Economic Engine: Job Creator & Boost Revenues

Everyone is looking for ways to create jobs and boost state and local government revenues.  The filmed entertainment industry is the most mobile of industries and is a terrific job creator and economic boon.

Unfortunately, for over a decade, the California Legislature failed to recognize the industry’s mobility and job-creating potential.  As countries and nearly every other U.S. state wooed film and television productions with tax incentives, Sacramento didn’t see fit to “close the barn door” before the cash cow was out.  What is the damage assessment?  Consider the following:

In its 2009 report, the Motion Picture Association of America (MPAA) released figures of film and television production spending by state.  States that had no film and television industries to speak of a decade ago are now reaping the benefits of hundreds of millions of dollars of in-state film production spending.  Those states that crafted their incentives intelligently have generated substantially more in tax revenue than they awarded in credits.  To serve the great influx of productions, out-of-state entrepreneurs have built studios and crew infrastructures to help ensure their new-found gains will last.

Meanwhile, we’ve seen our market share dwindle.  Last year was a tough one for our local film production industry, which represents roughly 95 percent of all filming in the State of California.  In 2009, FilmL.A. saw the steepest year-over-year decline in on-location permitted production days (PPD) – a drop of 19.4 percent from 2008 – since tracking began in 1993.  

Double-digit losses were seen in each of the major categories:  Features (movies) were down 29.9 percent, Television dropped 16.6 percent and Commercials fell 12.0 percent.  If this past year were an anomaly, we would chalk it up to a poor economy and expect a rebound in 2010.  While the poor economy makes for an easy scapegoat, it cannot explain the long-term declining trends in local production.

The Feature category set a record annual low of 4,976 PPD in 2009, annihilating the previous record low of 7,096 PPD set in 2008.  At our peak in 1996, we were coordinating nearly 14,000 Feature production days in the region.  According to the Los Angeles County Economic Development Corporation, a $70 million film generates at least $10.6 million in state taxes.  When one considers what the tax from a single film could fund – cops, firefighters, schools, etc. – it’s a tragedy that we’ve allowed Features to decline eleven of the last thirteen years. 

At one time, the term “runaway production” was only used to describe the flight of movie production from California.  There was a pervasive belief that the television and commercial industries were rooted in our state for good.  Unfortunately, the high-profile losses of TV shows like Ugly Betty and Deal or No Deal prove that entire productions can and will pull up stakes when it makes financial sense to do so.  A one-hour drama like Betty employs 200 - 300 people and spends around $3 million per episode on salaries, wages, equipment rentals and other vendors.  Each episode generates at least $260,000 in state taxes.  We feel the sting of the loss of every production filmed out of state.

In addition to the number of shows that have uprooted, many aren’t choosing Southern California as an option in the first place.  Since 2005, the number of primetime television pilots produced per season has declined by 17 percent.  At the same time, the number of pilots produced in the Los Angeles region has fallen nearly 42 percent.  For the current pilot season, one not-to-be-named TV network/studio isn’t shooting a single pilot in California, though Texas is getting several.  If picked up as a series, most of these shows will not film in California.

Just as the advertising industry is ensconced along Madison Avenue, Southern California was thought to have a lock on the commercial production industry.  Many states have pried that lock by including commercials in their incentive programs.  The Association of Independent Commercial Producers (AICP) just reported that Southern California’s share of all commercial production dropped from 54 to 48 percent in 2008 vs. 2007, even though the percentage of commercials shot domestically increased.

We are down but not out.  The City of Los Angeles and the California State Legislature have recently taken steps to fight back.  The City of Los Angeles is expanding its efforts to market itself to filmmakers and devising local incentives.  Though it’s written very narrowly, California has offered a film and television tax incentive since July of 2009.

By making smart policy decisions at the local level, and by increasing funding for the state incentive and making it available to more productions, California can increase state revenues, create jobs and reassert our dominance in the industry that once called us home.  If we don’t, our loss is Connecticut’s, New York’s, Louisiana’s, New Mexico’s, Michigan’s and Pennsylvania’s gain.

Paul Audley is president of  FilmLA Inc., For additional information visit: www.filmla.com.