As someone who has spent a significant part of my career in the dynamic world of film and television production, I can certainly empathize with the challenges faced by the industry in California today. The words of Rebecca Rhine resonate strongly with me as she describes the current state of production as being “in real peril.
As a dedicated gamer, I’ve seen how productions like “MasterChef,” “Supergirl,” and “The Kelly Clarkson Show” moved away from California due to enticing tax incentives offered elsewhere. Now, with runaway production and cost-cutting measures in Hollywood posing a threat to California’s dominance in the film and TV industry, Governor Gavin Newsom is taking action.
A preliminary budget plan suggests that California might significantly boost its annual cap for a program offering tax reductions to various industries from $330 million to $750 million. Governor Newsom is expected to unveil this on Sunday. If approved, this expansion could grant up to $3.75 billion in tax credits to the industry over a five-year period, starting in 2025.
Should it be approved, this subsidy would rank as one of the most generous provided by any state other than Georgia, which doesn’t limit the amount given to productions annually. This includes New York, a frequent second choice for filmmakers after Hollywood, in a rivalry between California and New York that has intensified as they compete fiercely in offering attractive incentives to lure Hollywood funding.
In essence, Mayor Karen Bass is stating that film production will continue in Los Angeles. This implies that the local employment opportunities that might have been relocated to other states or overseas will now remain within our community.
The details regarding future modifications to the program are still under discussion. These adjustments might influence the highest tax relief a single production is entitled to, as well as the kinds of expenses eligible for incentives.
Colleen Bell, director of the California Film Commission, mentions that they will evaluate various enhancements and possible repairs for the current program. The competition is fierce as everyone aims to attract production away from California. To protect employment opportunities and keep jobs within California, it’s crucial to make investments in our key resources and ensure that Californians can continue doing the work they enjoy while receiving their well-deserved wages.
After months of eagerly watching the unfolding drama in LA’s entertainment industry, I find myself grappling with a stark reality: the scarcity of job opportunities in this legendary production hub. Following the writers’ and actors’ strikes in 2023, local crew members and creatives have been vocal about an underwhelming resurgence in production. Major companies are reportedly trying to cut costs, leading to a slowdown that’s reminiscent of a car skidding to a halt at the end of Peak TV era.
As a gamer, I can relate to the struggle some workers face during strikes and their aftermath. They’ve had to sell homes, live in cars and RVs, and rely on food banks. Some even left the industry for other professions. But during labor negotiations in June, a potential solution was proposed: increasing tax incentives for productions across the state. This could potentially help alleviate the financial difficulties for union workers in the Los Angeles-area Hollywood Basic Crafts union coalition.
A few weeks ago, finding myself deeply invested in the local entertainment scene in LA, I took action by establishing a task force aimed at revitalizing our industry. This was in response to the disruptions caused by the pandemic, labor disputes, and the subsequent contraction of the industry. Notably, one of our key objectives has been to broaden the scope of California’s tax incentive program for film and television productions.
“This was the number one item on their agenda,” Bass says.
Data published on October 16th reveals that L.A.’s movie productions are nearing record lows, with the three-month span from July to September experiencing the least number of filming days in 2021. This figure is actually lower than the shooting activity during the same period last year, a time when production was halted due to a work stoppage. A significant worry is the dramatic decrease in unscripted TV production. During the last quarter, the number of shooting days for this category dropped approximately 56% compared to the same period in the previous year. Filming for television shows, which have traditionally been a mainstay in the area, is still decreasing as every scripted production category fails to meet historical averages.
Rebecca Rhine, Associate National Executive Director and Western Executive Director of Directors Guild of America, highlights a serious threat to filming within the state, stating it as being in “true danger”. She further explains that the governor’s proposal offers a crucial recognition that this is an industry we aim to preserve in California.
Based on Rhine’s statement, discussions regarding production issues such as high unemployment rates, job exportation, and ineffective competition against foreign incentives have been extensively held between Newsom’s administration and the DGA, along with other industry unions. Rhine adds that the governor appeared to be attentive during these conversations. The film industry, according to her, offers middle-class employment opportunities with benefits, not just for its employees, but also generates work for a variety of local vendors in California, ranging from dry cleaners to florists.
Newsom’s plan seeks to address a significant problem with California’s film and television incentive scheme: An overabundance of applications for subsidies. When these projects are turned down, they often move to other states or countries instead. The state has reportedly lost approximately $1.6 billion in spending from productions that applied but didn’t receive a tax credit since 2020, according to the California Film Commission. This means that, due to high demand for the incentives, many potential projects are being missed and the economic benefits they could bring are going elsewhere.
Bell points out that a crucial factor in deciding where films are produced is whether they qualify for tax credits. Our program has been overly popular for quite some time, but we’ve had to limit it due to a cap. As a result, we’ve had to decline some worthy productions, which then opt to produce their projects elsewhere, taking jobs that could have gone to Californians with them.
In California, tax credits can make it more financially feasible for productions to bear increased expenses related to labor, filming permits, and various other costs, which might otherwise be prohibitive compared to other locations.
Despite this, California will persistently encounter intense competition. Compared to many prominent film production centers, such as New York, New Mexico, and the U.K., California’s offer of a 20% base credit is relatively lower. Moreover, it is the only significant production hub that does not allow above-the-line expenses, like actor, director, and producer salaries, to qualify for incentives. This unique feature is something that both the U.K. and Canada, another popular filming location with additional benefits like favorable exchange rates and lower labor costs, have exploited to establish themselves as top choices for feature films.
California does not provide a separate tax incentive for visual effects. Consequently, numerous productions opt to send their post-production work to nations offering substantial subsidies for such tasks. This has led many visual effects companies based in California to establish branches abroad.
Canada and Australia provide some of the most attractive tax incentives in terms of post-production, digital, and visual effects spending. These regions allow productions to recoup at least 30% of their expenditure in these areas. Recently, the U.K. has increased its VFX costs incentive by 5% and eliminated the 80% cap on VFX expenses within the country, aiming to remain competitive.
Beyond raising the limit, the California Film Commission has also highlighted the absence of a tax credit specifically for Visual Effects (VFX) work to the governor’s office. In response, Bell stated, “We aim to succeed.
Contrary to California, other regions appear to be handling industrial downturns more effectively. Some evidence suggests that rival international movie centers are experiencing steady or even slightly increasing levels of film production. In the last quarter, both the U.K. and Canada surpassed California in terms of the number of live-action, scripted titles with budgets of at least $10 million being filmed domestically, according to data from ProdPro, a movie industry intelligence platform.
Furthermore, it’s important to note that it isn’t only regions beyond the United States experiencing this trend. In contrast to California, New York has demonstrated a higher level of resilience, with approximately 75% of 2022’s shooting incidents occurring there.
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2024-10-27 18:55