The recent decrease in shooting in the industry’s home city was largely driven by a decline in advertising work.
While LA commercial production suffers from the same macroeconomic challenges that shrink TV and film production, it faces additional hurdles. These include not being eligible for the California tax credit, a direct link to declining advertising spending due to the troubled economy and challenges from non-union, less expensive crews. The social media production, which is not included in the FilmLA report, is a double-edged sword in that it can use non-union crew but is making use of it.
Why the steep decline in LA’s commercial production is particularly scary
FilmLA spokesman Philip Sokolowski said the local decline in commercial production, measured in the number of shooting days, is not linear. The highest levels seen recently were 6,033 shoot days for the year in 2018 versus 4,119 shoot days in 2022, which was the second lowest level since 2020, when COVID-19 disrupted all shoots.
Commercial production matters to Los Angeles because it generates production jobs and business revenue for “countless industry support vendors,” Sokolowski explained.
“Los Angeles is attractive to commercial producers because of local production infrastructure as well as access to LA-based celebrity talent,” he said.
Sokolowski said the continued decline in commercial production would result in fewer work opportunities for local production crews, and a loss of business for industry-specific vendors, many of whom are small businesses, that help film productions of all kinds. Is. Commercial manufacturing operates from a shared talent pool alongside other forms of production.
A continuing challenge for commercial production, which last year was 24.5% below its five-year annual average in the region and declined 33.7% in the fourth quarter alone, is its volatility.
Matt Miller, president and CEO of the Association of Independent Commercial Producers, said that unlike local-based television shows, commercials are typically one-off projects that can move and adjust depending on markets and other factors. production industry.
Troubled economy adds an additional challenge to commercial production
“The one factor that is equally affecting every region within the United States would be the economy,” Miller said. “An uncertain economy is never good for any business and certainly not for the advertising business.”
That’s because some marketers get timid and hold back on spending when the economy looks shaky, looking at quick fixes in budgets rather than continuing to invest in building brands, he said.
Total TV Ads for 2023 may slip to 8.2% In the face of economic concerns, according to S&P Global. “It should be of concern to everyone involved in business,” Miller said.
Meanwhile, all filming locations in the US are competing with overseas destinations, which have cheaper labor costs, fewer union agreements and less expensive COVID costs, he said.
Mexico City, Prague, Vancouver and Toronto are among the most popular filming locations for commercial shoots today.
Commercial production cannot claim the California tax credit like TV and film.
While there is still a large crew base in greater Los Angeles, commercial production appears to be shifting outside the region, where producers can take advantage of tax incentives available in other states, Miller said.
According to FilmLA, California is not among about two dozen jurisdictions that offer tax credits for commercial production. In contrast, television and feature film production have been able to take advantage of those state credits.
For decades, Los Angeles has enjoyed a commanding share of commercial production in the country: Southern California accounted for more than half of US production as recently as 2007. 2009 But “eventually, the realities of finance hit,” Miller said.
“Other areas that have tax credits market them aggressively and are aggressive about scaling them up and making them attractive to filmmakers in a variety of areas, but especially commercials,” he said. “New York , Georgia and Illinois have been very, very successful in doing this”.
Every time California’s film and TV tax credit program, administered by the California Film Commission, comes up for renewal, the AICP pushes for “greater acceptance of commercials” as a piece of that tax credit, Miller said. But commercial production has not yet been included in the program, he said.
Gov. Gavin Newsom’s proposed 2023-24 budget extends funding for the film and TV tax credit program for an additional five years and proposes to make those credits refundable for the first time since the program’s inception in 2009. Enables refundable tax credit applicants to claim. Tax refund at a discounted rate over multiple years. But commercial production firms will not benefit from that change.
Miller argued that tax credits and other incentives are effective if legislatures are patient and supportive of them, although academic do not agree On their efficacy in stimulating economic growth.
Colleen Bell, executive director of the California Film Commission, which administers the state’s film and television tax credit program, said the L.A. area’s slowdown in television and feature film production is one reason the governor is extending the tax credit program for another five years. The goal is to increase. very important
She cited a recent Los Angeles Economic Development Corp. study that found that every dollar allocated by the commission’s tax credit program created $24.40 in economic output, as well as returning $1.07 in state and local tax revenue to taxpayers.
“The continued commitment to our program from California’s leadership and recognition of the positive economic benefits that programs like ours provide to the state is very important as competition from other states and countries increases,” Bell said.
But the benefits may not always outweigh the costs. Arizona reportedly allowed a limited film tax credit from 2005 to 2010, which expired after the state Department of Commerce found that the program cost taxpayers. over $6 million in 2008.
Tim Howell, Principal and Executive Producer at Full-Service Video Production Company binary pulse studio which produces commercials and other video content out of offices in Southern California, Arizona and Texas, said his company is doing well overall after taking on clients who shifted production from more expensive production companies . But some of his technology clients have recently paused some of their advertising due to the uncertain economy and low venture capital funding.
“We work with a lot of tech companies that have been told they need to stop and think more carefully about the decisions they make like 12 months ago, go, go, go,” Howell said. are doing instead.”
He added that if there were financial incentives that could encourage these companies to move forward sooner, they could engage in the commercial production industry. Since the company has an office in Scottsdale, they are also taking “a close look” at new tax credit incentives for filming, which Arizona is set to roll out after a public comment phase that is in process.
Non-union workers are more prevalent in commercial production
Miller noted that in addition to the economy and global competition, commercial production is fraught with other unique constraints, including new break-in units willing to work at cut rates, often without unionized employees, as well as entities owned by advertising agencies. There is also some competition by. There is also competition for stages, equipment and crew from long-term employers in the TV and feature film sectors.
“There are many challenges in this extremely fast-paced and on-off project environment,” he said.
Miller said commercial production makes sense for film regions like Los Angeles because it has low environmental impact and is high economic.
“Due to the shorter duration, all vendors and crew command a higher per day rate – and because of quicker commuting, we have less of a disruptive footprint,” Miller said. “It’s always been the most attractive formula for film centers.”
He said the continued decline in commercial production could have a significant impact on the sector as it is the “bread and butter” for many vendors and the crew base. Since commercial shoots need to be very flexible, clients go with their preferred vendors, locations, and crew to get the job done quickly.
“When commercial companies move to other places and they have a good experience, they go back to what they’ve done in the past,” Miller said.
While commercials typically account for a small percentage of production – between 10%–15% in many regions – the economic impact on the overall film infrastructure is generally very high, which is “critical to the health of the overall film ecosystem”. Adds up, Miller said.
The double-edged sword of growing TikTok and other short-form video production
Meanwhile, some video production companies say they haven’t been negatively affected by the economy or other external factors. There are several such companies in the LA area that do a variety of filming – not only commercial filming but branding videos as well as TikTok and Instagram clips.
FilmLA’s data is derived from permits, and if it requires a permit such work may be classified as “Commercial,” “TV” or “Other”; Shoots that do not require a permit may not appear in the data. As a result, the impact of this diversification is not immediately clear, but it appears to be getting some production firms excited.
“We’ve been getting a lot of inquiries from companies that want to boost their marketing and social media presence, so we’ve been really busy,” said Anaheim-based Ryan Corsino. Corsino Productions, A modern media marketing company. “It seems like the more people I ask, the more they budget for marketing now — that’s where it’s trending toward social media.”
Corsino said that when it comes to producing commercials, he is still getting retainers “here and there” to do weekly, monthly or bimonthly film shoots to produce commercials. In fact, they have seen a rise since the start of the pandemic.
“It seems like when people for some reason said, ‘Hey, let’s [step up] Our marketing because no one is coming to the office. Nobody is really doing anything. Let’s do some media, or advertising, so we can put them out later in the year,” he said.
