Of pineapple lumps, Gobbits and market economics

October 28, 2010

Every man woman and child in New Zealand has just paid about $22.20 towards the production costs of Lord Porkpie’s The Gobbit. It’s not quite enough to give us Gold Class, but seriously: Shouldn’t we all now get a ticket to see this Warner Bros blockbuster?

After all, thanks to the Teflon Gollum we effectively sold Middle Earth for a song and a dance.

And what is the opportunity cost of handing over nearly $100 million to Hollywood moguls?

Well, one lost opportunity would be to hire 166 more teachers for ten years, or approximately the same number of nurses and radiographers.

Seriously, what’s more valuable to New Zealand: better health and education outcomes, or a handful of tourist shekels and a promotional DVD?

How can the Teflon Gollum justify the social cost of helping out Warner Bros against the future of Kiwi children?

At a time when the National government is crying poor and refusing to give pay rises to health workers and teachers where does the $100 million come from?

Effectively everyone who works on The Gobbit in New Zealand is on welfare!

We’re told the movie will create thousands of jobs and enhanced tourism opportunities, but where are the numbers? So far it’s just a hollow promise. I’ve seen one economist’s estimate that about $1.5 billion will be generated in New Zealand, but no source is given for the data [ANZ chief economist Cameron Bagrie]. And if you see the numbers below, that $1.5 seems wildly inflated to me.

Significantly, other benefits are harder to pin down:

Work by NZIER in 2002 suggested the Lord of the Rings trilogy created 800 jobs for three to four years, and brought in $300 million-plus in foreign exchange earnings annually, although polling for Tourism New Zealand found a very small percentage of tourists were motivated to visit because of the films. [Stuff.co.nz]

What we do know is that Lord Porkpie made about $10 million for the first three LOTR movies, so he’s likely to score another $5 million or so.

And the LOTR trilogy grossed well over $1 billion for the studios

Rottentomatoes.com provides the following statistics:

The Lord of The Rings: The Fellowship of the Ring:
Box Office: $313,837,577
VHS Rentals: $17,160,000

The Lord of the Rings: The Two Towers:
Box Office: $340,478,898
VHS Rentals: $9,460,000

The Lord of the Rings: The Return of the King:
Box Office: $376,958,965
VHS Rentals: $3,030,000

Taking those statistics for the film we can add them up and find a total:
$1,060,925,440

Other estimates place the total at well over $2 billion.

So why does Warner Bros need tax breaks anyway? The simple answer is to put more precious in the pockets of shareholders?

A further question if I may: Why are we led to believe that the budget for The Gobbit is $670 million when the total cost of the LOTR trilogy was under $300 million?

Another aspect of this is the irony of a free-market government and its libertarian partners in the ACT party helping to minimise the market risk for a multinational corporate giant.

The Teflon Gollum loves to talk up his free market and money market credentials, but he’s the first to dish out a tonne of cash in the form of corporate handouts.

Congratulations Middle Earth, you have won another bag of Piiiiie Napplumps.