For decades, California reigned unchallenged as the center of the entertainment industry. Hollywood’s dominance rose before World War II, and the resulting war devastation in Europe and Asia left Hollywood the unchallenged leader in movies. When television arose, the movie studios adapted and became the principal producer of both dramas and comedies. But the problem with being a leader -- especially in an industry with such high wages as filmed entertainment: other places will want a piece of the action. Luring films and television from California has become almost an art form unto itself. Not only are many other locations now attracting a significant share of production, they are successful enough to become a real threat to California’s dominance. What gives places such as Vancouver, Sydney, London, Albuquerque and Atlanta staying power? Film productions are not simply being lured there by incentives, but also by the presence of a strong local skilled workforce.

New York is in many ways California’s greatest domestic competitor. The size of its credit program is four times that of California’s, at $420 million per year. Demand for the large credit helps New York offset the higher costs of filming there. Louisiana also provides the same 30 percent credit but imposes no funding limit on the incentive program, and no sunset date. The program has been so effective the film Battle: Los Angeles was actually filmed in Shreveport. Georgia’s credit program also has no funding or budget cap and also adds an additional 10 percent credit on top of the 20 percent base if the there is a qualified promotion of Georgia itself in the show or movie. This has led to further investments in local studios, including by impresario Tyler Perry. New Mexico has a 25 percent credit with no sunset date or budget cap and has attracted blockbusters such as The Avengers . These states are effective because they have concentrated on building up local facilities and workforces to make themselves a viable alternative to California.

The most significant international competitor remains Canada, which combines a significant 16 percent credit on labor expenditures with a series of local incentives. British Columbia is the most aggressive, with its 33 percent qualifying labor credit and an additional 17.5 percent bonus for digital animation or visual effects – an area taken for granted by policy makers in California. The province has an additional advantage of being in the same time zone as California, allowing for easy communication and data sharing with main offices back in Los Angeles. Further, the province provides an additional incentive for filming outside of Vancouver, as a way to spread spending throughout the province. (This in particular is important for California, where the sheer concentration of talent limits filming outside of Los Angeles.) Other Canadian provinces, the UK, Australia and Germany are also aggressive, but New Zealand is the real rising star. Building on the local talent from the Lord of the Rings series, there is a large-budget screen production credit of 15 percent that not only applies to filming, but also postproduction, digital and visual effects. This allows the country to provide competition on normal movies and on high value digital.

California’s current incentive program is based on a tax credit covering 20 percent of qualifying local spending, and 25 percent for qualifying, relocating TV series and independent films. There are some important factors to understand about California’s incentives. First, they do not cover any films with a budget greater than $75 million. Second, they do not cover network dramas, except when they move in from out of state, and third, they have a sunset date, meaning they will run out in a couple of years, affecting studio planning. Even with these limitations, production companies still want to film in the state. When the most recent lottery for credits was held this month, 322 productions applied for California’s credit, with only 28 winning.

It is time for California to realize the real threat from other states and countries comes from the combination of lower costs AND a rising talent base. Most producers and executives would rather film close to home, where they do not have to worry about housing or travel and can watch over productions directly. But as the competition grows, California must be careful that jobs don’t leave with productions.