About/Policy Positions

About the Site:

This site was created  for the study and research of Runaway Production and state and international film incentives.   My goal is to maintain this site as one of, if not the most, comprehensive resources for the study of runaway production and film incentives.  Resources include: news updates with commentary, videos, policy information and an extensive report library containing MPAA reports, economic impact reports and general runaway production reports.

I have been studying the issue of runaway production for many years and have been twice-published (2007 & 2011/12) by the University of Pennsylvania Law School for lenghty law review articles on the topic of runaway production and state film incentives.  Both articles are availble in the Report Library of this site.

To contact me, please email depauldem44@gmail.com or leave a comment below.  I would love to hear from you.

Position on Using Film Incentives to Combat Runaway Production:

The following excerpt is the thesis from my most recent law review article (Down the Rabbit Hole: The Madness of State Film Incentives as a ‘Solution” to Runaway Production) and it represents the official position of this site:

At the close of 2010, almost every U.S. state offered some level of significant production incentives in the hopes of becoming the next Hollywood North, Hollywood South . . . the “Hollywood anywhere.”  Sadly, many of these cash-starved states are beginning to realize that the perceived economic benefits of film incentives are, essentially, Hollywood special effects; they may look real, but they are an illusion.

What should have been a national solution to runaway production, using a single film incentive to protect the potent concentration of the Hollywood industry cluster in Los Angeles (and, to a lesser extent, New York), was bastardized into a state level tool that serves self-interested short-term “benefits” to individual states.  In the short term, jobs remained in the U.S. as opposed to going to Canada, but this was achieved by selfish, outrageously expensive and unsustainable policies that served to hurt not only the cash-strapped states enacting them, but also the entire nation.  The race to the bottom of U.S. states enacting film incentives has been a costly distraction from the threat runaway production poses from other nations.  Film incentives are a weapon that the nation can use to defend itself.  But like any weapon, the nation needs to understand how to operate it.  With film incentives, the fundamentals are like that of a gun.  Instead of pointing the gun at the other nations causing runaway production, the U.S. has been shooting itself in the face.

In addition to the problem of states fighting each other rather than responding to threats on an international level, convincing critics that a national film incentive is needed will prove difficult.  While production incentives can be employed to combat the effects of runaway production, they also have the effect of causing runaway production in other locations.  One of the common arguments against the use of film incentives in the U.S., at least at the state level, is that taxpayers are subsidizing an economic activity that would have taken place anyways, even in the absence of film incentives.  Hollywood, after all, will continue to make movies.

While this argument has a logical appeal, it is fatally flawed for a number of reasons.  First, in places where there is no film industry or very little production activity the argument that activity would have taken place there anyways is simply not true.  For example, in 2002, the year before Louisiana enacted its first incentive, production spending was just $3.5 million.  In 2010, after nearly a decade with an increasingly generous film incentive, production spending in Louisiana soared to just over $674 million, representing an almost incomprehensibly enormous increase.  Thus, at the state level in Louisiana, the argument that the film incentive is rewarding economic activity that would have taken place anyways is patently false.

Indeed, the argument that film incentives reward economic activity that would have occurred anyways is only valid in hypothetical scenarios.  If the U.S. economy existed in a vacuum detached from the global economy and no states offered film incentives, the economic activity from film and television would still take place; it would occur almost exclusively in California and New York.  In such a vacuum, it would be a waste of money for the nation to reward economic activity already benefiting the nation—and even more wasteful for California or New York to do so alone.  Taking this logic to the global economy, but for significant film incentives designed specifically to decimate and relocate Hollywood abroad, most film and television production would occur in the U.S.

But this hypothetical argument rests on an assumption that has no basis in reality.  Film incentives exist.  They are a weapon being used to wage economic warfare against the U.S.  Film incentives, like any weapon of war, were designed to cause maximum damage to the intended target.  For example, Canadian-designed film incentives cause runaway production by attempting to erode the comparative advantages the U.S. has from its concentrated industry clusters in California and New York.  These clusters are the key to the U.S. film industry’s global dominance, and policymakers in the U.S. seem completely oblivious to this monumentally important fact.

If the United States has a national interest in preventing runaway production to foreign nations, then having all fifty states competing with each other is not only counterproductive, but it is financially devastating to numerous state governments unable to sustain the huge amount of funds needed to pay for production incentives.  Any hope that film and television production will remain in states with no history in the industry once the production incentives cease is wishful thinking.  If the industry cluster in Los Angeles remains viable in the short-term, ending incentives in U.S. states outside of California and New York should result in a return of some to those two traditional locations.

A more likely result is that productions will, in the absence of domestic film incentives, flock in alarming numbers to locations abroad.  Just dealing with Canada and its film incentives was damaging to the United States.  Now, however, the nation faces a new host of opponents who have imitated the Canadian model of attack at the same breakneck speed at which it was adopted in almost every U.S. state.  The race to the bottom, certainly in the United States, must end.  It should be a concern for other nations, not this one.  With a national incentive combined with the advantage we already have from the industry cluster in Los Angeles, the U.S. would not have to compete in a race to the bottom.  In waging economic warfare—and military warfare alike—it is much easier to defend than it is to attack.  For each dollar the U.S. spent on protecting the film industry, the competition would need to match it with thousands more.  The international race to the bottom may prove too costly and the gains, if any, insignificant enough to sustain an industry without the steady stream of productions that require government spending to attract.

Position on Using Trade Action Against Foreign Film to Combat Runaway Production:

When I started writing about runaway production in 2005, I framed it as a national concern.  Runaway production was leaving the United States for international locations.  Canada was the primary destination because of its proximity, cultural similarities and (for a time) a favorable exchange rate.  Other popular destinations included South Africa, Australia, New Zealand, Romania, Hungary, and the United Kingdom.  At that time, the U.S. retained two potential weapons to fight runaway production to Canada and elsewhere:  a trade action in the hopes foreign film incentives would be declared illegal and the enactment of competing film incentives in the U.S. to “fight fire with fire.”  In 2007, a trade complaint was filed with the United States Trade Representative.  The United States Trade Representative considered and rejected the complaint.

In 2011, there was a development in Europe that could breathe new life into the argument favoring filing trade actions against Canada.  In June 2011, the European Commission launched “a public consultation as the first step of a review of the criteria used to apply EU state aid rules to Member States’ financial support for making and distributing films.” In the accompanying issue paper, the European Commission noted that, while European Union member film incentives may lure films to Europe, they also result in a subsidy race that contradicts treaty objectives:

Major US-financed films have an average production budget of $65 million (€46million), with the most expensive films exceeding $200 million (€141 million).  This is many times higher than those of typical European productions.  While attracting them with subsidies may ensure that these high profile films are made in Europe rather than elsewhere, such subsidies distort competition among European production locations.  In these cases, the question is not whether the film will be produced but only where this will be done.

To the extent that this use of public subsidies in effect leads to competition with other Member States, this is detrimental both to the sector and to European taxpayers.  It was not envisaged when the original State aid rules for promoting the European cinematographic culture were designed.  Avoiding subsidy races is precisely one of the objectives of the State aid provisions of the Treaty.[1]

The European Commission plans to complete its review by the end of 2012.  Regrettably, the only remaining option for preventing runaway production in the U.S. is the “fight fire with fire” approach.  This is not to say another trade action complaint couldn’t be filed.  It may be more advantageous to wait and see what action the European Commission takes first, however, before filing with the United States Trade Representative again.  A finding that film incentives violate trade law in the EU may offer a stronger case to present to the USTR.