Aussie stars struggling to shine

PDV sector not reaping rewards of good performance

Move aside Nicole, Hugh and Naomi. A dancing penguin named Mumble, a talking pig called Wilbur and a maternal spider named Charlotte are the real movie stars to come out of Australia in 2006, at least in the eyes of the Australian postproduction, digital and visual effects (PDV) sector.

Those three and their myriad friends and families are the creations of a small but growing number of Australian PDV companies that are riding the wave of explosive growth in the sector in the past decade.

Such companies as Animal Logic, Rising Sun Pictures, Fuel, Illoura, Digital Pictures, Cutting Edge, Photon and Soundfirm, though, are at a crossroads. Despite having developed world-leading technology and talent while churning out numerous high-profile projects as well as bread-and-butter TV commercials, the sector finds itself seemingly unable to capitalize on its reputation.

This may be the result of a sluggish set of tax incentives, a rising Australian dollar and the growing global mobility of the sector making Australia less competitive on the international market. Add to that burgeoning businesses based in the large Asian markets that are, according to industry heavyweights, plundering Australia's talent and knowledge base, and the outlook is grim.

While it's small, the Australian PDV sector would appear to be punching above its weight with a long list of credits, from "The Matrix" trilogy to Chinese productions "Hero" and "House of Flying Daggers" to "Superman Returns," "World Trade Center" and "Charlotte's Web." Work has ranged from effects on single shots and packages to the creation of individual characters and, with the Australian production of "Happy Feet," the creation of a fully digital feature.

Tony Clark, managing director of Rising Sun Pictures, which created the photo-real character of Charlotte in Paramount Pictures' "Charlotte's Web" last year, says the greatest threat to the Australian business is "the inability to create consistency" of work.

"It's impossible to dovetail jobs in the current competitive environment," Clark says, adding that a solution is at hand.

Since Australia's current 12.5% offset for foreign productions shooting here was introduced in 2001, a number of key territories including Canada and the U.K. as well as several U.S. states have upped the ante on rebates to as much as 20% of production expenditure while the Australian dollar has strengthened against the U.S. dollar by about 20%.

Australia has failed to match these increases, and the industry is now asking government for an overhaul of the policy, following a fall in foreign production in fiscal year 2004-05 to just AUS$23 million ($17 million) in Australian expenditure, according to the Australian Film Commission's "National Production Survey of 2006."

Ausfilm, the government- and industry-backed agency charged with attracting foreign production to Australia, has recommended that the government increase the tax rebate it offers foreign productions to 15% along with a relaxation of the local spend requirement. It also recommends extending the film tax offset to PDV-only services with a entry threshold of AUS$5 million ($3.85 million).

This also will help the PDV sector get more of the increasing amount of PDV-only work not related to productions that have been shot in Australia, Ausfilm says.

"There's a demonstrable effect that rebates have on the volume of work that's accessible," Clark says.

It's widely expected that the government will at least meet the industry's demand to raise the tax offset rebate to 15% when it decides on new measures to boost financing and attract more investment to the film industry as a whole. Those measures are expected to be announced by May.

That outcome, which Clark says is, at the very least, "sensible," should provide a significant boost to the sector that, in the latest available figures, had revenues of AUS$360 million ($277 million) four years ago, compared with an estimated value of AUS$5 billion ($3.85 billion) in the U.K. and the U.S. alone in 2005.

Such a move should also help arrest the continuing brain drain of talent that moves offshore when consistency of work is not available.

"Happy Feet" creator George Miller sounded a dire warning if the brain drain is not stopped: "I just notice the aggression of, say, China and India and most of Asia to basically foster their film industries. Some of the top people (who worked) on 'Happy Feet' have been headhunted into India, into England, into China, to teach them how to do it. …We develop this great talent and then it all dissipates. … Within a handful of years, they will know what we do and we'll be forgotten."