes
during Vancouver's chilly Spring, the holiday was changed
to the town's “tricentennial celebration.” But for Hollywood's
illusion-makers, who have much experience in geographically
deluding audiences, the northern exposure presents few problems
that can't be overcome.
Even
though Canada has spectacular settings, it was not its production
values that film producers go there to find. The lure, in
a single word, is money. While the studios have highly-efficient
sound stages and an abundance of skilled technicians in
southern California, the unions' work rules make it extremely
expensive to shoot exteriors. For example, a production
can only shoot for 14 hours with normal overtime and then
must pay double time. It also must employ redundant Teamster
drivers to chauffeur actors to and from locations (even
if they have their own drivers). These costs run even higher
for independent producers—about 9 percent—who are not part
of National Term Agreement which the studios have with the
unions. As a result, Indies need Canada—or another deep-discounted
country.
In
Canada, producers still have unionized labor to contend
with, but they get a huge discount—in the late 1990s, it
was as high as 35 percent—by paying labor in Canadian dollars.
On top of that, the Canadian Federal Government provides
foreign producers with a subsidy, called the Film Production
Services Tax Credit, which now equals 16 percent of Canadian
labor costs. (It was recently raised from 11 percent to
offset a rise in the Canadian loony against the American
greenback). In addition, British Columbia offers an additional
18% rebate on labor from that province. Finally, there is
a 20 percent break on digital effects, if they are done
in Canada. In order to qualify for this tax credit—which
the producer sells through a Canadian partner—either the
director or the screenwriter and one of the two highest
paid actors must be Canadian, which might partly explain
the demand for Canadian actresses, such as Alison Lohman.
Rachel McAdams, and Alexz Johnson, the star of Final
Destination 3 .
Hollywood
studios are limited in their ability to take advantage of
the Canadian El Dorado by the wishes of attached $20 million-plus
stars and rigidly fixed release dates for productions. Terminator
3: The Rise of the Machines , for example, had been
initially budgeted to be shot in Vancouver, where the producers
could score a multimillion dollar (salable) tax credit,
but after Arnold Schwarzenegger expressed a preference for
staying closer to home and Warner Bros. locked in a July
4th release date, the production was moved to Los Angeles.
(The change turned out fortuitous for Schwarzenegger, who
as Governor is now taking a principled stand against runaway
movie production.) Indie producers, on the other hand, are
less constrained in this regard, and free to run away to
Canada—or wherever the subsidy is greener.
Canada's
allure is of course relative. The loony has been increasing
in value against the dollar during the Bush years, which
in turn reduces the discount for shooting American film
productions in Canada. In addition, other locales, including
New York City, Louisiana, New Mexico, and Georgia, are now
offering “incentives” to productions in the form of subsidies
and tax rebates that compete directly with the Canadian
ones. And as one Indie producer put it “movies, like ladies
of the night, go where the money is.” Not to be outdone
in the escalating incentive war, Canada jacked up its salable
tax credits another notch this year. All this, of course,
is good news for the survival of the hard-pressed movie
producer.
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