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America's subsidies for filmmaking
The money shot
Aug 13th 2009
From The Economist print edition
Why government handouts to Hollywood are growing
WITH its deserts and its slight air of decay, New Mexico is a good place to shoot a post-apocalyptic action
film. But the state’s natural charms alone would probably not have been enough to lure the makers of
“The Book of Eli”. Broderick Johnson and Andrew Kosove, who are producing the Warner Bros film, say
they were particularly enticed by New Mexico’s generous production subsidies and interest-free loans.
All but seven of America’s 50 states now offer incentives to lure filmmakers. Some states refund a portion
of in-state production costs, which may include actors’ salaries. Others issue rebates against state taxes
that can be sold to local residents. The club is growing quickly. California, which resisted subsidies for
years, recently approved its first clutch of recipients. Kentucky is considering its first application. With
banks and hedge funds virtually out of the game, state governments are now the most important external
source of funding in the film business.
Public largesse has led to some odd artistic decisions. “Gran Torino”, a story that originally revolved
around Minnesota’s distinctive community of Hmong immigrants, was transplanted to Michigan to take
advantage of that state’s subsidies, which can amount to 42% of production costs. The forthcoming
“Battle: Los Angeles” will be filmed mostly in Baton Rouge, Louisiana—a reversal of the tradition by which
southern California stands in for everywhere else.
Studies commissioned by the states tend to show a healthy return on investment. Filmmakers have
certainly learned to follow the money: California’s share of big-studio productions dropped from two-thirds
in 2003 to less than one-third in 2008 as its politicians dithered over subsidies. It is also likely that
subsidies have helped America compete with Europe and Canada, although the weak dollar has probably
done more to restrain what is known as “flyaway production”.
The continuing bidding war is likely to result in diminished returns for the states. Michigan’s subsidies,
once considered improbably lavish, may soon be matched by Washington, DC. Alaska has approved a
44% rebate, although production companies must film in rural areas during the state’s gruelling winter to
qualify for the full sum. Whatever the benefit to the states, however, the subsidies are becoming ever
more important to Hollywood.
But as state budgets tighten, a backlash is gathering. This summer Indiana and Wisconsin reduced their
rebates. A bill to do the same is before the Michigan legislature. In the Midwest the surge in foreclosures
and the collapse of traditional industries has hardened hearts. Jud Gilbert, a Michigan state senator who
opposes film subsidies, points out that if he could offer a 42% rebate on car production, that industry
would not be in crisis.
Yet a broad retreat from film subsidies is unlikely. Some of the first places to offer rebates, such as New
Mexico and Louisiana, now have impressive sound stages and a deep pool of production workers. States
that want to compete with them will have to be extremely generous. And big studios and independent
outfits are sharply trimming their film output in response to the credit crunch and a faltering DVD market.
As the supply of work shrinks, the squabbling will only intensify.
Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved.
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