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A New York State of Post

Can the Post New York Alliance Help Build an Empire that Rivals L.A.?

According to a 2012 report by the Motion Picture Association of America, the film and television industry grew by nearly 25% in New York between 2008 and 2011 as a direct result of the Empire State Film Production Tax Credit. For films and television episodics, pilots and mini series shooting anywhere in New York State, the credit returns a healthy 30% refund on all qualified costs incurred during production. New York, however, still lags behind Los Angeles, where roughly double the number of film and TV productions shoot annually.

But California does not offer a separate credit devoted solely to post-production, and New York does. It is this difference, say those closest to the Empire State Film Post Production Credit, that could eventually put New York City's post business on a par with Los Angeles, Vancouver and London. And last July, when Governor Cuomo signed legislation that tripled the initial post credit from 10% to 30%, giving an extra incentive to those posting upstate with a 35% credit, that future seemed even more certain.

The Post New York Alliance (PNYA), the initial force behind the post credit, formed in December 2009. The idea, says Yana Collins Lehman, a PNYA executive board member and managing director at post accounting firm Trevanna Post, was to move away from a bundled production and post credit and let New York post facilities benefit from finishing films of every budget, no matter where they were shot. "From 2004 to 2010, New York had all its stakeholders working concertedly to put together the production credit," says Lehman. "But post-production wasn't getting any traction, so 14 facilities and other entities came together, including the Local 700 Editor's Union. We paid dues, hired a lobbyist and went up to Albany to start lobbying." In April 2010, during the economically rocky Governor Paterson administration, a 10% post-production credit became the only legislative add to the entire budget passed that later that year. "Our experience of lobbying was that it was incredibly easy," she says. "You go up to Albany, you ask for things, and you get it. Fantastic. So we pushed on." A meager 10% credit was not nearly enough to entice bigger budget films to post in New York, so the PNYA went back to Albany and lobbied to bring the credit up to the 30% available for production costs. "But that wasn't as easy," admits Lehman. "It took us two years to push it through."

The resulting 30% post credit, the largest percentage offered by any state in the U.S., has already nearly doubled the number of applications to New York's film office. During the two years with a 10% credit on the books, 18 applications came through the New York State Governor's Office for Motion Picture and Television Development. "From July 24 of last year to today, there have been 34," says Lehman. "It's definitely working as we hoped it would. We've also tripled our membership in the past six months, including the musician's union and more than 100 individual members, many of them from upstate."

To qualify for the credit, post facilities must spend 75% of their total post budgets—including picture editorial, sound editorial, film and lab, visual effects and animation, music scoring and music/sound effects—in New York. "You have to first qualify for the initial 30% by doing 75% of your post work here, but any piece of that done upstate gets a 35% credit," says Lehman. "We have a number of projects planned to help expand businesses up there."

The Case for Upstate

Upstate New York, from Albany to Buffalo, however, is a much harder sell than a thriving metropolis like New York City. If they build it, will they come? Lehman says two scoring facilities are being built near Albany with the hope that the relatively inexpensive cost of setting up shop near the capital city in its growing tech community, along with the unique 35% tax credit, will appeal to certain types of productions. "These are beautiful studios, and Albany is so easy to get to. We just have to get the word out about this tremendous opportunity."

Nurturing nearby talent is another key PNYA strategy. By helping to develop and promote educational programs that will train a new generation of post artists and technicians upstate, the PNYA hopes to push more opportunities beyond the city limits. It's a mission close to the heart of Company 3 founder and lead colorist Stefan Sonnenfeld, a PNYA board member. "As we work with technical colleges, public and private universities and other higher learning programs across the state to build curricula, we'll be able to grow talent by training them and then putting them to work," he says. "It would be much healthier for the industry in the U.S. if we're investing in and building a home-grown farm team in New York State, instead of outsourcing those jobs overseas. We already have so much amazing talent here, and we can truly benefit from a pipeline that begins in our backyard." PNYA is working with places like Daemon College, just north of Buffalo, which will be partnering with visual effects studios in Manhattan and offering a certificate program during the summer in which students will complete the kind of support effects work that might normally be sent to places like India.

"Obviously in Manhattan and Brooklyn and Queens, it's very expensive to have these kinds of large-scale render farms because the real estate is so pricey," says Lehman. "But the labor is highly skilled and we need to be creative and practical, and to start these kinds of places upstate makes the best economic sense for everyone." Other programs in development include those at the University of Albany and an upcoming job fair in June called Collider, to be co-produced with Stash Media, that will be entirely focused on post. "We need to let those talented people who are already in New York know that the jobs are now going to be here and they don't have to go to L.A. or Canada. It's got to serve the whole state, and we're very intent on making that happen."

A Lifeline for VFX

A new budget proposal before the legislature in Albany aims to detach VFX work from the rest of the incentive program and also extend the full credit for another five years. In legislation scheduled for a vote on April 1, Governor Cuomo has proposed carving out a separate qualified spend percentage that sits outside the 75% spend in post necessary to receive the credit. "That VFX bucket would then only be 20% or $3 million, whichever is less, in order to qualify for the incentive," says Lehman. "It is still a very aggressive incentive, but we feel like that tweak will bring even more and even bigger jobs here."

This latest clarification is crucial, she says, if New York wants to attract productions with blockbuster VFX budgets. "The problem with $65 million visual-effects budgets is, at this time, even if every visual-effects house in New York City banded together, they couldn't handle a budget of that scope. And when you put a VFX budget like that as part of the 75% threshold that must be spent here, it is even more difficult." Any VFX work done out of state, explains Lehman, is considered "bad spend" and counts against filmmakers. "If you do too much bad spend, you're knocked out of the program. That's not how an incentive is supposed to work. You're supposed to want to do everything here. But we need to help our visual effects houses here build and expand and get up to a point where more of them can handle that, and we don't want the rest of the post industry here to lose out because of that either."

Is that strategy enough to compete with enticing incentives just over the border in Canada? "It's really hard when you've got Montreal right across the New York border handing out more than a 50% incentive for VFX and animation," says Sonnenfeld. "Likewise with Vancouver, which has no minimum expenditure and starts the incentive at dollar one. But we're thinking more long-term than that, because they certainly don't have the infrastructure up there, especially compared with New York. If this is an evolving thing, and we can move through iterations of these programs in an intelligent way, then I think we will create one of the most compelling environments that we've ever seen."

Sonnenfeld certainly practices what he preaches. "I've made a concerted effort to throw a lot of my time and effort at helping this incentive work," he says, noting that he started Company 3's New York office shortly after opening his flagship in L.A. in 1997. "Many people don't know that I identified New York as one of the premiere markets before 9/11." Despite a financially wrenching move after 9/11, Company 3 in its newer location soon became a leading commercial facility in New York. When the bicoastal Sonnenfeld transitioned into feature film, he tapped his L.A. facility talent to start building out that side of the business in Manhattan. "We've really increased our New York presence in the past two years," he says. "We've spent money and done construction, we've added facilities and we've hired people. And I frequent it every few weeks. My kids are growing up on the East Coast. We're entrenched."

With Company 3 now under the Deluxe Entertainment umbrella of companies, Sonnenfeld also credits Deluxe owner Ronald Perelman with the drive to bring a more robust tax credit to the post industry in New York City and the entire state. "He's very interested in our side of the business and has invested some of his resources to help us make our case in Albany to various senators, the legislature and the governor," says Sonnenfeld. "But I'll be clear: We're not doing this from a self-centered perspective at all. We are providing incentive for the whole community, and providing support so the community at large benefits and we can provide a mecca for not only production but post because we feel that New York is the most interesting and dynamic U.S. city out there. To have that coupled with amazing post-production capabilities and strong incentives to grow those services—who wouldn't want to work here?"

Credit Where Credit Is Due

Despite how some critics have characterized it, the credit is not, say Sonnenfeld and Lehman, a lavish handout to Hollywood. "This is not about profits just for a few at the top of a rich industry," says Sonnenfeld. "To those who think this is only helping the wealthy, well, that's hogwash. This industry employs thousands of hard-working people and I've worked with them throughout my entire career. The credit is about building a solid infrastructure so that everyone can benefit." Nothing above the line qualifies for the credit, adds Lehman. "That's why it's so infuriating when people grumble that this is a gift to Hollywood. You could actually say that about the way some other states, which I won't mention, have set up their credits. But these don't go to the actor, director, writer, producers—no fancy dinners qualify. This is only below-the-line labor and stuff that is purchased and rented in New York State, so it gives so much back to New York's economy."

Lehman says the city's VFX community is already on an upswing, citing Mr. X Inc., a visual effects company that opened an office in New York last August weeks after the higher post credit went into effect. The facility, whose credits include Tron: Legacy, The Twilight Saga: Breaking Dawn, and the upcoming RoboCop retread, has 20 on staff in its SoHo location. Though it also has an office in Toronto, Mr. X's online job board lists a number of openings in New York, where it continues to staff up. 

New York, says Sonnenfeld, can learn a lot from London's Soho district, where Company 3 has a third office. "The entire business in London was built around incentives," he says. "Soho proper is purely post-production, and it's amazing. And that wouldn't be there if were not for the incentives. We want to do the same thing in New York, but we also want to be prudent about it so the rest of the state gets what it needs as well."

In turn, London's success has spilled back onto American shores. "Prime Focus and a few London companies have also opened offices here in New York recently," adds Lehman. "We're even seeing a film shooting in LA and posting in New York, which may sound completely bananas. But it's all because of the post incentive."

2 Comments

Categories: Business, Editing, Post/Finishing, Technology, VFX/Animation
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  • Fructoze

    Lambs to the slaughter. Don’t they realize that expanding capacity in the face of declining production makes for exactly the price war that the studios are longing for?

  • Svenson

    Deluxe won’t last longer than a decade. Perelman isn’t known for growing companies. He’s a billionaire for being good at buying, slashing and selling off the parts.

    Deluxe wasted 10s of millions of dollars building a film lab as digital cinema was growing. Now that’s just sitting half empty. Their other cash cow, DVD replication, has a finite life too with streaming taking over. Ascent Media was dying when Deluxe bought it for a song, and they still don’t know what to do with any of the assets. They are run by clueless “good ol’ boys” that can barely understand how to use their cell phones, let alone the digital future.

    Too bad Deluxe doesn’t have a parent company like Thomson, which can at least understand what the future possibilities are. Technicolor isn’t much better, but chances are good it’ll last longer than Deluxe. Perelman is probably looking to unload Deluxe sooner than later, bet buyers will be Chinese or Indian, and they only want the good parts. The rest gets just shut down. I doubt the lab will be worth much. Probably torn down and be a superfund site.

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