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鈥媁hen President Donald Trump 鈥媡urned the spotlight on Hollywood last month with talk of a protective tariff, he drew attention to 鈥媋 challenge 鈥媜鈥媐 rising urgency for California: the 鈥媜ngoing exodus of 鈥媔ts vaunted film and TV production 鈥媔ndustry to other states and 鈥媙ations.

The Golden State has a deep well of talent 鈥� from writers and makeup artists to grips and agents 鈥� but faces steep competition from a global marketplace for production. And in Los Angeles in particular, an identity as the entertainment capital of the world is at stake.

That identity is worth fighting for, says Colleen Bell, executive director of the California Film Commission, which administers a tax credit to incentivize production. A newly passed state budget expands those incentives for the industry.

鈥淐reativity flourishes when people feel free. That鈥檚 one of our greatest values here in California,鈥� she says. From Hollywood to Silicon Valley and the exploration of AI, the world鈥檚 fourth-largest economy is built on creativity. 鈥淚t鈥檚 all intertwined and it continues to deliver economic rewards and cultural rewards.鈥�

Why does it matter where productions take place?

In the early 1900s, movie studios established themselves in Hollywood, which was annexed into Los Angeles in 1910. Over time, studios fanned out to other parts of Los Angeles and adjacent cities, but Hollywood remains synonymous with moviemaking.

The motion picture industry is a small percentage (1.4%) of the state鈥檚 economic output, but California still leads the country in entertainment employment. Los Angeles is also the industry鈥檚 business center.

LA has a unique ecosystem of everyone and everything needed for a successful production. 鈥淚 just have to call and they don鈥檛 have to move,鈥� says Sanjay Sharma, who teaches entertainment finance at the University of Southern California. It鈥檚 important to preserve the ecosystem, he says, because it works.

The skilled crafts that underpin entertainment are also at risk of being lost, says David Offenberg, an entertainment finance professor at Loyola Marymount University. 鈥淏elow-the-line鈥� workers, like costume designers, set decorators, and sound engineers, can make or break a production.

Encouraging local production, he adds, keeps those crafts alive. 鈥淎nd if we lose that craftsmanship we may never get [it] back.鈥�

What are the incentives being offered in California?

California鈥檚 tax incentives are capped at $750 million per year statewide, more than double the previous cap thanks to a budget plan passed June 13. The state uses a formula based on job creation to grant the credits, and excludes the highest-paid, 鈥渁bove-the-line,鈥� positions such as lead actors, producers and directors.

It鈥檚 about 鈥渏obs, jobs, jobs,鈥� says Ms. Bell.

Those jobs peaked in 2022, when streaming companies like Netflix and Warner Bros. Discovery were creating content to feed pandemic viewing and entice new subscribers. But revenue didn鈥檛 keep pace with production, which eventually slowed.

Then in 2023, writers and actors went on strike for nearly four months, bringing production to a halt. The resulting wins for the unions increased production costs, which were already higher in Los Angeles, where the cost of living and labor exceeds that in most of the U.S.

Those jobs have yet to bounce back. An analysis of California鈥檚 creative economy finds employment in the film and TV industry is 25% below its 2022 peak despite adding 15,000 jobs in the past year. And between 2010 and 2023, California鈥檚 share of industry employment went from 54% to 46%.

At the local level, LA Mayor Karen Bass aims to encourage production in the city with a recent executive order that reduces red tape and lowers costs.

Gov. Gavin Newsom has made tax incentives a priority during his administration, pushing for the just-passed boost.聽Critics say the tax credit is a misplaced priority when the state faces a steep funding shortage, along with LA County鈥檚 wildfire recovery and entrenched issues like homelessness and the high cost of living.

The film commission cites its own 5-year study that found each tax credit dollar generates at least $24.40 in spending. The state鈥檚 nonpartisan Legislative Analyst鈥檚 Office calls the tax credit a 鈥渧alid tool for protecting Hollywood鈥檚 market share鈥� but says there is 鈥渨eak evidence鈥� it will benefit the state鈥檚 overall economy.

How has the president weighed in on Hollywood?

President Trump took office with Hollywood on his agenda. In January, he appointed聽film veterans Jon Voight, Sylvester Stallone, and Mel Gibson as 鈥淪pecial Envoys,鈥� he posted, 鈥渇or the purpose of bringing Hollywood, which has lost much business over the last four years to Foreign Countries, BACK鈥︹��

Tariffs were one of the envoys鈥� recommendations, which included federal tax incentives and subsidies for production companies.

The tariff idea met quick blowback from entertainment insiders who denounced them as unenforceable and out of touch with the globally networked way that movies are produced and viewed. And Governor Newsom leaned into it, suggesting a collaboration with the president for a $7.5 billion federal tax credit. President Trump later said there were no final decisions and all options are being explored.

Even if they don鈥檛 agree with the tariffs, Hollywood insiders welcome the help. 鈥淔or better or worse, whatever Trump is thinking, I applaud that he鈥檚 saying, 鈥極K, Hollywood should remain intact,鈥欌�� says Dr. Sharma.

How are other states and countries luring film production?

Countries like Canada, Hungary, Australia, and the U.K. have been luring film and TV production away from California for decades. So have other states, like Georgia, North Carolina, and New Jersey. Tax incentives are a big draw.

鈥淭hey鈥檙e all talking about rebates,鈥� says Alvin Lieberman, executive director of the Entertainment, Media, and Technology Initiative at New York University鈥檚 Stern School of Business. 鈥淵ou know, come to Malaysia, come to Nepal, come to India. And so they鈥檙e all offering it,鈥� he says, describing what he saw in Cannes, France, where he attended the eponymous film festival.

The United Kingdom, for instance, offers a 25.5% tax rebate on 80% of a production鈥檚 expenditures in the UK, with higher rebates for animated and independent films. Qualifying expenses include above-the-line talent. According to the British Film Commission, U.S. investment in UK productions went up 83% from 2023 to 2024.

More than half of U.S. states offer tax credits, ranging from 20% to 40% of qualifying expenses. Another 10 states offer other incentives. Georgia鈥檚 program is one of the most successful. The Peach State allows a 20% tax credit plus an additional 10% if the production makes qualified references to the state. It is more straightforward than California鈥檚 and has no cap.

The production ship has not yet sailed, says Professor Sharma, although its tethers are fraying.

LA still has what he calls the two Es: It鈥檚 effective and efficient. Along with a third, 鈥渆vil E鈥�: It鈥檚 expensive.

Any incentive that helps bring down the production costs will help, Professor Offenberg says. 鈥淧eople want to shoot here,鈥� he says. 鈥淚t鈥檚 just the cost difference is so big right now.鈥�

Editor's note: The story, originally published on June 14, was updated to correct the name of the Stern School of Business and the Oscar record of actor Sylvester Stallone.聽