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Business Roundtable: Film Industry

Posted: August 27, 2013 1:00 p.m.
Updated: August 27, 2013 1:00 p.m.

From left, Karen Bryden, Michael DeLorenzo, Jim McClafferty, Adam Gilbert and Jason Crawford.

 

With 10 movie ranches, four studios and a record number of 2013 filming days, local film industry experts agree that Santa Clarita deserves its new moniker: Hollywood North.

As other states vie for a competitive edge against California’s historically strong film market, Santa Clarita has been doing what it can to attract the span of productions, including locally based TV series and feature films.

Despite restraints from the state, on-location filming generated $25.7 million in economic impact to the community in the last fiscal year, according to the city of Santa Clarita. With film friendly policies, low permit fees and support from the community, Santa Clarita’s film industry doesn’t look like it’s slowing down.

We spoke with: Karen Bryden, president of Santa Clarita Valley Locations and manager of Avenue Scott Stages; Jason Crawford, marketing and economic development manager for the city of Santa Clarita; Michael DeLorenzo, president of Santa Clarita Studios; Adam Gilbert, director of corporate real estate for Disney; and Jim McClafferty, supervising location manager for “NCIS.”

Is the film industry an endangered industry in California?

MICHAEL DELORENZO: It’s a loaded question. It has a lot to do with our politicians in Sacramento. The industry started here 100 years ago. We have the best film crews in the world, but governors in other states are taking a lot of our work away. If Sacramento doesn’t do more to keep the work here, I think it will be endangered.

Is it endangered today or tomorrow? I don’t think so. If we keep seeing the erosion of filming in California and the constant building of industries in other states, then it may be endangered. We have to take steps now before the industry leaves.

JIM MCCLAFFERTY: That’s not endangered at this point. It’s a $30 billion industry. It’s really important that the state remain competitive.

Currently, we have a $100-million-per-year incentive program in place that will continue for three more years. It excludes network TV series and big-budget features, which are $75 million or more. It’s done exactly what it intended, which is to attract basic cable series.

DELORENZO: Sacramento is saying: we want the low-budget shows that don’t spend a lot of money and the big shows to go away, which sounds counterproductive to creating jobs, state income and tax revenue. It seems like it’s going the wrong way.

Why only attract the basic and non-paying cable channels? If you look at other states, they don’t say they only want basic cable productions. They want employment, tax dollars and infrastructure.

ADAM GILBERT: The 43 other states that have incentives have them because they work — not just as a motivator for productions. They work because they provide an economic benefit to the local jurisdiction. Louisiana and North Carolina are seeing the benefit of providing the incentive.

KAREN BRYDEN: California has a cap on the incentives it will give out. All the major competitive states have no cap on the amount that they will return or incentivize a production for. It’s unbelievable the amount of money they are willing to return to production — no matter how big or small.

What types of incentives are other states offering?


MCCLAFFERTY: New York has a $420-million-per-year industry. Some of the other states have a $500-million-per-year industry. We estimate that we lost 10 dramas to other states last year.
BRYDEN: Georgia has no cap, and they will incentivize up to 30 percent in tax rebates. And it’s a tax credit. And it’s transferrable.

DELORENZO: In Georgia, it’s across the board. They can bring in employees and crew members from California and receive a tax credit on 100 percent of their payroll, regardless if that employee is a Georgia resident or not.

BRYDEN: Currently, their legislation elects no end date to the incentive program.

What should California do to make more film productions stay here?

GILBERT: Obviously, the amount of incentive needs to increase in California. California is the home of the entertainment industry, and its incentive doesn’t reflect that. There are caps in terms of which types of productions can actually get the credit. It’s a lottery, as well, so you don’t even know if you’re getting the credit until later.

Productions that have strict budgets, and need to plan where they put their money, can’t rely on an unknown. That would need to change.

Yet, it needs to be competitive. A lot of the production people out here want to stay in L.A. They want to be closer to the productions. But the incentive and regulatory environment is better other places. So you can’t blame the productions for wanting to produce their product at a lower price elsewhere.

DELORENZO: California needs to look at future incentives as a business. Take out that top 1 percent, which is the above-the-line and A-list actors that make hundreds of millions of dollars. Look instead at the industry and the businesses that serve the industry.

When you do a lottery, the risky business for all studios is pilots. They’re investing anywhere from $3-12 million, and they have no idea if the show is even going to happen — that’s risky business. California doesn’t announce their lottery winners until June, and pilots are done before that. Some of the pilots don’t even qualify because they are network TV series. That’s the business California should go after.

When we went to Sacramento with the radio station, the question was posed: Where do you expect us to get these incentives from?

Hollywood has done studies that show for every dollar in tax credit given to the film industry the state gets back $1.06. I don’t know any other program they have that has a return on investment. We’re helping them pay for the programs that they were asking us how to pay for.

GILBERT: A number of those studies have been done. Every one has come back over a dollar. If I could go to an ATM and put in a dollar and get back $1.05 the next day, I’d be there all day long!

MCCLAFFERTY: There are other factors, too. The value of our industry in terms of what tourism it attracts…

GILBERT: There are all those indirect effects. Keeping training and talent here has a huge indirect effect on the local economy. There are grips, lighting people, makeup artists — people that are trained in the field. They have discovered they can maintain an adequate lifestyle in other states. It’s a brain drain of artistic talent out of the Greater Los Angeles region.

BRYDEN: Every time one of those crew members moves to another state, they take their knowledge with them and train the people around them. They create a trained workforce there, and it makes it easier for productions to go back there time and time again.

JASON CRAWFORD: Sacramento seems to have been more reactive, rather than proactive. They have taken too long. You can’t stop something from leaving once it’s already gone. The incentive was based off helping low-budget movies. Those were the things we saw leaving first to go to Canada, decades-plus ago.

Now we have added TV, but only if the series originated in another place and comes back to California. So it actually incentivizes a producer to go outside of the state to film their TV show and bring it back to California rather than keeping it here to begin with.

MCCLAFFERTY: The incentive demand far exceeds the supply.

There were concerns that tax credits were going to the top 1 percent. Does there need to be more awareness that the industry is a huge economic driver for the city and state?

CRAWFORD: In Santa Clarita, we have more than 6,000 people that live here and work in the film industry. We average about $20 million dollars spent from production filming locally and spending at local businesses — whether it’s gas stations, restaurants, hotels or supply stores, which provide materials for sets. That’s all money that’s going to local, often small, businesses. It’s employing people who are middle-class folks that need those jobs.

BRYDEN: The homeowners or business owners that are actually providing locations for them to film get a substantial income. Renting office space or a home or a parking lot provides income for a large part of this community.

DELORENZO: These other states are offering 20 to 30-plus percent in incentives. I don’t believe California needs to give those steep rebates because the infrastructure and experts are here. When a producer has to fly their talent out of state, that’s a big cost to them. It’s the hotels, first-class flights and dinners.

We don’t need to do that here. If we had a 20 percent tax credit across the board for anyone who wants to film here, that’s more than enough to keep productions here.

Have you had productions leave for another state?

BRYDEN: Mike and I worked on a joint show together. They packed up and left.

DELORENZO: It was a TV pilot that took place on a super carrier. Originally they were getting a lot of help from the Navy and Department of Defense. The Navy had to pull back. They decided to do it on a green screen at Avenue Scott Stages and build a ship. Budgets go up and up. North Carolina reached out to the producer with a 30 percent rebate. This a pilot for Fox that doesn’t qualify for rebates in California. They pulled out.

That doesn’t happen often. That’s an exception. It’s not, however, an exception for shows to set up production and leave California.

We had a pilot three years ago that moved in and started building sets. The first day of production, the manager called me and said they were leaving for Texas. I believe it shot there for three seasons. About 150 jobs went into that production, and now you have all those people unemployed. That’s money going out of the state’s budget for unemployment and loss from income tax.

GILBERT: I read a story in the L.A. Times about industry craft-level people like makeup artists. Their jobs used to be phenomenally busy and well-compensated. Now, one man in his 50s had to move back in with his parents. There wasn’t enough work. It was very anecdotal, but it made the broader truths of the story very real.

How will local jobs increase once Disney opens the new movie ranch?

GILBERT: Depending on the productions, there are about 150 people per production, maybe 200 people. We can accommodate multiple productions right now on our outdoor sets. On any given day, we can have a couple hundred people there.

With the studios, we’re looking at about another 1,200 people, once they’re built. The productions would be much more stable because they would be housed there. Right now, productions get moved around or have to take half days. Once the studios are built, it would be home for up to 1,200 more people.

What kind of growth has each of you seen locally over the last five years?

CRAWFORD: We all agree the state incentive program should be larger. But one quarter of the productions that have benefited from the state incentive have filmed in Santa Clarita. Out of the entire state of California, one quarter of those have been filmed in Santa Clarita.

If you view the film industry as a pie, the size of the pie keeps getting smaller because productions are leaving the state, but the Santa Clarita piece of the pie is getting bigger each year. A lot of that has to do with the investment the local studios are making in their productions. We’re seeing more while the state is seeing less.

DELORENZO: We’re charging rates that we charged 20 years ago, just to keep the shows here. We’re competing with Georgia, Louisiana and New York. Their rates are 20 years old.

BRYDEN: That’s absolutely true. Studio rates are significantly less than we would like them to be. The shows that we are getting here are good quality, but the budgets just aren’t what they once were.

The feature film industry is not what it once was. We’re seeing features that come back to California to do pick-up shots. We’re not getting principle photography on these larger features, so they’re coming back with smaller budgets, looking to fit shots in.

The primary increase for location filming in Santa Clarita is primarily TV and TV commercials. There’s a substantial increase in web series and lower-budget, independent productions. They’re making good quality stuff, but they require a lot of flexibility from property and business owners. The fees they are willing to accept to get the business here…

DELORENZO: Also, web series don’t qualify for tax incentives.

CRAWFORD: While the amount of filming has increased in Santa Clarita, filming for movies has gone significantly down. Instead of seeing two or three weeks of a movie, we see a day or two.

But we have been very specific in targeting TV production because it has better long-term benefits for the economy. Those are longtime productions with longtime jobs and long-term benefits to the economy, bringing more days than a movie could.

MCCLAFFERTY: What’s happened here in Santa Clarita is a testament to how hard the people at this table, and a lot of others, have been working. It’s a great community to do business in. The city and community have partnered with us. We all feel very fortunate to be working here in the SCV.

How are we faring compared to the state and Los Angeles County?

CRAWFORD: The state and county have all seen decreases in motion pictures, and they’ve seen increases in the amount of TV filming. There seems to be more opportunities for TV content now, with cable and other outlets for TV production.

What is the difference in economic benefit between a group of TV shows and a single movie?

DELORENZO: TV series will shoot for about 40 weeks per year, while a large feature will shoot for 16 weeks, if the entire thing is filmed here. And an average feature shoots for about eight weeks.

So, do we care if features are here?

DELORENZO: A TV series will spend anywhere from $2-4 million per episode, shooting about 20 episodes. A feature film will spend anywhere from $20-200 million.

MCCLAFFERTY: A large feature has the capability of hiring thousands of people. TV series like NCIS will hire hundreds of people. So it’s important that we’ve lost more than 60 percent of feature film businesses over the last 15 years. It’s important that California gets that back.

Why don’t more TV productions leave the state?

MCCLAFFERTY: We had a 20 percent loss just last year in TV production in network dramas.

GILBERT: About 90 percent of the new network one-hour dramas were filmed out of state. So if you do that five years in a row, knowing that most shows don’t last that many years, you’ll eventually end up with none of them.

DELORENZO: The networks don’t qualify for California film tax credits. In the other states that offer incentives, they do qualify, so that’s why they’re leaving. Ten or 15 years ago, feature films only went to these locations for exteriors. They went to New York for the skyline. They went to Louisiana for the swamps. Now they’re going away for the incentives.

Is infrastructure being built in these other states?

DELORENZO: Ten years ago, California probably had 90 percent of all the sound stages in America. Today, I bet we don’t have 55 percent.

MCCLAFFERTY: They’ve been able to capitalize on the incentives, so now they have the infrastructure to keep businesses there. They’ve created the sound stages. Five or six of the largest filming states have built multiple sound stages that are very competitive.

DELORENZO: But we do have things they don’t have. Besides the climate, we still have the best filmmakers in the world. We’ve trained them not only here in the states, but around the world.

GILBERT: Both on-screen and off-screen types of talent live here. They would prefer to be here. But if it makes the difference between having a job in Vancouver and not having a job at all, they will go to Vancouver, or wherever they find work.

For movies, if it’s a 12-week shot, they will be gone for the summer and come back home. These are not just folks with big houses in Bel Air. These are people with families and kids in school. They would sacrifice to take care of their families.

Is Santa Clarita the new go-to place for filming?

DELORENZO: It’s not new.

CRAWFORD: Mike invested in Santa Clarita a long time ago, and Adam’s company is reinvesting right now.

DELORENZO: Three years ago we had eight sound stages; now we have 13. We’ve been lucky and aggressive in attracting productions to stay here. We’ve been competing with other states by lowering the rates and offering more incentives. We’re the most film friendly city in the sate and maybe the country. What you can do here in Santa Clarita you can’t do anywhere else.

Santa Clarita and its merchants understand what the industry brings to the community, and they treat it accordingly.

MCCLAFFERTY: People get it here.

DELORENZO: I would say our film office is the best in the country. They attempt to attract business. They answer the phones and get back to everyone quickly. They try to make it work here.

MCCLAFFERTY: I don’t just speak for NCIS. People in the industry know that, as well.

BRYDEN: The longest series that we had was HBO’s “Big Love.” They were with us for just short of seven years, but they did five seasons in that time. We had a TNT series that shot one season, called “The Wedding Band.” Last fall, we did Disney’s “Saving Mr. Banks,” which Tom Hanks’ film. We could have another Disney feature film moving into the stages.

Can Santa Clarita truly become Hollywood North?

BRYDEN: It already is.

MCCLAFFERTY: We need to continue to raise the level of awareness. The city council has been helpful. The film office has helped generate a lot of interest in the business. The industry has created hundreds and hundreds of jobs. Santa Clarita is an attractive place to film.

Is future growth of the post-production industry a reality?

DELORENZO: We offer full post-production. Four of the five one-hour shows that shoot at Santa Clarita Studios do all post-production here.

GILBERT: There are some states that provide specific incentives for post-production.

MCCLAFFERTY: It’s so important for the larger productions — the features that are more than $75 million and creating tons of jobs — along with network TV shows to have more incentive. If we included them in the incentive program, it would help to grow the industry here and all over California.

It’s a state issue. It’s important for every Californian to realize how it will impact them if these jobs are gone.

Will the cache of having Disney’s Golden Oak Ranch out here help influence local growth of the industry?

DELORENZO: An increase in filming in this community helps every vendor, studio and ranch, including Santa Clarita Studios. When Disney makes an investment in Santa Clarita, it legitimizes the local industry even more. We’re no longer ‘way out there.’ It’s just a positive.

When your studio opened in 1989, did you have to explain where Santa Clarita was?

DELORENZO: I was still explaining where it was five years ago.

GILBERT: There are currently thousands of people in the industry who are schlepping down to Hollywood or neighboring areas who would love to be on a Santa Clarita ranch.

BRYDEN: Local jobs are very highly sought after.

GILBERT: That’s one of the biggest comments we’re getting about the news studios. People want to live and work in the same place.

MCCLAFFERTY: Mark Harmon, a star in "NCIS," would prefer to drive to Santa Clarita over any other city in L.A. County. It’s much easier to commute here.

Once people get here, they want to stay.

CRAWFORD: Repeat customers are common. They come up here and enjoy it. They see things they didn’t know were here, and they come back. It’s getting them up here the fist time that can be more challenging.

Disney brings a good brand-name association to Santa Clarita, as well as NCIS. That brings a certain amount of pride for us and respect from the industry.

What can we do to further grow the industry from here?

MCCLAFFERTY: The programs and incentives have worked. It’s just a matter of building upon the incentive program and staying competitive.

DELORENZO: The incentives that Santa Clarita offers I don’t believe any other city or county offers. Unfortunately, there needs to be a little more to compete with the other states, and it can’t come from the city. It has to come from Sacramento. The city can’t do any more.


But the business is growing in Santa Clarita. I’m happy to say we’re 100 percent booked.


BRYDEN: We’re 100 percent booked, as well.

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