The CFC’s Progress Report, first released Nov. 16, published results indicating that films with budgets higher than $20 million in the state’s tax credit program, which incentivizes productions to stay in or relocate to California, have spent between 5% and 6.5% of their total budgets on protocols including both labor and personal protective equipment.
Measuring data from the third iteration of California’s tax credit program, which wrapped its 2020-2021 fiscal year June 30, the study was one of the first in the industry to quantify Covid compliance, formalizing costs that production insiders anecdotally set at 10%-15% of budgets. Joe Chianese, executive vice president at Entertainment Partners, a Burbank-based entertainment payroll and workforce management company, told the Business Journal those percentages may be lower purely because of the range of data collected.
“Four months into the pandemic, there were a lot more protocols and procedures put in place that helped productions — I won’t say minimize, but at least be more aware of what the costs were going to be,” Chianese said.
The 48 approved projects for Program 3.0’s first fiscal year will reportedly generate $2.6 billion in direct in-state spending, including more than $992 million in qualified wages. The 50 projects currently in the tax program expect to pay more than $90 million for Covid-related costs as a portion of aggregated budgets totaling $1.9 billion.
After having adhered to guidelines proposed in June 2020 by the Industry-Wide Labor-Management Safety Committee Task Force and later formalized by the Los Angeles County Department of Public Health, industry unions and guilds including the Producers Guild of America, Academy of Motion Picture Arts and Sciences and Directors Guild of America successfully negotiated the Covid-19 Return to Work Agreement in September 2020, which outlined safety requirements involved parties could subsequently modify based on changing Covid conditions.
Chianese said the state’s rapid implementation of protocols, which included PPE material availability, testing or vaccination mandates, and a multizone system based on each cast or crew member’s role on a production, aided the industry in getting back to work. For a larger production like Netflix Inc.’s “Beverly Hills Cop 4,” the Business Journal estimates it spent more than $7 million of its almost $80 million in qualified expenditures on Covid-related costs.
Meanwhile, a CFC force majeure provision likely alleviated costs associated with delays and interruptions.
“Once you’re admitted into the California incentive program, you have to start production within 180 days,” Chianese said. “So, given that there were delays in start times or delays in production in general, these force majeure provisions definitely provided relief to producers as well.”
California has aggressively courted production with incentives like those in Program 3.0, which added $180 million in subsidies for television and $150 million to renovate soundstages and totaled $660 million for all incentives offered over the next two years. The program seems to be working: In October, the CFC reported that 25 TV series have relocated to California since 2015 to take advantage of these incentives as well as the state’s well-established infrastructure for personnel, soundstages and other vendors.
Nevertheless, there are tradeoffs for coming to California for production, such as relocation costs if shooting a film or television series has already started somewhere else, that may undercut the value of some of those incentives. Additionally, Chianese acknowledged that programs in other states, such as those in Georgia, offer incentives that are just as attractive as those in Program 3.0. But given California’s pedigree as the birthplace of the entertainment industry, he indicated that the motivation to come (or come back) to the state may be both creative and financial.
“What California did is encourage productions to come back by offering a 25% credit where (other states) might only offer 20%,” Chianese said. “But if your talent lives here to do your production here, versus having to fly your talent wherever you’re shooting outside of California and housing them, there’s less of a cost. So, there’s a variety of reasons.”