While budget shortfalls globally and throughout the U.S. translated into the reduction or outright elimination of a number of filming incentive programs over the past year, there have been on the flip side several tax credit and rebate initiatives that actually increased or were extended in various locales. This largely under-the-radar development emerged front and center during a panel discussion at the Producers Guild of America’s (PGA) Produced By Conference held this past weekend (6/4-5) at The Disney Studios in Burbank.
The session–“Worldwide Incentives: An Overview and Update”–took on an extra measure of relevance in that this was the first year that the Produced By Conference was held in tandem with the Association of Film Commissioners International’s (AFCI) annual Locations Trade Show. The two events blended successfully with high caliber producer foot traffic making its way to the outdoor Locations exhibit space featuring the wares of film commissions as well as production resources and services throughout the world. The pairing of events was also conducive to discussions between PGA members and a film commission community that provides more than $2 billion in annual incentives and financing for projects.
The “Worldwide Incentives” panel was moderated by Joseph Chianese, sr. VP of tax, business development and production planning for Entertainment Partners, which sponsored the session. Panelists were: John Hadity, president/CEO of Hadity & Associates and chairman of PGA East; Mary Ann Hughes, VP, film and TV production planning, The Walt Disney Company; Andrew Matthews, president, RKO Pictures; and production supervisor Bryan Yaconelli. During the session, Chianese also called upon film commissioners in the audience for select updates.
Chianese cited several encouraging developments, noting that progressive incentive measures have been extended in Illinois to the year 2021, Wyoming to 2016, Ireland to 2015 and Italy to 2013.
Furthermore Utah saw its tax credit increase to 25 percent on qualifying expenditures. Mississippi’s was raised to 25 percent as well–30 percent for residents. Maryland upped its annual incentives cap to $7.5 million. Puerto Rico instituted a 20 percent tax credit covering non-resident talent.
And there was even a silver lining to Michigan’s recently instituted restrictions on its precedent-setting 42 percent refundable tax credit. Though still in effect, that credit is subject to a dramatically decreased annual cap of $25 million. Still, Hughes noted that on the plus side, Michigan is honoring all projects for which producers have entered into contracts with the state prior to the cap reduction. Hughes related that having that kind of certainty once you enter into a deal with a state is invaluable, giving a project much needed stability. When such legally binding agreements are part of the procedural operation, producers can confidently plan their budgets.
However, not all states have legally binding contracts set with producers early on in the process, meaning that there are instances when changes in incentives could adversely impact certain projects. This has led to the emergence of insurance policies covering projects in the event of incentive changes. Whereas as recently as a year ago, said Hughes, producers generally weren’t seriously considering such insurance coverage, now they are given the cost-cutting policies being instituted by local and state legislatures in light of a challenging economy. Hadity said he wouldn’t buy such insurance for projects in Michigan or New York, for example, but he would consider one for a job in New Mexico.
Relative to trends, Chianese pointed to stand-alone postproduction incentives in Canada, Australia and New Zealand as some locales are showing interest in the post end of the business for those projects they might not be able to successfully court for shooting. There’s also a New York State post credit of 10 percent on projects for which 75 percent of the postproduction is done in New York. Currently under consideration in the NY State Assembly is a bill that would apply this post credit to individual specialties–meaning that rather than 75 percent of the overall post being needed to qualify for the credit, a project that had 75 percent of its VFX work done in NY could earn the credit on its VFX expenditures. The same would apply to music, and to picture to sound mix and editing.
In terms of how in demand incentives are, Chianese noted that California’s $100 million allocation for tax credits for the upcoming fiscal year started accepting applications on June 1. During that first day, 176 applications were received for either qualifying feature film or TV projects–as compared to 70 applications last year. The entire $100 million allocation was approved for 27 projects on day one of the filing period. In that mix are four studio features, 10 independent feature films, 10 TV series, one independent movie of the week, and two TV programs relocating to California. (Commercials are not eligible for the California Film & Television Tax Credit Program, which was enacted in 2009.)
Based on information provided by the applicants, it’s estimated that these projects will spend more than $662 million in California, including nearly $234 million in qualified wages. They will employ an estimated 3,048 cast members, 3,307 crew members and 49,778 extras/stand-ins.
The California Film Commission will continue to accept tax credit program applications throughout the fiscal year for placement on a waiting list. Those on the list will be accepted only after credits are freed up by other projects that withdraw from the program due to scheduling delays, casting problems or other production-related issues.
The California State Assembly voted last month to extend the state’s Film and Television Tax Credit Program five more years from 2014 to July 2019. The proposal next goes to the state Senate for consideration.
Traffic report
Last year’s stand-alone Locations Trade Show drew nearly 3,800 attendees to the Santa Monica Civic Auditorium. This year’s event held in conjunction with the Produced By Conference brought in 2,200-plus people. However, the general consensus among Locations exhibitors was that while the quantity was down, quality was way up with booth traffic consisting of more decision-makers than in years past.
“The philosophy of these two shows and their coming together is a natural fit,” assessed Honolulu film commissioner Walea Constantinau. “High-level producers and personnel are hopping over from the adjacent Produced By Conference to get a handle on what the film commissioners from all over the world are offering in terms of support. The level of people coming over to our booth has been quite good.
Those decision-makers spanned features, TV, commercials, music videos and varied media projects. Still, some film commission exhibitors observed that there were not as many commercial producers on hand as in recent years. Others, though, said they did connect with several from the spot production community. Visiting the Hawaii booth, for example, was a representative from Anonymous Content.
Several film commissions also held “On The Ground With” sessions as producers visited them at a central venue on the exhibit floor to talk in private, ask questions and gain feedback and insights into different locales, incentives, infrastructure, services and resources. Hawaii held such a session, which Constantinau and Georja Skinner, chief officer, creative industries division for the State of Hawaii Film Office, said proved valuable.
Hawaii enjoyed a banner 2010, drawing features, TV and commercials to the collective tune of more than $400 million in production spending. A catalyst for that business has proven to be the ongoing Motion Picture, Digital Media and Film Production refundable tax credit–15 percent of qualified production costs incurred on Oahu, and 20 percent on the neighbor islands (Big Island of Hawaii, Kauai, Lanai, Maui and Molokai).
While a measure to further enhance those incentives didn’t make it out of legislative committee, Hawaii’s tax credits remain fully in effect. And legislative support for the proposed enhancements grew substantively over the past year, causing Skinner and Constantinau to be optimistic over the prospects for expanding the scope of the program perhaps in the next session of Hawaii’s legislature.
Unlimited channels
Meanwhile a smattering of commercial production folk was part of a turnout for the Produced By Conference session titled “Unlimited Channels: Digital Content, Brand Identity, Unmined Resources.” David Tochterman, head of digital media at Innovative Artists, moderated the panel discussion, which featured speakers Justine Bateman, founder of Section 5; Paul Kontonis, VP/group director of brand content at The Third Act, which is Digitas‘ brand content entity; Erin McPherson, VP/head of originals and video programming for Yahoo!; Roy Sekoff, founding editor of the Huffington Post and now the AOL Huffington Post Media Group; Jed A. Selkowitz, director of entertainment marketing for The Coca-Cola Company; and Larry Tanz, president of Vuguru.
Bateman said that the digital space needs to be regarded fully as a medium unto itself–not just a portal to distribute material that was originally created for traditional venues. Her company Section 5 produced the last season of Easy to Assemble, the well received Ikea-sponsored web series featuring actress Ileana Douglas.
The Third Act’s Kontonis, who also chairs the International Academy of Web Television, observed that clients are often more comfortable than their traditional broadcast agencies with delving deeply into original web content. However, success stories in this discipline will hopefully bring more around to the potential of web fare. The Third Act and Digitas, for example, scored with Real Women Of Philadelphia, a series in which chef Paula Dean served as a catalyst for viewers to develop and share their recipes for cooking with cream cheese. The series, for which Dean and her colleagues served as co-creators, grew out of the need to shift consumer behavior towards cooking with the brand. Real Women of Philadelphia came out of a key insight that women need a new idea endorsed before they’ll try it–cooking being no exception. Once an endorsement is accepted, it can be shared and consumers love to share. So the idea of a community generated contest, finding the “Real Women Of Philadelphia,” was all about getting people who had tried cooking with Philly to suggest it to others. Just this week, Real Women of Philadelphia earned a Gold Effie in the Media Idea category.
McPherson said that part of her role is to “evangelize” Yahoo!’s commitment to developing original video while AOL Huffington Post’s Sekoff too is looking to step up its involvement in web video content.
Selkowitz noted that Coca-Cola is not just a financier but a marketing partner, deserving of a seat of its own–alongside its agency–at the content creation and development table. Coke is also a medium itself, with a channel sporting some 30 million followers on FaceBook.
Tanz, whose Vuguru develops and finances original scripted programming that is distributed on different platforms, sees the Internet as akin to what cable TV was and has become. He noted that the cable box was originally in place to get better reception, then local access programming, then MTV, then lower budget and now higher budget original programming. “There is no longer a division between cable and broadcast programming,” he observed. Similarly, the Internet is coming of age, having begun with user-generated content, then re-running product from traditional media (Netflix, Hulu) and now starting to commit heavily to original programming as reflected in the planned 26-episode series House of Cards. “The Internet is becoming like cable in that people won’t be coming online for the sake of going online. They’ll be coming to watch a good show.” Tanz reasoned that just like there was no distinction between broadcast and cable when cable matured, there won’t be such a great distinction as the Internet matures with first-run content.
