California vs. the World: The Race to Nab Film and TV Productions

As a seasoned producer with decades of experience under my belt, I’ve witnessed the ebb and flow of production landscapes like a ship navigating through stormy seas. Today, I find myself in awe of the dynamic changes that are reshaping the world of film and television.

In the previous year, Paramount Global received approximately $124 million in tax credits from New York State as a form of recognition for completing 10 projects filmed within the state. These projects, which spanned feature films, television series, and even a talk show like Clifford the Big Red Dog, Blue Bloods, and The Drew Barrymore Show, collectively invested almost $425 million in the region through expenditures on labor and other costs.

In contrast, California only received $71 million in film spending from Paramount Global for projects filmed there in 2023, which is significantly lower than the $295 million they spent three years prior on incentive-awarded projects. This decrease mirrors a growing trend of productions moving away from California and towards other regions that are strengthening their tax relief programs in an effort to lure Hollywood investments.

Despite being known as the world’s leading production center, California is gradually losing its charm as the top choice for many producers. While Los Angeles continues to dominate the U.S. film and television industry, its lead is diminishing. According to a report by Otis College, the region accounted for 27% of employment in this sector in 2023, which is a significant decrease from the 35% it held just the previous year.

Over the past decade, I’ve noticed a shift in where movies are being filmed, with the UK, Canada, and Australia rising as hotspots. This change is largely due to their more flexible tax incentive programs compared to California’s stricter ones. As a gamer, I’ve seen this reflected in the games I play, with more and more content set in these countries.

The results align with a report from FilmLA, which indicated a weak resurgence of filming in Los Angeles following a significant reduction due to production stoppages. The primary cause for the slow recovery: a double-digit decrease in TV productions over a three-month span from January to March. Filming in this category, historically a major contributor to the area’s filming, fell more than 32% below its five-year average. A subsequent report from the film office showed that production from April to June dipped approximately 12% compared to the same period last year and over 33% compared to the five-year average, despite reduced activity during strikes.

The International Association of Film Commissioners’ executive director, Jaclyn Philpott, emphasizes their commitment to “bringing the film industry closer to our film commissions and their respective regions” in order to “enhance” the sector. She acknowledges that “disruption isn’t novel,” but their aim is to “confront challenges to discover solutions,” and they are embarking on a “major digital transformation project.”

Tax benefits significantly contribute to California losing its portion of film production. The state’s film commission, unwilling to provide comments, provides a 20% base credit for feature films and TV series, which is lower than many other locations competing for Hollywood funds, such as New York, New Mexico, and the U.K. Additionally, California’s program has a $330 million limit.

“Ian Brereton, a legal advisor for production companies, explains that the likelihood of filming in California hinges on factors such as location, interest from talent, and whether the plot is tied to the region. If not, other regions might have an edge due to their softer market incentives and lower labor costs.”

Contrastingly, like California, Georgia offers identical initial incentives but provides an additional 10% bonus for featuring the state emblem in productions. In the fiscal year 2024, it disbursed a total of $2.6 billion in tax credits to 273 different projects. Unlike California, there’s no limit on the annual tax breaks Georgia gives to productions. Kelsey Moore, the executive director of the Georgia Screen Entertainment Coalition, emphasizes that the state has solidified its status as a renowned global production center and is now holding its own against heavyweights like Los Angeles and New York.

Notably, California is unique among significant production centers in that it does not consider above-the-line expenses such as actor, director, and producer salaries to be eligible for incentives. The United Kingdom has capitalized on this difference to attract high-budget productions. As a result, over the past few years, it has emerged as one of the primary locations for feature films.

As a movie enthusiast, I’m thrilled to share some exciting film projects slated for 2024! These include “Jurassic World 4” (Amblin Entertainment, Universal Pictures), the next installment of “Mission: Impossible” (Paramount), “The Fantastic Four: First Steps” (Disney), and “Wake Up Dead Man: A Knives Out Mystery” (T-Street Pictures, Netflix). These productions are eligible for a cash rebate on salaries for stars like Scarlett Johansson, Tom Cruise, Pedro Pascal, and Daniel Craig, as long as these expenses occur in the U.K.

Certain films produced in the U.K. may also receive benefits for carrying out visual effects and postproduction work abroad. For example, Canada and Australia provide the most substantial tax breaks for this field, as stated by Sarah Westman-Liu, who oversees incentives at payroll services company Entertainment Partners. She explains that in Canada, you can recover between 30% to slightly over 40% of your total expenditure. Additionally, she mentions the advantage of favorable exchange rates. Australia’s rebate is even greater now when you consider the 30% refund for productions that perform post-production, digital, and visual effects in their region (which increased from 16.5% in July) combined with a 15% credit from individual states.

Studios are not passive observers in the competition for incentives; they are actively seeking ways to influence legislative decision-making. In March, the U.K. announced an increase of 5% and the removal of the 80% cap for visual effects costs within the country, aiming to remain competitive in the VFX and postproduction sector. Following consultations with companies such as Pinewood, Warner Bros., and Sky Studios, finance minister Jeremy Hunt declared that eligible film studios in England would receive a 40% reduction on their business rates until 2034. The studio space in the country has doubled over the past three years, with Comcast-owned Sky Group planning a significant expansion of its soundstages just outside London.

On Tuesday, Simon Robinson, COO of Warner Bros. Studios, announced plans to invest around half a billion dollars each year towards productions in Nevada. This investment is dependent on Nevada passing a bill that significantly increases its film and TV tax incentive program’s cap from $10 million to $95 million. If approved, Warner Bros.’ move into Nevada would resemble Netflix’s increasing presence in New Mexico, where the state recently raised the maximum tax relief it offers to the entertainment industry.

In a concerning development for Los Angeles’ film industry, reality TV filming in L.A. dropped sharply during the second quarter of 2024, following a challenging beginning to the year. According to FilmLA’s recent report, on-location shooting for this format dropped by almost 57% compared to the same period last year. This decline significantly affected the entire television category, which has traditionally been a pillar of production in the area. “Typically, unscripted TV is a format that requires extensive location shooting and generates high permit usage,” explains Philip Sokoloski, FilmLA’s vice president of communications. “The job creation impact of reality productions is less than for scripted TV, and these projects are not eligible for incentives through the state of California. Nevertheless, it plays a crucial role in L.A.’s production economy.”

Due to rival companies offering increasingly enticing deals for unscripted programs, it’s uncertain if production levels for these projects will reach pre-strike heights in the same region again. In June, Illinois Governor JB Pritzker approved a bill expanding the state’s tax credit program, now covering game shows, talk shows, and reality TV contests, among others. Georgia has already made this format eligible.

Countries in Asia that traditionally haven’t offered tax breaks for movie and TV production are now looking to join the competition. Last year, Japan introduced an incentive program that refunds up to 50% of eligible expenses within the country, with a maximum of $6.4 million. This has attracted productions like “Snake Eyes: G.I. Joe Origins” and the second season of “Tokyo Vice”. Similarly, Thailand, where the next season of “White Lotus” was filmed, has increased its incentives for these programs as well.

Yet, despite efforts by other locales to lure movies and TV shows, California remains the heartland of production. Brereton notes, “It’s still the place where the magic is made.”

Based on my years of reading various publications, I found an interesting article that caught my attention in the August 21st issue of The Hollywood Reporter magazine. If you’re someone who enjoys staying updated on the latest news and trends in the entertainment industry, this is definitely a must-read! To ensure you don’t miss out on future issues like this one, consider subscribing to the magazine. Trust me; it’s worth it!

2024-08-22 17:26

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