Utopia, you are standing in it!

Peter Jackson and the rest of the New Zealand film industry recently received a large increase in tax breaks and subsidies to stay competitive in the global subsidy market that is film production. But for the increased subsidy, the New Zealand film industry would have suffered from runaway productions. Whether that race to the bottom is a game worth playing is for another time.

The Directors Guild of America and the Screen Actors Guild of America define runaway productions as motion picture productions or television shows that are

intended for initial release/exhibition or television broadcast in the US, but are actually filmed in another country.

One foreign shore for these runaway productions is New Zealand. New Zealand is a major beneficiary from the growth in internationally mobile cultural productions.

Runaways can be creative runaways because of script requirements or settings that cannot be duplicated or because the preferences of the actors or director.

An economic runaway goes abroad to reduce costs. The concerns of the Screen Actors Guild about runaway productions date back to the 1950s.

Consumer demand is an important driver of the globalisation of film production both in terms of expected quality of productions and a willingness to patronise individual films and television shows.

Film and television is part of a much larger, highly competitive and price-sensitive leisure and entertainment market.

Film producers learnt right from the start that audiences demanded novelty and innovation – they wanted to be surprised again and again. Short films evolved into full-length feature films with complex narratives. Sound, colour, spectacle, and endless special effects and increasingly sophisticated distribution and exhibition networks were required to stay ahead.

Film-going choices are driven to a high degree by a demand for novelty and a taste for uncertainty. Audiences take a chance on a film they may not know much about, which is a large part of the experience sought.

The first law of Hollywood economics is ‘nobody knows anything’. Extreme uncertainty is pervasive in film and television show production.

Every film and show is a unique product. In the film industry, the uniqueness of each film means product innovation is both rapid and thoroughly unpredictable.

Many famous films and shows succeeded because the producers made something that audiences did not know they wanted to see.

Their success surprised everyone, including the producers. Star Wars, Rocky, National Lampoon’s Animal House, The Blair Witch Project, The Gods Must Be Crazy, My Big Fat Greek Wedding, The Godfather, Fawlty Towers and Seinfeld are all examples.

Big budgets do not guarantee a profit; star power and large marketing budgets do not reduce ‘the terror of the box office’ and the films involving stars often run over budget.

There is no typical movie – industry profits depend disproportionately on rare blockbusters, and there are many dogs – 78 per cent of films are unprofitable. Steven Bonars explains it well:

In 2000 the average top 1% film earned 100 times as much and the average top 10% film earned 50 times as much as the median film.

Today these box office ratios are about 1400:1 and 550:1 for movies in the top 1% and 10% respectively.