Why production has left Hollywood

There was a time when Hollywood simply referred to a neighborhood in the central region of Los Angeles.

These days, “Hollywood” has come to represent the entire domestic entertainment business — and it’s at a crossroads.

Its namesake area is no longer the bustling production hub it once was, as studios have chased tax benefits and lower labor costs overseas. It’s more expensive than ever to make a movie or television series, especially after the pandemic and the writers and actors strikes which reshaped how creatives are paid in the new streaming economy.

Many in the industry have sought to rectify the movement of thousands of jobs to other domestic filming hubs — like Georgia, New York, Texas, New Mexico and North Carolina — and international locations including Canada, the United Kingdom, Ireland, Hungary, Croatia, Romania, Australia and New Zealand.

In July, California Gov. Gavin Newsom increased the state’s total film and TV tax credit to $750 million, nearly doubling the previous cap, to try to encourage more productions to film in Los Angeles.

President Donald Trump put a spotlight on the issue again Monday when he reiterated tariff threats on films made outside of the United States.

“Our movie making business has been stolen from the United States of America, by other Countries, just like stealing ‘candy from a baby,'” he wrote in a post on social media, adding that he would impose a 100% tariff on “any and all movies that are made outside of the United States.”

Trump made similar comments in May. Then as now, it is unclear how he plans to implement these duties, who they would target and who would foot the potential bill. Actor Jon Voight, who Trump appointed as “special ambassador” to Hollywood, said tariffs would only be implemented in “certain limited circumstances,” and the administration would focus on developing federal tax incentives, revising the tax code, creating co-production treaties with other countries and offering subsidies for infrastructure.

As Trump revives his threats, there are still numerous unanswered questions about how the U.S. could put a tariff on movies — and whether the move would really help bring production back to Hollywood.

“Since movies aren’t goods, they’re services, it remains unclear how a tariff could be placed on a service, but should some logistical loophole be found and enforced, it’ll cause chaos within the entertainment industry,” said Mike Proulx, vice president and research director at Forrester, in a statement Monday. “Then the question becomes what’s next? Where’s the line between a movie and a limited time series? What about the ad industry that saves money by shooting commercials outside the US?” 

The production of film and TV isn’t always simple. Some productions will shoot parts of a film internationally and pieces of it domestically. Would films be taxed based on the percentage of the film that was shot outside the U.S.? What would that mean for foreign films seeking release in the the country?

“What if the primary studio is in the U.S., but the film has to shoot on location, because the … story takes the … characters on a journey. Is there a threshold?” asked Alicia Reese, analyst at Wedbush. “There are just too many questions.”

Industry experts also worry about how the duties, if they are even enforceable, could affect relationships with other countries. Hollywood relies on international box office sales to recoup lofty film budgets. China has already limited the number of Hollywood-made movies it will showcases on screens. Other regions could retaliate and do the same.

“I strongly support bringing movie making back to California and the U.S.,” Democratic Sen. Adam Schiff of California said in a statement Monday. “Congress should pass a bipartisan globally-competitive federal film incentive to bring back production and jobs, rather than levy a tariff that could have unintended and damaging consequences.”

Budgets are getting tighter. Streaming fundamentally changed the media landscape, fewer people are going to movie theaters and studios are no longer generating significant revenue from DVD sales. So studios have to grip their purse strings tighter or face the wrath of investors who are still trying to calculate what the dissolution of linear TV, and its lucrative ad revenue, means for media titans like Disney, Universal, Warner Bros. and Paramount.

Even before the pandemic and the dual labor strikes, Hollywood was filming movies and television in other parts of the U.S. and internationally.

In some cases, this was because the script dictated…