Cut! Michigan’s Film and Video Game Startups Fear Loss of Popular Tax Credits

3/2/11Follow @xconomy

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finish shooting their movies.

Backed by Envy Capital in Farmington Hills, MI, PixoFactor currently employs 30 people at its new 6,500 square foot facility. The company has added 10 more jobs since last summer. And it is currently discussing a with a major video game publisher that would generate even more jobs in Michigan, Hurwitz says. [An earlier version mistakenly referred to PixoFactor's investor as Envoy Capital. We regret the error.]

“The incentive really does create permanent, long-term jobs,” Hurwitz says. “I don’t understand why no one [in the governor's office] really looked at this. It seems to be working. It’s like someone walked in and said ‘let’s take it away.’”

In July 2010, Maxsar Digital Studios opened a 60,000 square foot state-of-the-art special effects facility outside of Detroit.

The company, founded by veteran producer Phillipe Martinez, specializes in producing computer-generated imagery (CGI) for independent film companies who may also want to expand into video games and merchandising. Maxsar is currently working on a film called Scar23, a mix of live action and digital effects.

Over the past year, Maxsar has more than tripled its workforce to 50 employees and has plans to double that in the near future. The company offers a training program for graduates of local universities and design schools to help produce CGI feature films.

With the tax credit, Michigan could “build a digital media infrastructure,” that rivals Vancouver, says Maxsar president Eric Bruneau. “Within digital media we use 100 percent Michigan people. We bring a lot of new talent into the pool.”

Last year, Wayne State University’s TechTown and Unity Studios of Allen Park, MI, and its affiliated Lifton Institute for Media Skills launched a partnership under which the institute will teach aspiring film crews how to make movies and TechTown will teach them how to become entrepreneurs to sell their services.

Other relatively new media companies to hit the Detroit area in recent years include Parliament Studios, which specializes in web videos, animation, and documentaries, First Element Entertainment, and Stunt3 Multimedia.

“We saw the Michigan film industry taking off,” Parliament president David London told the website Southeast Michigan Startup. “Thanks to the tax credits it had more room for growth than any other industry.”

Hurwitz of PixoFactor hopes the tax credit can still be salvaged, even if it’s less generous than 42 percent. Perhaps the state can break up the credit into one for films and the other for video games, he suggested.

The proposed $25 million cap will create additional uncertainty for businesses because that number will likely fluctuate in future budget years, Hurwitz says.

Already, the uncertainty “is creating a bit of havoc for us,” he says.

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