Wednesday 23 January 2013

Hobbit budgets

I do not know how much NZ central and local governments spent on Lord of the Rings and on The Hobbit. There are conflicting reports, and nobody seems particularly clear on how much was subsidy in the sense of "they paid less in tax than they would have if they were some other business, but they might not have come here without it, so we don't know if the net effect on total taxes paid was positive or negative, but we're going to assume a counterfactual of that it would have been done here and assess on that basis" and how much was a straight-up grant. Gordon Campbell reports that, for LOTR, it was done as tax rebate and that it's now a grant. I've seen other sources counting a GST concession as a Hobbit tax break, but all products and services produced for export are GST exempt so inputs for that export product would always get a GST rebate. I'd love to see an authoritative figure.

But it can be useful to put the figure purported for The Hobbit into a bit of context. The most commonly cited figure for government support for The Hobbit is $67 million. I do not know whether this was a cash grant based on a proportion of their domestic expenditures, a tax concession, or something else. But I do know that for the 2012/2013 budget year, Vote.Tourism allocated $83.9 million for marketing New Zealand as an international tourist destination. 

Imagine that the only benefit we get from the whole LOTR/Hobbit franchise is as tourism marketing campaign.

For 2012/2013, which did more to market NZ as an international tourist destination: The Hobbit, or everything else the government might have done in tourism promotion? Which seems more likely to inspire travel to New Zealand: 100% Pure, or Middle Earth? 

Now I'm not sure that the government should be involved in tourism promotion in the first place.* But if they're going to do it, and if more tourism is a good thing,** is it crazy to think that LOTR/Hobbit could have delivered at least as much per dollar spent as the rest of the Vote.Tourism funding for overseas promotion? 

I don't like differential tax treatment for different industries. And races to provide tax breaks for films mainly benefit Hollywood (see here and here and here and here). But imagine that Peter Jackson had submitted a GETS tender to deliver international promotion of New Zealand. He provided The Hobbit - a 3 hour infomercial for New Zealand - and delivered it to maybe 90 million sets of eyeballs*** for $67 million. Could Tourism New Zealand have done better if they'd won that contract instead of its being outsourced? I'd try to evaluate the government's investment on that basis rather than on economic impact measures. 

Marginalia follows below.

* The main plausible market failure case would be that any firm attracting more tourists to New Zealand only recoups a small portion of the returns and that there are too many of them out there plausibly to coordinate. But there are ways around that kind of problem: The country's two main international airports could have coordinated things along with Air New Zealand, with LOTR sponsors getting access to LOTR tourist packs for incoming visitors. Affiliating sponsors could be listed on Hobbit Trails and the like on the tourist maps. 

** I wonder about it whenever cruise ships come into town. Princess Cruise Line's Diamond Princess visits regularly, carrying 2,600 elderly Americans, most of whom seem to get bused downtown at the same time. Christchurch's total population is about 360,000; Dunedin has about 120,000. This is just me being grouchy though. 

A free idea for somebody planning on entering the 48 Hour Film Festival: a man suffering severe caffeine withdrawal realizes that the passengers being bused into town from the cruise ship are actually zombies. The ship was infected en route. Nobody else in town notices that they're zombies because, well, their behaviours aren't that different from cruise ship passengers: slow shuffling from tourist photo spot to tourist photo spot, moving in herds attracted by noise and light, biting people. Film two versions: one where he does what's necessary about the zombie invasion, with the I Am Legend twist at the end [we'll all be elderly cruise ship passengers, some day, and they're just like that], the other where he tries and fails in raising the alarm because everyone worries about effects on local restaurants, etc. Idea perhaps inspired by that the quest for my first coffee Sunday morning was very slightly delayed by herds from the cruise ship.

*** US domestic gross $287m; international gross $608m (and counting). A U.S. movie ticket averages under $9. If we assume $9 per ticket, then that's almost 100 million people who sat and watched a 3 hour infomercial for New Zealand. That's likely an underestimate as foreign ticket prices should be less than those in the US, and lots of people will have seen the movie via torrented illegal copies. 


  1. There is the assumption that people care about the location of films; personally I don't. Most people I know overseas (who aren't LOTR fanatics) didn't know that the movies were filmed in New Zealand until I brought it up in conversation. On top of that, many people will assume that a large part of the backgrounds are digitally created or enhanced, so even knowing that the movies were filmed here doesn't mean they will expect NZ to be a photocopy of Middle Earth.

  2. If people don't know, then they must be pretty isolated. It's a regular touchstone/hackneyed joke on many overseas shows (QI, Graham Norton, Real Time with Bill Maher, The Daily Show, just to name a few I've actually seen) that NZ is "Hobbitland". I'm not honestly sure how people could miss it if they wanted to!

  3. Fine, but that's the income cohort likely to travel.