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Schwarzenegger's Plan to Jumpstart Hollywood Spending

Hollywood Movie Productions at a Standstill:
Schwarzenegger's Plan to Jumpstart Hollywood Spending

You'd think the streets of Los Angeles would be constantly buzzing with movie shoots. But right now, there's only one major film shooting in the City of Angels. That's DreamWorks SKG's "Transformers: Revenge of the Fallen." Compare that to the seven films shooting last August, according to Film L.A., which coordinates film permits for the area. If you include productions on studio sound stages, "Angels & Demons," the prequel to "The Da Vinci Code," is shooting in Culver City.

Blame it on the Hollywood labor conflict. The studios, afraid of being shut down by an actors' strike, wrapped up most of their movies for next year by June 30. While the TV business is frantically shooting to get ready for the fall TV season, movie production in the area has pretty much ground to a halt, which means a lot of people -- from caterers to special effects gurus -- are out of work. Apparently 10 percent fewer members of the International Allicance of Theatrical Stage Employees are working now than were last year.

But there's another serious reason for this year's dip, and a reason that Los Angeles film production has dropped nine of the past 11 years: runaway production. Productions are leaving California for other more cost-efficient states and countries. Over 40 other states offer incentives to shoot in their state, some refunding as much as 30 percent of a film's budget to lure business.

New York state recently upped its incentives to give a 30 percent rebate on "below the line costs" (pretty much everything but paying stars, writer, director, producer), and considering New York City's significant infrastructure and talent available for shooting films, it's a threat to L.A. Largely as a result of these incentives, there's been a 40 percent decline in the number of film production days shot on location in LA since 1997.

Enter the Governator. Gov. Arnold Schwarzenegger and Jon Favreau, the director of "Iron Man" and star of movies including "Swingers," are partnering to create tax breaks for film and TV production. Schwarzenegger is now saying he'd like to sign a tax rebate similar to the one in New York. The governor is blaming the California legislature for the dearth of state incentives. In contrast, most voices in Hollywood blame the former movie star for overlooking the issue for too long. But now that Favreau is pushing the issue forward, Schwarzenegger seems to be listening.

Marvel Studios (which produced "Iron Man") agreed that if there are some significant new tax incentives, they'll buy a studio lot in L.A. and make four films here over the next three years, with a combined budget of $600 million.

The question is whether legislators can be convinced they have to institute these incentives. Naysayers emphasize the fact that L.A. will always get production dollars just because this is where the entertainment industry is centered.

Others say other industries need the incentives more; or believe that money would be better spent on more high-minded causes, like health care. We'll see whether the Governator and the man behind Iron Man can come up with a superhero solution.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.