As Productions Move Abroad, California Gears Up to Battle Film and TV Exodus

Of the 12 TV shows that won Primetime Emmys this year, only two of them – Max’s Outstanding Comedy Series winner “Hacks” and Apple TV+’s “The Morning Show” – were filmed in California.

It’s one of many warning signs that the Golden State’s status as the worldwide leader in entertainment production is eroding, and Hollywood’s workforce is crying out for change — especially as other states and countries ramp up incentives to wrest productions away from the birthplace of Hollywood.

“Many of my constituents are really panicked right now over the state of the industry,” California state Rep. Laura Friedman (D-Burbank) told TheWrap. “The people who work directly on film and TV shoots haven’t seen a return to the levels of production before the strike, and the ancillary businesses that thrive off of those shoots haven’t seen their revenue return to normal.”

A grim situation for on-location shooting has not abated after the writers and actors’ double strike ended last year. The number of reported shoot days in Los Angeles County dropped 12% year-over-year last quarter, even with the start of the WGA strikes in May 2023 taken into account, according to FilmLA.

Fox is moving the Gordon Ramsay reality show “MasterChef” out of Los Angeles, as casting for its 15th season is requiring potential contestants for a valid U.S. passport and to be prepared to travel abroad. Meanwhile, game shows on the network such as “The Floor,” “Beat Shazam” and “Name That Tune” are now shot in Ireland as part of a production deal formed in 2022 with the Dublin-based production company BiggerStage.

Reversing the slide will require a whole suite of changes to incentivize studios to return to California. The biggest is the state’s $330 million film and television tax credit program, which offers studios and producers tax credits of up to $25 million based on eligible spending of 20-30% on productions in the state.

Some labor leaders tell TheWrap that to reverse the production exodus, California may need to triple the size of its program and expand the types of productions that can apply.

“I know from talking to these studio heads that they want to film more in California,” Lindsay Dougherty, head of Hollywood Teamsters 399, said. “It’s just that the numbers are not adding up for them … In the months ahead, we are going to have plenty of talks with all the stakeholders in this state about the importance of this tax credit program for the livelihoods of thousands of our members and thousands more across Hollywood’s workforce.”

To a degree, a decline in productions and employment opportunities in Hollywood was inevitable given the widespread imperative by the major studios to cut costs to make their streaming services profitable. A study from ProdPro released in July showed that total production in the first half of 2024 was down 20% worldwide compared to 2022 — but down 40% in the U.S.

At a time when Hollywood’s working class has already seen its financial reserves drained by last year’s strikes, the growing trend of major productions setting up shop in other states and countries is generating more frustration for crew workers, who are finding it harder than ever to find employment. (See TheWrap’s series: Holding on in Hollywood.)

According to the latest report from the California Employment Development Department, the information sector saw the largest monthly decline in jobs from July to August largely because of the motion picture and sound recording industries, which saw its job total drop by 4,300 to 98,100. That’s only 4.5% higher than the total job count a year ago at the peak of the WGA and SAG-AFTRA strikes.

This year’s contract negotiations between IATSE and Teamsters took place under a cloud of anger and distrust between Hollywood’s workers and studios, with fiery rally speeches from union leaders. Next year, those unions, along with studios and other businesses under the California Production Alliance, plan to lobby in Sacramento for significant changes to the Film/TV tax credit.

While Democrats are likely to hold onto their three-fourths majority over both the State Assembly and Senate after this November’s election, Dougherty and other labor insiders say it’s difficult to guess at this stage exactly how proposals to change the tax credit program will take form, as discussions around the issue in Sacramento do not fall along party lines.

“Last year, we were able to get the program funded through 2030, but we don’t have an author fighting for those tax credits,” Dougherty said. “A lot of talks we have are about educating lawmakers about why this program is so important to preserving a key part of the state’s economy and the livelihoods of thousands of residents.”

But there will be some major elements that insiders say are sure to be discussed. One of them is the question of above-the-line pay, as California does not permit productions to include the salaries of actors, directors and other top talent towards any tax credits.

Other major production hubs like Georgia and the United Kingdom permit above-the-line salaries to be deductible, which is part of the reason why many major studio tentpole films like “Wicked” (the U.K.) the Marvel Cinematic Universe (Georgia) and “Barbie” (mostly London) have filmed outside of California.

Another major topic of discussion will be whether to expand the types of productions that can apply for the tax credit, noted Thom Davis, head of the California IATSE Council. Currently productions like game shows, commercials and animated films are not eligible.

California’s tax credit was once competitive

When California established its tax credit program in 2015, major global production hubs already existed as financially friendly alternatives to filming in Los Angeles. But nowadays the types of productions leaving the Golden State have expanded.

“Once upon a time, it may not have seemed necessary for unscripted television to be eligible for tax credits, but California is now facing a far more competitive market,” Davis said.

When the tax program was first created, it was designed to help retain productions like scripted television that were leaving California at the time, Karla Sayles, deputy director of the California Film Commission, said during an industry panel hosted Tuesday by Friedman. “But now, we’re seeing other types like animation heading out to other states and countries over the last decade, so it’s worth discussing making changes.”

Then there’s the issue of how much in total tax credits the state allocates to eligible productions. Georgia has no cap on its tax credit program, and last year New York increased its cap from $420 million to $700 million. California’s tax credit program is currently capped at $330 million.

Dougherty says that Teamsters goal is to at least triple that amount, expanding it to $1 billion. It is a figure that she says the union has already floated to state lawmakers.

“In an ideal world, that’s the size we’re looking for to preserve the productions we still have and to bring others back to California,” she said. “A tax credit program of that size will bring more jobs to the state for entertainment crew workers who are the best in the world but are being left behind in this global race.”

But at a time when California has faced a significant budget crunch, that may prove to be a hard sell. Hollywood lobbyists managed to convince lawmakers in 2023 to extend the duration of the program and to make the tax credits refundable. That came after months of debate between Los Angeles and San Francisco Bay Area legislators supporting the program and their counterparts from other areas of the state, who were looking to protect state programs from major cuts and left less money for the state’s education and healthcare budgets.

IATSE is looking for an increase to the cap to at least account for the rise in production costs due to inflation and other factors. But Davis is reluctant to put a specific amount on how much the California IATSE Council would like to see the program cap be raised by.

“As it is right now, the program is economically viable and provides a net return on investment to the state, and there are a lot of discussions ahead on how much we can expand the program while maintaining that net return,” he said.

Friedman, a former film producer and development executive, became one of the most outspoken legislators for the entertainment industry after joining the Assembly in 2016 and is expected to be elected to Congress in November in the seat held by Adam Schiff, who is running for the U.S. Senate.

“We underestimate the ripple effect of this particular industry on things like tourism, ancillary businesses that are functioning around them, on many types of different types of employment, on people wanting to come to film school here,” Friedman said.“It is one of our state’s major economic engines.”

Friedman said that a continued decline in film and television productions in the state will mean there will be less money for other state programs.

“Something I tried to make my colleagues understand, and something that IATSE and Teamsters and everyone else in Hollywood will need to ensure the newcomers to Sacramento understand, is how interconnected the film industry is to the rest of the state’s economy, and it is in everyone’s best interest to keep it healthy,” she said.

While the bulk of the tax credit talks are months away, Friedman believes there are other areas where Los Angeles could make itself a more appealing place to film again. She said that Los Angeles’ city government needs to look at ways to eliminate permit fees and other costs it charges to productions to film in L.A. She pointed to Las Cruces, New Mexico, as an example of a place that does not charge fees for film applications.

“Are cities treating production like a source of revenue or as a way to boost businesses?” Friedman said. “If it is the former, that is only going to drive productions to other parts of the country where it is considerably cheaper to film.”

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