Conference Presentation, Panel
A Hollywood Exit: What California Must Do to Remain Competitive in Entertainment - and Keep Jobs
Milken InstituteFred Baron, Rajiv Dalal, Kathy Garmezy, Joseph Henchman, Kevin Klowden, Larry Mantle, David Rockefeller Jr.
- California has experienced an 11% decline (16,000 jobs) in its entertainment workforce since 2004, contrasting with a 25% increase in New York, while feature film production has been leaving the state since 1997 and one-hour drama production has dropped 20% in volume, representing a decline of over 40% in actual market share.
- A proposed state assembly bill aims to expand the types of productions qualifying for incentives, potentially increasing the pool of available funds to under $400 million to satisfy demand, with a worst-case scenario cost of approximately $1 billion if all productions were served.
- Current incentives are capped at $100 million, creating a lottery system with a waiting list of 300 productions that introduces uncertainty, prompting studios to seek locations with predictable funding and potentially higher subsidies, such as the 60% visual effects rebate in British Columbia or rates in New York, Georgia, and Louisiana.
- Strategic plans include increasing incentives by an additional 5% to retain productions moving to the coast (San Francisco, Sacramento, San Diego) and restructuring the bill to ensure visual effects count toward production day calculations to capture the growing global demand for digital jobs.
- Material expectations suggest that with competitive incentives, California could recover to 90-something percent of its peak production levels, potentially sustaining or creating 16,000 to 20,000 jobs, including 10,000 visual effects jobs, with an average salary for middle-class production jobs ranging from $30,000 to $50,000 in California versus $80,000 to $90,000 in New York.
- Risks identified include the potential for the state to see less than a $1 return on investment (estimates of 80 cents on the dollar) if subsidies fail to produce a critical mass, the precedent of states like Michigan and Maryland failing to sustain programs due to budget constraints, and the possibility that increasing incentives may not stop other states from further raising their own subsidies.
- Long-term concerns involve the loss of intellectual property through offshoring, the inability to return to 100% of 1997 production peaks due to global market shifts, and the risk that without a thick local labor market and infrastructure, states will stop paying subsidies, while independent studies suggest subsidies may result in a net revenue loss for the state.
- The political outlook involves balancing these industry supports against competing interests in infrastructure and education, with the Governor expressing a desire to save the industry despite tight budget constraints and potential legislative pushback regarding the use of funds.