California’s Film Industry Faces Challenges Despite New Tax Incentives
In June, California took a significant step to bolster its film industry by passing new tax incentives aimed at curbing the trend of runaway production. This initiative, particularly focused on Los Angeles, was designed to retain film and television projects within the state. However, recent data from FilmLA reveals a mixed picture for the industry in the third quarter of 2024.
Decline in Shoot Days
FilmLA’s latest report indicates that shoot days in Los Angeles fell by 13.2% in the third quarter compared to the same period in 2023. This decline raises concerns about the immediate impact of the newly implemented incentives. Despite this downturn, FilmLA officials remain optimistic, suggesting that the effects of Assembly Bill 1138, which expanded tax credits for film and television production, may soon be felt.
Philip Sokoloski, Vice President of FilmLA, acknowledged the current dip but emphasized that the organization is already witnessing early signs of recovery. “We know that it will take a little while for new incentive-backed projects to get underway and be reflected in our data,” Sokoloski stated. “Fortunately, we’ve already begun to see early signs of these incentives having their desired effect.”
The Role of Tax Credits
In August, the California Film Commission announced the approval of 22 television projects for tax credits, marking the first round of funding since Governor Gavin Newsom expanded the program to $750 million. This expansion has led to a remarkable 400% increase in applications for the credits, with the approved projects expected to generate approximately $1.1 billion in spending across the state. Notable shows receiving funding include new projects from Larry David and Dan Fogelman, as well as the second season of Seth Rogen‘s “The Studio.”
However, the lag in production numbers can be attributed to the fact that shows have up to 180 days to commence filming after qualifying for the tax credit. Consequently, many of the approved projects have yet to begin production, which may explain the current decline in shoot days.
Commercial Production Takes a Hit
A significant factor contributing to the overall decline in FilmLA’s numbers is the drop in commercial production, which does not benefit from the tax incentives available for film and television projects. Shoot days for commercials plummeted by 17.9% compared to the previous year, and even saw a slight decrease from the previous quarter. Television production also experienced a notable decline, down 20.7% year-over-year.
Interestingly, the second quarter of 2024 had shown a marked increase in shoot days, making the current downturn even more pronounced. Of the total shoot days recorded in Q3, only 8.8% were incentivized, suggesting that the full impact of the new tax credits has yet to materialize.
Notable Productions in Q3
Despite the overall decline, several prominent shows managed to film in Los Angeles during the past quarter. Productions included “Dancing with the Stars” (ABC), “The Price is Right,” and “9-1-1” (Fox), among others. Some of these projects also qualified for the previous round of tax credits, indicating that there is still a robust interest in filming in the region.
Feature film production saw a slight increase of 9.7% compared to last year, with approximately 22% of those shoot days already incentivized. Independent projects, such as Ben Affleck’s “Animals” and Chris Rock’s “Misty Green” for A24, contributed to this uptick.
Looking Ahead
Sokoloski remains committed to enhancing the filmmaking process in Los Angeles. “LA’s creative industry is too important to let go without a fight,” he remarked. FilmLA is actively engaging in industry listening sessions to gather feedback and improve service delivery, aiming to recommend actionable process and policy improvements to government partners.
Conclusion
While California’s new tax incentives represent a proactive approach to retaining film and television production, the immediate data suggests that the industry is still grappling with challenges. The decline in shoot days, particularly in commercial production, highlights the complexities of revitalizing a sector that has faced significant competition from other states and countries. However, the optimism expressed by FilmLA officials and the early signs of interest in new projects indicate that the state’s film industry may be on the cusp of a turnaround. As the effects of the tax incentives begin to take hold, stakeholders will be watching closely to see if California can reclaim its status as the epicenter of the entertainment world.
