Option 2

We would like to hear what you think about option 2 and the various design choices put forward to enable it.

Supporting a steady pipeline of productions

There are opportunities to address the issues with continuity of work. We are consulting on 2 approaches that could work separately or together to support a steady pipeline of productions:

A. A Repeat Activity Incentive to encourage studios to undertake consecutive production activity in New Zealand.

B. A per-project cap on QNZPE to help target specific segments of the international production market .

A. Repeat Activity Incentive to encourage studios to produce further work in New Zealand in consecutive years

A 5% Repeat Activity incentive would provide the opportunity to capture the greater benefits that might flow from multi-season, high-end screen productions, which are currently experiencing rapid growth. An implication of this shift in NZSPG settings is the potential for a more consistent pipeline of production and greater continuity of work, as well as enhanced career development and training opportunities. Over time this might result in a more sustainable and resilient sector.

A 5% Repeat Activity incentive could be applied when a production house or studio has repeat projects undertaken in New Zealand. Rules could ensure that the additional incentive is unlocked only when the second production is completed within a specified timeframe. Criteria could be introduced to ensure production activity from project to project remains relatively constant. E.g. a minimum level of QNZPE spending on each production to be eligible, or subsquent production activity remains a similar proportion to previous activity.

The incentive would be available to eligible studios that completed more than 1 of any kind of production work in New Zealand within the specified timeframe. The incentive would not be aimed solely at multi-season productions and would also apply to any NZSPG eligible productions produced by the same studio. We know that projects are often planned and budgeted individually and might not involve the same financing parties across productions (including individual seasons of a multi-season production). Any criteria introduced to implement a Repeat Activity Incentive would need to take account of this context.

By way of example, a studio producing a series and an unrelated feature film within the specified timeframe in New Zealand would be eligible for the incentive as outlined below.

Analysis indicates an incentive of this kind has not yet been pursued internationally. California has recently introduced a Relocating TV Series incentive to entice productions back to California, but the incentive requires productions to have had a prior season filmed outside of California. The incentive offers studios an initial 25%, which reduces to 20% after the first season has been filmed in California.

B. QNZPE cap per project to target specific market segments

Very large international productions can exacerbate the fluctuations in the sector’s pipeline of work by taking up a disproportionate share of skills and infrastructure.

An option to address this could be the introduction of a QNZPE cap per project. This cap could be used as a ‘hard’ measure to ensure productions of a certain size locate in New Zealand to be used as an alternative (or alongside) measure to the Repeat Activity incentive. This might prevent local workforce and infrastructure being consumed by disproportionally large international productions. Additionally, it could be used as a way to target specific market segments, which might help New Zealand differentiate itself from its closest competitors. A project cap could be applied to both live productions and PDV activity.

A range of potential project cap levels are discussed below:

• $75m QNZPE cap per production might prevent us attracting higher quality productions linked to bigger budgets and reduce our ability to attract a range of production sizes. However, it would clearly differentiate us from Australia. A cap at this level would exclude 9% of NZSPG-funded productions.^[26]
• $100m QNZPE cap per production would again clearly differentiate ourselves from Australia. A cap at this level might support New Zealand to attract medium to large productions ($50m-$100m in budget) of which we currently have a gap. A cap at this level would exclude 5% of NZSPG-funded productions.^[27]
• $150m QNZPE cap per production would allow a wider range of production sizes to locate in New Zealand, which might help to support a steady pipeline of productions. However, it could lead us to compete head on with Australia for productions over $100m. A cap at this level would exclude 5% of NZSPG-funded productions.^[28]

There is a precedent for per-project caps amongst New Zealand’s competitors. Some examples include Ireland, which caps projects at the lower of 70 million euros (or US$69m) or 80% of the total production budget; France at US$33m; South Africa at US$3.4m and California at the first US$100m for non-independent feature films and TV projects.^[29]

We want to understand the impact a cap could have on the sector, and what level of cap would be most suitable to support a steady pipeline of international productions.

A restructured NZSPG-NZ comprising a base incentive, plus stackable targeted incentives

When comparing NZSPG with other countries’ screen incentives, we have an opportunity to target more directly specific cultural outcomes through our NZSPG-NZ investment.

We are consulting on taking a similar approach in New Zealand by removing the headline rate and criteria for the NZSPG-NZ and replacing it with two components: a base incentive and a series of additional stackable incentives, targeting additional support towards specific outcomes.

This means that all eligible domestic productions and official co- productions would get a base rate (20%) and would then be able to apply for additional stackable incentives based on the cultural content and creative talent criteria outlined in Option 1. The key difference is that under this option, the Cultural Content and Creative Talent incentives would be offered in four 5% increments, further described below. This means that overall, eligible productions could access a maximum total rebate of 40%.

Most of the current criteria for the NZSPG-NZ would carry over to the new NZSPG-NZ base incentive criteria, including qualifying production expenditure definitions. However, the base incentive would not require the current Significant New Zealand Content Test (as this would be superseded by the criteria for the stackable incentives). There may also be other exceptions where the new NZSPG-NZ base incentive criteria should be different to the current criteria for the NZSPG-NZ in order to work well alongside the additional stackable incentives or to support the wider objectives of the Review.

Applying the Cultural Content and Creative Talent stackable incentives

Applicants would be able to access the cultural content and creative talent incentive in 5% increments, up to a maximum of 20%.

For example, a production that met two of the proposed key criteria (e.g. key creative roles are held by New Zealanders, and the story has a New Zealand setting, or NZ principal characters, or reflects New Zealand culture) could be eligible for 2 x 5% increments of the Cultural Content and Creative Talent incentive. A production that met four of the proposed key criteria could be eligible for the full 20% Cultural Content and Creative Talent Incentive (4 x 5% increments). In order to receive the full 20% incentive, productions would need to meet at least one criterion from each of the three objectives described below.

Cultural and creative objectives

• Telling New Zealand Stories
• Building, enhancing and showcasing New Zealand creative talent
• Expressing Māori culture or wider cultural perspectives

As outlined in the previous options, the design of the Cultural Content and Creative Talent incentive could retain flexiblity to determine on a case-by-case basis if criteria have been met. This could include devolving decision making to a group of people and/or organisations with the cultural competency and screen sector expertise to assess if a production meets the criteria of the test. Developing protocols to assess films with Māori content, stories and characters, alongside Māori, would be a key part of this approach and build from the work done by the NZFC in its Te Rautaki (Māori strategy).

Applying the Cultural Content and Creative Talent stackable incentives 

Under Option 2, both domestic and official co-productions would need to apply for the Cultural Content and Creative Talent stackable incentives in order to reach a total maximum rebate of 40% of QNZPE.

Introducing cultural content and creative talent criteria for official co-productions that wish to access the maximum total 40% rebate would be a significant change from status quo, as current co-productions are not required to meet any cultural content provisions. The rationale for change would be to ensure that our investment in co-productions delivered more cultural value by reflecting Aotearoa New Zealand’s unique and diverse cultural context and building and showcasing our creative talent. It would also mean co-productions would be treated similarly to domestic productions in terms of accessing the maximum incentive. 

Since being established in 2014, the NZSPG, and associated criteria for co-productions, has been accommodated within the current scope of co-production agreements, which are agnostic on content. These agreements allow for flexibility regarding specific criteria for each party and would likely accommodate any changes to meet a new cultural content and creative talent criteria.

Supporting new and emerging PDV activity: reducing the minimum qualifying QNZPE for PDV from $0.5m to $0.25m

A key objective of the review is ensuring that sector is resilient and sustainable in future. One way to support this is enabling businesses to grow and broaden what they can do.

The current structure of the PDV requires a minimum QNZPE spend of $0.5m in order to apply for funding. Contracts of this size may be outside of the capacity of smaller and emerging PDV businesses. Stakeholders have highlighted that lower thresholds for QNZPE might give productions the confidence to commit to undertaking PDV in New Zealand.

We are consulting on reducing the minimum expenditure threshold to $0.25m. This might help smaller and emerging businesses attract smaller parts of PDV-activity that would otherwise be out of reach. It might also assist in providing smaller projects to enable a steady stream of work. The impact of doing this could help businesses build their capacity to scale over time. However, this would be balanced by the costs of preparing and submitting a PDV application (e.g. audit costs).

How we see Option 2 proposals changing the NZSPG

NZSPG-NZ

The current NZSPG-NZ (for both New Zealand productions and official co-productions) would be restructured into 2 parts:

•  A 20% NZSPG-NZ base incentive (largely based on existing NZSPG-NZ criteria)
• Up to 20% in stackable incentives based on cultural content and creative talent criteria (as in Option 1, but offered in four 5% increments)

Stackable targeted incentives

To access the incentives, productions would first need to be eligible for the base incentive and then meet the additional targeted incentive criteria.

For the Cultural Content and Creative Talent incentive, productions could access part, or all of the incentive based on which elements of the proposed Cultural Content and Creative Talent criteria they met.

Official co-productions would also be required to meet new cultural content and creative talent criteria to access the stackable incentives. Enabling this change might require further adjustments to individual co-production treaties.

NZSPG-International

• All changes described under Option 1 above.
• The 5% Uplift supporting significant economic benefits would be removed and replaced with an incentive targeting repeat production activity. The 5% Repeat Activity incentive would be stacked onto the existing 20% incentive and applied to QNZPE when a production has serial work undertaken in New Zealand. The 5% Repeat Activity incentive would be implemented through rules-based requirements around repeat activity and only paid out once the repeat activity had occurred. Repeat activity would be expected to be in the range of, or greater than, the budget for the initial production.
• To further smooth out the peaks of production activity and to differentiate New Zealand from Australia, under this option we’re proposing to introduce a QNZPE cap per project.

NZSPG-PDV

• All changes described under Option 1 above.
• To allow new and emerging productions and businesses to access NZSPG-PDV, this option would reduce the minimum qualifying production expenditure threshold for PDV activity from $0.5m to $0.25m.

Attraction and promotion

• All changes described under Option 1 above.
• Attraction and promotion activities would be tailored to support this option and could include building strong and enduring relationships with key studios and creatives involved in location decision making for high-end drama series or building strong and enduring relationships with high-tech international studios to support potential growth in emerging PDV technologies..

Footnotes

25. Camberley Studios is a fictional studio. This example is to illustrate how the repeat activity incentive could be applied.

26. NZSPG-International and NZSPG-PDV funding data for productions receiving NZSPG payment between 2016-2021.

27. Ibid

28. Ibid

29. Global Incentives Impact 2022(external link)

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