Hawaii Film Blog: Doom & Gloom for L.A. Film Industry

Friday, December 02, 2005

Doom & Gloom for L.A. Film Industry

Is the sun setting on Hollywood?

A new study put out by the Los Angeles County Economic Development Corporation (LAEDC), a private, non-profit organization whose mission is to grow business and jobs in L.A. County, all but sounds a death knell for the future of the film and TV production industry there. Thanks to runaway production, a lack of incentives, a declining box office, piracy, and low DVD sales, jobs in production will continue to evaporate. Here are some key findings from the study:

L.A.'s film industry employs 249K people and generates $28 billion in revenues.
L.A.'s film industry has a “halo” impact on other local industries, especially tourism and apparel design.
While Canada remains a major cost competitor for production, other U.S. states are quickly gaining ground as fierce competitors. New Mexico, for example, offers generous tax incentives and there are plans to build a $60 million film studio in Albuquerque.
A lack of production incentives in California have cost the state jobs and tax revenues. For example, LAEDC found that one low-budget ($2 million) film creates 59 jobs and generates $215K in state taxes.
13-to-25 year-old males are going to the movies less because of high ticket prices, bad films, and growing interest in video games.
Though still lucrative, DVD sales, which hit $15 billion in 2004, have slowed in 2005 and will probably plateau in 2006. So much for the studios' dependence on this revenue stream to make back their costs. Add to this the ongoing negotiations with SAG and WGA, who want their members to get a bigger piece of the DVD pie. Only 10% of films make back their costs from domestic release, and only 25% of films make money after all revenue streams are accounted for.
New distribution channels and strategies threaten to cannibalize traditional theatrical distribution, which will impact theater owners and local real estate development. Pressure is mounting to simultaneously release films in theaters and on DVD.
Unions are calling for a bigger share of DVD sales and ancillary revenues from new distribution channels, upping the threat of union disagreements and strikes.