BY GREG HERNANDEZ,
Staff Writer
LA Daily News
4/27/07

Los Angeles, once the undisputed film capital of the world, is gradually turning into something far less glamorous and profitable: reality show central.

On-location feature-film production plummeted 22 percent during the first quarter of 2007 — the second-largest year-to-year decline on record, according to figures released Thursday by FilmLA Inc.

The region continues to lose significant ground to rival states and countries that are luring productions away with significant financial incentives.

On the surface, a 29.7 percent gain in television production during the quarter — which boosted overall production by 5.7 percent — would seem to cancel out the decline in feature films. But most of the gain is due to reality shows, which are not nearly as big of an economic boost.

"A reality show obviously is less intensive in terms of labor — you are creating some jobs but not as many as if you were creating a full-bore high-budget feature film," said Jack Kyser, vice president and chief economist of the Los Angeles County Economic Development Corp.

In all, television recorded 6,478 on-location production days during the first quarter — up 1,482 days, with reality shows accounting for 43.8 percent of that total. Dramas and sitcoms represented 25.6 percent and 9.3 percent, respectively. Made-for-TV movies followed the negative trend of features, falling more than 50 percent from the same period last year.

FilmLA recorded 1,860 permitted on-location feature-film production days, down 526 days from the 2,386 days recorded during first quarter of 2006.

With the exception of a 58.5 percent drop during the first quarter of 2002, it marks the steepest decline in feature-film production since FilmLA began compiling data in 1994.

The falloff five years ago at least had unique circumstances: it followed a record year in 2001 when production reached a frenzied pace in anticipation of threatened labor strikes that never materialized.

FilmLA President Steve MacDonald said the first quarter feature-film decline continues a long-term downward trend that began in 1997.

"Given the unprecedented growth in feature-film production in other locales, it appears the current drop in Los Angeles is a direct result of financial incentives now offered by more than 30 U.S. states," MacDonald said. "With substantial tax credits and rebates, other states have been able to lure big-budget films and the jobs and tax revenues that go with them."States such as New York, Louisiana and New Mexico offer financial incentives and have growing infrastructures in the form of filmmaking facilities and workers. This is happening at a time when studios and production companies are trying to lower their bottom-line costs.

In contrast, California has no state-sponsored incentives and no proposed legislation pending. A bill introduced last year was modeled after New York's incentive package and proposed offering a 12 percent refundable tax credit based on qualifying state expenditures. It never made it to the floor of the state Senate.

"The silence out of Sacramento is appalling," Kyser said. "There are jobs created and tax revenue generated for the state. I don't know what is going on up there but it is definitely something that they need to take seriously. These other states aren't doing it just for an idle diversion; New Mexico and Louisiana are deadly serious."

When New Mexico began offering a 20 percent tax credit, its production spending leaped from $71 million in 2005 to $142 million last year.

MacDonald warns that the "runaway production" associated primarily with feature films and commercials could easily spread to television.

"With so many jurisdictions offering financial incentives and new production infrastructure, L.A. may well lose its status as the first choice for television production," he said. "As one senior television executive told me recently, 'Los Angeles is now just an option; it's no longer the main focus.'"

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Greg Hernandez, (818) 713-3758
greg.hernandez@dailynews.com