California’s incentive program to keep film and TV production in state is undergoing a vast, and vastly important makeover, beginning with Friday’s approval of a bill that more than doubles the amount of reimbursements available to production companies. Even bigger changes are expected later this week.
Friday’s legislation bumps the annual amount of incentives available from $330 million to $750 million.
“That is a huge step forward,” said DeeDee Myers, the former Clinton White House press secretary who as direoverseeing California Gov. Gavin Newsom’s big revamp of state filming incentives. She heads Newsom’s office of business and economic development. “The governor made that a priority. He was very committed on it. He believes this is a jobs program, particularly in L.A. after the fires.”
Indeed, the January fires that devastated the city’s Pacific Palisades neighborhood, nearby Malibu areas, and the unincorporated Altadena neighborhood seemed to hit many workers in the region’s sprawling film and TV ecosystem.
But that ecosystem was already in deep, long-term trouble, thanks in part to three decades of “runaway” production that’s seen many projects head out of state seeking better incentive packages and cheaper production costs. States such as Georgia,. Louisiana, and Texas, and countries such as Canada, Spain, and the United Kingdom have put together far richer packages to entice more and more productions to their jurisdictions, at a time when the industry is going through massive transformation.
But merely offering more money, as California is now doing, was seen as not nearly enough to fix the problems facing the local industry, Myers acknowledged during a panel at the UCLA Entertainment Symposium on Friday.
That’s designed to be fixed, at least partly, by SB 1138, a second bill the Legislature is expected to pass as soon as this week, and Newsom to quickly sign, Myers said. That bill has several provisions that widen the incentives’ eligibility and flexibility:
- For the first time, animated programs and larger-budgeted unscripted shows, typically big “shiny floor” reality competitions spending more than $1 million per episode, will be eligible.
- So too, for the first time will shorter-duration shows be eligible, as long as episodes are at least 20 minutes long.
- The state chooses projects and distributes funds in a series of “windows” throughout the year. Now, there will be at least eight and possibly 10 such windows per year, providing more flexibility for producers piecing together financing from many sources.
- The incentives only cover “below the line” costs, i.e., the blue-collar production jobs that aren’t on-camera. Now, the percentage of project costs that can be covered will rise to at least 35% from the previous 20%, even more for returning shows.
- Refundability provisions have been loosened, to make the program more competitive with other states’ and countries.
- Limits on the budget size of “independent” productions would rise from $10 million from $20 million.
“It will make the program much more competitive and we think it will (bring) a lot more of the jobs in-state,” Myers said. “We’ve been working on it for a long time, but there’s nothing too small not to fight over.”
There are lots of reasons to fight, given the industry’s multiplier effect on the economy and its dire conditions these days for line workers.
“Twenty years ago, 65 percent of productions were in California,” Myers said. “Now, it’s 45 percent. We’re losing ground on that. We coasted on (California’s climate and crew quality) for too long. We assumed we were the coolest place and people would only want to be at the cool kids table. Turns out that was wrong.”
California isn’t only state beefing up its film incentives. Texas’ film and TV incentive fund will grow $50 million to $150 million for films with a budget of at least $1.5 million that have shot at least 60% of the production in state. The credits are capped at 25% of eligible spend.
The politics around the California bills have been complicated, though L.A.’s burgeoning entertainment jobs crisis helped ease traditional conflict areas. The unions representing much of Hollywood’s production workforce joined forces to back a bill they saw as a way to possibly save unionized, blue-collar jobs in one of the few U.S. industries that runs a trade surplus.
“People were really rowing together in ways that didn’t happen two years ago,” Myers said.
Other panelists welcomed the changes, but still cited a lengthy list of ways the incentives could be further improved, and better accommodate the special needs of smaller productions in particular.
“I think it’s great for California,” said Hal Sadoof, a producer and strategic adviser for many smaller film projects. “It’s great we’re making progress here. But it still doesn’t make it feasible for a lot of projects to come here.”
Projects are still required to begin using the money within 180 days, which Sadoof said “is a real hindrance for indie productions that are piecing together funding.”
Political realities kept some changes from happening. Post-production and visual effects, for instance, are typically a big part of production costs these days. But because post-production houses typically aren’t unionized, they had little support to get covered under the incentives.
Meanwhile, other countries include post-production as part of their incentive programs, said Ali Jazayeri, managing director and head of global lending for TPC.
“The post-production side is really important,” Jayazeri said. “Jurisdictions are creating their own post facilities in Malta and the United Kingdom.”
From bankers’ standpoint, Jayazeri said, California’s credit system is “about as good as it gets” in terms of consistent, quick turnarounds of funding for eligible projects. That makes the state’s credits a valuable, relatively fungible piece of film finance.
“All these changes, every one of them is an improvement, and will help California come up into the forefront,” Jazayeri said.
Another long-running issue is California’s incentives don’t cover “above the line” costs such as actors and the director.
“That’s a huge part of your budget,” Jayazeri said. “In the United Kingdom, you can get 40 percent (tax credits), including above the line. That’s a huge impact.”
But it’s also politically very difficult to make happen in California, Myers said, particularly in a year where Trump tariff uncertainty turned the state’s $6 billion budget surplus into a $12 billion potential deficit.
Reimbursing Hollywood companies for the salaries of high-paid, high-profile actors is “something that’s not politically feasible in California,” Myers said. “It comes down to Tom Cruise. Is Tom Cruise getting subsidized?”
Myers cited a study of productions that had applied for California credits previously, but didn’t receive them.
“Seventy percent left California” to shoot elsewhere, Myers said. “That’s almost $5.6 billion (in economic impact) and 60,000 jobs that left the state. We can’t even track the productions that didn’t apply.”
Jayazeri said the state “is really good playing defense, but it feels like they need to go on offense. They’re good at giving money to people who are already here, but not so much about bringing in people from elsewhere.”
“There’s an uplift of 5% for a show (that’s already previously produced seasons coming) from somewhere else, especially if it’s Florida or Texas,” Myers said. She joked that “We have a lttle party in the office every time that happens. We would love to poach from everywhere in the world and the indigenous productions here we’d like to have them stay.”
California can’t fix one big issue: the use by many other countries of national-level filming incentives. The United States has none, though Donald Trump’s “special ambassador to Hollywood” Jon Voigt included such breaks as part of a list of recommendations presented about two months ago to the president.
He subsequently posted on Trump Social a suggestion that internationally made films face a “100-percent tariff,” an idea that confused many given its definitional challenges in an international industry. White House sources subsequently attempted to walk back the tariff idea. National incentives, however, have gone nowhere as Congressional Republicans focus on other tax measures in their Big Beautiful Bill up for important votes in the next few days.
Elsewhere during the UCLA Entertainment Symposium, MoffettNathanson co-founder and senior analyst Michael Nathanson sketched out the financial challenges facing the major media companies that collectively are thought of as “Hollywood:”
If 2024 painted “a very negative view of industry profitability,” Nathanson said 2025 has seen a big improvement, mostly because studios are spending far less. Fewer films are being released, the pay-TV bundle that financed so much of Hollywood is flat even before you factor in 23% inflation since the pandemic, and streaming profitability is improving but not close to replacing lost cable and broadcast revenues.
Entertainment spending as a whole is down since its Peak TV high in 2022, with growth since then largely driven by ever-increasing sports rights costs. Total spending, including sports, is not projected to exceed 2022’s levels until at least 2027, Nathanson said..
Disney revenues are up 4%, if you don’t include its massive parks & resorts division. Overall, the company revenues are up 6 percent. For every other media company not named YouTube or Netflix, revenues grew only 1 percent, to nearly $185 billion. While streaming grew 14%, the still-profitable cable and TV linear networks are forecast to drop 7%, to $95 billion, as their viewership continues to fade with cord cutting.
“We’re very worried about the health of linear channels,” Nathanson said.
