Only three of the 100 top-grossing films of 2016 were shot in California with state tax incentives, according to a new report from FilmL.A. It’s another reminder that the state’s program isn’t doing much to capture big-budget blockbusters, which generally produce the most jobs and generate the greatest economic impact – the two main goals of the $330 million-a-year program.
As the report released today makes clear, California’s incentive program just isn’t set up to compete for big-budget blockbusters. To date, just three of the feature film recipients of the state’s new film tax credit have reported budgets more than $100 million, and only one has completed production.
“The state’s film incentive program seems optimized for use by a narrow band of feature film projects, with budgets from $40 million to $100 million,” the report found. “Generally speaking, California remains at a disadvantage in attracting the most expensive feature film projects. Most of the movies that rank in the top 25 at the domestic box office have budgets over $150 million.”
Georgia, the world’s undisputed king of blockbuster film production, was home to 17 films that made last year’s list of 100 top-grossing films, followed closely by the UK with 16, Canada with 13, and California in fourth with 12 – only three of which received state tax credits.
And while the report from L.A.’s film permit office holds out hope that the state’s enhanced incentives program will soon draw more blockbusters to the state, its most glowing praise is reserved for Georgia, whose massive incentives program spawned nearly three-times as many blockbusters last year as New York and its $420 million-a-year incentives program. Louisiana, which topped the list in 2013, was tied with New York for fifth place, with six films each.
“The rapid growth of the film and television industry in Georgia and the state’s steadfast commitment to its support is remarkable,” the FilmLA report stated.
Georgia set a record for spending on its incentive program last year – $606 million, which is the largest amount ever spent by any country in North America or Europe in a single year – and breaking the old record of $504 million, which Georgia set the previous year.
“By way of comparison,” the report says, “it took Louisiana more than ten years to spend $1 billion on its film incentive program; Georgia spent $1.11 billion in only two. In fact, since 2013, Georgia has spent just over $1.77 billion in issued credits.”
Only seven live-action films shot in California made the list of 100 top-grossing films last year, but four of them – including La La Land – didn’t qualify for the state’s tax incentives. Five others shot in the state that made the list last year were animated films, which don’t even qualify for California tax incentives, and those five were the only films shot in the state whose budgets exceeded $100 million.
And for the second year in a row, California did not get a single major live-action film with a budget of $100 million or more; the largest, which spent $52 million in the state, was Why Him?
“So even California, which among all global competitors for these projects has the deepest infrastructure, talent, and a film incentive of its own, was equipped to capture only a fraction of the 100 feature projects included in this report,” FilmLA said.
The report also cautioned that the state’s animation industry may be facing a tough road ahead. Without incentives, California’s share of animated films has been in decline recently. In each of the past two years, California captured half or more of the animated films released theatrically. In 2016, however, California’s five animated films represented just 42% of animated projects in the FilmLA top 100 study. Competing locations, such as British Columbia, with three animated films, and France, with two, hosted major animated projects in 2016 with combined budgets of more than $300 million. Some competing locations, like BC, have production incentives designed to specifically target animated projects.
“Moving forward,” the report noted, “policymakers in California should keep a wary eye on the health of California’s animation industry, as its future in the state is far from guaranteed.”
The report is hopeful, however, that live-action feature films will see a rebound here. “California should see an increase of feature films filming in the state because of the enhanced incentive,” the report says. “If these films perform well at the box office, they’ll show up in future editions of this report.” This is FilmLA’s fourth study of the top-grossing films and where they were shot and why they were shot there.
California tripled its tax incentives to $330 million annually at the end of 2014, with 35% of total funding allocated solely for feature films. Features with budgets over $75 million are eligible, but the incentives only apply to the first $100 million of a film’s budget, which is a major reason the really big-budget films are shooting elsewhere.
“Feature films – particularly the most expensive, effects-driven tent pole projects, continue to be made in areas where lucrative film production incentives exist,” the report states.
What’s not covered by California’s incentives program is another reason big-budget blockbusters aren’t being attracted to the state. “Spending on actors, directors, writers and other above-the-line costs are not covered under California’s film incentive, as they are in other top filming locations,” the report notes. “Creative considerations aside, film projects will locate where their budgets can be maximized.”
Nationally, the U.S. is also losing ground, hosting just 57 of the top 100 films last year – the lowest share in the past four years. But even here FilmLA sang the praises of the Peach State. “Viewed from a national perspective, Georgia helped the United States’ film industry maintain its dominance over many international competitors who could otherwise have been the beneficiary of the jobs and production spending generated by these feature projects.”
California is also losing ground in the areas of music scoring and visual effects on blockbuster films. In 2016, California was the primary location for the music scoring on 35 of the 100 top-grossing films – the poorest showing for music scoring in California in the last four years. By comparison, the state captured scoring work for 39% of the films surveyed in 2015; 41% in 2014, and 40% in 2013.
And last year, the report found, only two of the 25 top-grossing films had their visual effects work done primarily in California.
“The U.K. and Canada have both usurped California and the United States as global centers for VFX work,” the report concluded. “This is a concern for California because big-budget features spend much of their production budgets on post and VFX. Of the 25 top live-action movies with budgets of $75 million or more, almost half of the total jobs on many films go to VFX. On many films with budgets over $150 million, over half of the jobs go to VFX.”
In the Canadian provinces of BC, Ontario and Quebec, separate incentives for VFX are offered to lure post-production work. These incentives can be stacked on top of other provincial and federal film incentives, which has proven to be a compelling draw.
“Based on a review of the 25 live-action films with the largest budgets over the last four years,” the report says, “the situation for the California VFX industry saw a temporary reprieve in 2015, followed by a substantial drop in 2016.”
A change in FilmLA’s methodology has some more bad news for California – and for Louisiana. In its previous report, FilmLA found that California had been the leading locale for films that made its 2015 list of top-grossing films. Using a new method of looking at the data, California was downgraded to second place, with the UK now recognized as the leader that year. Similarly, Louisiana was downgraded from first to third place in 2013.
But all the news is not bad. “California’s incentive has returned some feature projects to the state,” the report stated. “In fact, in Los Angeles, on-location feature film production reached an eight-year high in 2016.”
Because the new incentives program only began to take effect in late summer of 2015, film projects selected under the improved incentive could not have begun production until after July 2015. “Moving forward,” the report said, “California should see an increase of feature films filming in the state because of the enhanced incentive. If these films perform well at the box office, they’ll show up in future editions of this report.”
And while California finished fourth in the top 100 films in this year’s study, the report argued that “the Golden State is still the world’s top film and television production center. With over $30 billion in direct spending annually, the volume of film and television production activity in California is more than New York, Georgia, Louisiana, the UK and Canada combined.”