HOLLYWOOD — All that runaway production hasn’t come back yet.
The attraction of subsidized feature film production outside the United States has led to losses for the U.S. economy of $4.1 billion and 25,000 jobs in the past four years, according to a study due to be released today by an independent research center.
“Subsidies are having the intended effect,” said Stephen Katz, co-founder of the Center for Entertainment Industry Data & Research. “The U.S. production industry has daunting choices: Match the incentives, find ways that are noninvasive (and) nonpunitive to the producer to stop foreign subsidies, or accept the fact that the industry is in serious decline that will have ramifications for years to come.”
Katz, who won an Oscar for co-development of Dolby Stereo, issued the report as part of appearing on Saturday’s keynote panel at ShowBiz Expo at the Los Angeles Convention Center. Panel will be moderated by Bruce Doering, national exec director of the Intl. Cinematographers Guild Local 600. Other speakers will include Steve Dayan, Teamsters Local 399; Jean Prewitt, prexy-CEO of the American Film Marketing Assn.; and Bryan Unger, western executive director of the Directors Guild of America.
The report says Canada lures the lion’s share of features away from the United States, with Europe and Australia making significant inroads. “It is not just Canada that is using subsidies to buy away U.S. productions,” Katz noted. “Our charge is to come together as an industry so we can understand the challenges at hand and find productive solutions.”
The study surveyed films produced between 1998, when Canada rolled out new production subsidies, and last year, with worldwide total spending edging up from $5.56 billion in 1998 to $5.6 billion last year. U.S. feature spending declined 18% to $3.24 billion last year from $3.93 billion in 1998; U.S. films with budgets above $50 million dropped to $1.51 billion last year from $2.3 billion in 1998.
During the same period, the total budget of features shot in Canada soared from $430 million in 1998 to $1.05 billion in 2001. Most of that gain came in midrange pics between $10 million and $50 million, as that category rose from $309 million in 1998 to $750 million last year.
Katz also noted that films shot in the U.S. with budgets north of $50 million had fallen from 31 in 1998 to 19 last year, while such projects in Canada grew from one in ’98 to four last year. Total number of features shot in Canada jumped from 23 in 1998 to 39 in 2001, while U.S. film shoots went from 127 to 119 during that period.
In a telling sign of the lure of Eastern Europe, activity jumped from $30 million in 1998 to $208 million last year — all of it studio-financed. Activity in the U.K. and Ireland declined from $486 million to $414 million, while the rest of Europe saw a jump from $204 million to $440 million in the same period.
Katz also contended that cost is the key factor in the loss of domestic production. “The U.S. production infrastructure is both talented and state of the art,” he added, but noted the benefits of keeping production at home have failed to stem increasing losses.
He said Canada has little attraction for low-cost films, defined as pics with budgets under $10 million, with spending falling from $48 million in 1998 to $29 million last year. The U.S. retained 84% of such projects, totaling $155 million.
“Producers are inclined to make their budget work in the U.S. so they can take advantage of the vast pool of available talent and crew, unique locations and advanced infrastructure,” Katz wrote. “In the U.S., talent and crew who normally work on higher-budget films are available to these productions.”
The study does not cover TV work, which has boomed in Vancouver, Montreal and Toronto in recent years.
The study underscores similarities in the production business north of the border, showing that average budgets of Canadian films have nearly matched U.S. films. The average Canuck budget has jumped from $18.7 million in 1998 to $26.8 million last year, while the average U.S. budget slipped from $30.9 million to $27.3 million in the same period.
The report also noted a dozen U.S. film commissions are either shutting down or cutting budgets. Yet, in one nugget of positive analysis for U.S. production, Katz pointed out that films produced in the U.S. generated a significantly higher box office-to-budget ratio than Canadian-produced movies over the four years.
“It is outside the scope of this report to determine whether this is the result of a poorer quality product made in Canada or simply the fact that marginal films were produced in Canada because they could be done ‘for less,'” he added.
The report is being released two days after the California Assembly approved a level-the-playing-field bill to provide wage-based tax incentives for film projects under $10 million shot in California. The legislation, which would go into effect in 2004 and cost $415 million in lost tax revenues over five years, now goes to the state Senate with full support from Hollywood orgs.
However, other parts of the runaway issue have split Hollywood, particularly December’s controversial filing of a petition by the Screen Actors Guild and a coalition of below-the-line workers to seek a federal investigation into annual Canadian subsidies of up to $1 billion. The petition was withdrawn amid arguments from the American Federation of Television & Radio Artists, Directors Guild of America and the Intl. Alliance of Theatrical Stage Employees that the probe could trigger a trade war by imposing tariffs, but backers plan to refile the petition.
SAG also launched a Global Rule One campaign a month ago to urge members to insist on guild contracts on foreign shoots. U.S. producers contend the initiative — designed to discipline members who defy its dictates — is illegal, but SAG is sticking to its guns due to significant losses in potential contributions to its pension and health funds from runaway production.