Sunday night, while the writers and producers in Los Angeles were doing their strike countdown, a good friend was catching a flight to Albuquerque to start production on a new feature film. It seems that New Mexico is offering tax credits that make it worthwhile for a feature film to be produced there, yet again "stealing" revenue from Los Angeles and California.
While no one on the production was interested in leaving town, the studio decided that the tax credits made it worthwhile. Sooooooo, he and his 80 crew members blew town to set up shop for months outside of Hollywood, and the state of California let them go. Vancouver and Toronto have established solid credentials as filming locations at a discount to Hollywood, and they have all the trappings for major productions. With about $350 million in film and television income last year, Louisiana has established itself as one of the nation's most popular film centers, and 40 other states are looking to follow suit.
California is losing hundreds of millions of dollars annually to these "runaway" productions. Runaway used to mean a film was over budget, or it was breaking box office records. Now it means they will film somewhere else.
All of the six major studios are located in the Los Angeles area, and are owned by multinational companies. Universal is owned by General Electric (NYSE: GE), Warner Bros is owned by Time Warner (NYSE: TWX), Paramount by Viacom (NYSE: VIA), 20th Century Fox by News Corp (NYSE: NWS), Sony Pictures (Columbia Pictures / Tri-Star / MGM) by Sony Corp ADR (NYSE: SNE) and Disney / Pixar by Walt Disney (NYSE: DIS).
While the studios are located on the West Coast, corporate headquarters are often located on the East Coast. You would think these major corporations would be lobbying for California to adjust its thinking, but there is no sign of movement. Since actions speak louder than words, every major film budget considers alternate locations away from "home."
One reason no action has been taken might be that state government is afraid that the studio producers will systematically bilk California out of tax credits for every production, as if they were never going to film anything here again. Although this is highly improbable, it is an issue. However, it might make sense for the state to simply assume that any production might leave, and offer an incentive to stay that is consistent and competitive within the needs of the local industry. Sort of a "good customer" incentive.
There is great angst in Hollywood every time the filming location is up in the air. New York's incentive programs have reinvigorated its film business and significantly reduced the tide toward Toronto. At a minimum, California should be studying the success of that program.
Perhaps this is all a part of the same sentiment that would let the best player in the NBA leave, or tell the NFL it might be nice to have a team here but it's not essential, so we're telling the entertainment industry that you can stay or you can go -- we don't care?
If California is willing to let billions of dollars in revenue get away without any effort to keep it here, then something is definitely wrong with this picture!
Sheldon Liber is the CEO of a small private investment company and the principal for design & research at an architecture & planning firm.
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