Talk of tariffs in Tinseltown continued Wednesday with several of the major Hollywood studio chiefs weighing in on Donald Trump‘s proposed solution to combatting runaway production.
“I think in terms of production leaving here, it’s almost more to California issue, honestly, than a U.S. issue. So while it’s true, so a lot of production has left the United States, it’s even worse for California, and there are a lot of people, including our companies, that are working on this with the state government and trying to come up with different bills that will help,” Ravi Ahuja, President and CEO, Sony Pictures Entertainment, said during a Milken Institute Global Conference panel on the future of the entertainment industry on Wednesday.
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Ahuja was joined by HBO and Max Content Chief Casey Bloys, Head of Prime Video and Amazon MGM Studios Mike Hopkins, Universal Studio Group boss Pearlena Igbokwe, and The Diplomat creator Debora Cahn.
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The group pretty unanimously agreed with Ahuja’s assessment that California has been hit the hardest by the mass exodus of production to international territories in recent years, and it’s unlikely that tariffs would help. Instead, they added to the chorus of voices across the entertainment industry insisting that more lucrative tax incentives would go much further to solve the problem.
“If the incentives are stronger in the United States, and they are in many states, we’ll shoot here. I think what’s often forgotten in our business is the margins are pretty modest,” Ahuja said. “In any studio, there’s something like 10%, so it’s not a business that relies on an enormous well of profit. And producers will tend to locate in a place that’s efficient. So the more we can make the U.S. efficient, the better.”
Hopkins conceded that much of the talent pool is already in Southern California, which would make it a much more convenient destination for production if the economics made sense. As of now, they don’t.
California Gov. Gavin Newsom has already proposed more than doubling the state’s current cap on its Film & TV Tax Credit Program to $750M annually. That proposal is expected to be approved this summer and would go a long way toward welcoming production back to the state. However, as union representatives and state lawmakers have also pointed out, increased funding alone won’t solve the problem.
The studio chiefs also discussed some of the limitations of the California program that have contributed to the state’s production decline. Unlike other territories, California’s tax incentive also operates as a jobs program that ties eligibility directly to the number of jobs a production will create and does not consider above-the-line wages to be qualified expenditures.
Since there is a cap on the overall funding, California’s program operates as a lottery. This differs from states like Georgia and international territories like Canada, where there is no cap on the incentives, effectively guaranteeing the tax credit to all qualified projects. Bloys and Hopkins pointed to the uncertainty the lottery system creates as another deterrent for the major studios.
“You have to get into a lottery, and you’re not sure if your show is going to get the tax break or not. So that uncertainty makes it very difficult,” Bloys said. “If California would address that, that would make a big difference, because the entertainment industry is based here, and there’s a lot of infrastructure here, but the uncertainty around that incentive has been problematic to plan [for].”
Hopkins says he’d also like California lawmakers to consider opening the door for above-the-line costs to be considered qualified expenditures. Some territories have been hesitant to include above-the-line costs costs in their incentive programs, because doing so raises tough questions for lawmakers. Do taxpayers really want to feel like they are funding Tom Cruise’s salary?
But, Hopkins argues “it actually does drive the economy, because they’re going to get their fee, no matter where they go.”
Whatever the solution, the group also pushed back on the notion that all international production is negative. There are many instances where a production should be based abroad, regardless of financial incentives, they say. The ultimate worry is that a broadly applied tariff would make that unnecessarily difficult.
“We’re going overseas because we have a show set in London, and we want castles and palaces, and we don’t have enough of them here,” joked Cahn. “I mean the facilities here and the talent pool here remains unmatched. We’ve had great experiences overseas, but you still don’t get the kind of designers, crews, craftspeople that you do here, anywhere else. So this is always my first choice. But if you need Buckingham Palace, you gotta go over there.”
While the solution remains unclear, no one disputes that runaway production has hurt the United States, particularly California. Production in Los Angeles is still down nearly 40% over five year averages. Two bills currently making their way through the state Legislature have been a beacon of hope for financially strained entertainment workers, but calls for federal intervention have also grown recently.
The White House has already walked back Trump’s initial claim that he would impose 100% tariffs on all films made outside the U.S., but the President has vowed to give more attention to the issue in hopes of finding a solution.
More developments are expected sooner rather than later as Hollywood responds to Trump’s interest. Notably, MPAboard members, including top CEOs and other representatives, plan to meet Friday, with next steps expected to be a topic, sources said. The board includes representatives from Disney, Netflix, Paramount, Amazon, Sony, Universal and Warner Bros.
