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No Hollywood Ending for IE Effects

December 24, 2012
No Hollywood Ending for IE Effects

In February 2011, Traverse City native David Kenneth was on the brink of realizing a dream he'd had since moving to Los Angeles in 1995: bringing his Hollywood film business – and new jobs along with it – back to his hometown.

I.E. Effects, a postproduction house specializing in visual effects, opened a Traverse City office at 315 N. Division that spring. The company hired more than a dozen artists and staff to begin working on a number of high-profile Hollywood projects, including The Green Lantern and Harry Potter and the Deathly Hallows: Part 2. In spite of looming drastic changes to the state's film incentive program – an initially uncapped amount of rebates that encouraged Kenneth to open the Traverse City office – the owner tells The Ticker he hoped to have 50 employees by the end of 2011, 100 by the end of 2012 and “250-plus within five years.”

Today, the I.E. Effects office on Division sits empty. The artists were let go over a year ago, told they'd be contacted if more work came in. Clover Roy, director of regional operations, sat alone in the office for the past several months, lobbying the state to fully restore or at least improve its film incentives package, which dropped to a $25 million cap in October 2011. Last month, with funds running low, she boxed up the company's equipment and placed it into storage after receiving an eviction notice.

So how did this once-thriving company find itself on the street in less than two years?

“It was a perfect storm of issues,” says Roy, who is now seeking other employment. “All of the projects we were counting on to keep us busy evaporated when the film incentives changed. There was a clear message sent to the film industry: Michigan can't be trusted anymore. Unfortunately, that meant no one wanted to trust us, either.”

Warner Brothers, the studio behind The Green Lantern and Harry Potter, farmed its postproduction work to I.E. Effects based on the understanding it would quality for Michigan film rebates. By the time Warner Brothers applied for the rebates, the Michigan Film Office notified the studio that any work which had already been completed was disqualified for incentives. The communication mix-up – which Kenneth says his company wasn't privy to – incensed the studio, and cost I.E. Effects a major client.

Similar confusion on rebates with another important client, Motorola, “left us with more mud on our faces,” says Kenneth. “Companies don't care if it's not your fault these incentives didn't materialize. They just know you didn't deliver.”

The film incentive cuts in Michigan not only impacted I.E. Effects' Traverse City office, but the company as a whole.

“My professional reputation...was basically shattered,” Kenneth says. “I put myself on the line waving a Michigan banner in Los Angeles, and I feel like my home state slammed the door in my face. It's heartbreaking, because my dream was to create jobs in TC and keep young talent there. To have that rug pulled out from under me is a hard pill to swallow,” he said, adding that he believes Michigan had the chance to become the “postproduction department of Hollywood” – and that the state “dropped the ball on the one-yard line.”

Kenneth, who still sees opportunities for his company to grow in sectors like overseas markets, theme parks and independent films, is optimistic I.E. Effects will eventually rebuild. He says he'd love to one day open another office in Traverse City – but that his experience here has left him weary.

“I've lost confidence in my home state,” he says simply. “I'm going to need reassurance, as will many others, that this is a place I can be successful in before I can return again.”

What is the current state of the Michigan film incentive program? Where do we compare with other states now in terms of rebates? Can film become a thriving industry in Michigan, or have we lost the trust of Hollywood? We spoke with Michigan Film Office Communications Advisor Michelle Begnoche to get her perspective on these and other questions on the Michigan film business. Check out our Q&A with her here.


Most Recent Comments

 
John doe on January 1, 2013 7:39pm

Don't understand why everyone now-a-days need government assistant to have a successful business. If you have a viable product then you should make money. If they only way you are going to survive is by receiving incentives from tax payers then your company shouldn't exist. I worked at I.e. and the only reason I got the job was because I was a local and they needed a certain number of local employees to get their incentives. I had no experience in the field. Soooo it seems like it's more about the incentives than the actual work. God I miss the old America

Jinny on December 26, 2012 1:23pm

I agree with Dan Ollar, let's see an article regarding the MBT.

Theresa Chaze on December 26, 2012 11:54am

Hey Deb,
The film industry brought in good paying jobs and hundreds of millions of new money to the state. Not only did those in the industry benefit, but so did hotels, local merchants, restaurants, the tourist industry and so many others. Within two years there was a six to one benefits for the state. If you really want to cut subsidies, the first that should go are those going to the oil and gas. They have been profitable for decades, yet the continue to rape the consumer with high prices.

Rich Brauer on December 26, 2012 11:49am

He really gave it 100%! We've had issues with the incentive too. It can be a double-edged affair. To bank on it though, is a risky thing. However it may happen, offering opportunities for Michiganders to work in this professional & green industry is a good thing! Viva la film!!

Cindy on December 25, 2012 9:12pm

continued check out all the corporations who benefit and the tea party doesn't mind giving businesses such as Dow, GE, Quicken Loans. Check out the list for yourself, doesn't seem quite fair to me for all these corporations to benefit and yet business people who want to employ 100's to make movies are unable to be subsidized http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html#MI

Cindy on December 25, 2012 9:05pm

Interesting Mike Gillman may have voted to give $7.41 million to Snowden http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html#MI Snowden Companies
Single Business Tax Brownfield Credit,
Brownfield Tax Increment Financing
3 Corporate income tax credit, rebate or reduction Traverse City 2009

mpabot on December 25, 2012 9:04am

Continued: The state never actually gave 40% to anyone - turned out to be in the low 30% range...and even films that were not made - brought people in who stayed at hotels, rented cars and space ate, entertained etc. Our bread and butter has always been commercials. IF the treasury had not weaseled out of allowing commercials an incentive our more local post houses and businesses would have seen an even more immediate and long lasting/sustainable effect.
The industry needs another way to attract film work to MI. Its a different industry and MI is lacking in industries not related to cars.

mpabot on December 25, 2012 9:02am

continued:
We WERE training people many of whom have now while educated here - have left and continue to leave to pursue careers. All of the adults in the room - that is the legislature made a promise that MI was going to DO something BIG. The state never actually gave 40% to anyone - turned out to be in the low 30% range...and even films that were not made - brought people in who stayed at hotels, rented cars and space ate, entertained etc.

mpabot on December 25, 2012 9:01am

continued: MI was no longer in the game - as canada and over 35 states offered incentives to lure films. Unlike IOWA where incentives really don't make sense!. If you build it they will come was the mantra. AND they did come. We WERE developing infrastructure that might have maintained had we re established a foothold.

mpabot on December 25, 2012 9:00am

Here's the thing. States have been incentivizing econ development for years where they vie for businesses - shifting people and infrastructure around. The idea is to gain some traction from these businesses - like the film industry which has been in MI for over 50 years.

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