New Zealand increasing financial incentives for international films.

At least another three Avatar films are to be made in New Zealand and the country is to increase its financial incentives for all international films costing more than US$12.4m to 20% from April 1, 2014 – and provide an additional points-based sweetener that could add a further five per cent.

A memorandum of understanding (MOU) signed today by Lightstorm Entertainment, 20th Century Fox and the NZ Government stipulates that a minimum of $414m (NZ$500m) will be spent on the films and that 100% of the live action and 90% of the visual effects – including character animation – will take place in New Zealand, subject to the country having the capacity and capability. The post-production mixing on at least one of the films will also happen in NZ.

Prime Minister John Key, Economic Development Minister Steven Joyce and Arts, Culture and Heritage Minister Chris Finlayson went public with the big news in Wellington this morning New Zealand time in the presence of Avatar director James Cameron, producer John Landau and Fox executive Paul Hanneman.

The MOU also spells out various conditions about the employment of New Zealanders and their skills development and notes that Cameron and Landau will be founding members of a new screen advisory board aimed at developing the NZ industry. The Americans have also agreed to promote New Zealand during the marketing campaign, sing the country’s praises on the DVD extras and host at least one red carpet Avatar premiere.

“It’s important for everyone to know this [agreement] isn’t just about the Avatar films directly,” Cameron is reported as saying by the NZ Herald. “It’s about trying to lift up the New Zealand film industry, incubate new talent and develop new IP.”

Cameron now owns land in New Zealand and said he and his family will soon be moving there from the US. He also noted that he and Peter Jackson will liaise to ensure there are enough cast and crew to stretch across their productions.

It is expected that the Avatar films will be released in Christmas 2016, 2017 and 2018.

Meanwhile the NZ Government is to increase the tax rebate of 15% on NZ expenditure on international productions costing more than US$12.4m (NZ$15m) to 20%. A points-based system could lead to productions being eligible for a further five per cent on top of the uncapped 20%. How points will be earned has not yet been finalised but it will relate to “significant economic benefits such as the size of the proposed expenditure and the employment of New Zealanders in key roles”.

NZ projects, subject to a points-based local content test, will continue to be eligible for up to 40% but this rebate has been extended to television and to productions with larger budgets. Under a two-tier system, the 40% rebate will be payable as a grant in the case of local film and television productions spending up to $15 million; and as an equity share for those spending US$12.4-41.4m (NZ$15-$50m). The latter group was referred to as the “missing middle” of NZ films in the current environment.

Productions in both tiers will have to meet a points-based content test but larger budget production will also be judged on business as well as cultural factors. The government has said it will also attempt to reduce the burden of complex legal and financial documentation.

The Cabinet memorandum paints the NZ industry as “experiencing a period of difficulty, potentially putting at risk the sector’s development over the last decade”. Increased incentives in other jurisdictions and the high exchange rate got most of the blame but there was a warning about adopting a “race to the bottom” mentality.

Attracting international production has financial, technological and tourist advantages – statistics indicate 8.5% of non-business visitors in the first half of 2013 cited The Hobbit as a factor behind their visit.

The change to the structure and level of government support for both overseas and NZ productions was painted as a way of developing the screen sector so that it is “in the longer term less dependent on taxpayer incentives for its commercial success”.