California Film Industry Faces Critical Challenges

News Summary

A new Milken Institute report warns that California’s film and television industry is at risk due to high costs, outdated processes, and complex regulations. With production shifting away, the report urges reforms to revitalize Hollywood’s status as a global entertainment hub, advocating for increased tax incentives and streamlined permitting processes to combat declining productions and high living costs.

California is facing a significant crisis in its film and television industry, as outlined in a recent report from the Milken Institute. Titled “A Hollywood Reset: Restoring Stability in the California Entertainment Industry,” the report highlights that the state is losing its competitive edge in production due to high living costs, outdated processes, and a complicated permitting system.

The authors, Kevin Klowden and Madeleine Waddoups, issued a warning that the ongoing decline of filmed entertainment in California could become irreversible without immediate and substantial changes. They note that Los Angeles has the most expensive permitting costs among major cities, with a permit application fee of $3,724. In contrast, New York City’s fee is $1,000, London charges $540, and Atlanta only requires $400. These escalating costs are compounded by additional fees associated with filming, such as charges for drones and necessary public safety personnel.

This high financial burden stems partly from the structure of FilmLA, the company managing the city’s permitting process, which operates without municipal funding. Compounding the challenges is California’s film credit program, which the report describes as overly complex with a restricted application window of just three days. The program also mandates that applicants provide an analysis of job creation, adding another layer of difficulty for production companies.

Moreover, California has experienced a notable decline in film and television productions, with the share of shows filmed in the state for North American audiences dropping to 20%, a significant decrease from previous years. The soaring average home price in the state, which has reached around $981,000—higher than New York’s average of $760,000—has further exacerbated the financial strain on industry workers, leading many to leave California.

A strong U.S. dollar has also shifted the landscape in favor of international production. Companies are drawn to work abroad in countries with subsidized healthcare, which creates more attractive financial conditions for filmmakers. The report suggests several reforms, including increasing the budget of California’s film and television tax credit program from $330 million to $750 million and raising the base incentive rate from 20% to at least 30%. Additionally, the report recommends allowing production companies to apply for tax credits on a rolling basis and expanding eligibility to encompass unscripted projects and shorter television episodes.

To reform the current landscape, local governments are encouraged to revisit FilmLA’s funding structure to reduce permitting fees and streamline the process. The current fragmented labor contract system is pushing studios to take projects overseas, thereby limiting local job growth. The combination of high labor costs, expensive living conditions, and a complicated film incentive framework is prompting many industry professionals to exit California.

In light of these challenges, Los Angeles Mayor Karen Bass has formed an Entertainment Industry Cabinet to tackle the concerns related to production leakage. The significant drop in productions filmed in Los Angeles—over 30% within the past five years—has led to projections that 2024 will witness one of the lowest shoot day totals in decades. The ongoing contraction of the global film industry and the aftermath of recent writer and actor strikes have further intensified production declines in California.

Various unions are currently lobbying the state government for the film incentive program to be prioritized, emphasizing its critical role in supporting local employment. However, there is also criticism surrounding film tax credits, as some experts argue that they do not generate enough economic activity to warrant their substantial costs. Amid California’s budget crisis, certain lawmakers are pushing for a redistribution of funds from film industry subsidies to essential social services instead.

Despite these challenges, film and television production remains a vital economic driver, generating significant benefits. Reports indicate that every dollar allocated to the California Film Commission produces approximately $24.40 in economic activity, making a case for the need to reform and sustain the industry. The Milken Institute report underscores the urgency for revitalization efforts in order to maintain Hollywood’s status as the epicenter of the entertainment world.

Deeper Dive: News & Info About This Topic

• Hollywood Reporter: California Film & TV Production Challenges
• LAist: California’s Competition for Film Production
• The Guardian: Los Angeles Film Production Declines
• New York Times: Hollywood Filming Trends
• Encyclopedia Britannica: California Film Industry