Why aren't filmmakers shooting in LA?

NPR.

The first movie Aaron Moore had ever saw in theaters was Jurassic Park.

I think it was rated not for five-year-olds, but my parents let me see it.

Aaron ended up going to film school, and then he moved to Los Angeles.

He and a couple of collaborators started making independent horror and sci-fi movies together.

There's a little plot twist in Aaron's career journey, though.

He's based in LA, but he shot his movies elsewhere.

Take his 2014 film, Spring, about a traveler who gets involved with a woman who turns out to be a mutant.

That movie was shot in southeast Italy.

And they found her dead body institution.

Or take Aaron's 2019 movie, Synchronic.

This one is about two paramedics investigating a new drug that alters people's perception of time.

It was shot in New Orleans.

It pulled over so much, it'd be people dying all over New Orleans.

Both projects had story reasons to shoot where they did, but just as important were the economic reasons.

Aaron got incentives from Italy and New Orleans.

And this kind of story has been playing out across the industry.

Film and TV production has shifted from Hollywood to other states and countries.

This is The Indicator from Planet Money.

I'm Darren Woods.

And I'm Waylon Wong.

We are doing a special series this week about about the movie business.

On today's show, is Hollywood still the epicenter of film production?

We look at the shifting economics of movie making and how the industry is trying to revive LA.

This message comes from NPR sponsor, Capella University.

Interested in a quality online education?

Capella is accredited by the Higher Learning Commission.

A different future is closer than you think with Capella University.

Learn more at capella.edu.

This message comes from Vanguard.

Capturing value in the bond market is not easy.

That's why Vanguard offers a suite of over 80 institutional quality bond funds, actively managed by a 200-person global team of sector specialists, analysts, and traders.

They're designed for financial advisors looking to give their clients consistent results year in and year out.

See the record at vanguard.com/slash audio.

That's vanguard.com/slash audio.

All investing is subject to risk.

Vanguard Marketing Corporation, distributor.

This message comes from Schwab.

Everyone has moments when they could have done better.

Same goes for where you invest.

Level up and invest smarter with Schwab.

Get market insights, education, and human help when you need it.

This message comes from NPR sponsor Shopify.

No idea where to sell.

Shopify puts you in control of every sales channel.

It is the commerce platform revolutionizing millions of businesses worldwide.

Whether you're a garage entrepreneur or IPO ready, Shopify is the only tool you need to start, run, and grow your business without the struggle.

Once you've reached your audience, Shopify has the internet's best converting checkout to help you turn them from browsers to buyers.

Go to shopify.com slash npr to take your business to the next level today.

In yesterday's episode, we talked about how Hollywood is an example of an agglomeration economy.

That's when businesses in the same industry or complementary industries set up shop in the same geographic area.

Ideally, this clustering leads to lower costs and greater productivity.

Patrick Button is an economist at Tulan University who wrote their dissertation on film tax incentives.

Patrick says that in the early 2000s, state governments started vying for a piece of that Hollywood economic sparkle.

And they did this by offering subsidies for film and TV production.

The idea is that this could, you know, bolster the local film industry and it could sort of create jobs, but there's a lot of motivations that go behind this.

It's all about featuring their city where they live and telling their stories, right?

So this is really, really tied up with culture and identity.

And then there's also some flashy elements of this too.

So maybe, you know, you have a film incentive and then a film comes through that has like Angeline and Jolie or like Lady Gaga or someone, you know, like that's a big deal, right?

Yes, Lady Gaga is a big deal.

So you can see how state lawmakers got dollar signs and stars in their eyes.

Patrick says a couple of early adopters like Louisiana and New Mexico jumped in during the 90s.

Then the number of states offering film incentives exploded between 2005 and 2010, went from fewer than 10 states to nearly 40.

And here's how these incentive programs tend to work.

Production companies recoup a certain percentage of the money they spend locally.

That could be for hiring workers, renting equipment, or paying for a hotel.

The filmmakers get this money back in a few different ways.

It could be a rebate check.

It could be a credit towards local taxes.

If the credit is more than what the production company owes in local taxes, it can sell that credit to another business.

Patrick says there's a whole market for buying and selling these tax credits.

Ultimately, these rebates can be 20 to 35 percent of local expenses.

For some filmmakers, those subsidies can make the difference between whether a project happens or not.

But the upside for local governments is murkier.

Economic research by Patrick and others show that these film incentives haven't been that effective in creating new jobs or businesses.

People used to talk about New Orleans being the Hollywood of the South.

And, you know, we don't see as much of an impact on the local film industry as you might think would be the case.

What these programs have done is slowly draw production away from California.

And it's not just US states.

In Canada, both the federal and many provincial governments subsidize film production.

The UK, Hungary, Thailand, they all have programs.

New Zealand, my home country, offers offers up to 40% back on local spending.

We are obsessed with our movie industry in New Zealand.

Clearly.

Well, you know, this global race to capture film production unfolded so gradually that it was hard to notice at first.

That's according to Jason Blum.

He's the founder of Blum House, which is the company behind horror hits like Get Out.

Good to see an older brother around here.

And the Purge series.

Help me!

Someone, please help me!

It was a creep.

The first one was like, we're going to save $2 or $3 million.

So I was like, well, that one, we should go out of state.

But I didn't think that the next 10 would then be out of state.

You know what I mean?

Data from an LA nonprofit shows that 2024 was the second lousiest year ever for local filming.

Only 2020 was worse.

Hollywood has suffered a number of recent setbacks from the COVID shutdowns to labor strikes to the devastating wildfires in January.

Jason can feel how quiet it's gotten when he visits studio lots in town.

These are big with many, many stages.

And you see like, you know, three game shows and very little scripted

movies or shows shooting on these stages.

And there's so many resources on these lots.

There's a wood shop, there's a costumer, there's a prop house.

Like, I need a typewriter from 1952.

You know, here it is.

The infrastructure is better in Hollywood than anywhere else in the world by a lot.

So, emotionally, it's kind of sad, but it also seems so wasteful.

California has tried to compete with its own incentive program.

Jason's company got a tax credit from the state for the Purge 2.

That was back in 2013.

He says he usually doesn't even bother to apply.

That's because he typically doesn't hear back from the state until it's too late in the planning process.

That timeline is something he'd like to see change in California.

People in the industry also want a bigger pot of money for film incentives because it's often too pricey to film in LA given the costs of permitting, labor, and other expenses.

A more generous incentive program could make the math work better.

Financiers are willing to spend a little bit more money to stay in California.

People are willing to make a little less money if they can live at home.

What it's not worth is paying twice as much or a third as much more, which is what is the case right now.

And economist Patrick Button says, unlike other states, California is a place where tax incentives could work.

This is thanks to the state's natural advantages as an agglomeration economy.

There's one study from 2021 showing that California's incentive program did increase the probability of filming within the state.

Budgets and hiring also went up for non-independent productions.

So then the question comes, you know, is this a good use of taxpayer dollars relative to other uses of that money, right?

This debate took center stage when the state hammered out its new budget.

Last month, Gavin Newsom signed a new budget that expands California's incentive program.

The state will now award $750 million a year, up from $330 million in previous years.

This month, lawmakers also bumped up the tax credit from 20% to 35%.

On the federal level, President Trump has talked about putting tariffs on foreign movies as a way to bolster American film production, but it's unclear how this would work.

What is real for people like Aaron Moorhead, the filmmaker we heard from earlier, is their connection to LA.

He plans to keep living in the city, and he hopes there is still a pathway for Hollywood hopefuls to build a career like he did.

He started out making indie horror films, and today he's a director for Daredevil, the Netflix superhero series.

What I want to see is a lot of young filmmakers out there shooting their little micro budgets in indies and stuff like that.

And I want them not having to break their bank account just to just to show up.

Yes, I want the big business to thrive, but I also want its youthful energy to come back in terms of like it feeling like the place where you build your dream, you know.

Tomorrow on The Indicator, we'll shift our focus to China and how that country has been pursuing its own Hollywood-style dreams.

This episode was produced by Angel Carreras and engineered by Jimmy Keeley.

It was fact-checked by Tyler Jones.

Kicking Cannon is our show's editor and The Indicator is a production of NPR.

This message comes from NPR sponsor Shopify.

Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the U.S.

from household names like Mattel and Gymshark.

Get started with your own design studio with hundreds of ready-to-use templates.

Shopify helps you build a beautiful online store to match your brand style.

If you're ready to sell, you're ready for Shopify.

Sign up for your $1 per month trial and start selling today at shopify.com slash NPR.

This message comes from NPR sponsor Charles Schwab with its original podcast On Investing.

Each week, hosts Lizanne Saunders, Schwab's chief investment strategist, and Kathy Jones, Schwab's chief fixed income strategist, along with their guests, analyze economic developments and bring context to conversations around stocks, fixed income, the economy, and more.

Download the latest episode and subscribe at schwab.com/slash on investing or wherever you get your podcasts.