Entertainment Disrupted: Is Hollywood Still the Production Capital of the World?
Hollywood’s place in the global entertainment industry industry has never felt so contested. What was once the centre of filmmaking on earth has had its position eroded since the pandemic. Data released recently by FilmLA showed that shooting in LA is approaching historically low levels. Hollywood Reporter recently asserted that Tinseltown is becoming a ‘production graveyard’.
To situate this narrative into a broader context as part of our ‘Entertainment Disrupted’ series with dentsu, LBB’s Alex Reeves caught up with Geneva Wasserman, the network’s global EVP, film and TV development and financing.
LBB> There have been multiple news stories recently that seem to make it clear that Hollywood is struggling to hold onto its role as a production destination. What's driving that?
Geneva> Hollywood has lost its place as the production capital of the world due to the financial conditions. Hollywood’s world-class crews, creatives, and talent (in front of and behind the camera) and being in the backyard of the Hollywood executives greenlighting and overseeing production all make filming in California the preferred location, but the high costs of local production has made it less attractive.
The tax credit/incentives have not been enough to keep production local to Los Angeles or even the State of California, which has driven producers to find other locations such as Canada and then to places within US such as Georgia and now to places like the UK (which have some of the world’s best incentives that seem to be getting better and better!) The recent news about VFX incentives show that the UK is pushing to become the ‘new’ Hollywood and indeed, the UK is quickly becoming a leading production hub. Spain, Greece, Columbia, Mexico and Bulgaria are also locations that are having success luring production.
Proximity to Hollywood is still important for producers and talent, especially with television production which tends to have a much longer production run, so relocating too far away from the US (at least in the short term whilst many in the industry are still located here – as well as the physical plants of the studio system), is not optimal. Looking back at the ‘content boom’ that lasted from approximately 2012-early 2020, many productions moved out of Los Angeles as, at that time, there weren’t enough production facilities to shoot at and that is also why people looked to shoot outside of Hollywood. Of course, that was a different time: interest rates were low and the markets were bullish on streaming models and therefore investing heavily in content in a sort of content arms race.
The tables have since turned and today it is all about efficiency – the bottom line. Many in Hollywood are praising [California governor] Gavin Newsome’s announcement for doubling the incentives. Time will tell if it will be enough to lure back production to Los Angeles.
LBB> How is technology reducing the importance of geography for production?
Geneva> There are various innovations like virtual production that are turning locations digital.
Virtual production has gained ground significantly over the past year or so. With production capabilities like the Volume and volumetric stages, productions do not need to have as many location shoot days as they did before and this cuts down costs substantially.
Top level production innovations are still expensive, but as the technology catches on, costs will come down and I predict that we will see fewer and fewer location shoots as a result. How this will impact the overall market remains to be seen, but in the short term locations will do all that they can to bring production on site with tax credits and facility/stage builds.
LBB> How does cloud processing and AI enter this story?
Geneva> The cloud has provided incredible computing power without being tied to a physical location. This tech has transformed production and post production – particularly in VFX and animation. Cloud computing allows for encoding and transcoding in multiple resolutions, allowing for real-time processing/rendering. In addition, AI has allowed for some really interesting innovations such as virtual product placement and post-editing opportunities. Cloud computing and AI are really powerful tools that are already transforming how and where we work. I know we discussed this recently – I don’t see AI completely replacing humans and I certainly do not support that. There is no machine that can replicate human emotion and perspective. I do think we will see generative AI in storyboarding, and even used as a tool in scriptwriting.
I know of a few films that are being created entirely by AI – so that is concerning on some level, but I believe audiences will always want human stories told by humans acted by humans so I have faith that humanity will prevail over the machines. The pipeline efficiencies that cloud computing provides for pre and post production are very exciting and will, in time, provide significant cost savings. It may be obvious, but without these technologies for encoding, we would not have streaming – whether that is a good thing? Let’s discuss that another time!
As we have discussed everything old becomes new again and it seems that whilst we have streaming tech that allows for new business models (e.g. binge viewing), we are already seeing old models (that were time tested and profitable) return… after introducing these models, now every streamer is looking for their event programming opportunities outside of just live sports. I look forward to gen z and gen alpha experiencing the ‘must see TV’ and watercooler moments that I so enjoyed 20 years ago!
LBB> As brands, what is it most important to understand about the ways that these technologies are changing what's possible within certain badgers and/or timeframes?
Geneva> I think it’s important for brands to understand that almost anything is possible for them when it comes to content creation. Developing with top tier creators, finding cost efficient locations and technologies to shoot at/with, being able to directly connect with audiences through social or bespoke marketing campaigns or even creating their own film and TV programming, are now much easier and more efficient to do than ever before. It’s no longer just about buying commercial spots on network television. The future is about direct engagement that ensures a meaningful connection with viewers.
LBB> And how about tax incentives? The UK budget this week just promised a new tax relief for visual effects. What's important to understand about the impact that has on global production projects?
Geneva> Countries like Spain have a 60%+ tax incentive. Colombia is at 40%+ (and offers a favourable currency exchange compared to USD and GBP). Those rebates coupled with the already low cost of production in those markets make them attractive locations to film. The UK has tremendous crews, services and A-list talent as well as amazing tax incentives. The UK also has some of the most incredible stages to film in/on in the world. The UK incentives were bolstered significantly and offer amazing incentives for animation, production, post production and with this new announcement, are even better than ever with VFX bump ups. One note: the GBP is still high compared to other currencies, but even with the less favourable exchange rate of GBP, the UK is becoming a booming production hub.
In the US, it is still hard to beat Georgia – incredible crews (there was a big exodus to Georgia when Marvel moved so much production there and Trillith built some incredible stages), a solid tax program and very talent friendly. We are seeing other locations in the US with incentives, but Georgia is still the top choice for many producers.
Still, just north of the border, Canada offers incredible incentives with talented crews, top-notch facilities and super talent friendly. Canada (particularly Toronto and Vancouver) has been known as Hollywood North for a while. What are new are the production capabilities coming from south of the border. We are seeing a lot of excellent production capabilities coming out of Colombia with studios/stages being built to accommodate the increased demand there. The same is happening in Mexico. The exchange rates are favourable to USD, there is a tax incentive and the costs are lower than in the US or UK.
