It's The Economy, Stupid

14 thoughts on “There’s not much business in show business”

1. Hi Mr. Campbell, I posted this on the Globe and Mail article you wrote.

   I have to speak from the experience of a Nova Scotian employed by the film industry in my province. New Brunswick’s film industry is, frankly, radically different.

   I question the choice of year used to calculate these GDP figures. In 2008, Nova Scotia experienced a terrible decline in production, dropping to $76 million and making it the first year in more than a decade that production was less than $100 million. The following year, production rebounded to $150 million. I’m certain this substantial fluctuation would have an impact on your GDP calculations. I can’t actually check how you arrived at these figures, as the hyperlinks you published don’t lead to the data (unless I spend hundreds of dollars requesting them from Statistic Canada, I’m guessing).

   Unlike many Canadian provinces, the majority of the activity in Nova Scotia is indigenous, meaning it is local producers and filmmakers who are telling their own stories, screening them at prestigious festivals like Sundance and Cannes, airing them on every major network, and generating economic activity while doing so. The industry employs over 3,000, and is, in the words of the Nova Scotia government, “a cornerstone of the creative economy.” It employs local writers, directors, actors, musicians, visual artists, animators, graphic designers, costume designers and many others, and clearly has a major impact on numerous other industries, while making Halifax and other communities in the province a more vibrant place to live for all.

   New Brunswick has a younger, less established film industry, and it has struggled to gain that critical mass that Nova Scotia has achieved. The New Brunswick government’s musing of cancelling the tax credit has seriously injured prospects there. I can say this from my own experience, as I know of so many young, ambitious and creative New Brunswickers who have moved to Nova Scotia to be a part of the vibrant arts scene here.

   Nova Scotia is implementing a strategy of nurturing a creative economy that will have an impact on the province’s future for decades. New Brunswick has stumbled badly in this regard, and I feel it is unfortunate the province’s politicians have lacked this vision. I guess the question remains: how important are the arts, and the telling of our own stories, to the future of a province? I suppose we will see in a few years time.

2. Nova Scotia and New Brunswick are apples and oranges. The former NB tax credits deemed up to 75% of the crew workers to be temporary residents of New Brunswick and paid tax credit on income that was taxable to other provinces when those workers went home, which was not sustainable. Nova Scotia has only ever offered tax credit on actual Nova Scotia residents’ labour. Plus, Nova Scotia can provide 100% of a project’s needs, from the full crew to specialized equipment to digital post-production (which is now the only kind of post-production with the demise of 35mm prints). Nova Scotia collects tax revenue not just from the tax-creditable employees, but on all the costs of making a film– rent, equipment, tapes, make-up, food, lodging, computers, etc, etc– meaning the tax income for the government goes far beyond the rudimentary employee versus tax refund statistic cited by Stats Can. A proper study that examines the bigger picture would show the impact of 3000 jobs plus $50M non-labour cash injection into the overall economy versus 3000 unemployed people is a huge positive impact on the local economy. Knowledge of economic impact is important but the sources can’t be myopic and useful at the same time. It leads people to think the government would still receive the tax income of all the jobs that were not created, when in reality those jobs would simply go to benefit other jurisdictions. Well designed tax credits ensure that job creation actually happens.

3. I can’t make heads or tails out of most of this.

   For example, in the subsidies section, calculating out the effect on GDP there is NO number calculated as to actual ‘sales’ of product. The closest thing I can find is ‘output’, but that is not calculated with total GDP for some reason. Unless it is ‘other operating surplus’, which seems a bit of a catch all.

   Second, ‘output’ is 1.00 for ALL three provinces? Come on, get real.

   But counting in the indirect jobs and actually the total GDP comes out to only -.07. That’s actually pretty good considering all factors. The province doesn’t even have its own television station, unlike most western provinces. Most english NBers probably couldn’t name a single NB production in the last five years.

   And compare it to other industries. Natural resource industries basically rely on a piece of the province which is taken away forever. Given lumber subsidies and bailouts, I’d have a hard time believing that the numbers come out much different for most resource industries.

   So considering the industry was in such a nascent stage, that’s actually a pretty good listing.

   And from a public policy point of view, I should remind readers that when the tax incentives were cancelled, whether you agree with them or not, the province changed its position to one of directly funding productions (which they like). For example, the production about the boys basketball team in Bathurst recieved an outright grant from the province. A policy, I seem to recall, that usually isn’t that popular around here.

4. David,

   After reading your post from last year and the comments and the expectation that you will once again see many more for this post, I wanted to make a suggestion. It was clear the vast majority of the readers think film credits represent a tax break that merely represent a reduction in the amount of taxes collected. This is a common misconception and it is 100% the opposite of how the credits work. There is a MAJOR reason film credits are “refundable”–it’s because production companies almost never owe or pay taxes. Almost all of the credits issued in jurisdictions that offer refundable film credits are redeemed for a direct cash payout of their face value. In effect, if a project is awarded a $100,000 tax credit and its tax liability (assuming it has one at all) is just $1,000, then the government writes a check for the other $99,000 and its free cash in the producers pocket. In Saskatchewan, for example, just $2 million was used to cover owed taxes and the remaining $98 million was paid out as cash. It’s critical people understand this.

5. It IS critical that people understand the above to make an accurate judgement of public policies. However, it needs to be taken in context. The VAST majority of forestry companies in New Brunswick have NEVER paid taxes. The majority of MINING companies have NEVER paid taxes. They pay a nominal (usually low) royalty fee and in general that is it.

   NB and Saskatchewan are apples and grapefruits. When the ALward government cancelled the tax rebate, I’m pretty sure I remember the complaint was that “it costs the government 3-5 million dollars a year”. I’m almost positive that was the number, but somebody can check. That is NOTHING. Like I’ve said, the Alward ‘gift’ to apartment owners is going to cost the government SIXTY SEVEN MILLION every single year. So its absolutely insane to complain about five million going to video production.

   The other problem is one of averages. For example, SOME video and film production is geared for ‘entertainment’, its meant to make money, simple as that, there is no other real need for it. However, other products are things like documentaries or cultural products, where everybody KNOWS they won’t make money, but there is a ‘good’ invested in the product itself. And you really need to compare the two as separate. And again, how much of that ‘subsidy’ is FEDERAL, maybe through the Heritage department or other federal programs. In that case, its not the province at all.

6. Usually Mikel’s posts are based on facts – at least his interpretation of facts but in this blog his comments are bordering on incoherent. The Statistic Canada data clearly shows that forestry and mining generate between 15 and 22 cents of tax revenue for government for every dollar of industry GDP. The film production sector generates a *negative* direct GDP.

7. I am wondering if there is, or will be an overlap between movie making and the IT world that everyone recommends we should be developing.

   I suspect there is, and so a certain density of creative talent must be available, in my humble opinion. One year is hardly indicative of the overall activity of the industry. I can’t speak to the value of tax credits as they are applied in this industry, I would be careful not to throw the baby out with the bathwater.

8. Thom 3000 full time employees would indeed be a Disney reproduction of the classic Pinocchio with you playing the lead. By figures you put here you are trying to say the Film Industry in Nova Scotia employs 600 less people then the combined employment of Michelin Canada at their three Nova Scotia Plants. Come on now.If there were three hundred seasonal full time jobs it would be a stretch. What promoters of businesses in the Entertaiment field do is inflate the numbers like the Tourism business does. A transportation captain on a movie counts the number of employees at Enterprise Rent a Car who he is doing business with and then includes so people in the Employeed in the industry figure. You then throw in the Hotel staff the talent says in. A building you are shooting in Downtown HRM and so on. What I know from working at movies a while ago is fiction not only makes the editing suite it also is placed in the publics mind in regards to what Movies actually do for an economy. If this was a great booming business then please explain why was 5 soundstages in this province ,all getting provincial start up capital, closed except one. Tour Tech has a great business that does not rely on Soundstages alone and hence why they are the last soundstage in the province.

   The reason for the rise and decline , government money drove it and once that was gone too much space sat dormant and building owners found full time tenants . In the case of the South Shore the local development corporation took a bath on a soundstage. I think the Film Industry can use funding but David Campbell has really dug up something here that points once again to a sense of entitlement in our region that indeed has had Taxpayers as Shareholders in the most risky business in the world Entertainment. Banks dont loan to these things so why are taxpayers the unwilling shareholders in a business that fails to make money. I think funding hobbies is for the ones who enjoy them. How much were we out for K-19 widowmaker which did not recover the costs from the box office.

9. Excellent points Marc Almon, Mikel and Thom Fitzgerald. (But Paul Taylor? I know from personal experience that you are as wrong as wrong can be on so many points it’s not worth getting into. I hope that in the future, you become less bitter about your former film career.)

   As a New Brunswicker who moved to Nova Scotia many years ago but still works film gigs there on occasion, I’d say Marc, Mikel and Thom’s appraisals are bang on.

   The other issue in NB is the “three centers” problem – Fredericton, Moncton & Saint John where supplies and labour aren’t sufficient for that center to handle all needs, so people and materials are brought in for a production. Plus, a lack of infrastructure in NB is a real issue. Sound stages built outside any major center or built only for one show will always fail once that one project ends.

   In the heady days of yore, when IA 849 was just starting, I found a mid-1980’s report from BC (perhaps done by ACTRA??) showing that government investment in film had an economic return that was 2 to 3 times higher than those for mining, forestry or fishing. So, seeing this Globe article claiming that film’s a sinkhole, was a real shock for me.

   What’s that old joke? There are three kinds of lies: Lies, Damn Lies and Statistics!

   If these new stats are true, how did we get from being an excellent economic incubator to a lousy one? The writers, crews and producers developed their skills, equipment houses settled in, sound stages, post services and animation houses appeared (and some sadly disappeared) school-based training programs grew and our films are world class.

   Crew pay cheques certainly aren’t as “robust” as they were and departmental budgets are far smaller too – so how can gov. investment in film not be succeeding as it did before all of these “adjustments”? I just don’t get it.

   I remember a story that in 1990 the NSFDC was created only after a politician was told that without any assistance, the NS film biz was “bigger than blueberries”. I wonder, are we still bigger than blueberries?

   Rather than looking at film in a vacuum, it would be interesting to see that BC report from the 1980’s again and update it to see how we’re actually doing compared to other industries like fishing, forestry and mining. Mr. Campbell, I hope you’ll have a go at this. Although it may not garner as much press, it would be a far more useful exercise.

10. @mikel
    Agreed. But there is a difference between not paying taxes or getting lower tax rates with special deductions or credits versus the negative outflow of tax dollars as a PAYMENT to the film industry. Not only do most production companies not owe or pay taxes, they then get other peoples tax dollars given to them as a cash rebate. Lower royalties on oil means the government is collecting less taxes than it could, but it still collects something at the lower rate. With a film credit, it collects nothing and only pays out the money. That is not rational public policy, in my opinion.

11. First, to Paul, I know there is a Moncton IT company that is a big flash video game maker. They now have a deal with Archie Comics, and were even featured at the ‘Big Fish’ industry trade show in Oregon last year (one of the bigger online Flash game sites).

    And to be fair, I know the government WERE promising a new package that was supposed to include all other forms of digital manufacturing, maybe I missed it, but pretty sure we’re still waiting.

    And again, from a public policy point of view people here are missing the point. If you don’t like subsidies of ANY kind or corporate welfare of any kind, that’s fine. But that is NOT the issue, because the government IS directly funding production, but it has said ‘only productions we like’-like the guys who are shooting the movie about the Bathurst basketball team. So that corporate welfare IS still going on, but instead of a refundable tax credit, it is simply a ‘handout’ with no set legislation marking how the money is to be used at all.

    As for the mining industry, Brunswick Mining and Smelting was notorious for not paying taxes. There are so many carry forwards in the mining and forestry industry that revenues come from payroll taxes and other taxes (not income). Fraser has been in bankruptcy protection for YEARS now, and forestry carry forwards were changed to expand to ten years.

    I don’t usually argue with statistics canada, but I’m aware of the big forestry companies in the province, and I’d have to see how those numbers are added. There is almost no mining going on in the province anymore, so for forestry, there are five leaseholders-if you can find me a balance sheet that says “X” amount went to corporate income tax then I’ll believe that. But I’m NOT talking about the taxes that the owner of Fredericton Plywood pays, or some private landowners. I’m talking about what were previously the ‘big five’.

    And again, those industries rely on relocating those costs. So for example, there is considerable evidence that clearcuts increase water runoff, and most people have no doubt noted the extreme flooding that happens now each year. That is a HUGE cost, but Twin Rivers certainly doesn’t pay it, nor is it calculated in statistic canada documents.

    And just to add my quick two cents, I personally don’t think you need to subsidize this stuff AT ALL. Big productions usually make the worst quality. Like other provinces, New Brunswick simply needs its own internet or television station. It needs a place to ‘feature’ product. Look how much money feeds into Irving, all because its literally the ONLY place to advertise. Or else change the mandate of Rogers Television, which doesn’t even ALLOW them to produce anything but the crap they have on. Somehow they got around that with “Acadiaman”, but by law they can’t fund or show drama on their local stations.

12. Any half witted eight grade with a political bias, could have reached your assumption by playing with numbers and choosing the worst economical year ever. why not base your findings on a ten year stint. also for your information the subsidy is based on where in the province you shoot and the number of locals you employ. Also if you look at all the forgiven loans and huge tax breaks big business enjoy you would be singing a different tune

13. @Hank White 2008 is the latest data available for Input-Output modeling. Any half-witted eighth grader with a web browser could’ve found that out with a simple Google search.

    The salient point here, I think, is that we need to take a deeper look at the overall effect of subsidies on industries. There are plenty of people who rattle on based on ideological or theoretical grounds, but few who actually take the time to dig in and see that cause/effect.

    Forgiven loans and tax breaks in industries that have an overall positive net effect are positive things. People often see them as rewarding large corporations for things they’d do otherwise, but there’s a pretty big library of work out there that suggests that large corporations are becoming more mobile and more willing to up and move than ever before.

    So while we might cringe at who our tax dollars are going to on some ideological ground, the reality is that if you want a type of behaviour to occur and you’re willing to incentivize it, you should really know what happens after the fact.

14. That really makes no sense. First, we have NO idea ‘what happens after the fact’ with most subsidies primarily because the biggest players in the subsidy game are Irving and McCain and because they are private companies we have no idea of the after effects.

    And as has been said, all you have to do is make those ‘refundable tax credits’ into ‘non refundable tax credits’ and the whole problem goes away. Although I fail to see why even the FEDERAL government makes tax credits in this industry refundable, yet all for the sake of five million dollars, its not good enough for New Brunswick.

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