“If you were a filmmaker in the 20th century, California was the only place to create your film. This monopoly is starting to change.
2024 saw Los Angeles have its lowest amount of film production anywhere in the US in over 30 years, while New Jersey, Texas, Michigan and Louisiana (often referred to as “Hollywood South”) are all aggressively pursuing a piece of the $70 billion the United States spends annually on film and television production.
This has come about through a multi-decade-long tax credit war.
How Tax Credits Have Changed How Hollywood Makes Films
Starting in the early 2000s, states across the country began offering significant tax rebates or credits to prospective studios looking to film away from California. In total, 38 states now offer various forms of production rebates/credits. Over the past two decades, states have collectively invested more than $25 billion in tax incentives.
New Jersey has emerged as one of the largest benefactors of this trend.
In 2018, NJ Governor Phil Murphy re-established and expanded the state’s tax incentive program. Productions filming in New Jersey can now obtain 30% to 44% transferable tax credits based on eligible expenses. The total annual amount of funding made available through tax credits is $400 million, with an additional $150 million to be issued to long-term studio partners developing large scale permanent film studio.”
This Strategy is Working
New Jersey’s production spend prior to incentives returning in 2017 was $67 million. Last year it exceeded $800 million. In early 2025, New Jersey was one of the top 5 production centers in the US.
Some government entities and the major studios have been tremendous supporters of this theory. Some examples of their investment can be seen: Netflix has announced that they are building a $1B studio campus on a former US military base. Lionsgate is building a 350K square foot studio in Newark. Investments are also being made into large-scale infrastructure because New Jersey is building an ecosystem instead of only chasing production.
Why California is losing ground
California is still the highest producing state, but they are also the most expensive. Union costs, location fees, permits, and public safety costs have greatly contributed to the high costs of film production in California. The gap in cost between states and overseas for streaming purposes has never been greater.
The traditional model of making money from the box office is no longer effective based on the fact that a $200M film could make billions in revenue. In the streaming era, studios treat all of their content as a “loss leader.” Not only do they use the big-budget films to gain and keep subscribers, but they also have trouble determining how much money they are making on each film produced.
As companies now focus more on making a profit rather than growing their subscriber base, they are seeing their production budgets decrease. The studios are cutting costs wherever possible, which often translates to filming outside of California.
ALSO READ: Why OpenAI’s Massive Losses Reveal A Deeper Problem In The AI Business Model
The global production race
Beginning in the late 1990s, Canada sparked the current production tax incentive “arms race.” Today, around 58 countries offer production incentives and America’s share of worldwide film production has dropped from approximately 51% in early 2022 and is projected to be 39%.
Filmmakers now “layer” their incentives by shooting in country “A,” doing visual effects in country “B,” and finishing post-production in country “C.” This is possible since many countries offer lower labor costs, favorable exchange rates, and/or low/no union costs.
Studios are increasingly shooting films set in Los Angeles outside the United States.
What about federal film tax credits?
President Trump proposed instituting tariffs on movies produced outside the U.S., which would be difficult to enforce.
A more feasible solution gaining traction is a federal film production tax credit (probably around 10%), in addition to the various state-based production incentives. This could bolster America’s international film competitive position, according to proponents. Critics contend that it only will lead to increased spending on subsidies without addressing the fundamental problem associated with movie production and streaming economics.
FOR MORE: https://civiclens.in/category/category-business-economy/
About the Author
