California Film Industry Faces Crisis Amid Rising Costs

News Summary

California’s film and television production industry is in crisis, with a 20% decline in productions attributed to high living costs, complex processes, and competition from other regions. The Milken Institute report recommends boosting tax credit budgets and streamlining permitting processes to restore stability. Analysts express urgency, noting a projected drop in shoot days for 2024 and the ongoing challenges post-pandemic and strikes. Local governments, businesses, and labor unions are lobbying for reform to maintain California’s status as a global entertainment hub.

California is facing a significant crisis in its film and television production industry, according to a new report from the Milken Institute. The report, titled “A Hollywood Reset: Restoring Stability in the California Entertainment Industry,” highlights several key issues contributing to the state’s declining competitive edge in the entertainment sector. With rising costs, complex processes, and changing market conditions, experts warn that failure to address these challenges may lead to irreversible damage to California’s storied film industry.

The Milken Institute report identifies high living costs, cumbersome film credit processes, and a complex permitting system as primary barriers to production in the state. Specifically, Los Angeles is noted for having the most expensive permitting system among major cities, charging a permit application fee of $3,724. In contrast, peer cities like New York and London charge about $1,000 and $540, respectively. Additional fees related to filming, including those for drone use and public safety personnel, further exacerbate financial challenges for production companies.

Analysts Kevin Klowden and Madeleine Waddoups caution that the state has already seen a 20% decrease in film and television productions, with only a fraction of North American shows currently filmed in California. This downturn is attributed not only to rising local costs but also to increasing competition from other regions offering more attractive incentives.

The report suggests that the average home price in California has escalated to $981,000, making it more expensive than New York City’s average of $760,000. These high living costs are driving away industry workers, further straining the local economy. A strong U.S. dollar has made production abroad more appealing, particularly in countries with subsidized healthcare that reduce operational costs for studios.

To combat this decline, the Milken Institute recommends boosting California’s film and television tax credit program budget from $330 million to $750 million and increasing the base incentive rate from 20% to at least 30%. Further recommendations include implementing a rolling application process for tax credits and broadening eligibility to cover unscripted projects and shorter television episodes. Streamlining the current permitting process could also alleviate some financial burdens on production companies.

Additionally, the report points to California’s fractured labor contract system as a contributor to the problem. The disjointed nature of labor agreements encourages studios to pursue projects in other states or countries where costs are lower, limiting local job creation and economic growth.

The urgency of reform in California’s entertainment industry is underscored by a marked decrease in productions—a drop of more than 30% in the last five years—with 2024 projected to be one of the lowest in terms of shoot days in decades. The global contraction of the film industry and the aftermath of the recent writer and actor strikes have compounded difficulties, leading to further production declines.

As local governments grapple with these challenges, businesses and labor unions are actively lobbying the state to prioritize the film incentive program. Many emphasize the economic impact of production, noting that every dollar allocated to the California Film Commission generates an impressive $24.40 in economic activity, a testament to the sector’s potential to contribute to the state’s economy.

However, not all opinions are in favor of increasing tax credits. Critics argue that film tax incentives often fail to produce sufficient economic activity to justify their costs. Additionally, some lawmakers propose reallocating funds from film industry subsidies to essential social services amidst California’s budget crisis.

In response to these challenges, Los Angeles Mayor Karen Bass has begun assembling an Entertainment Industry Cabinet to specifically address issues of production leakage and explore potential solutions. The path forward for California’s film industry remains uncertain, but immediate action appears crucial to maintain its place as the leading hub of entertainment globally.

Deeper Dive: News & Info About This Topic

• Hollywood Reporter: California Film Industry Crisis
• The Guardian: Los Angeles Film Production
• CoStar: California’s Film Production Loss
• New York Times: Hollywood Filming Overseas
• The Guardian: Los Angeles Film Production
• Wikipedia: Film Industry in California
• Google Search: California Film Tax Incentives