Oz the Great and Subsidized

Courtesty of Walt Disney Enterprises, Inc.

Oz the Great and Powerful is not the most expensive movie ever made, but with a reported production and marketing cost of $325 million, it is an unusually expensive film, even compared with other similarly effects-driven spectacles.

In order to help finance the picture, the studio resorted to a now-common practice: moving the production to a state with lavish film subsidies. In this case, that state was Michigan, which has one of the most generous film subsidies programs in the nation. The filmmakers got almost $40 million to shoot in the state. As Michigan Capitol Confidential, a site run by the Mackinac Center for Public Policy, a free-market think tank based in the state, notes, that works out to a little more the price of one movie ticket for each of the state's residents:

Michigan has 4.5 million individual taxpayers, and the state gave the film studio $39.7 million to shoot the movie in Pontiac. That works out to a subsidy of $8.82 per taxpayer while average ticket prices nationwide are $7.96.

The subsidy was granted in 2010 when the program refunded up to 42 percent of Michigan expenses to film makers — essentially a check from the treasury to Hollywood studios. The program expired, but the Legislature, dominated by Republicans, overwhelmingly decided to keep it around.

There's another wrinkle, too. As part of the financing process, the filmmakers wanted to borrow about about $18 million in municipal bonds. In order order to do that, they needed a backer. So the state stepped in, and agreed to use its state worker pension funds as a guarantee. "If the investors failed to pay," the New York Times reported in a piece on the deal last December, "the retirees would be on the hook." 

Lo and behold, the investors didn't come through. But now the state is. Another report from Capitol Confidential explains:

Michigan Motion Pictures Studios, which is being celebrated in the local media for having made the movie, "Oz: The Great and Powerful," in Pontiac, has missed its last three payments on $18 million in bond obligations. The movie opens across the nation today.

Under a deal made in 2010 by then-Gov. Jennifer Granholm, the State of Michigan Retirement Systems is on the hook for those missing payments. Michigan Motion Pictures Studios was formerly known as Raleigh Studios.

According to state officials, the state retirement system has made three payments since February of last year totaling $1.68 million. Michigan Motion Pictures Studio didn't respond to requests for comment.

I wrote about film subsidies in Reason's December 2012 issue. Kurt Loder reviewed Oz the Great and Powerful for Reason here. I reviewed the movie for The Washington Times. 

Comments

[Warty]

As always, I blame Art Modell.

[Fist of Etiquette]

Why does reason want everyone to pay less taxes except for Hollyweird? Hollywood is just as much a person (in the form of a corporation) as the Koch brothers, you know.

[BakedPenguin]

All animals are equal, but some are more equal than others.

See if you can understand this FoE: should I get taxed less just because I'm so much more handsome than you, smell better than you, and am, in general, a much more valuable human being than you? Of course I should. But it's still kind of unfair.

[darius404]

It's especially unfair as I'm handsomer, smell better, an am, in every way a much more valuable human being than either of you. Obviously you should both be taxed MORE than me for being such drains on society. Now THAT'S fair.

[adrian]

Fist,

You may not realize this, but in every state (or nation) outside California, the film tax credits literally have nothing to do with lowering actual owed taxes. Production comanies are temporary entities set up to film the one-off film or show. On paper, they have only losses and no revenue. Revenue comes later when film is released and it flows to parent studio, which is taxed in California. The film credits in EVERY state save California are transferable or refundable. Meaning you can sell them for cash value to someone who does owe taxes or you can get a cash handout doing a refund directly from the state.

Right now, most states or nations are paying for 25% or more of any given film and TV show budget. I kid you not.

[A Serious Man]

Pay no attention to the subsidy behind the curtain!

[fresno dan]

for that amount of money, close to 3,000 high class porn movies could have been funded (i.e., without dwarves - if you have nothing against dwarves, we could have had close to 47,000 low class porn movies,i.e, dwarves with Ron Jeremy....)
Now, that cums out to about 851.3 boobs per taxpayer. I ask you, was this movie a good use of taxpayer funds???

[DRM]

I've been thinking about it. Why not a US federal tax on movies equal to 100% of state and/or foreign production subsidies? Just shut the nonsense right down.

[adrian]

Disney got a $39 million cash payout for shooting Oz in Detroit. Of the $104 million they spent making the film, $39 million was effectively paid for by the Michigan taxpayers as a cash refund. In return, just 257 Michigan residents were employed on the one-time production. That's cost-per-job of over $150,000 each!

Of the total Disney spent in MI on Oz ($104 million) $72.5 million was just for wages alone. Michigan residents got paid just $21 million of those wages and the other $51.4 went to out of state labor and cast.

[SumpTump]

Dude is liek totally rocking it man I like it.

http://www.PrivateWeb.da.bz

[jasperj]

All in all, "Oz the Great and Powerful" is all smoke and no mirrors, no fantasy, just effects without affect. To be honest, more like Oz the Amiable and Un-threatening. The best, funniest Oz thing I've read lately is DA YELLER BRICK ROAD, a revisionist telling of The Wonderful Wizard of Oz by Uncle Remus. The conceit is it was originally by Remus (who didn't exist) and then "borrowed and cleaned-up" by Baum. Hilarious and charming. All that "Oz the Great and Powerful" is not.