The simple answer is, yes.
And it’s actually been doing so for some time now.
But before we dive into it, let’s reminisce for a moment…
Decades ago, during its golden years, Hollywood was the land of fantastical ambition, strikingly beautiful people, and where everyone’s wildest imaginings were magically transformed into reality before our very eyes.
Icons like Marilyn Monroe, James Dean, Audrey Hepburn, and John Wayne formed the stuff of legends. And even years after their deaths, they still live on as heroic and awe-inspiring household names of the modern era.
The tone of today’s Hollywood is pretty different, especially after the sexual harassment floodgates have opened with Harvey Weinstein and Kevin Spacey at its core.
It was the same with Bill Cosby not too long ago, with scandal after scandal seemingly snowballing one after another.
I can’t watch the evening news, mindlessly browse through social media, or even check out at Wal-Mart without being bombarded with headlines about some celebrity’s latest affliction.
Our lives are filled to the brim with the notoriety of Hollywood’s celebrities, and that disease is quickly spreading to the very infrastructure of the industry.
The golden and glamorous Hollywood that we think we know is dying…
The Exodus of Hollywood
It used to be that most of Hollywood’s films and television shows were made in, well, Hollywood.
But tax incentives that are too good to resist have lured productions from California to places like the U.K., Canada, Georgia, Louisiana, and New York.
Many big-budget movies, like the Star Wars films, Marvel movies, and reboots like Beauty and the Beast, were filmed primarily outside of the U.S. for both creative and tax reasons.
The U.K. offers a cash rebate of up to 25% of the U.K. expenditure for qualifying films. Canada offers tax incentives of 20% to 30% off qualifying local expenses, depending on the region.
And the state of Georgia currently offers a tax credit of up to 30% on qualifying projects.
Seventeen feature films were produced in Georgia last year, meaning that the Peach State outpaced previous front-runner California as the top location for feature film production.
According to FilmL.A.’s 2016 Feature Film Study, the U.K. came in second place with 16 features, Canada took third with 13, California slipped to fourth place spot with 12 features, while New York and Louisiana were the other top U.S. locations with six productions each.
Altogether, California-shot projects spent approximately $99.5 million in filming and received $12.4 million in tax credits, thanks to the California Film & Television Tax Credit Program, which was designed to reignite its fleeting film industry.
Film incentives are the primary reason for productions flocking to Georgia.
It also seems, from the outside, like Hollywood is undergoing simultaneous crises at once: the systematic sexual scandals, the “Worst Summer Box Office Ever,” the precarious positions of theatrical releases and theater experiences, and also the rise of streaming and Silicon Valley’s incursion into the entertainment industry.
It’s like the industry’s version of a “geostorm.”
And it really is as bad as it seems. Simply, the movie industry has lost its plot; It’s lost sight of the reasons why people go to the movies.
It’s been focused on “what movies can we market?” which is essentially shorthand for “what movies will people just show up for without us having to convince them that they actually should?”
Given that, every other problem — changing technology, financing issues, the insane cost of making and marketing films — gets exacerbated.
And in times of trouble, the big guys in charge fall back on what they know — bludgeoning consumers over their heads, essentially, with something they’ve already heard of, and strong-arming them into attending opening weekend screenings.
That kind of thinking has produced a world where making and marketing some of these movies costs upward of $500 million. Every one of them is a gamble, which is why production always resorts back to what they know: bigger, safer, and more predictable. And this, in turn, is why we, as consumers, are plagued with never-ending sequels to movies that aren’t even that good, to begin with.
Think about it: They made a movie about emojis… Really?
And the franchise system continues indefinitely or, at least, until it finally dies out for good.
Impending Revival?
When Netflix (NASDAQ: NFLX) began creating its own content back in 2013, it shook the entire industry.
Theater attendance numbers plummeted as the streaming generation took hold. And it has almost dealt a lethal blow to the film industry as a whole. For instance, the country’s largest theater operator, AMC (NYSE: AMC), saw attendance numbers drop 16% this summer, compared to last year.
The basic problem: streaming services, viral TV series, and quick DVD releases make watching at home both easier and less expensive.
And with a big chunk of overall production leaving Hollywood, streaming services have only compounded the industry’s problems even further.
However, Netflix may just be part of the solution for California instead of the outright problem.
With its $6 billion production budget, the popular streaming service isn’t willing to cut corners on its production. And it wants to spend more time in its home state.
In an exclusive interview with The Wrap, Netflix Chief Content Officer Ted Sarandos said he’s intending to bring as much production as possible back to California, having concluded that chasing tax incentives to other states only diminishes returns on screen.
States like Georgia and Louisiana have been luring film and TV production out of Hollywood for years now.
Disney’s Marvel is now a mainstay in Atlanta, where statewide revenue from the film industry soared to $7 billion in 2016.
In Louisiana, Ryan Murphy’s popular limited anthologies American Horror Story and Scream Queens were both initially shot in New Orleans, before finally relocating to Los Angeles last year for California’s own favorable tax credits.
California does offer a tax incentive program, a gruelingly competitive jobs ratio score system, which accounts for $330 million in funding.
And Sarandos’ comments are likely to provoke reactions from other states where billions of dollars in production is at stake.
He doesn’t take Netflix’s unique position for granted. Sarandos said if he were an independent producer, he’d most likely be chasing tax incentives, as well.
But Netflix is following its own model. Sarandos concluded by claiming that the money the company is saving is showing up on screen.
It’s true: Netflix’s original content has yet to disappoint.
But will it be enough to save the Hollywood’s disintegrating film industry?
I guess we’ll just have to wait and see…
That’s all for now.
Until next time,
John Peterson
Pro Trader Today