North Carolina prepares to bail out of film incentives

dirtydance.jpgThis was one of the first states to aggressively pursue movie and television productions, going back to the "Dirty Dancing" shoot in the 1980s. But North Carolina lawmakers have decided that the economic benefits of attracting production companies aren't worth the tax revenues lost from overly generous incentives. Whether that's true depends on which economist you're asking - measuring the long-time worth of tax credits produces an array of results, with disinterested, academic types generally concluding that the incentives are not especially worthwhile, while studies commissioned by the entertainment industry finding that they are beneficial. The North Carolina pullback, which is supposed to take effect after next year, is no doubt fueled by a conservative legislature and governor that can't be thrilled at the idea of subsidizing those lefty pinko filmmakers from California. Damn hippies! Still, some Democrats are also getting antsy - and other states have been reconsidering their giveaway programs. From the WSJ:

The number of states offering incentives has declined as they cite shifting priorities or problems with individual programs or productions, according to Dama Claire, a tax expert who advises producers on where to film. Some still see opportunity: Nevada is launching a 15% transferable tax credit starting next year "Is it nice and glitzy? Yeah, everybody likes 'Homeland,' " said Sen. Bob Rucho, a Republican who leads North Carolina's Senate finance committee and represents Mecklenberg County, where the popular Showtime TV series is filmed. "But is it worth spending the money on film credits? There's no evidence that it is." "We spent $70 million on film incentives last year, and what else could we have done with that $70 million?" said Rep. Mike Hager, the GOP majority whip, who hails from Rutherford County, where "Dirty Dancing" was shot. "We could have paid more teachers, kept our teacher assistants, given raises to our highway patrol."

I'm guessing that further pullbacks are inevitable in other states - the money just isn't that great. For Mayor Garcetti and other local lawmakers, this would be a good time to take a breath and realize that more tax breaks for an already privileged industry are not the answer. The reality is that some business will continue to be lost, but not to the apoplectic extent that Hollywood unions and L.A. politicos would have you believe. Anyway, show biz is the topic in this week's Business Update on KPCC:

Steve Julian: Business analyst Mark Lacter, would you agree it's been an up and down summer at the box office?

Mark Lacter: It's been a flaky summer for Hollywood, Steve. On the plus side, ticket revenue jumped more than 10 percent, and was up around six-and-a-half percent compared with last year (and we're talking about the period between the first week of May through Labor Day weekend). The problem is that the studios and their investors spent huge amounts of money to make a lot of these movies, and they had to compete in a very crowded market - 23 big-budget films came out this summer, which is way higher than normal, and some of them never had a chance.

Julian: Some examples?

Lacter: Well, probably the biggest clunker was "The Lone Ranger," which could end up losing close to $200 million for Disney. Another big disappointment was "White House Down," which was distributed by Sony and brought in only $140 million, which for a big-budget action film is really bad. Even a film like "Pacific Rim," which did well at the box office, might still end up in the red because the production and marketing costs were so high.

Julian: And summer, of course, is the time when studios want to bring out these monster releases -

Lacter: - right, what they call "tent poles" - and in that category, the biggest winner was Disney's "Iron Man 2," which took in $1.2 billion. Also having a great summer was "Monsters University" from Pixar, with $700 million. Then you had "Despicable Me 2" and "Fast and Furious 6," which might not be our cup of tea, but did very well for Universal. Eight of the top 12 films this summer were sequels - and yet, sequels were no guarantee of success (a number of them really struggled). And, some non-blockbuster films found considerable success: "Now You See Me" from Lionsgate only cost $75 million to make.

Julian: So, in some ways, Hollywood was its usual unpredictable self.

Lacter: That's right - and don't expect any big changes in strategy when it comes to big-budget films. The prospect of having huge success with one of these blockbusters is just too great, but perhaps more important is the fact that many of these films are financed by multiple groups of investors, and so the risk is spread around. It's not like the old days when a studio bankrolled the whole thing.

More by Mark Lacter:
American-US Air settlement with DOJ includes small tweak at LAX
Socal housing market going nowhere fast
Amazon keeps pushing for faster L.A. delivery
Another rugged quarter for Tribune Co. papers
How does Stanford compete with the big boys?
Those awful infographics that promise to explain and only distort
Best to low-ball today's employment report
Further fallout from airport shootings
Crazy opening for Twitter*
Should Twitter be valued at $18 billion?
Recent Business Update on KPCC stories:
Naysaying emerges in wake of LAX shootings*
Holiday shopping: On your marks, get set... spend!
What to do with all that bad chicken?
Why it's hard to gauge progress of health care programs
Why L.A. isn't being hit too hard by shutdown - for now

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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