Producers bid goodbye to Hollywood


A study by the Milken Institute finds that California has lost more than 10,600 entertainment industry jobs since 1997. Film and TV production has been exiting the Golden State, lured by tax and wage incentives in other states and even places outside the USA.

The study results, “Film Flight: Lost Production and Its Economic Impact on California,” put the direct tally at 10,600 lost jobs in the entertainment industry, but an additional 25,500 related jobs as well. In all, the TV/movie production flight has cost California $2.4 billion in wages and $4.2 billion in total economic output since 1997 as film and TV production has moved to other states and countries.

The Milken Institute study notes that states like New York, New Mexico and Michigan, and countries like Canada and Germany have been aggressively courting the lucrative film industry with extensive tax and wage incentives. “The Blind Side,” “No Country for Old Men” and “The Incredible Hulk” are among the many movies that have been filmed outside of California in recent years.

“There’s no doubt that incentives have been drawing jobs and wages away from California,” said Kevin Klowden, Director of the Milken Institute California Center and lead author of the report. “And while California’s incentive package, passed in February 2009, appears to be working, we have a lot of catch up to do just to get back the share of production we had in 1997.”

According to the report, 42 states (including California), plus the District of Columbia, are currently vying for a piece of the $57 billion US film production industry by offering tax incentives. In July 2009, California implemented a tax credit for projects filmed in state with budgets of $75 million or less. Since its inception, 75 projects have been approved to receive credits. These projects were estimated to spend more than $1 billion in the state, generating $500 million of wages for below-the-line staff. The report notes that California’s tax credits are set to expire in 2014 and are more attractive to independent films and television series than to big-budget studio productions, because only projects with production costs below $75 million are eligible.

The study found that the number of movies either wholly or partially filmed in California has fallen sharply, from 272 in 2000 to 160 in 2008. Over the same period, California’s share of North American employment in the industry has declined from 40% in 1997 to 37.4% in 2008. Jobs losses go beyond the movie industry, the study noted, because for every job created in California’s film sector, another 2.5 jobs are created in other sectors.

The report makes a series of recommendations on how California can turn the tide, including:

Design a two-tier film incentive program – one set of benefits to engage big-budget studio films that are not covered under the current incentive program, and another set to attract smaller independent production.

Implement a new digital-media tax credit to attract and retain developers of digital animation, visual effects, and video games.

Also, make tax incentive programs permanent, signaling long-term commitment.

The Milken Institute is a nonprofit, independent economic think tank based in Santa Monica, CA.