An Overview of Film Production Incentives
Harrison, Haskel D., Gnuschke, John E., Business Perspectives
In 1998, Canada began providing tax incentives for filmmakers and quickly turned their initiative into a multi-billion-dollar movie production industry--thus hundreds of millions of dollars from state and communities in the United States. This fantastic growth precipitated a bellwether response to "runaway productions"--films that could be made in U.S. locations, but for financial reasons are not--and served as a wake-up call to local film commissions to sharpen their competitive advantage. Not only do local communities vie for their share of Hollywood dollars with other countries, they also must compete with their more immediate neighbors as well. Disney recently released a movie about U.S. Naval Academy midshipmen made in Philadelphia, even though Annapolis, Maryland, was right next door. Baltimore's Daily Record (September 3, 2004) quoted Sharon Pinkerson, executive director of the Greater Philadelphia Film Office, who said that filmmakers typically choose a venue for shooting in a particular type of location, and once they identify the best places, they look for the best deal. "It's a combination of the creative side mixed with the financial side."
Why Would a Community Want a Movie Production in Their Back Yard?
The simple answer is that a movie production brings money into the community. A film production is the thousand-pound tourist gorilla for a local community. It spends huge sums of money in a very short period of time, requires little care and maintenance from the local infrastructure, and has a substantial direct and indirect economic impact on an area. In addition, it has a lasting impact in terms of promoting the need to upgrade the local workforce in anticipation of future projects.
Although hard figures are difficult to obtain, a research firm specializing in analyzing the economic impact of a movie production in a local community estimates that, on average, a television production spends approximately $85,000 a day on location for a 7- to 14-day shoot for a single episode. Feature films spend over $100,000 per day, and low budget productions and documentaries average between $15,000 and $35,000 per day. Television commercials average between $50,000 and $100,000 per day, and still shoots run around $25,000 per day. With these kinds dollars at stake, competition between desirable communities is intense. It is disturbing for a local community, considered a front runner to host a production, to find themselves in a competitively undesirable position. Take the recent case of Knoxville, Tennessee.
The Knoxville News Sentinel reported on December 11, 2004, that East Tennessee might lose a movie production slated to begin next year. David Bennett, executive director of the Tennessee Film, Entertainment and Music Commission, was quoted as saying, "The area is attractive to the movie's producers because of its mountainous terrain. But geography alone won't bring the movie to the area. Studios are looking for a cash payback. They can't shoot in Tennessee because they want to. There has to be some incentive." Such unsettling news is the type that prompted the following: "a group of civic and business leaders from Memphis will press state officials in the coming year to offer more incentives to film and video production companies interested in working in Tennessee" (Memphis Business Journal, November 26, 2004).
What Has Been the Economic Impact of Film Production on Communities?
Information on spending in a local community and the overall economic impact of the movie production business is limited. Much of the information necessary to examine spending from film production is not reported, collected, or maintained. Frequently, data from the film production industry are not made available to public sources like the Bureau of Labor Statistics or the Department of Commerce. Much of the information is confidential and is not available to researchers. In addition, many studies that have been completed are proprietary or have not yet been added to the public record. Therefore, it was not surprising to discover a dearth of usable information.
The most common method used to measure the economic impact of the injection (single event, short-term project, or single industry) of investment into a community is an input-put model called RIMS II (Regional Input-Output Modeling System) or a similar model called IMPLAN[r] (Impact Analysis for Planning). These two models measure impacts such as sales and revenues, earnings, and jobs created. Benefits are generally reported in two ways: direct impact--spending from the production company on things such as wages and salaries, payments for goods and services, rentals, and permit fees--and indirect impacts--additional spending that is stimulated by the production company's initial spending for goods and services. Another impact results from the continued spending of this extra income throughout the local economy.
Why Should State Government Provide Incentives for Film Productions?
State and local governments routinely provide an array of economic incentives to attract business investment into their communities. Today's competitive economic development environment requires various forms o public tax and financial incentives like tax abatement, tax increment financing, state income tax credits, infrastructure improvements, and favorable utility plans (Downing, 2004). States routinely spend a considerable portion of their budgets to promote tourism. Like the big spenders courted by the gambling industry, the film production business is available as a short-term visitor that will spend huge sums of money in the state. There is no other sector of the economy, except state government, that has a comparable interest in the need to promote film production in state locations. The return on relatively small inducements can stimulate employment, earnings, and taxes, as well as considerable expenditures of"new money" in a community in a relatively short period of time.
Film production is a high-wage, labor-intensive business, relying on local coalitions, employing skilled workers and large numbers of local self-employed technicians, …
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Publication information: Article title: An Overview of Film Production Incentives. Contributors: Harrison, Haskel D. - Author, Gnuschke, John E. - Author. Magazine title: Business Perspectives. Volume: 17. Issue: 3 Publication date: Fall-Winter 2005. Page number: 4+. © 1999 University of Memphis. COPYRIGHT 2005 Gale Group.
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