Wednesday, February 01, 2006

Canadian Consulate Comments On LA Production Slowdown ...

Rosalind H. Wolfe is Sr. Officer, Political/Economic & Public Affairs, for the Canadian Consulate General in Los Angeles, CA.

Here is her update/comment on the current LA production scene:

"Both trades, (The Hollywood Reporter and Daily Variety), as well as the Los Angeles Times, highlighted the current state of on-line production in Los Angeles last year as slowing after an unusually busy season in 2004, fuelling concerns that the region is continuing to lose production to the lucrative incentives offered by other states and countries.

Film L.A., formerly known as the Entertainment Industry Development Corp., the area's permitting agency, reported an overall 2005 growth rate of 4.1% for film, television, commercials and other projects, well off the 19.1% pace set the year earlier amid a particularly busy pilot season.

Film L.A. president Steve MacDonald said there are early indications that this year's pilot season could be slower, sapping the strength of the only recent bright spot -- television production -- even as the worldwide appetite for programming continues to grow.

"That overall pie is expanding, but we're not getting the share we used to get in the past, and I believe the incentive programs offered by other states have really taken their toll," MacDonald said, referring to Louisiana, New Mexico, New York and others that have aggressively pursued production dollars.

Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., echoed MacDonald's concern that competition from other states and countries was eating away at Los Angeles' entertainment economy, which was already threatened by slower DVD sales growth and a lethargic box office.These fears muted enthusiasm for the 9.3% gain in feature film production in the region last year, which has only now returned to the rates seen in 2000. The 9,518 days of film production in the Los Angeles region last year, up from 8,707 in 2004, remain well below the 1996 peak of 13,980.

According to The Hollywood Reporter "the seven-year decline in film production from 1997-2003 largely has been blamed on Canada's incentive programs, which have lost some appeal in the past two or three years because of fluctuations in the exchange rate that made it more favorable to stay in the U.S."

States other than California have jumped in to offer generous tax breaks and other incentives that aim to establish new and permanent production centers far from the industry's traditional base in Los Angeles.

With an estimated 20 U.S. states now offering incentives, California is hoping to catch up via a bill backed by Gov. Arnold Schwarzenegger.Television production in Los Angeles, which has risen steadily since 1999, saw a severe downturn last year as growth slowed to 2.6% (18,740 days) from about 27% in 2004. Permitting officials also find it worrisome that about 30% of that work is for reality TV series, which tend to have smaller budgets and fewer employees than scripted shows, thus lowering the economic impact for the area.

Commercial production rose 4.1% to 6,983 days last year compared with 2004.The commercials sector has seen steady growth since 2000, when it was heavily affected by a six-month strike by members of SAG. The union's contract with advertisers is up in October, and both sides are hopeful that a new deal can be reached without another strike. Commercials producers also are contending with shrinking ad budgets and emerging technologies such as mobile phones and video downloads, said Steve Caplan, exec vice-president at the Association of Independent Commercial Producers.Los Angeles city officials are considering local incentives like waiving facility fees, but the industry has high hopes that the state's bill will become reality this year after several past failures."



The important point to remember is that film, television and commercial production in Los Angeles set a combined record in 2005 for the second straight year, with TV leading the way and film production continuing to rebound. However, it appears that local film officials, who are pushing for state tax credits to keep productions from moving elsewhere, are downplaying the milestone. They note that growth is slowing, with production still vulnerable to poaching by other states and countries offering financial incentives.

According to the Los Angeles Times, "about 20 states such as Louisiana, Illinois and New Mexico have enacted aggressive tax incentives to lure productions away from Los Angeles. At a meeting with an executive from a major studio, he disclosed that he was analyzing bills from six different states introducing tax incentives to entice film production.

It is interesting to note that neither trade publication highlighted how conditions in Los Angeles, such as high union wages are a contributing factor to declining productions. A recent study by the Los Angeles County Economic Development Corp. found that the average wage of a film, television and video production worker in 2003 was almost $105,000, more than double the $39,000 average for all industries in Los Angeles.

It’s also higher than the year’s second highest-paid employment sector – management executives – by nearly $30,000.

The study cited pay as a significant reason for high production costs that are causing studios to move productions elsewhere in exchange for monetary incentives.

“The studios have started to pull their horns in, and loyalty to the local market isn’t a factor,” said Jack Kyser, the LAEDC’s chief economist and a co-author of the study. These levels of wages have prompted localities all over the world to provide economic incentives of various kinds.

Drafted : Roz Wolfe
Approved: Eric Pelletier