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From Hollywood to ‘Wellywood’:

A political economy study of New Zealand as a location for global Hollywood                

Bridget Conor

AUT University

From Hollywood to ‘Wellywood’:

A political economy study of New Zealand as a location for global Hollywood                

 

New agglomerations of Hollywood production are increasingly incorporating peripheral locations such as New Zealand. In this context, the New Zealand film industry has become a location for ‘runaway production.’ This has generated a huge amount of activity, discussion and hype in relation to domestic feature film production, particularly in the wake of The Lord of the Rings) trilogy and its international success (Jackson, 2001, 2002, 2003). This has led some filmmakers, financiers and policymakers to argue that the rise of a global entertainment industry is diminishing the traditional centralised power of Hollywood and creating new opportunities for international filmmaking outside the US. However, I will argue that such optimism is largely illusory.The continued concentration and economic domination of the US studios is reinforced by their adaptation to changing global conditions. Partial out-sourcing of production has enabled cost reduction but does not represent a relinquishment of power. As David Morley and Kevin Robins argue, vertical integration and globalisation are dominant forces in the Hollywood cultural production system and these forces enable only partial disintegration and localisation. Here I will argue that critical political economy enables an analysis of the structures of profit making and power in the mainstream film industry as it seeks to out-source production, lower costs, recruit creative talent from peripheral locations and co-opt local governments into its international production strategies.

These strategies will be analysed in relation to the political economy of the New Zealand film industry. Recent initiatives of the New Zealand government have been embodied in the ‘Brand NZ’ slogan that has been employed to promote New Zealand as a desirable location for global film production (in competition with other film locations). The objectives of global Hollywood and an ill-resourced and dependent film industry coalesced with striking clarity during the production of The Lord of the Rings trilogy. A complex ‘partnership’ developed between a Hollywood studio, New Line Cinema and the New Zealand government. This was represented within a highly optimistic set of official discourses; the New Zealand film industry and its workers were apparently, entering a new era of independence and autonomy.

Political economy and global Hollywood: Contesting paradigms

As the film industry and its wealth become ever more concentrated, it is increasingly difficult to avoid the issues and analysis that a political economy of film offers (Wasko, 2003, pp. 13-14).

The optimistic discourses about the New Zealand film industry (as in other locations) can best be understood using a political economy approach which critically analyses the runaway production phenomenon. In New Zealand, government optimism springs from the increasing globalisation of Hollywood productions. With budgets ballooning for major ‘high-concept’ Hollywood films, filmmaking outside the United States has become a necessity when location and labour costs and other 'below-the-line' expenses can be significantly reduced by filming offshore (Monitor Company, 1999). Whereas California once provided these incentives in abundance, other countries including Canada, Mexico, the Czech Republic, Australia and New Zealand are now the locations for major studio-driven film productions.

In general, the political economy approach views mainstream Hollywood feature filmmaking as a high profile and lucrative facet of an increasingly global entertainment industry still associated with the construct of an American-based ‘Hollywood’. Opposing the 'Three C's' thesis that political economy subscribes to is the post-Fordist notion of flexible specialisation, understood in the context of global cultural production and Hollywood filmmaking. This perspective emphasises the shifting nature of Hollywood production, the de-verticalisation of the major studios’ activities and the de-concentration of production from studio backlots in Southern California to numerous foreign destinations as production costs have risen (Christopherson and Storper, 1986, 1989; Storper, 1989, 1993).

A post-Fordist framework can give the appearance of “…the diminution of monopoly” (Wayne, 2003, p.82). It posits that mass production has been forcibly replaced by a more flexible system of organisation. In the context of the film industry, it is argued that the Hollywood studio system represented an example of a mass production system that has given way to a more flexible process. Christopherson and Storper  state that certain key events such as anti-trust legislation in the late 1940s and the growth of television triggered a process of vertical disintegration in the US film industry (Christopherson & Storper, 1986, 1989; Storper, 1989, 1993). This has fundamentally altered labour relations and industrial politics as well as the spatialisation of feature film production. In general, post-Fordism argues for a new “…plurality of capital’s operating units” (Wayne, 2003, p. 93). Vertical disintegration is seen to represent a break, a shift from Hollywood’s mass production and monopoly capitalism in the studio era, to a ‘new’ flexibly-specialised Hollywood. The major studios have been compelled to diversify and engage in horizontal partnerships in order to survive in an advanced capitalist society. There has been a switch “…from product differentiation in the motion picture industry to product variety in the entertainment industry” (Storper, 1989, p. 290).

This is a highly contested paradigm and one that has been criticised by various theorists. A key criticism is that the flexible specialisation argument underestimates the oligopolistic power of the major Hollywood studios and their giant parent corporations. Recognition of shifts in the production process underplays the continuing importance of the distribution and exhibition axes in the motion picture business. This critique is echoed by other commentators. Wayne writes “…it is highly misleading to apply the term vertical disintegration to the production sector alone when questions of market dominance are assessed by the vertical links across production, distribution and exchange” (2003, p. 93).

Blair and Rainnie’s (2000, p. 188) examination of independent production companies in the UK film industry and their relationships with major Hollywood producers/distributors argued that such ties were “…neither new nor unique.” They were seen to reflect a ‘boom and bust’ pattern which had always dictated the fortunes of the UK film industry. Others, such as Balio (1998) have argued that since the anti-trust legislation of 1948, the major studios have engaged in a gradual process of vertical re-integration. This is evident in the waves of corporate mergers that have deepened the concentration of power and capital in the entertainment industry along with the acquisition of theatre chains by producer/distributors. Staiger’s (1983) analysis of the end of the studio era questioned whether the film industry was a good example of a once-Fordist industry. She observed that independent production had always been a part of motion picture production, albeit a subordinate one; “The move to independent production was not ‘outside’ the dominant sectors of the industry. “The major studios supported an ideology of ‘individualism’ from the late 1920’s” (Staiger, 1983, p. 79).

Political economists, in tracing the historical development of filmmaking, undercut optimistic predictions by emphasising the corporate power of the major studios and their parent companies in recent decades. Political economy approaches argue that strategies of vertical integration and horizontal re-integration have been consolidated in order to minimise risk and maximise profit for the studios. Distribution and exhibition are the keys to Hollywood’s continued economic success, coupled with state support for the maintenance and expansion of international markets (through free trade agreements, anti-piracy legislation and so on) (Aksoy and Robins, 1992; Guback, 1976, 1983; Miller, 2001; Miller et al., 2001; Wasko, 1994, 2003). Aksoy, Robins and others see the major studios and their parents as retaining world market power through distribution whereas writers like Christopherson and Storper implicitly argue that a partial dispersal of power has occurred, at least along the production axis, in terms of the initiation and execution of projects. Flexible specialisation supposedly allows more players along this axis to exercise more autonomy.

Vertical integration has always been an important strategy for the studios. They have organised themselves through formal vertical integration, in terms of direct ownership of distribution companies and theatres. The majors have also used informal strategies such as distribution ‘deals’ and alignments with various companies along the distribution/exhibition chain. The flexible specialisation thesis is problematic and cannot fully articulate either the historic complexity and dynamism of Hollywood filmmaking or the logics currently at work in the global entertainment industry. Christopherson and Storper (1986, 1989) have also been criticised for being inherently optimistic about the supposed benefits of flexible specialisation. This has been a recurrent focus of critique; as Tomaney (1995, p. 157) has observed, post-Fordist arguments anticipate “…the rise of more benign forms of production organisation and labour practices.”

Storper (1993) has responded to the criticisms of Aksoy and Robins (1992), writing that flexible specialisation is not necessarily incompatible with oligopolistic control in Hollywood. In this view the political economy of global Hollywood has become characterised by the domestic concentration of capital and creative control and the global out-sourcing of production in order to reduce costs and risk. The concentration and economic domination of the US studios is thus reinforced by their adaptation to changing conditions. Partial out-sourcing of production enables cost reduction but does not represent a relinquishment of power. As Morley and Robins (1995, p. 33) argue: “Whilst disintegration and localisation are important (allowing major Hollywood motion pictures to be made outside the US for example), integration and globalisation remain the dominant forces.”

Wayne (2003) provides another pertinent assessment in trying to negotiate between post-Fordism and monopoly capitalism. He argues:

…the new corporate structures are characterised by decentralised accumulation, [original emphasis] where the dominant logics of capital are mediated through a multi-divisional corporate structure in combination with a web of subsidiary and subcontractor modes which give the appearance of plurality and autonomy in the marketplace (p. 84).

For Wayne (2003), it is the ‘appearance-forms’ of diversity and competition, the basic tenets of post-Fordism, that must be recognised and examined. However, the weakness of the flexible specialisation argument is still obvious, because these ideals mask the underlying sites of capital, power and control.

The suggestion from post-Fordist writers is that at the core, Hollywood is losing its historical power base because of a geographic dispersal of production. In fact, the studios are more powerful and parasitical than ever – making record profits in key global territories (Guider, 2003; Mohr, 2007), tailoring marketing strategies to each locality and co-opting local governments, workers and publics into their production and marketing strategies.

Global Hollywood and New Zealand

More than ever, Hollywood is under pressure to spread the production, distribution, finance and exhibition spheres of the image business, not only across different product markets (both hardware and software), but also across different locations. The new Hollywood system is about ensuring the integration and cohesion of this spatial disarticulation on a global scale (Aksoy and Robins, 1992, p. 19).

Runaway production has enabled global Hollywood to reduce risk and maximise profit. Some within Hollywood, especially film workers vulnerable to the ups and downs of the business, are worried about this trend and have called it ‘runaway production’. Empirical evidence obtained by US unions and the US Government has supported such concerns (Monitor Company, 1999, US Department of Commerce, 2001). The Monitor Report (1999, p. 2) defined runaway productions as “…those which are developed and are intended for initial release/broadcast in the US, but are actually filmed in another country.” Statistics illustrate that this phenomenon has increased over time.

From 1990 to 1998 the rate of US developed film and television productions produced abroad almost doubled from 14% to 27% while economic losses from runaway production increased fivefold from US$2 billion to US$10 billion (US Department of Commerce, 2001, p. 4).

Incentive schemes have been developed by locations (beginning with Canada in the mid-1990s) to attract mobile production and it is argued, have had an ‘astounding’ effect on the geographic location of feature film production since the 1990s. Recent statistics indicate that the runaway trend has continued; the dollar volume of Theatrical Release production in the U.S. dropped from US$3927 million in 1998 to US$3378 million in 2005, a decline of 14%. This was coupled with a sharp decline in the U.S. market share of production dollars for Theatrical Releases (from 71% in 1998 to 47% in 2005). Correspondingly, the dollar volume of feature films shot outside the U.S. grew 135% from US$1630 million in 1998 to US$3828 million in 2005 (CEIDR, 2006, p. 2). On-location feature-film production in Los Angeles dropped 22% during the first quarter of 2007 – the second largest year-to-year decline on record (Hernandez, 2007).

The location of production represents only one aspect of the filmmaking process for Hollywood studios however. Capital still flows predominantly to the vertically integrated US entertainment companies in Los Angeles and New York, where the major production decisions are made. Production can be spread offshore and production costs reduced (with the help of favourable exchange rates) but the ideological and market dominance of the major studios is maintained in the global arena. Variety reported that worldwide box office revenues for the major studios rose to an all-time high of US$25.8 billion in 2006, up 11% on 2005's US$23.3 billion. This gain was driven mostly by overseas markets - the international box office set a record of US$16.33 billion as it jumped 14% from the 2005 total (Mohr, 2007).

In order to ensure the cohesion of global Hollywood’s spatial disarticulation, a number of strategies are employed in the runaway production process. These include the out-sourcing of production and post-production work to peripheral and independent producers for cost reasons, the recruiting of creative talent (both above and below-the-line) from peripheral locations and the co-option of local governments into international production webs and marketing campaigns. These strategies will be analysed here in the context of a relatively small location – New Zealand. Large-scale runaway productions from Hollywood to New Zealand have increased in recent years. This can be attributed particularly to the filming of The Lord of the Rings trilogy in Wellington and other locations from 1999-2004.

The global supremacy of Hollywood is a given in most Anglophone film markets, especially in terms of distribution and exhibition. In a highly peripheral economy such as New Zealand (in geographical relation to the ‘core’), a film industry is further disadvantaged because of size and relative costs of filmmaking. This has been reinforced by New Zealand government initiatives designed to promote New Zealand as a desirable location for global film production. These initiatives have been marketed under the government’s ‘Brand NZ’ slogan. The objectives of global Hollywood and an ill-resourced and dependent film industry coalesced during the production of The Lord of the Rings trilogy.It was during the filming of the trilogy that New Zealand became increasingly visible as a location for large-scale Hollywood productions and was recognised as a possible threat to the centralised Hollywood production complex. A ‘partnership’ developed between a Hollywood studio, New Line Cinema and the New Zealand government. This was publicly represented within a highly optimistic set of post-Fordist discourses; the New Zealand film industry and its workers were apparently, entering a new era of independence and autonomy. However the ‘appearance forms’ of flexibility, autonomy and independence within the New Zealand film industry have effectively reinforced the economic imperatives of global Hollywood. These are risk minimisation, profit maximisation and the maintenance of corporate control through complex financing, distribution and exhibition deals.

Production and post-production outsourcing

New Zealand has been recognised as a location for runaway production by reports released by the Monitor Company and the US Department of Commerce. The Monitor report looked at theatrical productions (ie. features, made-for-TV films etc.) It concluded that the impact of runaway production on US labour and revenue was profound. In 1998, US$10.3 billion and 20,000 jobs were lost, according to the calculations of the Company (Monitor Company, 1999, p. 3). The primary alternative locations were identified; Canada (81% of runaways in 1998) and the UK and Australia are also mentioned. Causes were recognised as being multi-faceted and ‘integrated.’

The Monitor Report (1999) drew a distinction between ‘creative’ and ‘economic’ runaways that highlighted the different motivations for moving offshore. ‘Creative runaways’ are concerned with the need for a particular setting that cannot be replicated in Burbank. These types of productions have been a part of the Hollywood production process right through the twentieth century as production companies have striven for ‘exotic’ settings and original narratives. ‘Economic runaways’ on the other hand are based entirely on reducing production costs and therefore represent an ongoing threat to Hollywood’s hegemony and to the filmmaking labour force based in Los Angeles and New York (US Department of Commerce, 2001, p. 4).

The Monitor Report outlined the ‘integrated approach’ taken by Anglophone countries such as Canada and Australia in attracting mobile production capital from the US:

In this approach, a country begins with a relatively undeveloped production industry. It then launches a series of (usually tax credit-centred) initiatives to attract production activity and investments and often creates qualifying requirements for those incentives that stimulate hiring of local personnel. As a result, local production crews, actors and production managers gain valuable experience and training and are therefore more capable and attractive to other producers. At the same time, investments in physical infrastructure are sought so that more and more productions can be accommodated. As these production capabilities expand, other tax incentives such as those for local labour expenditures are offered to further stimulate demand for local production resources. Ominously, this approach to capture productions is readily replicable by other countries… (Monitor Company, 1999, p. 24-26).

New Zealand is recognised as a possible ‘threat’ in the original report and this is borne out by subsequent research. The Centre for Entertainment Industry Data and Research (CEIDR, 2006) profiled key locations of runaway production in their most recent report and these included Australia, New Zealand, Eastern Europe and South Africa as well as Canada, the UK and Ireland. Other Anglophone countries competing for ‘runaway productions’ have also recognised New Zealand as becoming increasingly attractive for US production work. The Toronto Star reported in September 2003 that countries such as Australia and New Zealand and their “seductive incentives” were now Canada’s biggest competitors and were “rerouting millions of dollars” (Whyte, 2003, p. H4).

The US Department of Commerce report (2001) discussed ‘other countries catching up to the United States’ and looked specifically at ‘foreign’ governments’ incentive programs as principal drivers of production out-sourcing. Numerous countries have now positioned themselves as locations for both economic and creative runaways, offering lucrative incentive schemes (from the standard 12.5% and 15% rebates in New Zealand and Australia respectively to more generous 20% rebates in European locations such as Germany and Hungary). Some countries promote themselves as offering settings that ‘stand-in’ for numerous locations – “Morrywood”, Morrocco, has become “…a location double for the Arab world and Middle East, a could-be Egypt, a convincing Iraq” (Hopewell, 2006). There is now fierce competition between locations to attract mobile production activity and capital from Hollywood and this increases the studios’ centralised control over outsourcing processes – whole nations now act as contractors, striving to offer the cheapest deal, the most flexible crews and the right mix of settings and scenery. Importantly, as the New Zealand case demonstrates, productions often move offshore because of economic and creative reasons.

Increasingly New Zealand has hosted both creative and economic runaway productions since 2000. Associated hyperbole about a New Zealand filmmaking boom has been vocalised by government bodies, some filmmakers and the New Zealand media. A cover story in a New Zealand trade publication, spelt it out:  “Start of the Golden Weather?: This summer could be the busiest yet for screen production with up to 8 movies and at least that many television projects in the next 3-4 months” (‘Start of the golden weather?’, 2002).

Major projects from US studios have received much press coverage since 2000 – productions included Vertical Limit (Campbell, 2000), Sylvia (Jeffs, 2003), The Last Samurai (Zwick, 2003) and the three films in The Lord of the Rings trilogy (Jackson, 2001, 2002, 2003). Most of these films would be classed as primarily economic runaways although these examples also had some creative considerations; Vertical Limit and The Last Samurai needed specific locations such as mountains and the principal filmmakers of these projects had connections to New Zealand. They argued to one extent or another that filming in New Zealand was a personal choice. For example, Christine Jeffs (director of Sylvia) and Martin Campbell (director of Vertical Limit) were both locally born. The Lord of the Rings trilogy itself represented a complex combination of both economic and creative considerations that led to the deal between Peter Jackson and his crew and New Line Cinema. Jackson already had a well-established production complex in Wellington, New Zealand. He was able to persuade New Line that the creative talent of his team along with the cut-price costs of filming in New Zealand and the simultaneous filming schedule for the three films would both reduce the risks for the studio and maximise their profits (this will be discussed in more detail below).

New digital technologies (such as special effects and computer-generated imagery) have increasingly been harnessed by the major studios in order to increase their economic power and decrease the financial risks of filmmaking. Advances in computing and software technology have aided complex post-production activities such as editing, sound engineering and visual effects. The ‘high-concept’ on-screen results enhance the filmic and commercial landscape of big-budget films. These technologies also play a central role in the processes of out-sourcing.

Today new technologies have allowed the film production process to become unbundled – it is no longer necessary to have all the people in the extensive chain of film production together in a single location (US Department of Commerce, 2001, p. 65).

The US Department of Commerce (2001) report notes that such technologies rely on ‘Virtuality, not Proximity’. In a sense, this highlights the fact that big-budget Hollywood film production no longer needs to be concentrated in Southern California; “Contemporary technologies…now make it logistically feasible for individuals from all around the world to collaborate and participate in the post-production process, no matter where they happen to be located” (US Department of Commerce, 2001, p. 67).

New Zealand filmmakers have tapped into these trends - ‘Wellywood’ (a term now widely used in the New Zealand press) is a substantial production and post-production complex in Miramar, Wellington which Peter Jackson developed during TheLord of the Rings production. It includes the former New Zealand Film Unit facilities, Stone Street and Camperdown studios and WETA Digital and WETA Workshop, the special and digital effects companies owned by Jackson, Richard Taylor and other key Rings filmmakers. WETA also represents the best evidence of a New Zealand based commercial enterprise dealing in film-related products and merchandise. The ability to produce cut-price and cutting edge special effects means this complex aids New Zealand’s position as a desirable location for runaway production. WETA is recognised in the CEIDR’s 2006 report as a key aspect of New Zealand’s continued attractiveness as a location. The New Zealand Government has also recognised this. Its strategies to promote New Zealand as a location emphasise the development of information and communication technology infrastructure and the development and retention of intellectual property rights (to maintain national ‘competitive advantage’.)

However, it is quite clear that WETA is closely calibrated to Hollywood production objectives. Its market advantage is that it can produce digital effects and merchandising cheaper than in Los Angeles. Recent projects include digital effects for the Hollywood films I, Robot (Proyas, 2004) and Van Helsing (Sommers, 2004). In a 2001 interview John Labrie, chief technology officer at WETA, pointed out that the nature of their business was “nomadic”:“Personally, as a business model, I can’t see us saying that we’re going to do effects in New Zealand ad infinitum” (Lehane, 2001). WETA has since worked on Jackson’s King Kong (Jackson, 2005) but again, because of the nature of its business, workers are recruited from a world market and on a project to project basis. John Labrie’s comments reflect the precarious nature of the business and the need for companies such as WETA to be globally oriented rather than tied to a peripheral location.

Global Hollywood’s strategies for outsourcing production are primarily concerned with reducing costs and risks; here, an essential element is the recruitment of creative talent from peripheral locations. Miller, Govil, McMurria and Maxwell (2001), who write extensively about the migration of production from the centre to the periphery characterise the trend as reflecting the ‘new international division of cultural labour’, (the NICL).  Aksoy and Robins emphasise the importance of risk minimisation and creative talent, while also rejecting the flexible specialisation thesis. They write:

What distinguishes the film industry is the high level of risk attached to the product. This is partly because it is so dependent on creative talent, and control over creative talent, in terms of its productivity, efficiency and cost, is extremely difficult to achieve…the golden rule in the film business is that if you do not have the creative talent to start with, then there is no business to talk about at all, no hits or misses. Talent, moreover, does not come cheap (1992, p. 12).

In the case of The Lord of the Rings in New Zealand, Peter Jackson, Fran Walsh (Jackson’s writing partner) and their production team (including Richard Taylor and the WETA animators) were considered to be valuable creative talent worth investing in, although risks needed to be minimised in many other areas. Advantages such as a tax loophole and reduced location costs (because of a favourable exchange rate) off-set the risks associated with shooting in New Zealand. Also, by shooting three films simultaneously, economy of scale was achieved, further reducing overall costs. Even so, anecdotes abound about the level of anxiety New Line executives had about Peter Jackson’s track record and experience and his ability to ‘deliver’ during production (for example Holson, 2003).  The ultimate success of the trilogy assured Jackson’s role as a ‘creative entrepreneur’ within New Zealand. Furthermore he is now a powerful person in the international industry. Able to command major investment for Universal’s King Kong (Jackson, 2005), he was named as Hollywood’s most powerful person in Premiere magazine in 2005 and was listed in the top 30 most powerful people in Forbes between 2004 and 2006 (‘Jackson top of the heap in Hollywood Power List’, 2005).

Tellingly, Jackson and co-writer and partner Fran Walsh are now suing New Line Cinema over the profits made from the first film, The Fellowship of the Ring (Jackson, 2001). This is an important action because it illustrates Peter Jackson’s new-found power – producers and directors are usually subject to the ‘creative accounting’ strategies of the major Hollywood studios, a murky but familiar aspect of any studio’s profit-making strategy (Wasko, 2005).  But most producers/directors usually do not have the personal resources or leverage to audit a studio or pursue legal action.

Clearly, New Line recognised the creative talent of Jackson and Walsh and engineered the finance for the trilogy. But they also took whatever measures necessary to reduce their investment risks and maximise profits. With the increased international profile resulting from New Line’s success, Jackson has responded in true Hollywood style, litigation (Campbell, 2005; Johnson, 2005). This action is now being echoed by fifteen New Zealand actors who appeared in one or more of the three Rings films and who are also suing New Line Cinema over their share in profits from merchandising deals. Their contracts entitled them to 5% of ‘net merchandising revenue’ which became virtually meaningless after certain ‘unexpected expenses’ were deducted, such as a 50% distribution fee (Chaney, 2007; Hudson, 2007).

These developments indicate that above-the-line creative talent is vulnerable to the international division of cultural labour (NICL) and that peripheral creative talent is easier to manipulate and control at many levels.

The large investments required to secure top creative talent can be partially offset by the recruitment of cheap, non-unionised, below-the-line crews. Cheap and relatively skilled crews are a key factor in attracting promiscuous production. Employment for most below-the-line workers on such productions is ‘flexible’ (and therefore precarious). Miller et al. identify Robles’ notion of ‘peripheral Taylorism’, a term that could be applied to New Zealand’s position in providing cheap crews. They write:

Hollywood’s runaway trend depends on peripheral nations that have the right skills, language, familiarity, business links and foreign exchange rates to suit - what has been called a form of ‘peripheral Taylorism’ such that there are highly-developed efficiencies available from a skilled working class in places that nevertheless continue to import what is made on ‘their’ territory - but never under their control (2001, p. 63).

Many issues have arisen as more runaway production work has utilised below-the-line services in New Zealand.  There have been claims that local work is being affected by the inflationary nature of big-budget foreign productions (Campbell, 2003; Perrott, 2004), reports of unsafe working conditions on big-budget film sets (Watt, 2006) and suggestions that immigration laws have been ignored to allow for the hiring of foreign rather than local crew (Chalmers, 2004). In local labour disputes workers have been hired as flexible ‘contractors’ rather than employees and then conveniently fired in accordance with the ups and downs of the global market and industry.

One key labour dispute emerged out of a court case between a model-maker hired for the Rings trilogy and Three Foot Six Ltd, Jackson and Walsh’s production company. The technician was initially hired by WETA Workshop and was then dismissed in 2001 when his models unit was downsized even though he argued that he saw himself as an employee of ‘Three Foot Six’ rather than an independent contractor. The main issue was whether Bryson was an employee of ‘Three Foot Six’ and thus able to claim for unjustifiable dismissal. The Employment Court judge ruled that Bryson had been an employee, allowing him to undertake a personal grievance case against ‘Three Foot Six’. The Court of Appeal then decided that ‘Three Foot Six’ could appeal this judgement. Within an analysis of the case, witnesses were quoted as being concerned that a decision in favour of Bryson would damage the industry as a whole. Brian Osbourne, American producer of the trilogy is reported to have “implied that should this change [industry specific employment arrangements] New Zealand might become a less attractive location for lucrative film deals.” The Supreme Court has now overturned the Court of Appeal decision, ruling that Bryson was an employee and is now able to file the personal grievance case. Industry players have differing views as to whether this case will affect the industry as a whole in the long term. Many assume this reduces New Zealand’s competitive advantage on the international production stage (Sorrell, 2004; McLean & Cardy, 2005; ‘Film industry model maker wins employee case’, 2005).

Such a case illustrates the international division of cultural labour at work in the production strategies of global Hollywood. Overall, the recruitment of flexible and peripheral below-the-line workers represents another key element in Global Hollywood’s spatial disarticulation. The differences between the experiences of above- and below-the-line crew are often stark but experiences of exploitation and precariousness are evident at both levels in the New Zealand context.

Government subsidisation of global Hollywood: economic realities and promotional discourse

As with many other locations now used by Hollywood for peripheral production, New Zealand has been able to offer cheap, non-unionised production crews, creative talent and a favourable exchange rate. However, there have been other avenues through which global Hollywood has been able to significantly lower costs while maintaining centralised control in New Zealand.

In order to both reduce their risk and maximise their profits in the making of The Lord of the Rings trilogy, New Line Cinema orchestrated a complex financing and marketing strategy, a common approach for large blockbusters. They reduced their investment exposure with a number of interlocked funding avenues; foreign distribution deals, huge marketing and promotional agreements (with companies such as Burger King and JVC Electronics) and a tax loophole within New Zealand tax law.

The New Zealand Government aided in directly funding The Lord of the Rings trilogy through the loophole which was closed after the trilogy was confirmed (Campbell, 2000, 2001; Berryman and McManus, 1999). The studio was thus able to reduce their direct investment in the films. The New Zealand Film Commission (the local film funding body) played a key role in this process, certifying the three films as New Zealand films in order to qualify them for the tax break. It was reported at the time that: “Lord of the Rings has the potential to extract some NZ$210 million from our tax base, leaving the financiers with a NZ$140 million tax windfall, compliments of our government, on top of any profit they might make” (Berryman and McManus, 1999, p. 1). Overall, out of the US$350 million budget, New Line was responsible for US$123 million (Grainger, 2005, p. 4). Michael Lynne, co-chairman of New Line, said in February 2005, “The amount of money that New Line actually had at risk on Rings was never as much as anybody thought. It was actually relatively small. In actual dollars” (Ibid).

Such a lucrative loophole may be found and exploited on a case-by-case basis but more frequently locations are offering tax breaks or grants tailored specifically to big budget Hollywood films. The studios are now able to shop around for the best out-sourcing deal and local or regional governments implement such schemes in order to attract particular productions and/or retain their status as ‘location-of-choice’ for global Hollywood.

Jim Anderton, New Zealand’s former Minister for Economic Development, pushed through a large budget grant scheme for film and television production in mid-2003. Productions spending NZ$50 million or more in New Zealand automatically qualify for funding which enables a 12.5% recoup of costs spent in New Zealand. Another production category, for budgets between NZ$15 and NZ$50 million, requires projects to spend 70% of their budget in New Zealand to qualify. Anderton commented: “The only reason we subsidise Warner Bros is if there is an economic benefit. I will subsidise the devil incarnate if there is a net economic benefit to New Zealand” (cited in Calder, 2004, p. B3). The grant scheme was directly linked to Hollywood productions rumoured to be considering New Zealand as a location at the time, chiefly The Chronicles of Narnia: The Lion, the Witch and the Wardrobe (Adamson, 2005) and also Without a Paddle (Brill, 2004). Paramount (makers of Without a Paddle) said at the time of filming the only reason New Zealand was chosen as a location was because of the grant scheme (Owen, 2003).  

Both economic and creative runaways have benefited from the savings generated by the grant scheme. For example, The Last Samurai (Zwick, 2003) did not qualify for the large budget grant scheme but received a NZ$3 million ‘golden handshake’ as an ex gratia payment because the grant scheme was negotiated while the film was in production (Calder, 2004).. TheChronicles of Narnia: The Lion, the Witch and the Wardrobe (Adamson, 2005) received a grant of NZ$16.7 million, based on qualifying expenditure of NZ$133.8 million (‘King Kong gobbles $48m from taxpayers’, 2006).

Most recently, the New Zealand Screen Council (an independent industry body formed in 2004 in order to ‘facilitate growth’ for New Zealand’s screen production sector) is currently lobbying for the large budget grant scheme to be increased from 12.5% to 15% to counter the highly valued New Zealand dollar and to match the increased incentives that Australia now offers (their production grant was increased to 15% in May 2007; see Boland, 2007). This indicates that fierce competition between locations shapes the policies of local host governments such as New Zealand’s. This competition continues to benefit global Hollywood who can continue to shop around for the best possible production ‘packages’.

In order to secure the best deals - the most lucrative and competitive tax incentives, the best facilities and crews and unobstructed access to locations, services and infrastructure in peripheral regions, global Hollywood must co-opt local governments into its production strategies. These governments are often willing partners within runaway production webs and typically view the processes of outsourcing within the optimistic post-Fordist paradigm. Within individual production deals, both the studio and the government involved are tied up in complex ‘partnerships’ that encourage optimistic discourses within peripheral locations and downplay or deny any charges of exploitation.

The key to the success of New Line’s strategy during The Lord of the Rings production was the co-operation of the New Zealand Government. As well as enabling exploitation of the tax loophole, the Government enthusiastically contributed to the public relations and marketing campaign associated with each film release. State funding bodies (such as the Ministry for Economic Development) paid for all the publicity and leveraging activities within New Zealand under the ‘Brand NZ’ logo. This included the premieres, the NZ$4.5 million upgrade of the Embassy theatre in Wellington where the premieres took place and New Zealand-themed parties before the Academy Awards ceremonies between 2001 and 2004 (Hodgson, 2003). All this was at the behest of New Line and the studio was well aware of its role in indulging the Prime Minister and her ministers (including ‘Minister for the Lord of the Rings’, Pete Hodgson). Michael Lynne, co-chairman of New Line said of the premiere of The Return of the King: “Nothing like that had ever happened before in [Wellington]. And it will probably never happen again” (Higgins, 2003: 79).  

The New Zealand Government has strenuously argued that any investments made during this production were worth it – encouraging further offshore production, boosting tourism and other ‘trickle-down’ industries. Both New Line Cinema and Peter Jackson have secured their positions in Hollywood as a result of the success of the trilogy (Harris, 2002; Lyman, 2001; Pulley, 2004) but any ongoing benefits of the production to the local industry have been much more difficult to quantify. Surveys of incoming tourist numbers and regional studies of the economic impacts of particular films (such as the economic impact assessment report which examined the filming of The Last Samurai in Taranaki, New Zealand; BERL Ltd., 2004) have provided little evidence of lasting benefits (Alley, 2003; Barnett: 2002, McDermott Miller Ltd, 2002; NFO New Zealand, 2003). The economic benefits of the large budget grant scheme for the film production companies are clear. As outlined above, TheChronicles of Narnia: The Lion, the Witch and the Wardrobe (Adamson, 2005) received a grant of NZ$16.7 million, based on qualifying expenditure of NZ$133.8 million; King Kong (Jackson, 2005) received NZ$48.65 million based on qualifying expenditure of NZ$389,221,032. So far, a single independent economic evaluation of the scheme has been completed – it estimated that the net economic impact of the large budget grant scheme was somewhere between a NZ$33 million net gain and a NZ$38 million net loss (a ‘conservative’ evaluation) (‘King Kong gobbles $48m from taxpayers’, 2006).

The New Zealand Film Commission commissioned a report into the ‘lasting effects’ of The Lord of the Rings trilogy for the New Zealand film industry which became a key tool for government ministers to prove that direct state investment in a Hollywood production was worth it. The report focused on the new ‘entrepreneurial culture’ created by the production, as well as the ‘enhancement of Brand NZ’ (NZIER, 2002). The report discussed a new era of globalised Hollywood production which enabled more autonomy and independence for national industries outside Hollywood and referred to ‘internationally-mobile films’ rather than the more pejorative ‘runaway productions’.

The use of the term ‘internationally mobile films’ in this report also sits cosily within the flexible specialisation paradigm. The ‘Scoping’ report indicated that The Lord of the Rings production had made New Zealand more attractive for mobile production capital and reduced the perceived risks in filming so far from the US. This is viewed as evidence that New Zealand has gained more power and control as it has become more visible as a location. Increased plurality and autonomy will, it was argued, enable more 'internationally mobile films' to come to New Zealand.

The re-naming of ‘runaway production’ as ‘internationally mobile films’ in New Zealand  illustrates the post-Fordist optimism that drives state funded film policy for international filmmaking. This position is couched within the easy assumption that Hollywood is now vertically disintegrated and flexibly specialised. State-funded industry bodies have embarked on a process of marketing New Zealand as a location in order to compete with other countries and regions for mobile production opportunities. New Zealand’s Prime Minister, Helen Clark, encapsulates this view in statements such as: “Film and television make a significant contribution to New Zealand’s economy and export earnings as well as being very powerful media through which we express our national identity and assert our unique brand” (Clark, 2003). This branding strategy has encompassed the whole country - Jane Gilbert from Film NZ (the locations office) said in 2002: “Studio New Zealand represents the idea that virtually all of New Zealand can be a film studio, if desired. A studio doesn’t have to be bricks and mortar. It can be God’s studio” (‘New protocols will attract big budget films’, 2002). The ‘Brand NZ’ slogan and the establishment of incentive schemes have been deployed in an attempt to cash in on the opportunities that The Lord of the Rings production has supposedly enabled (Jackson, 2001, 2002, 2003).  Such a process fits neatly within the strategies of global Hollywood. Maintaining locations as supplicants and encouraging ever cheaper locations to open up and provide incentives, infrastructure and scenery on-demand reinforces decentralised accumulation at the core.

Impacts upon the New Zealand film industry

Global Hollywood continues to utilise New Zealand as a location and recent productions illustrate New Zealand’s position as a location for both creative and economic runaways.  Peter Jackson has produced other large-scale productions for Hollywood notably King Kong (Jackson, 2005) for Universal. Jackson earned a base US$20 million pay packet, as well as a lucrative profit-sharing deal. This was again filmed entirely in New Zealand, using Jackson’s production and post-production facilities in Wellington with WETA producing the digital effects for the film. WETA continues to produce computer-generated effects for Hollywood producers (Avatar, directed by James Cameron, is currently in production).

Other projects illustrate New Zealand’s continued role in structures of ‘peripheral Taylorism’. The next film in the Chronicles of Narnia series (Prince Caspian, due in 2008) is to be filmed largely in the UK and the Czech Republic as opposed to New Zealand. The pull factors that favoured these locations were a fresh set of British tax incentives and a new Czech studio. This was coupled with a high New Zealand dollar which made New Zealand a less attractive option. Post-production will also be undertaken in the UK, not with WETA as initially reported. A ‘small-scale’ shoot will take place in New Zealand (as happened with the first film which also utilised the Czech Republic) (Chalmers, 2006; Sabbagh, 2006).  This illustrates the ongoing complexity of runaway location shooting – it is volatile and will move where economic conditions are most favourable. Runaway production can only be controlled locally, at the periphery, if one has enough clout in Hollywood (which a producer such as Peter Jackson now has).

So where does this leave the New Zealand film industry? As with all the locations of runaway production, the benefits of large-budget productions on a local industry such as New Zealand’s can be significant - the upskilling of film workers, the build-up of infrastructure such as studio space, the fostering of networks within and between sectors and sub-sectors of production and the international promotion of nations as creative economies and tourist destinations. Government officials continue to trumpet the health and success of the local industry. Trevor Mallard, Minister for Economic Development said in late 2006:

The New Zealand screen industry is in great shape and its reputation overseas continues to grow. The government’s large budget screen production grant is an important part of the package that makes New Zealand an attractive place to make both feature films and television. Two other key elements of the package are our magnificent and diverse locations and highly skilled production crews (New Zealand Government, 2006).

However, in the face of the overwhelmingly positive and upbeat discourse surrounding New Zealand’s film production sector, the film industry struggles. A  Statistics New Zealand survey of the New Zealand screen production industry found that revenue for the 2006 financial year fell 34%, a “dramatic downturn” according to local filmmakers. This was coupled with a steep drop in US investment in the local industry, which fell 38% (Drinnan, 2007; Andrew, 2007). New Zealand filmmakers have expressed real concern at the figures:

I’ve been making films for 35 years, I don’t remember it ever being this bad, to the point where I’m really considering my options. Opportunities for directors and writers are very few and far between (New Zealand filmmaker Costa Botes quoted in Andrew, 2007, p. 2)

There is also concern at the discrepancy between investment for international productions (through the large budget grant scheme) and the lack of support for local filmmaking.The Government argues that it is supporting both local and international filmmakers:

This is about strengthening the domestic base at the same time as we attract international productions. We’re building critical mass and taking advantage of all the opportunities and benefits – like skills development and knowledge transfer – that come with exposure to international experiences. And it’s about taking that and making it uniquely our own (Clark & Anderton, 2003).

However, there has been little substantive funding for local filmmakers since the advent of the grant scheme. An extra NZ$10 million was allocated to the New Zealand Film Commission in 2004 for the production of ‘New Zealand’ films however this funding sits next to the large budget grant scheme which has granted tens of millions of dollars to studios such as Disney and Universal in the last two years. The Film Commission is also increasingly tied up in the administration of mechanisms that promote international location filming – it now administers the large budget grant scheme and certifies international films such as the Rings trilogy as ‘New Zealand’ films in order to qualify for significant refunds on expenditure in New Zealand.

As stated above, in the wake of the Statistics New Zealand survey figures, the New Zealand Screen Council has been lobbying the government to increase the large budget grant scheme from 12.5% to 15% in order to remain competitive and claw back ‘lost’ US investment. The Council has played down the survey figures, characterising the industry as “robust” and arguing that the small nature of the New Zealand industry means that a single big-budget production can skew figures from year-to-year (Drinnan, 2007; Andrew, 2007).  However, the Screen Council is another government initiative, developed (in the wake of The Lord of the Rings trilogy) to promote ‘Brand NZ’ - its remit is to ‘facilitate growth’ for New Zealand’s screen production sector.  ‘Brand NZ’ continues to dominate rhetoric and policy and this signals that commercial objectives (particularly the need to compete with other locations) now govern every aspect of filmmaking as a national activity.  This rhetoric also downplays and denies the discrepancy between New Zealand’s state-supported ‘domestic base’ and New Zealand’s state-supported role as another supplicant to the Hollywood machine.

An alternative reading of the most recent and troubling figures is that they illustrate the vulnerability and precariousness of a national industry which is now heavily reliant on runaway production - single big-budget productions may have short-term economic benefits but the volatile nature of global Hollywood production means that there no long-term sustainability or security. There has been little ongoing discussion in the public arena about the state of the industry and the ongoing effects of the vagaries of runaway production on local filmmakers.New Zealand Directors Guild president, Dan Salmon commented:

Writers and other creatives cannot earn a living wage from their work. Yes, it’s important to attract offshore production in an economic sense, but we’re still waiting for the same commitment to domestic production (cited in Wakefield, 2004b, p. 9).

Conclusion

In terms of both government policy and public discourse, runaway productions overshadow the local industry and the focus of both policy and discourse is firmly commercial. Any cultural or nationalistic arguments for filmmaking in New Zealand are now primarily incorporated into the notion of ‘Brand NZ’ by the current New Zealand Government in order to justify the nature of its relationship with Hollywood and sources of mobile production capital. The continued focus on New Zealand as a location and the corresponding drive to compete against other locations perpetuates the myopic view of feature films as revenue generators and ties policy such as incentive schemes to the material yet speculative benefits for the industry and the country. Unlike the consequences of a more straightforward policy of deregulation, the trends I have outlined are obscured by local hype and motivated by the desire for recognition and validation from the metropolitan centres of global Hollywood.

Overall, the post-Fordist optimism which underpins these developments obscures the workings of global Hollywood and its continued dominance on a global scale. I have illustrated that rather than genuine autonomy and independence, it is precariousness, exploitation and competition that characterises the relationship between the New Zealand film industry and global Hollywood. Out-sourcing strategies and processes of risk minimisation and profit maximisation run the gamut from the utilisation of national incentive schemes to the exploitation of the international division of cultural labour and these ‘new’ strategies are coupled with long-standing tactics such as ‘creative accounting’ that highlight Hollywood’s supreme economic control through decentralised accumulation. These strategies continue to be masked by optimistic post-Fordist discourses about flexible and autonomous film production that are perpetuated both by producers at the centre and by the national governments who are now essential players in the spatial disarticulation of global Hollywood.

 

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‘Brand NZ’ is a broad term which was deployed by the New Zealand Government from 2002 onwards to promote New Zealand’s creative economy and film industry in particular. This sat within a broader arts and culture policy implemented from 2000 onwards, based on ‘creative industries’ policies in the UK. A ‘Third Way’ approach to arts funding, it set the course for initiatives based on fostering economic growth within New Zealand’s creative sectors. The film industry was identified as a key growth area and policies to promote New Zealand as a location for runaway production were developed. At this time, The Lord of the Rings trilogy was filming in New Zealand and the promotion of ‘Brand NZ’ was tied closely to this. For example, the catchphrase of the time in media coverage and government rhetoric was: ‘New Zealand - Home of Middle Earth’.

“…the centralisation and concentration of capital.” (Wayne, 2003, p. 82)

I have analysed,from 2001-2003, economic data on The Lord of the Rings  production and other contemporary runaway productions, media coverage on the productions and government reports, press releases and policy documents (as Rings was underway). This data collection forms the basis of this paper – supplemented by a more recent gathering of data from 2004.