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'Runaway'
Productions
After 1978 the absence of
incentives did not unduly inhibit the financing
of US movies until competing regimes began to
spring up in Canada and other English-speaking
countries which began to attract what is known
as 'runaway' US film production. Complaints from
the industry and demands for a US tax credit system
reached a crescendo in 1999.
In
August 1999 more than 5,000 industry workers staged
a rally in Hollywood to protest runaway production
and the loss of American film and TV jobs to Canada
and other foreign countries. By all accounts,
it was the largest demonstration in Hollywood's
history.
The rally was organized by the Film and Television
Action Committee, a grass-roots coalition of industry
workers who support legislation that would offer
tax incentives to producers who shoot their productions
in California - incentives that would counterbalance
the generous tax breaks being used to lure U.S.
producers to Canada and other countries.
"This rally is not the last," then FTAC
chairman Jack De Govia told the cheering crowd.
"You have not heard the last of us. We will
not stand by and let a foreign government buy
our jobs and our lives and the future of our families.
We helped build this industry and this town and
state and nation, and we will not give them up
without a fight!"
The immediate target of the demonstration was
the California legislature, which was considering
the creation of local film production incentives.
But the Screen Actors Guild and the Directors
Guild of America, both of whom supported the demonstration,
were focusing more on solutions at the national
level, and had produced a report showing that
US runaway productions had cost the American economy
$10.3 billion in the previous year.
A
number of factors had encouraged US film production
to move abroad, including growing worldwide consumer
demand for filmed entertainment, construction
of new state-of-the art studios abroad, favorable
financing and tax incentives from foreign governments,
the formation of international production companies,
and new technology that has both led to the replacement
of some US film workers and facilitated the movement
of high-quality film production to nontraditional
locations. Film budgets are increasingly consumed
by high production costs both above and below
the line and by increased emphasis on marketing.
At the same time, the meteoric expansion of television
channels worldwide via cable has brought huge
demand for productions that typically require
lower budgets. Foreign film industries have seen
the window of opportunity that these circumstances
have opened and, with the help of government programs,
have moved in to claim their share of the action.
All of these factors have transformed what used
to be traditionally American television and feature
film production into an increasingly widespread
global industry.
Ballooning
production costs are another problem. Many people
in the film industry talk about exchange rates
and runaway film production, attributing runaways
to the dollar’s purchasing power abroad.
They often cite Canada as an evidence that costs
in the four principal destination countries for
fleeing films (Australia, the United Kingdom,
Ireland and, of course, Canada) increased or remained
the same relative to costs in the United States.
By the end of the 1990s, rising costs and lower
operating margins led US studio executives to
conduct a major restructuring of their business
practices in order to remain competitive. As one
media analyst described it, studio executives
found themselves ... in a race between the slower
growth of their profits and their ability to restructure
their balance sheets.” The restructuring
included aggressive cost-cutting, personnel layoffs,
the introduction of more sophisticated market
research, entry into strategic joint ventures,
experimentation with risk-reducing financing alternatives,
the production of fewer films, and, inevitably,
moving production abroad. As a result of these
measures, costs have in fact come down since 1998.
New film production centers have developed abroad
in part because advances in technology have enabled
them to train a labor force, build the necessary
technological infrastructure, and create a film-friendly
culture with a speed and ease that has never before
been possible. Most of the technological advances
in the production process revolve around the ability
to "post-produce” film entertainment
content electronically. Post-production is a term
of art that refers to important processes, such
as editing, color correction, sound engineering,
and creation of computer-generated images (CGI)
and combining (or compositing”) CGI with
live action visual images. Post-production processes
generally occur after the film has been shot.
Contemporary technologies also now make it logistically
feasible for individuals from all around the world
to collaborate and participate in the post-production
process, no matter where they happen to be located.
In
addition, new digital tools make it more economically
and technically feasible to shoot at certain locations
which can be digitally converted to appear like
other locations. For example, a producer could
film in a large foreign metropolitan area and
digitally replace license plates, billboards,
signs, and other elements in the scene to make
them appear like their American counterparts.
The ability to create the visual image of another
location has provided film makers with increased
flexibility in choosing production locations.
All
in all, it was understood that runaway film problem
could threaten to disrupt important segments of
a vital American industry and the thousands of
workers who depend on it. Not only would this
have a serious effect on local communities and
families around the country, it could also turn
out to have an adverse impact on an important
and influential aspect of American popular culture.
Many
industry observers have proposed that the United
States or individual states offer comparable tax
incentives to encourage production in the United
States. Several state film commissions have also
been pressing for the creation of a US Film Commission
to marshal resources for, and attention toward,
the film industry at the national level. The United
States is the only major county that does not
have a federal-level government organization tasked
with addressing the business of the film industry.
The commission could coordinate with state film
commissions on how to attract film production
through streamlining bureaucratic processes, simplifying
access to government-owned property for filming,
and standardizing licensing and permitting procedures.
Finally, the commission could publish periodic
economic analyses of the industry. However, substantial
action in this direction has still not been taken.
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