Should Films be Profitable?

The state of film funding in New Zealand

As a Kiwi artist, I’ve often been concerned by the failure of our public arts funding model. While the arts are a cultural issue, there are economic forces at play in their production.

Late last month, the New Zealand Film Commission released its annual review of how it has supported the film industry:

The first figures that jumped out at me were:

• $13.9M had been invested in New Zealand films.

• $78M had been approved rebates for 29 New Zealand productions.

• $228M had been approved rebates for 25 international live action productions.

• $40.8M had been approved rebates for 14 Post, Digital and Visual Effects productions.

This trend of government funding going to international productions instead of local productions is a consistent one and, due to the lobbying of industry groups, it is not well understood by the public.

I. Reflecting our Culture

From Creative New Zealand: How the arts are funded

What is the purpose of public arts funding?

Well, in 1978 our government passed the New Zealand Film Commission Act. This legislation came into being through lobbying efforts from local film producers, efforts based around a vision of reflecting our culture back at ourselves.

Here is what the Interim Film Commission said about its goals:

“We are not aiming to establish a romantic Hollywood of the South Pacific... On our farms, our cities, our maraes, our beaches, our battlegrounds, and close to our homes, New Zealand film-makers have captured visual images of the way we are and the way we feel and think.”¹

So, with noble intentions, our government started allocating public money to film-makers with the goal that their films would reflect how Kiwis are, how we feel, and how we think.

Unfortunately, this is not the state of affairs today…

As we can see, the NZFC now allocates most of its funding to international productions that support giant studios such as Weta FX and Stone Street Studios. This ‘Wellywood’ looks a lot like the “romantic Hollywood of the South Pacific” that the founders of this commission wanted to avoid.

While about $250M of taxpayer money goes directly to funding these ‘Hollywood’ and ‘Wellywood’ productions every year, most local artists are struggling to make ends meet and important public services (such as hospitals) are not receiving adequate funding.

If this $250M was going to local artists, then a serious discussion could be had about the value propositions of reflecting our culture back at ourselves vs healthcare funding.

However, with this money instead enriching greedy international producers, it is pretty hard to argue that it wouldn’t be better spent on other public services.

II. Lobbying and Bureaucracy

While some Kiwis have become aware of this distortion in the values of our funding body, and attempted to get the NZFC re-focused on their actual goals, these efforts have consistently failed.

In 2010, Sir Peter Jackson and David Court released a scathing assessment of the NZFC’s strategic direction and the NZFC’s poor relationship with local film producers.² The NZFC hit back with media lobbying efforts to defend itself against these claims, and nothing really changed.³

In 2018, Economic Development Minister David Parker attempted a serious inquiry into the NZFC’s excessive spending on international productions.⁴ However, lobbying by industry groups such as SPADA (whose members benefit from these grants), quickly put the kibosh on cutting funding for international productions.

Soon after this, I attended various hui (meetings) held by government funding bodies that wanted feedback on their strategies. Unfortunately, the opinions of the bureaucrats giving strategy presentations differed substantially from those of the artists who attended these hui.

From Creative New Zealand 2019 Annual Report

In one particularly egregious example at a 2019 Creative New Zealand hui, these bureaucrats told us the problem was that artists don’t charge enough money for their services. They said:

“The living wage is $25 an hour, but it looks like most artists are only charging $15 an hour. This is not even the minimum wage, artists need to start charging more and stop going to the government for funding.”

The artists got into circles to discuss this presentation, and we all came back with the same rebuttal:

“If the public would pay us $25 an hour, we would charge them that much. People are barely willing to spend any money on local art, probably because a lot of taxpayer funding already goes to the arts. Perhaps you should run an advertising campaign to explain why the public should pay us that much?”

The bureaucrats didn’t take kindly to this idea, and insisted that the problem was artists not valuing their work enough to charge a living wage.

They ignored the concerns of the actual artists at the meeting, instead proceeding with a bold diversity strategy that did nothing to solve the issue of how the public views their financial relationship to artists.

While this was disappointing, a much worse hui was just around the corner. In 2020, a wide variety of government bodies invited artists to discuss The Aotearoa New Zealand Screen Sector Strategy 2030.

From MBIE: Background to the screen sector and the New Zealand Screen Production Grant

Many independent film-makers had grown sick of the ‘us vs them’ relationship we had with the NZFC, and went along in hopes of changing this.

In addition to film-makers, many representatives of the video game industry came along. This was because their screen industry was substantially more profitable than the film industry, but received a fraction of the government funding that film did.

Unfortunately, just like at the CNZ hui, artists concerns were largely ignored and the bureaucrats forged ahead with their plan.

While they admitted film was not a commercially viable medium in New Zealand, they maintained it could be if we continued to attract international productions to support local growth - a strategy that had been failing for about 20 years by this point.

Specifically, they noted that the screen sector:⁵

• Remains reliant at every level on some form of government support, with limited opportunities for sustainable growth.

• Developing the capacity, sustainability and resilience of the sector by building companies with the scale to compete globally is a key challenge.

• There is a need to enhance the capacity, skills and career opportunities of screenwriters, actors, directors, producers and other key sector roles vital to the development of intellectual property.

• It must strive to become more diverse and inclusive at all levels, including promoting greater use of Te Reo and Tikanga Māori in the sector’s practices and processes, and ensuring the sector successfully reflects New Zealand’s unique and diverse cultural landscape.

While that final point is in line with the initial goals of the NZFC, the other three are a tacit admission of their spending failures.

A massive amount of government money has been thrown at international productions and it has distorted the local economy of film production. Despite the increased efficiency offered by digital production techniques, the industry has stagnated under this funding strategy.

III. Return on Investment

The consistent argument from the bureaucrats is that, while the films produced with government money are not profitable themselves, the ‘return on investment’ from screen production grants is $2.04 for every $1 spent by the government.

From Aotearoa New Zealand Screen Sector Strategy 2030

While that figure looks nice, it is artificial.

It is largely not based in any direct and measurable effects, but instead on imputed increases to tourism and hospitality spending from the ‘marketing of New Zealand’ provided by the film industry.

This may have been true when the strategy was pioneered by The Lord of the Rings Trilogy (2001 - 2003) - but, as with all marketing, it is practically impossible to accurately infer the value these productions bring to other industries.

Unlike direct effects however, these inferences make it very easy for bureaucrats to massage imputed data points and create a presentation that shows they are making wise funding decisions.

More importantly, the money going to international productions is a grant.

Meanwhile, local productions are given an investment that is supposed to be paid back out of a film’s profits. By measuring these, we can see the direct return on investment from the NZFC’s funding strategy.

Due to the distortions caused by international productions paying ‘top dollar’ for cast and crew with their government grants, producing local films has become consistently less profitable.

Since 1988, only 4 local films - Once Were Warriors (1994), The Irrefutable Truth about Demons (2001), Whale Rider (2002), Gardening with Soul (2013) - have fully repaid their production investments to the government.

As the NZFC is a public body, all their funding decisions can be viewed here.

While distorted market values are part of the reason so few of these investments are repaid, the other part is Hollywood accounting.

This perverse structure of ‘cooking the books’ enables successful projects like Taika Waititi’s Hunt for the Wilderpeople (2016) to claim poverty while raking in millions at the global box office.⁶

So, if we look at direct return on investment (instead of imputed returns), we can see that the current strategy is not building a sustainable and resilient film industry where an entrepreneur can flourish.

IV. Is the Goal of Art Profit?

Obviously one who sets out upon artistic endeavours rarely expects much in the way of financial reward.

Art is a passion, a movement of the spirit, not an economic activity focused on raising capital and creating profits. For a nation to thrive, people need to see their own culture reflected back at them by local artists.

While art holds great value beyond the mere economic, film is an art form that requires substantial investment to be successful. However, our government is not doing anything to build a thriving economy for these investments to come from.

Instead, productivity is declining in film production just as it is in every other enterprise across New Zealand. Bringing in proper tax breaks for local philanthropists would be a good start, but more importantly it is the ‘mode of production’ that needs to change.

In 2024 the NZFC invested $13.9M in local productions, but their total ‘film income’ was $3.7M from 251,386 viewers. This fell well short of their forecast goal of 400,000 viewers and of the 398,697 viewers they had in the previous financial year. They also saw a 5% drop in the amount of Kiwis who said they had watched a New Zealand film in the last year.⁷

As the NZFC invests about $1M - $3M in each local feature production, this means that every year our government is giving away about $250M directly to ‘Hollywood’ and ‘Wellywood’ producers while making a loss of around $1M on each local production.

This is a terrible model. Despite these economic distortions, independent producers with an entrepreneurial mindset have succeeded in working outside it.

I was able to produce a film in New Zealand with $40,000 that I raised by working as a middle manager in tech support, and Bernie Rao gained international recognition with his micro-budget horror film Killer Sofa (2019).⁸

Ultimately, the current strategy has helped the rich get richer, done little for local artists, and important public infrastructure has not been funded so that government money can be allocated towards the noble goal of paying international producers to exploit our people for profit.

I remain optimistic that the logic of market forces will eventually prevail upon the economic incentives employed by our government, but the political mess of our current corporant society means this is unlikely to change soon.

1. Dunleavy, Trisha and Hester Joyce. New Zealand Film and Television : Institution, Industry and Cultural Change. Intellect Books Ltd., 2011.

2. The hypocrisy of this scathing 2010 report being presented by the same man who lobbied for the infamous ‘Hobbit Law’ to prevent screen industry professionals from unionising effectively is not lost on me. https://www.beehive.govt.nz/release/sir-peter-jackson-review-film-commission-welcomed

3. https://www.nzherald.co.nz/nz/jackson-report-wrong-film-commission/F4PMRSB4HWOL5L57GCAT467TIM/

4. https://www.rnz.co.nz/national/programmes/ninetonoon/audio/2018652459/does-nz-get-bang-for-its-movie-buck

5. https://www.mbie.govt.nz/business-and-employment/economic-development/screen-sector/new-zealand-screen-production-rebate/increasing-value-from-government-investment-in-the-new-zealand-screen-production-grant/part-1/background#fn12

6. Hunt for the Wilderpeople (2016) received $2,237,065 from the NZFC in various funding decisions. While they did pay back a $50,000 script development investment, the film has not fully repaid any of its other NZFC investments. However, it has made about $23,900,842 at the box office.

7. These figures come directly from the NZFC 2023/2024 Annual Report. Film income is from section 2.2 of their financial report (page 72) and box office figures come from section 4b of their Statement of Service (page 62).

8. Portrait of a Knight (2018) was my independent feature. The NZFC did give Killer Sofa (2019) a $15,000 finishing grant, but no direct production investment.