California pays to lure filmmakers back to Hollywood

By Dan Whitcomb

LOS ANGELES (Reuters) - After a decade of watching film production slowly abandon Hollywood, lured away by financial incentives first in Canada, then other U.S. states, California hopes to woo the movies back home.

But some worry that it might be too little, too late after the number of studio feature films shot in California has dropped to less than half of what it was in 2003.

Broadcast and cable television and commercial shoots, which had been more likely than feature films to stay in Hollywood in recent years, are also down significantly, with 44 of 103 pilot episodes shot outside southern California this year.

"In 2008 the worst numbers ever were recorded and the first six months of 2009 show a 50 percent drop from that. That can only be described as a disaster," said Paul Audley, president of FilmLA, the non-profit organization which coordinates film, TV and commercial production in and around Los Angeles.

Film production and its attendant industries generate $38 billion for California's economy and employ nearly 250,000 people, according to Governor Arnold Schwarzenegger's office.

Although it contributes less than 3 percent of state output, movie making also adds value to the tourism and entertainment industries.

Schwarzenegger, former star of "Terminator" who has championed the fight against runaway film production, in February approved California's first-ever incentives. The package is targeted at movies most likely to leave the state and includes a 20 to 25 percent tax credit.

GONE WITH THE WIND

But some say California's incentives may not be enough to compete with the 40 or so other U.S. states offering up to twice the tax credits, often with less red tape.

"(California's) was an incentive package for feature films where the largest budget film you could produce was $75 million, which a lot of people felt didn't go high enough, especially if you are trying to attract tentpoles," said Jack Kyser, chief economist for the Los Angeles Economic Development Corp, referring to the big-budget event movies that can make or break a studio.

As film production has begun to desert California, the economic ripples reach across the state, to countless businesses, directly or indirectly related to the industry, that are already struggling during recessionary times.

In July Hollywood's second-largest prop house, 20th Century Props, closed its doors after 40 years, its owner saying he had fallen victim to runaway production and a 14-week strike by film and television writers that ended in February.

"There are so many shows that have already left," said 20th Century's owner, Harvey Schwartz. "'Ugly Betty' was the first big one to just shut down in California, lay everybody off and move to New York for that 30 percent rebate."

The Culver Studios, a landmark studio where "Gone With the Wind" and "Citizen Kane" were filmed, has also been hit.

Jamie Cella has run The Culver Studios since 2006 and has watched movie production plummet in Hollywood, where just a few years ago 70 percent of all feature films were made.