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Hollywood film production in 'bad spiral' as competition bites

A man sets a digital display above the red carpet during preparations for the 86th Academy Awards in Hollywood, California February 26, 2014
A man sets a digital display above the red carpet during preparations for the 86th Academy Awards in Hollywood, California February 26, 2014

By Tim Reid

LOS ANGELES (Reuters) - Three days before the Oscars, the Los Angeles film czar and a think tank delivered some damning news to Tinseltown: Hollywood's status as the home of American film and television production is threatened because places like New York are offering better financial incentives to studios.

The study of employment and production data released on Thursday by the Milken Institute, an economic think tank, says California has lost tens of thousands of entertainment jobs to New York and other U.S. states in the past decade, and film and television productions with them.

While it may be one of the best years for high-quality film in recent memory, with nine strong films nominated for the best picture Oscar, just one of the nine was filmed in California.

Ken Ziffren, a veteran California attorney recently appointed as Hollywood's film czar by the mayor of Los Angeles, said the report showed Hollywood was in a "bad spiral," both in terms of jobs and productions leaving California.

Ziffren repeated a call for an expanded California film and tax credit, as did the Milken report - an issue that is politically controversial.

Proponents say it is vital to keep middle-class jobs and film production in the state. Opponents say wealthy Hollywood studios don't need another tax break and question whether further financial incentives will produce a net gain in jobs and revenue.

The report by the Milken Institute, headquartered in Santa Monica, California, but with a national and international perspective, said California lost 16,137 film and TV industry jobs between 2004 and 2012, based on U.S. Labor Department statistics.

During the same period, the report said, New York state gained 10,675 entertainment jobs.

"California is losing film and television productions to New York and other states," the report said. "The data shows that other states are being more effective in using their incentives to bring in new productions and create jobs."

The report said the loss of jobs was particularly troublesome because it represented the exodus of middle-class wage earners with high pay, an average of $98,500 per person, and businesses that thrive on the movie industry such as caterers.

BATTLE OF THE TAX CREDITS

California has a tax-credit program, but essentially only productions with budgets of $75 million or less qualify for the rebate of 20 percent to 25 percent.

Proponents of legislation under consideration in California want the incentives to cover big-budget movies, as well as television pilots and dramas.

New York offers tax credits of between 30 percent and 35 percent and allocates more money - $420 million annually - out of its budget to give incentives to film and television production there, roughly four times what is awarded in California.

Other states such as Louisiana, Texas and New Mexico have also drawn jobs and production from California in recent years through tax credits.

The Milken report says that production in California hit its peak in 2004, when 128 films were made there, while 50 were filmed in New York. In 2012, other states offering incentives were involved in 142 films, compared with 104 in California.

Of the nine movies nominated for best picture Oscar on Sunday, only "Her," the science fiction romantic drama starring Joaquin Phoenix and Scarlett Johansson, was made in California. It had a relatively low budget of $25 million.

(Editing by Mary Milliken and Jan Paschal)

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