Hollywood Struggling against new film meccas

Associated Press

LOS ANGELES

In the old days, filmmakers flocked to Hollywood for its abundant sunshine, beautiful people and sandy beaches. But today a new filmmaking diaspora is spreading across the globe to places like Vancouver, London and Wellington, New Zealand.

Fueled by politicians doling out generous tax breaks, filmmaking talent is migrating to where the money is. The result is an incentives arms race that pits California against governments around the world and allows powerful studios —with hundreds of millions of dollars at their disposal— to cherry-pick the best deals.

The most recent iteration of the phenomenon came earlier this month when James Cameron announced plans to shoot and produce the next three “Avatar” sequels largely in New Zealand.

What Cameron gets out of the deal is a 25 percent rebate on production costs, as long as his company spends at least $413 million on the three films.

“There’s no place in the world that we could make these sequels more cost-effectively,” says producer Jon Landau. “We looked at other places,” says Landau. But in the end, “it was this rebate.”

In exchange, the local economy will benefit hugely, Landau says, comparing the ripple effect to the boost that comes from new home construction.

Driving the trend are powerful global forces squeezing the entertainment industry. Falling DVD sales are putting pressure on movie-making budgets, while the demand for ever-more-amazing special effects grows.

The spread of technology and skills around the world is creating a huge number of special effects suppliers — some using cheaper labor than can be found in Hollywood.

Government largesse has helped create minimoguldoms in Vancouver, Montreal, London, New York and Wellington, all of which are aggressively one-upping one another to become the next new hotbed of activity.

The tax-incentives race is destined to accelerate next year. State incentives in California — home to “Star Wars” pioneer Industrial Light & Magic — are too small to accommodate big-budget movies.

And the U.S. federal incentive, an arguably difficult-to-use tax deduction of up to $20 million per film or TV episode, is set to expire at the end of 2013.

Industry business leaders say they’re simply following the money.