Can Hollywood Keep Production Alive Despite Tax Incentive Battles?

Hands holding a film clapperboard against a dark background.

Los Angeles faces an existential threat as its iconic film industry crumbles under pressure from competitive tax incentives elsewhere, with industry insiders warning the entertainment capital could become “the next Detroit” without immediate action.

Key Insights

Los Angeles film and TV production plummeted 22.4% in Q1 2025 compared to the same period last year, with television production down 30.5%.
Industry experts warn that without competitive tax incentives, California’s entertainment industry faces a Detroit-like collapse as productions flee to states with better financial incentives.
Governor Newsom has proposed increasing film incentives from $330 million to $750 million, while new legislation aims to boost tax credits to cover 35% of qualified expenditures.
High housing costs and tax burdens are driving a celebrity exodus from Los Angeles to states like Texas and Florida, further threatening the industry’s cultural center.

Hollywood’s Alarming Decline

The entertainment industry in Los Angeles is experiencing an unprecedented downturn, with on-location production decreasing by 22.4% in the first quarter of 2025 compared to the same period last year. From January through March, shoot days totaled just 5,295, representing a dramatic decline in the city’s core industry. Television production, traditionally the backbone of LA’s entertainment economy, has been particularly hard hit with a 30.5% decrease across all categories including dramas (down 38.9%), comedies (29.9%), and reality shows (26.4%).

Feature film production hasn’t fared much better, falling by 28.9% in the same timeframe. Even more concerning, only 13 TV pilots were shot in Los Angeles last quarter, the lowest number ever recorded by FilmLA, the region’s film office. Soundstage occupancy has also declined significantly, with average occupancy dropping to 63% last year from 69% in 2023, reflecting the broader industry slowdown that has persisted even after the resolution of the writers’ and actors’ strikes.

The Detroit Comparison

Industry stakeholders are sounding the alarm with increasingly urgent warnings about the future of Los Angeles as an entertainment hub. At a town hall meeting on April 14, industry professionals gathered to discuss the crisis and potential solutions. The comparative decline of Detroit’s once-mighty auto industry has become a common and troubling reference point for what could happen to Los Angeles if current trends continue unchecked.

“This is not hyperbole to say that if we don’t act, the California film and TV industry will become the next Detroit auto.” – Noelle Stehman

The concern isn’t just about studio profits but about the middle-class workforce that depends on a thriving local production ecosystem. Unlike executives who can prosper regardless of where productions are filmed, crew members, technicians, and support staff face severe economic hardship when productions relocate. These workers are the backbone of the industry and the ones most vulnerable to the ongoing shift of production activity to more tax-friendly locations.

Competitive Disadvantage

California’s current tax incentives simply cannot compete with more aggressive programs offered by states like Georgia, New York, and New Mexico, as well as countries like Canada and the United Kingdom. These regions offer tax credits covering up to 35% of qualified production expenses, while California’s program is more limited in both scope and scale. This competitive disadvantage has led to a steady migration of productions away from Los Angeles, with productions choosing locations based primarily on financial incentives.

Governor Gavin Newsom has recognized the severity of the situation, proposing an increase in film incentives from $330 million to $750 million. Additionally, proposed legislation (SB630) aims to boost tax credits to cover up to 35% of qualified expenditures and expand the types of productions that qualify for these incentives. Currently, many television formats, including half-hour comedies, are ineligible for California’s tax credit program, contributing to the steep 30% decline in comedy production.

Economic Impact Beyond Hollywood

The implications of this decline extend far beyond the entertainment industry itself. Los Angeles’ identity and economy have been intertwined with Hollywood for over a century, and the diminishing presence of film and television production threatens the city’s cultural prominence and economic vitality. High housing costs, already a significant burden for industry workers, could further exacerbate the exodus as middle-class professionals find it increasingly difficult to justify remaining in a high-cost area with diminishing job opportunities.

“This is not a tax giveaway. This is a job program that is keeping people in their homes, keeping people off the unemployment rolls. If we don’t do this, it’s going to cost a lot, lot more than these tax credits are costing us.” – state Assemblyman Rick Zbur

The celebrity exodus from California to states with lower tax burdens like Texas and Florida further threatens Los Angeles’ status as the entertainment capital. As industry professionals and stars relocate, they take with them not only their tax dollars but also the intangible cultural capital that has defined Hollywood for generations. This migration reinforces the narrative that Los Angeles is losing its competitive edge and may accelerate the industry’s decentralization.

The Path Forward

For Los Angeles to maintain its historic position as the center of the entertainment universe, substantial policy changes appear necessary. Industry advocates argue that enhanced tax incentives are not handouts but investments in maintaining a vital economic sector that supports thousands of middle-class jobs. The proposed expansion of California’s tax credit program represents an acknowledgment that the state cannot rest on its laurels or natural advantages when competing in a global marketplace where financial incentives often dictate production decisions.

“California can’t afford to surrender any more work to its competitors” – FilmLA spokesman Philip Sokoloski

Without decisive action to create a more competitive environment for film and television production, Los Angeles risks more than just a temporary downturn—it faces a fundamental restructuring of an industry that has defined the region for generations. The stark numbers from the first quarter of 2025 suggest that this is not a post-pandemic adjustment or strike-related anomaly, but rather part of a longer-term structural shift that threatens to permanently alter Hollywood’s landscape.