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TheGrill@ Locations: Can the Visual-Effects Industry Survive the Pitfalls of Free Money? (Video)

Visual-effects pros discuss the crushing effect that tax subsidies have had on their already suffering business at TheWrap's TheGrill@ Locations Show

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Free money isn't always free — in fact, it can actually be downright disastrous for an industry.

That was the dilemma at the heart of the panel "Visual Effects and Tax Incentives: A Race to the Bottom?" at TheWrap's TheGrill@Locations Show Friday at the West Hall of the L.A. Convention Center.

During the panel, moderated by TheWrap's Brent Lang, Namit Malhotra of Prime Focus and Mark Driscoll of Look Effects discussed the difficulty of staying afloat in the visual-effects industry in the current global business environment.

Driscoll and Malhotra discussed how the already struggling industry has been hit even harder by the tax incentives from different governments across the world that lure studios to farflung areas — and forced visual-effects companies to reinvent themselves.

Jonathan Alcorn

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"There's more and more of us getting into the business, we're diversifying to take advantage of the spectrum of the subsidy zones around the world," Driscoll (at left) offered. "But if you combine that with the reduction and the concentration of the movies being made, it tends to create this environment where we're basically just trying to kill each other to get the next job."

A continuing theme during the panel was the lack of subsidies offered to visual-effects companies in California, which has caused a talent drain in the state.

The global movie-production marketplace, fueled by government subsidies to film productions, has already caused Look to scale down its Los Angeles operation "pretty significantly" over the past few years, in favor of locations such as Vancouver and Germany. Meaning that, in some cases, employees are faced with the choice of relocating or losing their jobs.

Jonthan Alcorn

Even so, Malhotra doesn't blame the studios for racing across the globe in search of tax incentives.

"In any industry … if you can  buy a ticket for $30 less, you're going to do that, so it's hard to tell the studio they're being opportunistic," Malhotra offered. "Who wouldn't take it? Frankly it's hard to avoid."

Still, the end result is instability for the industry.

Malhotra recalled the disheartening experience of working on "Avatar" and seeing the joy of accomplishment dissipate as employees were laid off out of financial necessity.

"In which other industry does that actually happen, where you have people who slog it out and do great work [and they get let go]?" Malhotra marveled. "You don't see that in any other professional services business. You don't have your key talent leave and then come back for the next project."

Neither Driscoll, who said that he's "resigned to the fact that incentives are here to stay," nor Malhotra thought that much salvation could be found in the way of unions or trade organizations, due to the disparity of laws and circumstances from region to region.

They did see the possibility of evening out the financial playing field for visual-effects firms by changing the models by which they're compensated by the studios. Billing "on the basis of material and resources," where studios pay more as a project requires more of both, might create a more equitable situation.

Right now, Driscoll said, "We bid on something basically, blindly, and then the creative process starts, and you have no idea where it's going to go."