The article repeatedly mentions how production moved to Atlanta due to tax incentives. Even that is a race to the bottom, as Disney moved production of Marvel movies out of Atlanta last year to the UK where they got better tax incentives. Even the undercutting cities are being undercut.
The whole tax incentive business is a big race to the bottom. Sports teams also abandon their taxpayer funded stadiums once somebody else offers a better deal.
Yep. See the Kansas City Chiefs.
Clark Hunt is the largest recipient of welfare in the entire region.
Sports teams are an interesting one because often times these things go on the ballot and people vote for that. So it looks like people and municipalities have varying reasons for keeping a team. That said sometimes it just doesn’t make business sense for a team to stay and other times a municipality decides it’s not worth the cost to keep a pro team.
In the case of the Chiefs, Jackson Co., MO voters voted not to fund a new stadium.
The reasoning was pretty simple: the Hunt family is worth $25 billion [0]. They could likely pay for any sort of improvements to Arrowhead, or to replace it altogether, without taxpayer funds, which comes from people in a metro area where the average income is on the lower side of things in a time when costs for everything keep going up.
On the other side of the state line, Kansas lawmakers specifically targeted the goal of moving two professional sports teams to the state using public funds called STAR bonds.
The end result is that the Kansas City metropolitan area will be spending, in total, about $3-4 billion to give the Hunt family a new place for their sports team to play, likely far away from the city center, and that Arrowhead needs to be torn down, which will cost at least tens of millions of dollars, once again, at taxpayer expense.
$3 billion could probably build out a real public transit system for the KC metro.
[0] https://sports.yahoo.com/meet-25-billion-hunt-family-2024104...
The crazy thing is that the best case is that the city will hopefully break even i all the promised benefits materialize. In most cases they don't. I bet if they hired a good VC to invest the same money into maybe 50 startups they would have a much higher change of a good ROI. But then the same people who accept sales tax increases for the sports team would probably be complaining about the tax burden.
I also don’t like subsidizing sports teams. To me it doesn’t make too much sense. Yes I know fans can be pretty loyal and sometimes that team is sort of like a pet dog. They love it through highs and lows. It’s something that can provide some identity to some as well as live vicariously through them. I get it but I feel sometimes you gotta let boyhood ideas and dreams go.
But hey sometimes people vote for their teams to stay despite the negative monetary ROI.
What is weird to me as a European is that sports teams in the US can move. Can you imagine FC Barcelona moving to Madrid?
We have funny examples a little bit like "imagine FC Barça moving to Madrid" in the US. Used for comedy (but these are all real examples) from the opening monologue of the film BASEketball
> The Minneapolis Lakers moved to Los Angeles, where there are no lakes; the [Houston] Oilers moved to Tennessee, where there is no oil. The [New Orleans] Jazz moved to Salt Lake City, where they don't allow music.
Other names like that are
- the Baltimore Colts (named for Maryland's thoroughbred racing tradition) moving to Indianapolis (more known for open wheel auto racing),
- the Vancouver Grizzlies moving to Memphis, Tennessee (which never had Grizzlies even in the post-glacial period)
- the Brooklyn (Streetcar) Dodgers moving to Los Angeles in 1958 right when the LAMTA took over the few remaining street car lines before replacing them with buses in 1963.
The closest thing I can think of in European sports, and it's a stretch, is cycling teams. I picked this teams as the first example I could think of, not because it's some egregious example:
1984–1986 Kwantum–Decosol
1987–1989 Superconfex–Yoko
1990–1992 Buckler–Colnago
1993–1994 WordPerfect
1995 Novell
1996–2012 Rabobank
2013 Blanco
2013–2014 Belkin
2015–2018 LottoNL–Jumbo
2019–2023 Jumbo–Visma
2024– Visma–Lease a Bike
via https://en.wikipedia.org/wiki/Visma%E2%80%93Lease_a_Bike_(me.... Also note that the team was newly formed from a schism in TI–Raleigh, where the other half of the riders went to Panasonic.
The parallel is that the name changes make tracking that team a real ship of Theseus problem: if the name, sponsors, riders, and staff turn over, is it worth calling it the same team? Similarly, if a football team changes cities, names, personnel, and owners, is it worth calling it the same team (Houston Oilers, Tennessee Oilers, Tennessee Titans)?
It's a little weird but the teams and the sports leagues are basically just corporations that engage in show business. They have no real connection to where they are located.
I just saw the new Spider-Man movie and there were a ton of notices about Canada-based film credits and from various provinces, too. I'm not sure how these credits work, but maybe spreading the work out to various tax incentivized areas is the current play.
Not that you're wrong, but I could have sworn that Marvel production was always based in the UK.
Post-production is very much still in California though.
https://discoveratlanta.com/stories/things-to-do/atlantas-ma...
Atlanta did a lot of the big ones.
What has yet to be mentioned is why Hollywood, in the first place?
Out of the many reasons, one is quite simple: daylight. This used to be really important with film.
Historically, this was why efforts to move filming to somewhere like 'Scunthorpe, UK' didn't really work, despite tax fiddles, because you need light and some places just don't have it.
But this doesn't matter now, because film has moved on, there is no need to have a massive glowing unshielded nuclear fusion reactor, 93 million miles directly overhead, just to get some lens focused on some bits of silver halide.
My understanding is that an important consideration at the time was that it is very far from New Jersey.
Edison had a lot of early patents for film, and wanted to monopolize the industry.
Film makers in California were far enough away that it was inconvenient for Edison to sue them, both because it required sending people there in person, and because the district courts were favorable.
The irony here being that Netflix is currently in a massive layout to build a studio in NJ (like, 20 minutes from the old Bell Labs). Almost feels like giving that troll the finger!
A hundred years ago they were practically giving away land in LA. The real estate value has flipped.
You, uh, you're not from New Jersey are you? I promise you, we're not giving away land around here.
I too have experienced the light of Scunthorpe. ‘The skies reflect our labours’ as they say ;)
Why Hollywood?
Because Edison and Patents in New York which was the original centre for filmmaking in America.
https://en.wikipedia.org/wiki/Motion_Picture_Patents_Company...
I mean, the VFX part of the Film industry (and actual location shooting to some degree) has been chasing subsidies / tax credits since around 2002 with the Harry Potter movies that mostly were shot and produced (and more specifically the VFX were done in London, rather than in California) in the UK.
Since then Canada and the UK in particular (and NZ and Australia) have had various different fluctuations in subsidies for various parts of filming / doing post-production of movies over the intervening years.
Nobody really wins in a race to the bottom
Film in Atlanta has dropped significantly.
We had a boom from 2010-2022, but post streaming era the gravity has moved to the UK and Eastern Europe.
soon they will be filming in mumbai. already setup for movie making.
Much of the VFX and CGI industry is already in India.
Movies and shows like Inception, Interstellar, Ex Machina, Tenet, Dune 1&2, Odyssey, Chernobyl, Foundation, and The Last of Us were VFXed in large part by Indian companies like Prime Focus, Makuta, Phanton, and their subsidiaries.
A number of these overlap with HPC and Distributed Systems with a number of major players in the space coming out of the GPU design space like Raja Koduri (AMD, Apple, Intel). Nvidia, AMD, Intel, Apple, and others having dedicated GPU design teams in India since the early 2000s also helped.
Why though? I thought Hollywood had their own accounting rules which always meant movies made a loss. What are they paying the tax on?
Tax incentives these days include transferable tax credits. Even if your net tax rate was 0%, you can sell the credit to someone else, typically a bank. IOW, states and countries give you money, not simply give you a tax rate break.
What kind of dystopian fuckery is that?
It reminds me of the eBay market in bulk lots of used scratch-offs harvested from the trash:
https://www.forbes.com/sites/robertwood/2016/01/14/powerball...
I'm not sure of the exact history, but it may have been copied from how affordable housing projects are subsidized at the Federal and state levels: https://sgp.fas.org/crs/misc/RS22389.pdf
Affordable housing tax credits are contingent on a tremendous amount of regulations and stipulations, including who ends up holding equity in the property (it's not easy to use these as passthrough vehicles to get personally rich), so the private lenders tend to be repeat players, often banks, who understand how to navigate the process. Among other things, I guess it's a way to outsource oversight, so that the government doesn't need to maintain a huge bureaucracy to police each and every development project. OTOH, the financing complexity comes at a cost; a significant fraction of the value of the tax credits pays for lawyers and accountants, rather than to actual construction.
I don't know if filmmaking subsidies are more lax or easier to game.
Also, I think using tax credit schemes, instead of direct payments, might be a way to obfuscate the cost of these programs from a legislative and political perspective; not unlike the Earned Income tax credit. Nominally speaking, tax credits reduce government revenues rather contribute to expenditures; the latter draws far more attention.
Hollywood accounting rules are regular accounting rules (GAAP). The only reason “Hollywood accounting” is a thing is because of a bunch of actors who didn’t know the difference between “gross” and “net” points got screwed over.
Everyone involved still pays their taxes, but the special purpose vehicle used to organize the production is essentially a passthrough entity.
If you’re not a name, you’re not getting gross points. There’s a wide swathe of participants (actors, writers, directors…) who need to demonstrate risk by taking net points to get signed, and they are routinely screwed by tactics like artificially inflated self-dealing distribution fees that cause the “production” itself to show a paper loss while the IP has generated hundreds of millions of dollars more than has been invested into it.
Movie Money Understanding Hollywood's (creative) Accounting Practices 9781879505865 This is THE book on the subject. There's a lot more to it than that. Sometimes productions get creatively charged by the studios costs that may not be directly related to shift losses. Sometimes contracts redefine common terms so your points structure is completely misleading.
I presume that what happens is if a movie is too profitable, other business expenses are shifted to the ledger to reduce the profits. This works because a movie is not a separate accounting entity.
>This works because a movie is not a separate accounting entity.
Each movie is set up as a separate legal business entity (LLC). That's the SPV (special purpose vehicle). https://www.google.com/search?q=each+hollywood+movie+is+a+se...
There's also a separate LLC for the parent production company. The production company LLC can also send invoices to the individual movie LLC for services. People can get creative with production companies "overcharging" for various expenses back to the movie's LLC but whatever creative accounting they want to do still needs to ultimately satisfy IRS scrutiny if there's an audit. There are entertainment attorneys that specialize in movie LLCs.
Why would that matter if it's all still a subsidiary of Apple/Amazon/Disney/Comcast/Netflix/Sony?
The relevant taxing authorities would be concerned with the parent companies' financials, not the subsidiaries. Moving money from right hand to left hand doesn't change one's tax liabilities.
"Hollywood accounting" only refers to civil disputes due to insufficiently defined contracts between two businesses (usually actors and producers).
The benefit of “Hollywood accounting” isn’t necessarily tax avoidance; that’s what the tax credits are for. Rather, “Hollywood accounting” provides a way to avoid paying profit-based compensation.
Movies like Forrest Gump, Return of the Jedi, Men in Black or Harry Potter 5 all managed to lose money, according to "GAAP".
If that's not creative accounting, I don't know what is.