Chapter 8

The Ever-Changing Landscape

 

 

Whatever has happened in my quest for innovation has been part of my quest for immaculate reality.

—George Lucas

In the 1920s, the movie industry really began to flourish, and every decade or so, there have been innovations that made an enormous impact. During the 1930s, sound was introduced. The late 1940s and 1950s brought the television set. In the late 1970s and 1980s, we saw big advancements in visual effects (think Star Wars). Digital started making a significant impact in the 1990s, and the turn of the millennium brought remarkable advances in technology. The melding of tech and entertainment has been revolutionizing our business, and I see no end in sight.

Another big change has been the effect of film tax incentives being offered by almost 40 jurisdictions within the U.S. and by several countries throughout the rest of the world. Hollywood, or I should say Los Angeles, is no longer the film capital of the world, and up until 2014 when new legislation was passed to increase the state’s modest film and TV tax credit program, there was widespread fear that California had lost its signature industry for good.

It makes me dizzy just thinking about the changes that have occurred since this book was first published in 2005. Who would have thought that people would be watching content from their phones and tablets (smartphones didn’t exist quite yet, and while tablets did exist, the iPad wasn’t released until 2010). Who would have imagined that we’d be streaming shows from the Internet, using drones for filming, that there’d be such a thing as a 360-degree video camera, that production offices would be paperless, that “binge watching” would be a popular way to spend a weekend, that actors would be required to have at least a million YouTube followers in order to be considered for a new web series, and that movies would be shot on iPhones?

If this is the industry you want to be in, or are already in, you need to stay on top of the learning curve—whether it’s on the latest in technology and how tech is changing the way we do business, to how incentives are determining where the work is being done. Staying up-to-date on the shifting landscape isn’t just about being able to hold your own in a conversation, it’s also about knowing where the jobs are, the new businesses are starting, the new opportunities are emerging. It’s realizing that a lot of the old business models have been thrown out the window; hybrid startups are the order of the day and content creators have more choices. You can still work within traditional systems, but there’s more room to work outside the system or even create your own system.

This chapter will touch on some of the ways our industry has been changing, and what you should be aware of.

WHAT ARE PLATFORMS, AND WHY ARE THERE SO MANY?

Whether it’s a feature film, TV show, 5-minute webisode, documentary or a 60-second commercial, we’ll always be in the business of creating narratives—telling stories, and we’re going to use the most state-of-the-art methods to tell our stories. We’re going to exhibit them across the latest platforms.

The media landscape today is a network of connected platforms—methods in which content is being consumed. Platforms include movie theaters, network and cable TV, DVDs, VOD (video on demand), premium cable, Internet-based platforms, games, mobile devices, print (magazines, books, comics, graphic novels) and social media—Facebook, Facebook Live, Twitter, Snapchat, Instagram, Pinterest, etc.

Long gone are the days when a film was made, exhibited in theaters and then shown a couple of years later on television. These days, there’s little produced that isn’t distributed, spinned-off, discussed and/or marketed across multiple platforms. And the more platforms to fill with content—the more content that gets produced. The more content, the larger the variety of programming, the easier it is to target consumers by age and special interests. Just one small example of how a show that extends over multiple platforms can benefit viewers is the ability to interact with other viewers in real time while watching a program live. According to Nielsen Social, millions of TV fans across the U.S. come together on Twitter each week to discuss TV’s biggest moments as they happen without having to leave the comfort of their couches.

BRANDED CONTENT

Branded content is a word we hear a lot of these days. According to Wikipedia, it’s a form of advertising that uses the generating of content as a way to promote the particular brand which funds the content’s production. In essence, it’s a commercial. But it’s not necessarily the 30- or 60-second spot we see on TV (or fast forward through whenever we can). The whole definition of a commercial has expanded to incorporate multiple forms of branded content and new types of media and tech to communicate a brand’s message. The results can be anything from the traditional 30- and 60-second spots to a series of lovely 11-minute short films starring Jude Law made to promote Johnnie Walker Blue Label to a multi-episode web reality series promoting Samsung to a virtual reality experience that falls under the category of “cause” marketing. By using various platforms (including social media and visual social platforms), branded content (commercials) can be delivered directly to your target audience in a multitude of ways.

The long-established model of a brand hiring an ad agency to represent them, and the ad agency hiring a commercial production house to produce commercial spots for them will never fully go away, but we’re now seeing more flexible hybrid companies that may incorporate any or all aspects of an ad agency/tech firm/production company/post house. Some brands now deal directly with production companies (skipping the agency all together), and some brands are building their own production companies. There is no one standard any longer.

BROADENING HORIZONS

For me, job searches used to include the major studios and the medium to large-sized production companies (DreamWorks, HBO, Marvel, etc.). Many of my students are now looking for jobs at newer digital multi-platform companies such as Maker Studios, Vice, Awesomeness, Daily Motion, Believe Media, Omnivision Entertainment, and Fullscreen Media. Vice is a prime example of a multi-platform media company as they have an international network of digital channels; a television and feature film production studio; a magazine; a record label; a book-publishing division; and a television channel.

Major studios and networks have digital arms specializing in derivative content (based on their pre-existing shows) as well as original programming. And several production entities have created out-of-the-box business models, such as Joseph Gordon Levitt’s HITRECORD where artists from all over the world are invited to collaboratively edit, build upon, develop and remix each other’s work to create songs, animation, short films, books, live shows, music videos, etc. Some companies specialize, such as Machinima, in a network that creates fandom and gamer content in the form of scripted series, original content, weekly and daily shows, official publisher pop culture content and gameplay videos across multiple video platforms.

WHAT’S NEXT?

I recently attended a conference where panelists proclaimed that VR (virtual reality) is coming into its own, and that AR (augmented reality—the integration of digital information with the user’s environment in real time) is on the horizon. Not three weeks later, the AR-based Pokémon Go hit the market, and players across the globe went nuts. Who knows what’s truly on the horizon. But it’s to your benefit to keep up with the latest and greatest innovations that will continue to shape our industry.

INCENTIVES

There was a time when if you wanted to work in the entertainment industry, you absolutely had to live in Los Angeles or New York. Not anymore! Not for a while now. And why not? Because of incentives. You can’t start a career in show biz these days without understanding one of the largest driving influences shaping the way our business operates. And if you’re out there making your own films, this is a topic you should have a good working knowledge of, as it could save you a lot of money. Incentives offered to filmmakers include tax breaks, cash rebates and other benefits offered by states, cities and regions throughout the United States and many other countries to encourage film production within their jurisdictions. The Hollywood of today is virtual as well as international, with substantial production hubs in Georgia, Louisiana, Massachusetts and New Mexico, as well as Canada, Central Europe, Germany and the UK. A friend from L.A. who recently returned from Atlanta estimated that there were at least 30 productions shooting there during his stay—many of them large features. He said he kept running into people he knew, saw location directional signs all over town and that the traffic is getting almost as bad as it is in Los Angeles. Maybe that’s why some have started calling Atlanta “Hollywood South.” Georgia is booming because of the lucrative tax incentives they offer as well as their growing infrastructure and the career training they offer—all of which has been contributing to the creation of a major production center. (Notice how often you see the Georgia peach in the end credits of movies and TV shows? That’s because the state is giving an extra 10 percent in tax credits to productions that display the state’s promotional logo.) Film production personnel from all over the country are relocating to Atlanta. It’s become a great place for newcomers to the business to break-in and find work.

You’ll also find thriving film centers in Louisiana, Massachusetts, New Mexico and Puerto Rico (just to name a few), and one of the most recent jurisdictions introducing incentives is the U.S. Virgin Islands. Production is also flourishing in the UK, Germany, Canada, Central Europe and Australia, with growing infrastructures in South Africa, South America and the Middle East. Most recently, the country of Georgia as well as Ukraine have introduced incentives to lure U.S. and other international producers to their countries. China, another country in the spotlight, has the largest distribution market in the world. It’s also the country investing the most in its infrastructure for the purpose of developing a larger local film and television industry aimed at attracting international producers. China has been partnering with international companies and is currently developing national and regional incentives. And U.S. companies are now producing Chinese versions of U.S.-made movies, filmed in China for the Chinese market.

There are various types of production incentives (explained further ahead), but the bottom line is that a producer, production company or studio will basically decide to shoot in a particular country, region, state or jurisdiction, because it’s where they’ll get the most bang for their buck—sometimes shaving tens of millions of dollars off their budgets because of the incentives being offered in that particular locale. So even if the locations don’t quite provide the looks you’re after, even if the weather isn’t quite what you’d prefer, the crew base isn’t quite as experienced as you’d hoped they would be, the infrastructure’s not quite as substantial as you’d wanted—you’ll make it work. Production accountants are doing multiple budgets for each picture to see which locations will save them the most, and sometimes the savings realized will make the difference between producing a show or not.

Before applying for any incentive program, remember these two very important things:

1. The laws, regulations and guidelines pertaining to incentive programs are always in flux, so make sure you’re dealing with the most current rules and are aware of how these laws, regulations and guidelines could change.

2. Insist on certainty—certainty in the law, certainty in the process and certainty in the funding—before you agree to anything.

Incentives have fostered an entire industry involving state and international governments, film commissions, CPAs, consultants, attorneys, bankers, payroll companies, studio and network executives. Numerous positions (and entire departments) exist at studios, networks, law firms, payroll companies and consulting firms. The best of these specialists possess the legal astuteness to analyze complex legislation, the training of a CPA to understand complicated tax issues, the shrewdness of a politician to deal with state officials and the knowledge of what’s important to studios, networks and producers. All of these skills are vital in assessing a very wide range of often complicated programs and in being able to advise others—providing them with the incredibly detailed information they need to decide where to shoot their projects.

Several of the U.S. juridictions that offer incentive programs are also offering new and expanded educational opportunities for their budding filmmakers and local workforce—providing a myriad of film classes. And many of these courses are taught by highly-skilled and experienced instructors from Los Angeles and New York. The more qualified the local crew, the fewer number of people the production has to bring with them, the more money they save. And the larger the local workforce, the more successful the incentive program is in providing jobs and raising state revenue.

Types of Incentives

The following is based on information taken from the Entertainment Partners’ website (epfinancialsolutions.com), which includes an online version of The Essential Guide to U.S. & International Production Incentives.

Rebate

A cash rebate is the amount of money paid to a qualified production company based on the qualified expenditures made or the jobs created in the state. These funds don’t require a tax return to be filed and are not handled by the local tax authorities. They’re administered by the local Film Office, Departments of Trade and Industry, Commerce or Economic Development.

Tax Credits

Tax credits can be refundable or non-refundable—transferable or non-transferable, and they’re administered by the local taxing authority, most often the Department of Revenue.

Refundable Tax Credits

Although administered differently, a refundable tax credit functions in the same way as a production rebate, but can only be claimed by filing a tax return. The production company must file a tax return regardless of whether it has any income or owes any tax in the jurisdiction. If the production company does owe tax, a refund will be granted for the excess of the credit over the amount of tax owed. In some cases, banks or other lenders can monetize refundable tax credits so the production company can receive the money earlier.

Transferable Tax Credits

Transferable tax credits are non-refundable. So if a production company’s tax liability isn’t great enough or the production chooses not to wait until after an audit to capture their credit, they’re allowed to sell (“transfer”) the tax credits directly to local taxpayers—often to corporations that would buy them to offset their own tax liabilities. In addition, the production company will need to discount the credit from its face value to entice local taxpayers to purchase them. Rates often range from 85–90¢ on the dollar (sometimes lower), and the transfer can be handled directly by the production company or indirectly through the use of a broker (who would generally charge a commission).

Non-Refundable, Non-Transferable Tax Credits

A non-refundable, non-transferable tax credit is a tax credit that can only be used towards one’s own tax liabilites. Meaning, it cannot be refunded or sold/transferred. However, a non-refundable, non-transferable tax credit can generally be carried forward and used to reduce taxes in subsequent years if the production company has no current tax liability.

Incentive programs are not only complicated, but they’re also constantly changing, so do your due-diligence to stay on top of the latest programs being offered throughout the world. For more indepth information about incentives, check out my other book—The Complete Film Production Handbook (4th Edition).

I’d like to extend my thanks to Entertainment Partners’ JonDaniel Cornett, Staff Financial Solutions Specialist and Joseph Chianese, Executive Vice President of EP Financial Solutions for their help with this chapter. Entertainment Partners provides a worldwide production incentive website and online guide (The Essential Guide to U.S. & International Production Incentives) that are part of their ongoing commitment to providing the production community with the tools and knowledge needed to maximize the value of their production dollars. For more information, go to: epfinancialsolutions.com.

I dream for a living.

—Steven Spielberg

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