New Incentives to Pass Incentives

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I'm Matt Holzman with The Business Brief, a guide to what's happening in and around the business this week.

Canada has always been an attractive place for film and television production. They speak English -– or a version of it –- they have trained crews, they have equipment and facilities. Vancouver, Montreal and Halifax have stood in for just about any city in the world. In 1997, the Canadians added to the mix financial come-on's to Hollywood and that, plus their weak currency, managed to create a mass migration of production to the great white north. The result has been dubbed "runaway production."

These days, the American dollar isn't so strong in Canada, so production is returning to the US. But in the interim, all but nine of the 50 states have passed – or are in the process of passing – some sort of incentives to lure Hollywood to their neck of the woods. So while production is no longer running north from southern California, it is headed east.

So much so that California has seen its share of feature film production go from 66% to 31% in just the past five years, according to the California film commission.

The incentive "war between the states" started in Oklahoma, of all places, when they passed their "compete with Canada" act in 2001. And as filming has become increasingly expensive overseas, states' investments have started to pay off handsomely. Film and TV dollars spent in Louisiana, for instance, have gone from something like $3.5 million to $400 million in the last five years. Laissez les bon temps roulez indeed.

Now, why has southern California always been the home of so much production anyway? Because the business is based here. Because of the weather. Because this is where the best crews are and the best equipment rental houses and the best sound stages. But certainly not because of tax incentives, since California, you may be surprised to learn, is one of the few states that don't have any.

That's partially because people assume Hollywood will always be the center of the show business world. But as Silvio Horta said, Hollywood is a state of mind.

Who is Silvio Horta, you ask? He's the executive producer of Ugly Betty, the hit ABC sitcom that announced it was moving its production east last month, twelve days after New York announced generous new incentives.

The departure of such a high-profile show has reignited the question of why California has no financial incentives to keep production at home. The state assembly has passed incentive legislation twice in recent years, but it didn't make it through the senate either time.

It seems like a no-brainer. No one in Hollywood really wants to work in Louisiana, right? Toss ‘em a little tax break and they'll stay home. And you'd think that the Governor, a former thespian himself, would be able to use those big strong arms to push production incentive legislation through the senate. But it's just not that simple.

First of all, you might have heard that California's in a budget crunch. If the experience of other states is any proof, it seems clear that incentives for production pay off -– but in the long haul. And tax breaks are a kind of spending now -– but we're broke. We're like the world's best poker player without a stake to get in the game.

The second issue is political. Only a few senators come from southern California and the rest don't want to pay for the gas in John Travolta's private jet. It just doesn't look good to their constituents.

Then there is the reality that other – bigger – industries are fighting for the same money. Though show biz people think the business is the state's only business, entertainment is really only the seventh biggest employer in the state.

But while being forced to give tax breaks to our spoiled little home-grown industry feels a little like getting blackmailed by one of your own kids, sooner or later we're going to have to just fill the suitcase up with cash and drop it off where they tell us. Because incentives work and runaway production is costing us billions, though it's the little guy – the grip, the camera assistant, the make-up guy – that's bearing the brunt of it. And it might as well be sooner than later: while Hollywood may not be California's biggest industry, it fuels the industry that does top the list: tourism.

For KCRW, I'm Matt Holzman and that's The Business Brief.



Matt Holzman