The Real Impact of State Motion Picture and Television Production Tax Credits

by Kate Bedingfield 01/28/2014 11:30 (UTC-08:00) Pacific Time (US & Canada)

A USA Today story that posted last night on the economic impact of statewide film and television production tax credits unfortunately omits important facts that would have been helpful in presenting a balanced story.  While the piece accurately notes that productions spend heavily with local vendors and small businesses including lumber, dry cleaning and lighting, it fails to take a comprehensive look at the economic benefits that have been reaped by states that have built and maintained a robust credit program.  The motion picture and television industry is a portable one, and producers need a consistent, reliable economic environment in order to plan to bring production to a state.  That’s why states like Georgia, Illinois and New York have enjoyed such economic benefit in the form of jobs, spending and tax revenue.  You can read about some of their successes here, here and here

Numerous studies over the past two years have shown that incentive programs for film and television production have resulted in a significant return on investment for a number of states including Massachusetts, North Carolina, New York and Florida.  Unfortunately, the story doesn’t mention any of this data.  

These programs generated new revenue for state coffers, created tens of thousands of jobs and stimulated business for local vendors.  In short, they provided an important economic boost to the state.  Here are a few highlights from those studies:

  • New York: A December 2012 study found that production incentives supported 28,900 jobs and generated $6.9 billion in economic spending in the state in 2011.  The study also found that jobs within the film and TV industry in New York grew by nearly 25 percent between 2008 and 2011 – even while private sector employment as a whole declined by 1.6 percent during that time.
  • Florida: A March 2013 study on the economic impact of the Florida Film and Entertainment Industry Financial Incentive Program estimated that state and local tax revenues in Florida in the 2011-2012 fiscal year totaled $547 million.  The study also found that the incentive supported 87,870 jobs and $2.3 billion in labor income, as well as $7.2 billion in economic spending across the state, both through production spending and induced tourism.
  • North Carolina: An April 2013 analysis of the economic impact of Iron Man 3, which filmed in North Carolina, found that the film was responsible for $179.8 million in spending and 2,043 jobs in the state.  The analysis also found that the production was responsible for $104.1 million in labor income across North Carolina, and that spending associated with the film engaged 719 vendors in 84 communities across the state.
  • Massachusetts: A May 2013 study on the economic impact of the Massachusetts Film Tax Incentive Program found that for every $1 of film tax incentive awarded in 2011, $10 in spending was generated.  A total of $37.9 million in film tax credits generated $375.3 million in economic output, and the incentive was responsible for 2,220 jobs in the state.

Nearly 40 states around the country have implemented programs to encourage the local production of movies and television in their communities for one simple reason: motion picture and television production is a driver of local economic growth and capital investment.  When looking at the economic impact that these credits have on local economies, it’s important to look at the whole picture. 

More state-by-state statistics on the production tax incentives can be found HERE.

At CES, Michael Lynton and Vince Gilligan discuss how technology has made for better TV storytelling

by Kate Bedingfield 01/08/2014 13:25 (UTC-08:00) Pacific Time (US & Canada)

At this week’s Consumer Electronics Show (CES) in Las Vegas, Michael Lynton, CEO, Sony Entertainment and Chairman and CEO, Sony Pictures Entertainment, and Breaking Bad creator Vince Gilligan highlighted the positive impact that subscription video on demand (SVOD) services are having not only on the economics of making TV shows and movies – but on how our favorite stories are actually told.

“When I started out on shows like The X Files,” Gilligan said, “the conventional wisdom was that serialized storytelling was to be avoided, that one episode completes the story.  SVOD allows a hyper-serialized form of storytelling and gives people the freedom to access content when they feel like it.”

“Now we have five to six SVOD services competitively bidding on TV series and films that never existed before, both in first run as well as syndication. It has changed the economics dramatically for us – but in a positive way,” Lynton added. 

The discussion was an important reminder of the degree to which technological innovation and storytelling are inextricably linked.  Technology is giving creators more freedom to tell stories the way they want to.  “When I grew up, TV series were framed and cut to a smaller screen size which led to a lot of talking heads,” Gilligan said. “With giant, wide TVs, you get to frame and emulate John Ford or Sergio Leone and, in the case of Breaking Bad, you can place characters in an endless expanse of Mexico prairie which gets to look very painterly and cinematic. That's a wonderful development.” 

As the technology that allows creators like Gilligan to tell stories and the technology that delivers those stories to audiences continues to evolve, consumers reap the benefits.

In the U.S. alone, there are currently more than 95 online services for streaming and downloading legal content, including iTunes, Netflix, Hulu, Amazon Prime, HBO Go and Flixster.  (A list of these services can be found at WhereToWatch.org.)  There are more than 410 unique online services around the world offering legitimate full-length films and TV shows to consumers.
 
At yesterday’s CES event, Sony said it would give consumers yet another option by launching a new cloud-based TV service this year that combines live TV with video on demand.  It will include a “watch and resume” function that allows consumers to seamlessly switch devices in the middle of a movie or TV show.
 
The continued growth of legitimate VOD services gives audiences ever more ways to watch our favorite movies and TV shows. As it turns out, they actually also help creators produce the type of content we enjoy watching most.

Premiere of “The Walking Dead” Shows Piracy Is A Complex Problem

by Kate Bedingfield 10/15/2013 13:31 (UTC-08:00) Pacific Time (US & Canada)

This past Sunday, AMC’s post-apocalyptic zombie thriller The Walking Dead returned for its fourth season and 16.1 million fans in the United States tuned in to watch – up more than 5 million viewers from last year’s premiere.  Both AMC and the show’s international distributer Fox Intl. Channels worked to make the premiere widely available: through the end of this month viewers can visit AMC’s website and stream the premiere episode for free, and, less than a day after first airing in the U.S., it was released to viewers in 125 countries across the globe.

But despite these efforts to make it as available to watch as possible, over 500,000 people around the world still chose to illegally download Sunday’s premier within 16 hours of first appearing online – with the highest percentage of downloaders coming from here in the United States according to Variety.

Every day our industry is hard at work developing innovative ways to bring our content to audiences when they want it, where they want it, on the devices they want to watch it on and at a fair price.  We are unwaveringly committed to it.  But the experience of The Walking Dead’s season premiere is an unfortunate reminder that content theft is a complex problem with no one-size-fits-all solution.  And it is a problem that needs to be taken seriously.  Gale Anne Hurd, the CEO of Valhalla Entertainment and Executive Producer of The Walking Dead, recently discussed the problem with The Hollywood Reporter , saying “Piracy [keeps me up at night.] If people aren’t paying for content, the content creators and the financiers will not continue to create the content.  Anyone that’s not staying up at night worrying about this has not faced the facts.”

Protecting the hard work of the creative people who bring you shows like The Walking Dead will require comprehensive solutions – solutions that incorporate all stakeholders in the Internet ecosystem.

Britain’s House of Commons Makes the Case for IP Protections

by Kate Bedingfield 09/30/2013 14:39 (UTC-08:00) Pacific Time (US & Canada)

A new report released last week in the U.K. further underscores the prevalence of online piracy and offers some suggested prescriptions for addressing it so that content creators can be appropriately compensated for their work. 
 
The report – aptly titled “Supporting the Creative Economy” – was released by the Culture, Media, and Sport Committee of Britain’s House of Commons and argues that government should be a “powerful champion” for the enforcement and protection of intellectual property rights. 

It noted that there is “a systemic failure to enforce the existing laws effectively against rife online piracy.”  To address this deficiency, the Committee recommends the enforcement of penalties that will help deter intellectual property theft.  It also condemned search engines for failing to take action to limit the role of search in facilitating piracy and said tech companies should take proactive steps to tackle the problem.
 
The report also pointed to the economic impact of piracy, which can be especially detrimental for those in the creative industries trying to make a living off the work they produce.  According to the Committee’s conclusions, “millions of pounds are being lost by the creative industries with serious consequences for the wider economy.”
 
The House of Commons report is further evidence that everyone in the Internet ecosystem must continue to work to develop collaborative voluntary solutions to the piracy problem so that creators and innovators can continue to thrive.

Phoenix Center Paper Debunks University of Munich and Copenhagen Business School Findings

by Kate Bedingfield 09/16/2013 12:47 (UTC-08:00) Pacific Time (US & Canada)

This morning, the Phoenix Center for Advanced Legal & Economic Public Policy Studies released a paper debunking the results of a recent study conducted by the University of Munich and the Copenhagen Business School which claimed that the box office revenues of mid-size films are helped by online piracy.  Dr. George Ford, author of the Phoenix Center's paper, argues that the improbable result of this study is “an artifact of a poorly-designed statistical model" and the researchers’ misunderstanding of the economics of the film industry.

As the paper points out, one problematic component of the Munich and Cophenhagen model is that “according to the analysis in the University of Munich Study, what the authors define to be a ‘blockbuster’ movie makes only one-fourth (1/4) of the revenues of mid-sized movies. Obviously, the math just doesn’t add up."

In order to conduct their study, the researchers in Munich chose to compare the opening weekend box office revenue  for various "sized" films in approximately 55 countries both before and after the last summer's shutdown of online piracy giant Megaupload.com. 

But this method failed to take into account that although some films only open in a handful of theaters during opening weekend, over the course of their time in theaters they will be shown on thousands of screens and make huge profits.  According to this study, these would be considered small or mid-sized films – regardless of their final total box office.

Individuals who watch pirated films online do not discriminate based on a film’s size, and a review of the academic evidence available finds that in fact online piracy does hurt sales. As Dr. Ford concludes in the Phoenix Center's paper, once you begin to dig into the methods and details that produced this questionable result, the Munich study "adds nothing constructive to the debate—save a little excitement.”

The Film and Television Industry: A Network of Small Businesses

by Kate Bedingfield 06/17/2013 11:18 (UTC-08:00) Pacific Time (US & Canada)

Today is the first day of National Small Business Week, a time set aside by Presidential proclamation to honor the important contributions of American small business owners and entrepreneurs.  When most people think of the film and television industry, they think of their favorite director crafting a scene or their favorite actor delivering a powerful monologue.  What most people don’t realize is that behind the scenes, a network of 95,000 businesses helps create and distribute that final product they see at the theater. Hundreds of thousands of real people behind the screen depend on a healthy and vibrant entertainment community for their livelihood.  

According to the U.S. Small Business Administration, more than half of Americans either own or work for a small business – in the network of businesses that comprise the film and television industry, 81% employ fewer than 10 people. In 2010, the film and television industry paid $42.1 billion in wages directly to nearly 700,000 workers, who earn an average income  32% higher than the national average. These are the talented, fiercely creative professionals who are directly responsible for the magic every one of us enjoys on the screen. People like legendary makeup artist Steve LaPorte, the former clown school student who has worked on films and television shows like Terminator 2, Lost, and Oz: The Great and Powerful; or film composer Atli Örvarsson who grew up in a town of 18,000 but has worked on The Pirates of the Caribbean series, NBC’s Chicago Fire, and the recent box office smash Man of Steel. For every story like Steve or Atli’s, there are thousands more who work tirelessly behind-the-scenes and are often self-employed.

The production and distribution of movies and TV programs also requires quite a bit of help from vendors outside our industry. The industry made $37.4 billion in payments to nearly 278,000 businesses across the country in 2010. Of those vendors, 93% were local businesses. As we’ve seen again and again from local productions, when a film or television project comes to town it creates jobs in the area and generates hundreds of thousands of dollars for state and local economies. A perfect illustration of that significant economic impact: the North Carolina production of Marvel’s Iron Man 3. A recent MNP LLP study commissioned by the MPAA found the film created over 2,000 jobs and was responsible for $179.8 million in spending- all just from one film production.

We join leaders across the country this week in celebrating the vital role small businesses play in moving our economy forward, and are proud to do our part as we continue to support the 2.1 million people in our industry who work every day to deliver one of the nation’s most valuable cultural and economic resources—the stories on the big screen. 


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