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Propping up a 'House of Cards' [Commentary]

Incentives for film companies should be awarded as part of a long-term goal to boost the state's economy

By Kevin Klowden and Arthur Greenwald

1:54 PM EDT, April 3, 2014

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Life imitated art recently in Maryland as the producers of "House of Cards" played political hardball with state officials. MRC Productions filmed the first two seasons of the hit series in Maryland, and, evoking Frank Underwood — the ruthless politician played by Kevin Spacey — MRC officials said "we will have to break down our stage, sets and offices and set up in another state" if Maryland doesn't provide another $15 million in production incentives. That's on top of $26 million for the first two seasons, the Washington Post reports. Maryland legislators have a choice: Pay up or risk losing their most buzz-worthy film project and the estimated $250 million it's delivered to the local economy.

Maryland is just one of 43 states eager to seduce production jobs away from California. Collectively, the ever-growing war chest in this competition exceeds $1.5 billion in annual incentives and tax credits. For Maryland and other states that want to compete in luring filmed productions, there are lessons to be learned, not only from California's challenges, but also from other states' successes. In the new study from the Milken Institute, "A Hollywood Exit: What California Must Do to Remain Competitive in Entertainment — and Keep Jobs," the focus is both on what California needs to do, and on how states such as New York, Louisiana, New Mexico and others have established themselves and managed to grow their employment base.

Since 2004, California has lost over 16,000 jobs in production; meanwhile, New York gained over 10,000 jobs and Louisiana and New Mexico each added more than 1,500. These are not low end jobs — in New York, the average pay is over $89,000, and it's even higher in California. If states manage their strategy correctly, they can develop an effective center of high-paying sustainable jobs with the benefits that come with them. If not, they will see new revenue evaporate as soon as the incentives are used up or cut. That happened in Michigan in 2011, when a newly elected governor vowed to cut film incentives without specifying when or how much. Even though the situation was later resolved, the uncertainty resulted in the flight of several productions from the state — most notably the blockbuster film "The Avengers," which then relocated to New Mexico and Ohio.

There are some key lessons that can help policy makers in Maryland and other states seeking to build a healthy filmed entertainment sector. Here's what they need to keep in mind:

It's not enough to lure one or two productions. The goal is to create new and sustainable jobs for a wide range of workers such as truckers, caterers, electricians, crafts people and others.

Build up the local entertainment infrastructure. Like all high-tech and knowledge based industries, filmed production is more sustainable and contributes more to the local economy if there are ongoing businesses and facilities that employ local workers.

Be consistent and reliable. Incentives should be approved for multiple years so that producers, especially of TV series, can plan out their productions with reasonable protection from the whims of politics. If incentives must be cut, be as transparent as possible through a public review process. Avoid the uncertainty that derailed Michigan's program and has created conflict with "House of Cards."

Reach a clear understanding of how much of a center for filming you want to be — and can be. New Mexico thrives because it fully grasps the limits on how many productions it can handle. New York, on the other hand, builds on its existing talent base from Broadway and television networks and can afford to be much more ambitious. Canada and the UK both position themselves as the main Hollywood alternative outside the U.S.

Award incentives to support your state's long-term employment goals. Without a clear plan, incentives will only bring short-term gains and can even lose money.

Maryland can thrive as a center of filmed production for years to come if it crafts a clear, long-term incentive strategy. Let's leave cliffhangers — such as what happens with the next season of "House of Cards" — to be played out on screen, not off.

Kevin Klowden is a managing economist at the Milken Institute, a Santa Monica-based think tank, and an author of "A Hollywood Exit: What California Must Do to Remain Competitive in Entertainment — and Keep Jobs." Arthur Greenwald is a producer and consultant for television, tech companies and entertainment trade associations. They're emails are Kklowden@gmail.com and greenwaldarthur@gmail.com.


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