All this looks like small beer compared to the meltdown here on Wall Street this month, but I was back in Michigan over Labor Day and found myself thinking the state’s huge production incentives program isn’t being fully utilized.
Up North, things are particularly bleak. In the town where my parents stay, Boyne City, 95 people started Labor Day weekend with a pink slip, as LexaMar, one of the biggest corporations in the town of 3500 laid them off on Friday. It made small talk everywhere, downtown, strolling past the classic cars on display, at the police-sponsored drag race at the city airstrip, another midsized manufacturer slicing off jobs as the economy expels another ragged breath.
The one point of light in a state with its biggest industry, automobiles, breaking down, is film production. It’s exceptionally cheap to shoot anything in Michigan right now, and that has ushered in the closest thing to a business renaissance the region has seen in years, at least the latest Band-Aid to create an economic buffer around the doomed car business, like Oakland County Executive L. Brooks Patterson’s Automation Alley plan that began about a decade ago.
A combination of tax credits for production and infrastructure development and job creation, investment loans, job training incentives, free use of state property and more are putting up to fifty cents on the dollar back into film production companies’ pockets. It’s having huge effects throughout the commercials industry; I’ve personally chatted with five different people or groups who’ve shot spots in and around Detroit, and there are a bevy of Hollywood productions that have moved through the state.
That’s all well and good, and it’s a huge source of state pride in addition to the reassuring sound of at least a few thin dimes rattling in the piggy bank, but I’m inclined to think the State and specifically the office of Bill Huizenga, the sponsor of the bill, weren’t forward-thinking enough when it comes to digital production.
See, here’s the problem: the Big Three spend millions of dollars a year on marketing, and Michigan’s plan might be bringing some of that money back to Michigan for film shoots, but the digital production is getting done offshore, at what, with the rebate and incentive conditions, are probably comparable rates to having it done in Michigan (if the hazy incentives rules cover things that are getting outsourced, like banner ads).
It’s entirely up to their advertising agencies where that money goes when it comes to production, and what communities benefit from a shoot (and there’s a big benefit, even for a two-day spot shoot, in trucking, craft services, rentals, you name it). But the biggest marketers in Michigan, the automakers, aren’t doing the bulk of their digital production in Michigan, they’re doing it in places like Costa Rica. Those dollars that go to digital production become websites, banner ads, films that play on the Internet, etc. And while the latter of those is covered in the Michigan Film Incentives plan, websites are explicitly excluded. Incentives in digital are in place for interactive games, internet video, internet programming, video games and digital animation but not interactive websites “that are primarily used for institutional, private, industrial, retail or wholesale marketing or promotional purposes.” Here’s a PDF of the application; maybe banners could be described as ‘digital animation’ or ‘internet programming’ but I’d imagine they’re excluded if not explicitly named, I’m not entirely sure.
I’ve recently been looking quite a bit at offshore digital production, and the trend where agencies and marketing holding companies make it easier for mass-production of digital assets like banners by shops in places like Costa Rica. In the past, if your client wanted 300 different banners for a new pickup launch, for example, each customized to a different region or for a different nuanced demographic, you might quote the client a specific dollar amount and then send the project offshore; you pocket the difference. But now clients are getting wise to the pass-off, and networks think it’s smarter to own up to the business realities up front, explaining to the client the mass-production work will be done offshore and the savings will be passed along to them. The savings are great, according to the players involved, and several major holding companies are consolidating their business to make it easier to get these things done cheaper in developing nations. Read my interview with the CEO of WPP’s new venture Deliver to get a sense of where that’s going.
A great article from the Wall Street Journal shed more light on this movement, including General Motors’ involvement with Prodigious, Publicis Groupe’s offshore coordinator:
GM says that the number of variations of the ads it uses for campaigns is now several times greater than it was just two years ago. For instance, a consumer might notice 10 to 15 different ads promoting GM’s Chevy Malibu sedan online, says Mike Devereux, executive director of digital marketing for GM. But each of these ads can have up to a couple hundred variants, ranging from the background color to the text highlighting things like the car’s gasoline mileage or horse power.
GM used to work with multiple ad agencies and each had a different process for producing the ads. “It was inefficient. We never would have been able to scale,” Mr. Devereux says. Now, GM meets in Detroit with teams from Prodigious and the carmaker’s ad agencies to manage the digital production of its online advertising.
So, GM dollars funnel out through Publicis to places like Costa Rica, Bulgaria, the Ukraine, where savings occur because of lower overhead. But with these tax rebates, I’d argue it’s just as cheap to do production at present in Michigan.
Wouldn’t it make more sense for GM to take advantage of production incentives and do its part to help the local economy? It would at least soften the local economic blow when the giant ultimately topples. And wouldn’t it make more sense for the film incentives office to include potentially lucrative markets and make sure they were within range of the economic sprinkler?
Again, I have no idea why certain aspects of digital production are barred from the incentives. One argument is it would alienate present operators, but screw it, give the company that’s been making banners in downtown Detroit for the past five years the rebates too–film production companies that are already established can apply for the rebates.
Part of this argument feels like an updated, creative economy version of the old ’80s and ’90s calls against Michiganders buying foreign cars, but the shift in thinking is different than that. By clarifying the wording and specifically opening up the Incentives structure to a greater range of digital production forms, the Michigan Film Incentives office has the potential to turn the state into a center for a highly creative discipline. I can think of a few people pursuing digital startup options who, given the availability of real estate in downtown Detroit, would strongly consider a fat tax rebate on their bigger productions to be the deciding factor in their decision to open up a boutique in Michigan.
I’ll see if the Film Incentives office has any answers about what sort of digital stuff is covered. Who knows, maybe Michael Moore, yeah, that guy who used to be concerned with the Michigan economy, will want to press on the rest of his colleagues for the benefit of the next generation of communications, the good old Internet. He’s on the Michigan Film Office’s Advisory Council.
Meanwhile, Michiganders, don’t just look at the stars and the glitz when you read about the incentives, think about the how the state’s economy could look to the less fancy aspects of production and help everyone flourish.