Film and Television Production in Massachusetts: Industry ...

University of Massachusetts BostonScholarWorks at UMass BostonCollege of Management Working Papers andReports College of Management

2-11-2010

Film and Television Production in Massachusetts:Industry Overview and AnalysisPacey C. FosterUniversity of Massachusetts Boston, [email protected]

David G. TerklaUniversity of Massachusetts Boston, [email protected]

Robert LaubacherMassachusetts Institute of Technology

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Recommended CitationFoster, Pacey C.; Terkla, David G.; and Laubacher, Robert, "Film and Television Production in Massachusetts: Industry Overview andAnalysis" (2010). College of Management Working Papers and Reports. Paper 7.http://scholarworks.umb.edu/management_wp/7

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Film and Television Production in Massachusetts: Industry Overview and Analysis

February 11, 2010

FILMANDTELEVISIONPRODUCTIONINMASSACHUSETTS:

ANINDUSTRYOVERVIEWANDANALYSIS

February11,2010

ProfessorPaceyC.Foster,ManagementandMarketing,UniversityofMassachusettsBoston

ProfessorDavidTerkla,Economics,UniversityofMassachusettsBoston

WiththeassistanceofRobertLaubacher,MITSloanSchoolofManagement

Acknowledgements

ThisresearchwasmadepossiblewithagrantfromthePresident’sCreativeEconomyInitiativesFundattheUniversityofMassachusettsBoston.RobertLaubacherofMITcontributedsignificantlytothesectionsonunions,historyofdocumentaryproduction,postproduction,highereducation,services,studioprojects,residuals,healthcareandbenchmarking.HisworkwassupportedbytheAdamsArtsProgramoftheMassachusettsCulturalCouncil.WearealsogratefulfortheinputprovidedbyTheMassachusettsProductionCoalition(MPC)andTheMassachusettsFilmOffice(MFO)aswellaslocalunions(IATSE,SAG,IBT)andcompanieslikeBrickyardVFX,NationalBostonStudiosandPowderhouseProductions.WealsothankTheCenterforIndependentDocumentary,theLEFFoundationandofficialsattheMassachusettsDepartmentofRevenueandotherstateagenciesfortheirhelp.WearegratefultothemanyotherindustrymemberswhoagreedtotalkwithusforthestudyandespeciallytoBenOlendzkiforhisresearchassistancethroughouttheprojectandtoErinSiskforherworkonthelocaldocumentaryandindependentfilmmakingsector.Inaddition,wewanttothankRaijaVaisanenwiththeUniversityofMassachusettsDonahueInstituteforherassistanceinconductingtheIMPLANanalysisandtoDanKochwhohelpedusmapfilmindustrynon‐wagespendingpatterns.

2

ExecutiveSummary

Thisreportdescribesthestructureandrecentgrowthofthefilmandtelevisionindustryin

Massachusetts.Webeginwithadiscussionofnationaltrendsinthisindustryandfindthat

Massachusettsisoneofthefastestgrowinglocationsforfilmandtelevisionproductioninthe

UnitedStates.Wethendiscussrecentemploymenttrendsinthissectorandfindthattherehas

beensignificantrecentgrowthinthetotalnumberoflocalfilmandtelevisionproductionjobs‐‐

particularlyamongtheunionizedcrewandactorsthatstafflocalproductions.Examinationof

federaldatarevealsthatbetween2005and2008therehasbeena117%anda126%growthin

employmentinthemotionpictureandvideoproductionandpostproductionindustries

respectively.Usingnetworkandgeographicmodelingtools,wealsoidentifynovelpatternsinthe

non‐wagespendingoflocalfilmandtelevisionproductions.Wecontinuewithadiscussionof

growthtrendsacrossseveralsubsectorsofthelocalfilmandtelevisionsectorandfindthat

severalaregrowingrapidly.

Whileourreportrecognizesanddiscussestherevenueandfiscalimplicationsofthefilmindustry

taxcredit,itisnotthefocusofouranalysis.Indeed,theevaluationoftherevenueimplicationsof

theMassachusettsFilmTaxCredit(FTC)1hasbeendonecarefullybytherecentMassachusetts

DepartmentofRevenuestudy(2009).Ourreportisfocusedmorebroadlyonunderstandingthe

breadth,performance,anddynamicsofthefilmandtelevisionindustryinMassachusetts.

Updatingthe“LensontheBayState”study(Laubacher,2006),weprovideanoverviewof

aggregateemploymenttrendsinthisindustryanditssub‐sectors.Weusefederalemployment

datatoexaminetheeconomicimpactofthisindustryontheCommonwealth.Wealsorelyon

interviewswithindustryparticipants,employmentandspendingdataprovidedbylocalunions,

archivaldatacollection,andbothnetworkanalysisandgeographicvisualizationstodescribe

productionandemploymenttrendsinspecificsub‐sectorsofthisindustry.

1 While we use the term Film Tax Credit (and its abbreviation FTC) in the report below, the program

actually applies to motion pictures as well as certain kinds of television programs. A description of the program is provided in Appendix 2.

3

Weidentifyseveralimportanttrendsintherecentgrowthofthefilmandtelevisionindustryin

Massachusetts:

1. Massachusettsisamongthefastestgrowinglocationsforfilmandtelevisionproductionin

theUnitedStates;andnotablysomestateswithmoregeneroustaxcreditprogramshave

notexperiencedasmuchrecentgrowthasMassachusetts.

2. EmploymentinfilmandtelevisionproductionhasincreasedinMassachusettsduringa

periodwhentotalstateemploymenthasbeenonthedecline.Thereisalsoevidencethat

someofthisjobgrowthhashelpedtooffsetjoblossesinparticularlyhardhittradeslike

constructionandtransportation,asworkersfromthesesectorshavefoundworkinfilm

andtelevisionproduction.

3. Localnon‐fictiontelevisionandpost‐productioncompanieshaveexperiencedparticularly

dramaticgrowthinrecentyearsandseemtobegeneratingnewcareerpathsforlocal

collegegraduates.Inaddition,becauseorganizationsinthissectortendtospendalarge

proportionoftheirproductionexpenseslocally,theyrepresentaparticularlyinteresting

sectorforlocaleconomicdevelopment.Moreover,asthehometoWGBH,Massachusetts

hasalonghistoryofleadershipinnon‐fictiontelevisionanddocumentaryproduction.This

historycombinedwithitsnumerouscollegeprogramsgeneratingfilmandtelevision

students,researchuniversities,andhightechnologycompaniesprovidesMassachusetts

withauniquestrategicadvantageintheproductionofnon‐fictioncableandpublic

televisionshowsaswellasgrowingopportunitiesinpost‐production.

4. Thegrowthinlocalfilmandtelevisionproductionhasstimulatedgrowthamongacluster

oflocalfilmservicecompaniesthatsupporttheseproductions.Ithasalsoluredsome

largernationalfilmservicecompaniestotheCommonwealth.Thereremainsroomfor

growthinthisareaassomespecializedfilmandtelevisionproductionequipmentisstillnot

availableinMassachusettsandthereforeneedstobesourcedoutofstate.Totheextent

thatthelocalfilmservicesectorcontinuestogrowinresponsetoincreasingproduction

activity,anincreasingproportionofnon‐wagespendingmayremaininthe

Commonwealth.

4

TableofContents

ExecutiveSummary..................................................................................................................... 2IntroductionandGoals ............................................................................................................... 5

DescribingMassachusettsFilmandTelevisionProduction .......................................................... 7 MassachusettsInTheNationalandRegionalLandscape 7

LaborMarketStructure 10 AggregateStateEmploymentTrends 11

TheContributionofFilmandTelevisionSpendingtotheMassachusettsEconomy ........................................................................................................... 16

EmploymentTrendsinLocalFilmProduction 17 Non‐wageSpendingPatterns .................................................................................................... 22

DevelopmentsinSpecificSubsectors ........................................................................................ 25

Conclusion ................................................................................................................................ 41Appendix1:Methodsandapproachesinstudiesofregionalfilmand

televisionindustriesandincentiveprograms ............................................................................ 42

Regionalfilmandtelevisionproductionincentiveprograms 44

Variationsinmodels:adiscussionandevaluation 47 Secondarymarketfortaxcredits 50 Marketingandtourismbenefits 51

Incometaxfromresidualsandthegrowthofalocalcreativetalentbase 53 Benefitsfromchangestothemassachusettscorporatetaxlaws 55 Increasedhealthcoverageandotherbenefits 56

Benchmarkinglongtermgrowthtrends 58Appendix2:AbriefsummaryoftheMassachusettsfilmindustrytaxcredit.............................. 59 References 61

5

IntroductionandGoals

Asdocumentedinthe2006“LensontheBayState”report(Laubacher,2006),theMassachusetts

filmandtelevisionindustrywasonthedeclineinthe1990swithtotalemploymentfallingathird

between1990and2006.ThelocalindustryreachedanadirwiththeclosingoftheMassachusetts

FilmOfficein2002.Torevitalizethisoncethrivinglocalcreativeindustry,in2005theState

Legislaturepassedataxincentiveplanthatprovidedabankabletaxcreditforqualifyingmotion

pictureandtelevisionproductionsproducedinMassachusetts.Asupdatedin2007,the

MassachusettsFilmTaxCredit(FTC)providesarefundable/transferrabletaxcreditfor25%of

qualifyingwageandnon‐wageproductionexpensesandasalestaxexemptionforqualifyingin‐

statespending.2

TheFTChasclearlyincreasedtheamountoftimeandpercentageoftheirbudgetsthatfilmand

televisionproductionsarespendingintheBayState.Industryrepresentativesreportthatthis

increasedactivityhashadapositiveimpactonlocaljobs,non‐wagespendingandthegrowthof

localfilmservicecompanies.Whilemembersoftheindustryhaveclearlyexperiencedthepositive

impactofthisprogramandsomestudieshavefoundthattheyhavepositiveshorttermrevenue

implications(ErnstandYoung,2009a,2009b),othersstudiesraisequestionsbothaboutthevalue

oftheseprogramsandmethodsusedtomeasuretheirimpacts(Luther,2010;Gregg,2008;Saas,

2006;Tisei,2007).Thislackofagreementisdriveninpartbythechallengesofaccurately

measuringeconomicactivityinaproject‐basedindustrylikefilmandtelevisionproductionandin

partbyvariationsinthemodels,data,andassumptionsusedinstudiesofincentiveprograms(see

Appendix1forathoroughdiscussionoftheseissues).

TheprimarypurposeoftheFTCistostimulatefilmandtelevisionproductioninMassachusetts.

However,tobuildapermanentandstablefilmandtelevisionindustryrequiresthatpolicymakers

considerbothannualreturnsoninvestmentaswellasaggregateindustrytrends,localworkforce

developmentandcareerpaths,infrastructuredevelopmentandthegrowthoflocalfilmservice

2 For a detailed description of the provisions of the tax credit program see Appendix 2

6

industries,aswellasvariationsinproductionpracticesandlinkagesamongsub‐sectorswithinthis

industryandemploymenttrendsineach.

BecauseMassachusettsisoneofmanystatesthatofferFTCprograms,itwouldalsobehelpfulto

evaluatehowMassachusettsisdoingrelativetootherstatesthatarecompetingforashareofthe

totalnationalfilmandtelevisionproductionbudgeteachyear.Finally,itisimportanttoidentify

whethertheCommonwealthhasasetofuniqueresourcesthatcanputsubstancebehindthe

aspirationofbecomingapermanentcenteroffilmandtelevisionproductionintheUnitedStates.

Industryrepresentativesarguethatbecauseofitsuniquecombinationofdesirablelocations,large

numbersofuniversitiesandstudents,atalentedcastandcrew,taxincentives,andstatusasa

worldclasscitythatisdesirabletotalent,Massachusettshasthepotentialtobecomethethird

largestcenteroffilmandtelevisionproductionintheUnitedStates(behindCaliforniaandNew

York).Indeed,ifthissectorgrowstothepointthatMassachusettsbecomesanewhuboffilm

production(likeVancouver,BritishColumbiadidinthe1990s),therewillbefuturebenefitsfrom

workforceretentionandattraction,infrastructuredevelopment,linkagesbetweenuniversities

andindustry,newcareerladders,etc.Conversely,iffilmproductionleavesMAassoonasanother

stateoffersamoreattractiveincentive,evenarevenuepositiveincentiveprogramcouldfailin

establishinganewindustryinMA.

Therearethreeprimarygoalsofthisstudy:

1. Todescribethestructureandrecentgrowthpatternsofthefilmandtelevisionindustryin

Massachusetts,identifyitskeysub‐sectors,andbegintounderstandthekeyeconomic

leversthatpromotesuccessinthissectorofthecreativeeconomy;

2. Toestimatetheaggregateimpactofthefilmandtelevisionproductionsectoronthestate

economythroughdirectandinducedspending.

3. Tosupplementanalysesusingstandardinput/outputmodelsbycollectinginterviewand

networkdataonemploymenttrendsandnon‐wagespendingpatternstobetter

understandthelinkagesamongthesesubsectorsandtheirconnectionstoothersectorsof

thestateeconomy.

7

Toaddressthesegoals,wecombineeconomicmodelingwithinterviews,archivaldatacollection,

networkanalysisandgeographicmodelingtoprovideanuancedpictureofthemotionpictureand

televisionindustryinMassachusetts.Byfocusingonproductionpracticesandvariationsacross

sub‐sectorsofthislocalcreativeindustry,weidentifyfactorsthatmayimpactthelong‐term

healthofthefilmindustryinMassachusetts.

ThisreportbeginswithanoverviewofthecurrentstateoftheMassachusettsfilmindustryusing

datafromtheBureauofLaborStatisticsandtheMotionPictureAssociationofAmerica(2009)to

discussaggregatelocalandnationalfilmandtelevisionemploymenttrends.Followingthis

overviewoflocalandnationaltrends,weanalyzethelocalfilmandtelevisionproductionsectorby

classifyingorganizationsandemployeesprimarilybythekindsofproductstheyproduce(e.g.,

featurelengthfilms,advertisements,scriptedandnon‐fictiontelevisionprograms,independent

filmsanddocumentaries,etc.)andidentifyingconnectionsamongthesesectorsviashared

workforce,materialrequirementsandproductionpractices.

Wealsoidentifytheorganizationsthatprovidesupportservices,equipmentandmaterialtofilm,

television,andvideoproductionsanddiscussrecentactivityinthesesubsectors.Weconclude

withasummaryofourfindingsandadiscussionofourfuturework.Anextensivediscussionof

issuesinvolvedinevaluatingtheimpactofFTCprogramsisprovidedinAppendix1.

DescribingMassachusettsFilmandTelevisionProduction

ThissectionbeginsbycomparingthegrowthofthefilmandtelevisionindustryinMassachusetts

togrowthratesinotherstates.Afterdescribingtheaggregateemploymenttrendsinthe

Commonwealth,wediscusstrendsinnon‐wagespendingandidentifyacoreoffilmservicefirms

andlocation‐specificspendingpatternsassociatedwithlocalmotionpictureproductions.We

concludewithadiscussionofseveralimportantsub‐sectorsinthisindustryandinterconnections

amongthem.

MassachusettsintheNationalandRegionalLandscape:Overthelastdecade,severalimportant

nationaltrendshaveemergedthataffectthegrowthofthefilmandtelevisionindustryin

8

Massachusetts.WhilethebulkoffilmandtelevisionproductionstilltakesplaceinLosAngelesand

NewYork,otherstatesareincreasinglycompetingwiththesetraditionalcentersthroughtax

creditandotherincentiveprograms.Infact,on‐locationshootingdaysinLosAngelesdropped

19%in2009;thesteepestdeclinesincetrackingbeganin1993(Verrier,2010).Toanalyzerecent

nationaltrends,weuseddatafromtheMotionPictureProductionAssociationofAmerica(2009)

andtheQuarterlyCensusofEmploymentandWages(QCEW)datafromtheBureauofLabor

Statistics.

AccordingtodatafromboththeMotionPictureAssociationofAmerica(2009)andtheQCEW,

Massachusettscapturedalittleover1%ofthetotalnationalspendingonmotionpicturesand

televisionproductionsin2007.WhileMassachusettsdoesnotcurrentlycapturealarge

percentageofthenationalfilmandtelevisionproductionspending,itseemstobegrowingmore

rapidlythanotherstates(someofwhichhavemoregeneroustaxprograms)andcapturingwork

thatmightotherwisebetakingplaceelsewhere.

Figure1usesdatafromtheMotionPictureProductionAssociation(2009)tochartthepercentage

changeinthenumberoffilmandtelevisionproductionsthattookplaceinthetop25mostactive

statesintheUnitedStatesbetween2007and2008.Duringthistime,workdeclinedintraditional

centerslikeCaliforniaandNewYorkandgrewrapidlyinstateslikeGeorgia,Indiana,

Massachusetts,Michigan,MinnesotaandWisconsin.Accordingtothesedata,Massachusettshad

thefifthlargestgrowthrateamongthetop25mostactivestatesinthecountry.Itisalsoclear

thatseveralstateswithactivetaxincentiveandinfrastructuredevelopmentprograms(andmore

generousincentivesthanMA)arenotamongthetop25mostactivestatesaccordingtotheMPAA

(2009).Careiswarrantedininterpretingthesedatagiventhatthemagnitudeofchangesinstates

likeWisconsinweredriveninlargepartbytheverysmallnumberofproductionsthatithadin

2007.

9

Figure1.Percentagechangeinfilmandtelevisionproductions2007‐2008

Source:MotionPictureAssociationofAmerica

DataonnationalemploymentprovidesadditionalsupportforthenotionthatMassachusettsis

amongthemostactiveandrapidlygrowingstatesinthenationforfilmandtelevisionproduction.

UsingdatafromtheQuarterlyCensusofEmploymentandWagespublishedbytheBureauof

LaborStatistics,weexaminedrecentemploymenttrendsinthe15stateswiththemostfilmand

televisionworkersin2008.Table1presentstheaverageemploymentinthesestatesbetween

2001and2008.Notably,duringtheperiodencompassingtheenactmentoftheFTCin

Massachusetts(2005‐2008),totalemploymentintheNAICScode5121(MotionPictureandVideo

Industries)inMassachusettsincreased33%.Thisrepresentsthelargesttotalpercentagegrowth

between2005and2008ofanystateamongthe15withthemostmotionpictureandvideo

employeesin2008.Thisisnotablegiventhatstateswithmuchmoregenerouscreditslike

Michigan(whichoffersbetween30‐42%onqualifiedexpenses)actuallyexperiencedadeclinein

filmandtelevisionemploymentduringthisperiod.

Theseaggregatenationalemploymentandproductiondataconfirmthewidespreadreportsfrom

industryparticipants(aswellasthefrequentcoverageofHollywoodstarsightingsinlocalpapers)

thatMassachusettsisfastbecomingafavoredlocationforHollywoodproductions.Inthe

following,welookbeneaththesenationaltrendstodiscusslocalemploymentinthe

Massachusettsfilmandtelevisionindustry.

10

Table1.Averageannualemployment(NAICS5121)

Source:BureauofLaborStatistics,QuarterlyCensusofEmploymentandWages

LaborMarketStructure:BeforeanalyzingtrendsinMassachusetts’sfilmandtelevisionindustry

employment,itisimportanttofirstdescribetheprimarylaborpoolsusedinfilmandtelevision

industryproduction.Thisisahighlyunionizedandproject‐basedindustryinwhichlabor,services,

andmaterialareorganizedthroughlooselycouplednetworksthatcoalescetemporarilyaround

specificproductions.Whilesmallerandindependentproductionssometimesrelyonnon‐

unionizedemployees,largestudioproductionshiretheirtechnicalemployeesfromoneoftwo

internationalunions,theInternationalAllianceofTheatricalStageEmployees(IATSE)andthe

InternationalBrotherhoodofTeamsters(IBT).

IATSErepresentsfilm,televisionandtheatricalemployeesinskilledcraftslikesetconstructionand

dressing,lighting,specialeffects,rigging,props,camera,sound,wardrobe,make‐upand

hairstyling.Ineachofthesecrafts,relativelyseniorcraftspeopleassemblecrewswhowork

togetheronasemi‐regularbasisandmovefromjobtojob.Inthisrespect,thetechnicallabor

requiredforfilmproductionisorganizedliketheconstructionindustryandothertrades.

11

Moreover,becausethetechnicalskillsrequiredinsomeaspectsoffilmproduction(e.g.,set

constructionandlighting)aresimilartothoseintradeslikecarpentryandelectricalwork(and

becausebothsectorsarehighlyunionized),wefinditinstructivetocomparestateemployment

trendsacrossthesesectors.TheTeamstersrepresentthetransportationemployeesthatdrivethe

trucksandotherequipmentusedinfilmproductions.Becauseitalsorepresentstransportation

employeesinlargerlocalindustries,filmtransportationworkersrepresentarelativelysmall

segmentoftotalTeamstermembershipintheCommonwealth.

Inadditiontotheskilledemployeesdescribedabove,filmandtelevisionproductionsalsoemploy

creativepersonnellikeactors,writers,andproducerswhoareorganizedthroughtheirownunions

andtradegroups(e.g.,TheScreenActorsGuild,AmericanFederationofTelevisionandRadio

Artists,theWritersGuildofAmericaandtheDirectorsGuildofAmerica).Thesetwolaborpools

aretypicallyreferredtoas“belowtheline”(e.g.,IATSE,IBT)and“abovetheline”talent(e.g.,

AFTRA,SAG,etc.),respectively,andtogetherrepresentmorethanhalfthetotalcostsofatypical

majormotionpicture.

AggregateStateEmploymentTrends:Therearefour,five‐digitNAICScodesthatmakeupthe

5121MotionPictureandVideoIndustriescategoryanalyzedabove.Ofthese,twocapture

productionactivities(MotionPictureandVideoProduction51211andPostProductionServices

andOtherMotionPictureandVideoindustries51219).Thesearethetwoprimarycodeswefocus

oninthefollowing.Theremainingtwocodes(MotionPictureandVideoExhibition51213and

MotionPictureandVideoDistribution51212)donotrelyonthesamekindsofemployeesand

organizationsthatareengagedinproductionactivities(andparticularlyinthecaseofexhibition

aretreatedasseparateindustries).Asaresult,wedonotaddressthesesectorsinthisstudy,

althoughwerecognizethatoverthelongterm,thepresenceofanactiveproductionsectorinthe

Commonwealthcouldencouragegrowthofalocaldistributionsector.

InadditiontothetwoprimaryfilmindustryNAICScodes(51211and51219),wealsoexplore

employmenttrendsintwosectorsthatlikelycontainsignificantnumbersoffilmandtelevision

industryworkers.Becauseofthelargenumberoffreelanceemployeesinthissector,filmand

televisionproductionstypicallyusepayrollservicestomanagewithholdingsanddistributewages

12

forcastandcrew.Before2008,theseworkerswerenotclassifiedbytheBureauofLaborStatistics

asbeingpartofMotionPictureandVideoProduction(NAICS51211).Beforethistime,some

proportionofemploymentinlocalfilmandtelevisionproductionlikelyappearedinthecategory

for541214(PayrollServices)andtheprocessofrecodingemploymentfromthiscategoryto51211

isstillongoing.Similarly,itisunclearwhatproportionofemploymentinrelatedNAICScategories

(e.g.,71151IndependentArtists,Writers&Performers)actuallyoccursinfilmandtelevision

production.Therefore,whilewereportandanalyzeBureauofLaborStatisticsdatainthe

following,werecognizethattheylikelyunderstateaggregateemploymentinthesector.

Between2008and2009,Massachusettsexperiencedsignificantjoblossescausedbycontraction

inthelocalandnationaleconomies.Overallemploymentdropped3.2%inMassachusetts

betweenMarch2008and2009continuingadownwardtrendthatbeganin2007.Although

Massachusettsexperiencedsignificantjoblossesin2008(withthestateunemploymentrate

increasingfrom4.9%inMay2008toover8%inMay2009),jobsinthefilmandtelevision

productionsectorhavebeengrowingrapidlyduringthesameperiod.

Between2005andthethirdquarterof2008,thenumberofmotionpictureproductionemployees

(NAICS51212),postproductionandotheremployees(NAICS51219)andindependentartists

(NAICS7115)intheCommonwealthgrew117%,126%and8%respectively(Table2andFigure2

below).ThesubstantialgrowthinNAICS51219(postproductionandother)isnotableparticularly

becauseestablishedlocalcompaniesaredoingsomeofthiswork.Inaddition,thePayrollServices

sectorgrewsubstantiallyinto2007,whichwasbeforerelevantfirmswerereclassifiedintoNAICS

51212,sosomeofthisgrowthmayreflectgrowthinthefilmindustry.Moreover,asnotedabove,

reclassificationisstillongoing,whichmeansthatsomeofthe2008figuresforNAICS541214still

representfilmindustryactivity.

Althoughthenumberofestablishmentshasnotgrownasrapidlyasemployment,thismaybe

causedbythewidespreaduseoffreelancelaborinthissectorandthefactthatexistinglocalfilm

servicecompanieshavegrowntomeetnewdemand.Itisalsoworthnotingthatmotionpicture

productionandindependentartistsareveryhighwagesectorsandthatpost‐productionhas

vacillatedbetweenhighandrelativelylowaveragewages.

13

Table2.AverageAnnualEstablishments,EmploymentandWages:1998‐2008


Figure2.AverageAnnualEmployment:1998‐2008


Somecaveatsarerequiredwheninterpretingthesedata.First,becauseQCEWdatadonotcontain

freelanceemployees(whicharealargeproportionoftheworkforceinthisindustry)theymay

underestimateaggregateemploymentinthesector.Second,someofthelargepercentage

14

increasesarepartiallyareflectionofthesmallbaseofemployeesinthesesectorsandthusdonot

representlargeabsoluteincreases.

Third,bothmotionpicture&videoproductionandpostproduction&otherservicesexperience

largefluctuationsinemploymentduringtheyear,reflectingthedifferingintensitiesof

moviemakingactivitiesintheCommonwealth.Figures3and4belowplotmonthlyemploymentin

NAICS51211(motionpictureandtelevisionproduction)andNAICS51219(postproductionand

other)for2007and2008.Inthecaseofmotionpictureandvideoproduction(NAICS51211),

employmentin2007rangedfrom1162to1462andin2008from1869to3126.Evengiventhis

range,therehasstillbeenasignificant(61%)increaseintheminimumlevelofemploymentinthis

sectoracrossthetwoyears.Fluctuationofmonthlyemploymentinthepostproductionsector

(NAICS51211)hasbeenevenmoredramatic,rangingfrom230to1505in2007and314to2480in

2008.Therefore,whilethereappearstohavebeenasignificantgrowthincoreemploymentin

thissector(theminimumemploymentlevelin2008wasalmost40%higherthanin2007)itisless

dramaticthanwhatisimpliedbytheannualemploymentnumbersinTable2.

Figure3.MonthlyemploymentinNAICS51211:MotionPictureandVideoProduction


15

Figure4.MonthlyemploymentinNAICS51219:PostproductionandOther


Thesedynamicsalsohelptoexplainthesignificantdropinwagesinpost‐productionbeginningin

2007.Onecontributingfactorseemstobethehiringofalargenumberoftemporaryemployeesin

supportoflargefilmproductionsinMassachusetts.Anotheristhegrowthofthelocalnon‐fiction

televisionandpostproductionsectorthathasalsobeenhiringlargenumbersofrelativelylower

paidnewentrants.Manyofthesehireshaveinfactbeenlocalcollegegraduateswhoarefinding

newcareerladdersinlocaltelevisionproduction.Becausebarrierstoentryarelowerintelevision

andpost‐productionthantheyareinstudiofilmproduction,thesejobsareparticularlyimportant

fordevelopingthelocalworkforce.

Finally,in2008therewassomereclassificationofemployeesfrompayrollservices(NAICS541214)

intothefilmindustryNAICScode51211(motionpictureandvideoproduction)making

comparisonswithprioryearsinMassachusettssuggestiveratherthanconclusive.However,since

thiswasanationaleffort,itshouldnotaffectourcomparisonsacrossstates.

Manyofthejobsinthefilmindustryconsistofcrewandskilledworkerswhobuildthesetsand

runthelights,cameras,andotherequipmentusedinfilmandtelevisionproduction.Thesetrades

16

usemanyofthesameskillsthatarerequiredinconstructionandothersimilartradesthat

experiencedthefastestrateofjoblossesinMassachusettsin2008.InMassachusetts,

employmentintheconstructionindustrydropped12.8%betweenMarch2008andMarch2009

sheddingatotalof17,400jobs(BureauofLaborStatistics,2009).Asdiscussedbelow,thereis

evidencethattherapidincreaseinfilmindustryemploymentduringthisperiodhashelpedabsorb

someemployeesfromconstructionandothertrades.

TheContributionofFilmandTelevisionSpendingtothe

MassachusettsEconomy Asnotedinthediscussionabove,formalmodelingofthefilmindustry’scontributiontothe

Massachusettseconomyisdifficultbecauseoftheindustry’sstructure,fluidity,andthedifficulty

inobtaininganaccuratesnapshotofthecurrentstateoftheindustry.However,itisstillworth

knowingwhatstandardeconomicmodelscalculateastheeconomicimpactoftheindustryonthe

Commonwealth,giventhebestsourcesofemploymentdatathatareavailable.Itisimportantto

distinguishthisanalysisfromtheanalysisconductedbytheMassachusettsDepartmentof

Revenue(2009)inrelationtotheFTC,whichisdiscussedinAppendix1.Inthisanalysis,weare

concernedwiththecontributionoftheentirefilmindustryaswehavedescribeditonthe

Massachusettseconomy,notjusttheimpactoftheportionoftheindustrythatcanbeidentified

ashavingbeenattractedtoMassachusettsbytheFTC,whichisthefocusoftheMassachusetts

DepartmentofRevenue(2009)study.

Table3showstheresultsoftheIMPLANanalysisforthefilmindustrysectorsthatwehave

focusedupon3.Thefirstcolumnrepresentsthenumbersthatwereusedasinputsintothemodel,

withtheemploymentnumberderivedfromthetotalofthethreeprimarysectorsdescribed

previously(wedidnotincludepayrollservicesbecauseitisnotclearallemployeesofthissectorin

3IMPLANisaninput‐outputmodelthatquantifiesinmonetarytermstheflowofgoodsand

servicesamongindustriesandhouseholdsintheeconomy.Thisenablesonetofollowaparticularexpenditureasitimpactsdifferentsectorsoftheeconomyandtracethemoneyasitisspentandre‐spent.Inthiscase,thepathofadollarthatoriginatesinthefilmsectorendswhenthatdollarleavestheCommonwealththroughdomesticorforeigntrade,oriscollectedasatax.Likewise,thisexpenditureanalysisalsoenablesustotraceemploymentimpactsinthesedifferentsectors.

17

2008arefilmindustryrelated,butasnotedpreviously,someemployeesareprobablypartofthe

filmindustrysoouremploymentnumberismostlikelyanunderestimate).Theoutputnumberis

basedontheIMPLANmodelassumptionsthatemployeesinthesefilmsectorsonaverage

generate$119,101perworker.Itisworthnotingthatthisisassociatedwithassumedrelatively

lowaveragewagesofbetween$26,000and$32,000.However,asnotedpreviously,twoofthe

industrysectorsweexaminedhadmuchhigheraveragewagesin2008of$61,225and$94,316.

Thus,IMPLANcouldbesignificantlyunderestimatingtheimpactofthissectorontheeconomy.

Table3.IMPLANAnalysisofMAFilmIndustryEmployment2008

Direct Indirect Induced Total MultiplierOutput 451,749,958 268,463,348 159,959,092 880,172,401 1.95Employment 3793 1821 1171 6785 1.79

Thisemployment(3793)andtheexpendituresassociatedwiththisemploymentbothintermsof

employeewagesandthevalueofproductionproducedbytheseworkersthengenerates

additionalemploymentandexpendituresinindustriesthatsupplyproductstothesefilmsectors

andthisismeasuredinthecolumnlabeled”indirect.”Thenextcolumn,labeled“induced”

measurestheadditionalemploymentandspendinggeneratedbytheexpendituresofthedirect

andindirectemployees.Theseimpactsarethenaggregatedinthe“total”column.Thefinal

column,labeled“multiplier”,reflectsthetotaladditionalimpactontheeconomythatthefilm

sectorhasgenerated.Theoutputmultiplierof1.95canbeinterpretedtomeanthatanadditional

dollargeneratedbythefilmsectorwillproduceanadditional$.95ofoutputvalueinthe

Commonwealth.Theemploymentmultiplierof1.79canbeinterpretedtomeanthatanewjob

generatedinthefilmsectorproduces.79additionaljobsintheCommonwealth.

EmploymentTrendsinLocalFilmProduction

Therearefourprimaryorganizationsthatrepresentcrewandcastemployedonmotionpicture

productionsinMassachusetts:TheInternationalAllianceofTheatricalStageEmployees,Moving

PictureTechnicians,ArtistsandAlliedCraftsoftheUnitedStates,itsTerritories,andCanada

(IATSE);theScreenActorsGuild(SAG);theAmericanFederationofTelevisionandRadioArtists

18

(AFTRA);andtheInternationalBrotherhoodofTeamsters(IBT).Therehasbeensignificant

employmentandwagegrowthineachoftheseunionsinMassachusettsinrecentyears.

IATSELocal481:MostlargemotionpictureandtelevisionproductionsinMassachusettsaredone

bycompaniesthathavesignednationalagreementswithIATSEoragreementswithLocal481

specifically.Asaresult,crewsonlargeandmediumbudgetstudiofeaturefilms,televisionpilots,

televisioncommercials,andsomelowbudgetindependentfeaturefilmstypicallyworkunderthe

termsofaunionagreement.IATSErepresentedemployeesmakeupalargeproportion(upto

75%)ofthecrewonfilmandtelevisionproductions.Alargeproportionofthesearemembersof

IATSELocal481(http://www.iatse481.com),whichrepresentsthestudiomechaniccraftsinthe

NewEnglandstates(Massachusetts,RhodeIsland,NewHampshire,Vermont,Maine).4

IATSEmembershiphasgrowndramaticallyinrecentyearsasaresultoftherecentgrowthinfilm

andtelevisionproductioninMassachusetts.Local481’sMassachusetts’smembershiphasmore

thandoubledsincethepassageoftheFTC,increasingfrom237in2005to585in2008.There

havebeensimilarratesofmembershipgrowthinotherMassachusettsIATSElocals.

TotalannualwagesearnedinMassachusettsbyLocal481membersincreasedten‐foldoverthe

sameperiod,growingfromapproximately$3millionin2005to$30millionin2008.Because

IATSE’swageratesareeffectivelyfixedbyitsagreementswithproducers,andinlightofthe

growthinLocal481’smembership,itissafetoassumethatthisgrowthinwagesrepresentsan

increaseinearningsfromincreasedworkopportunitiesacrossabroadspectrumofthelocal’s

members.

WhileLocal481’smembershiphasgrowninsize,ithasalsoincreasedinquality.Overthepastfew

years,manyLocal481membershaveadvancedfromjuniorrolestobecomeheadsof

departments,aprogressionthatnowprovidesthemwithincreasedresponsibilitiesandhigher

wages.ThisdevelopmenthasenhancedtheabilityofMassachusettstosupportlargeproductions

withlessneedtoimportkeyworkersfromoutofstate.Forexample,onarecentlyfilmedAdam

4 The 15 crafts represented by Local 481 are Art Department Coordinators, Construction, Costume/Wardrobe, Craft Services, Electric/Set, Lighting, Greens, Grip, Locations, Medical/First Aid, Properties, Set Dressing, Sound, Special Effects, Teleprompter Operators, and Video Assist.

19

Sandlermovie(“LakeHouse”)almostallofthedepartmentsrepresentedbyIATSEmemberswere

staffedlocallyfromdepartmentheadsdown.Oneveteranofthelocalindustrynotedthatthe

Commonwealth’screwbasecouldnowsupport4‐5featurefilmsatonce,whichwasnotthecase

twoyearsago.

IATSErepresentativesreportthatsomeofthesenewmembershavemigratedfromrelatedtrades

thathavebeenexperiencingsignificantemploymentcontraction.Therearenumerousinstancesof

carpenterswhohadbeenlaidofforwereunderemployedintheconstructionindustry

transitioningtothemotionpictureindustry,workingsteadily,andthenjoiningLocal481.Each

newjobinfilmandtelevisionproductionthatreplacedalostjobinconstructionandrelatedfields

generatedbothdirectbenefits(inincreasedwages)andindirectbenefitsbyreducingdemandsfor

stateservicesandbenefitsthatwouldhavebeencollectedbyunemployedtradespeople.

ExperiencedmembersofotherIATSElocals,formerlybasedinLosAngelesorNewYork,whohad

familytieshereorwhohadattendeduniversitiesinMassachusetts,havealsomovedbacktothe

Commonwealthtoworkonproductions.Ifthesetrendscontinue,itcouldincreasetheproportion

ofwagesfromlargeproductionsthatgotoCommonwealthresidents(atrendtheDepartmentof

Revenueiscurrentlytracking).

SAGandAFTRA:SAG(http://www.sag.org/)andAFTRA(http://www.aftra.com/)bothrepresent

performerswhoappearintelevisionshowsandcommercialswhileSAGalonerepresents

performerswhoappearinmotionpictures.Sincemotionpictureproductionaccountedformost

oftherecentincreaseinproductioninMassachusetts,recentworkforcedevelopmentsinthelocal

branchofSAGareespeciallyrelevanttounderstandingtheimpactoftheseprojectsonthelocal

workforce.

TheBostonbranchofSAGgrewbyalmost30percentbetween2005and2008,withmembership

topping2100bytheendof2008.Therewasa58%increaseinwagesearnedonfeaturefilmsand

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televisionprogrammingin2008,ascomparedto2005.5Wagesearnedontelevisioncommercials

bymembersofSAG’sBostonbranchremainedroughlyconstantbetween2005and2008.This

mightbeduetotheoveralldownturninthecommercialindustryaswellaslessawarenessofthe

availabilityoftaxincentivesinthispartoftheindustryasopposedtofilmproduction.

Anotablefeatureoftelevisioncommercialsisthattheygenerateresidualpaymentsforactors.

Totalresidualsearnedbyactorsonacommercialtypicallyequaltwicethewagespaidduringthe

shootandmayrepresentfuturetaxableMassachusetts’sincome.Featurefilmresidualsare

currentlyaminorcomponentoftheearningsofBostonbranchSAGmembers,approximately10

percentofoverallfilmwagesin2008.However,thereisoftenaseveralyearlagbetween

productionandtheeventsthattriggerpaymentoffeatureresiduals,suchasreleaseofDVDand

appearanceoncable/broadcasttelevision.Featureresidualsarelikelytoincrease,potentially

markedly,forlocalSAGmembersasproductionsthathavebeenshotinMassachusettsoverthe

pasttwoyearsreachthosephasesofthedistributionprocess.Inaddition,itispossiblethatfuture

wagesfromresidualspaidtoprincipalperformersandparticipationagreementsforabovetheline

talentcouldbetreatedasMassachusettssourcedincome.Ifso,thiscouldrepresentasignificant

sourceoffutureCommonwealthtaxrevenue.(SeeAppendix1foradiscussionoftheseissues).

InternationalBrotherhoodofTeamstersLocal25:TheInternationalBrotherhoodofTeamsters

Local25(http://www.teamsterslocal25.com/)representsthetransportationworkerswhodrive

thetrucksandequipmentusedinfilmandtelevisionproduction.Althoughfilmandtelevision

employeesrepresentasmallproportionofLocal25’stotalmembershipof11,500employees,this

grouphasbeengrowingrapidly.Historically,therehaveonlybeen30Teamstersemployedinthis

industry.Currently,thereareover200.Inadditiontothegrowthintotalemployment,therehas

beenagrowthinthetotalhoursworkedbytheseemployees.In2008,therewereover330,000

hourspaidintotheTeamster’spensionandhealthandwelfarefundsbylocalfilmandtelevision

workers.AsinthecaseofIATSEmembers,someofthesenewworkershavecomefromotherlocal

transportationindustriesthathaveexperiencedrecentcontraction.

5 Permission is required from SAG’s national office to report on gross wages earned by local

branches, and since the national has not granted such permission to the Boston branch, we are only able to report on trends in this report.

21

Becausetransportationcoordinatorstypicallygetcompetitivebidsfrommultiplevehicleand

equipmentleasingcompaniesandbecausemanykindsofequipmentandtrucksarenotavailable

intheCommonwealth,localproductionsoftenrentequipmentfromoutofstate.Somelocalpress

reportshaveusedthisfacttosuggestthattruckswithoutofstateregistrationsarebeingdriven

byoutofstateemployees.Infact,anytruckorpieceofequipmentthatisusedinaunionfilmor

televisionproductionisdrivenbyamemberofLocal25.Therehaveevenbeeninstancesof

TeamsterstravellingoutofstatetopickupequipmentbeingusedinMassachusetts’sproductions.

WhilethesedriversarepaidasMassachusetts’semployees,increasingthenumberoffilm

equipmentrentalcompaniesinMassachusettswouldincreasetheproportionofnon‐wage

spendingbeingkeptintheCommonwealth.

Workforcedevelopment:Asdescribedabove,therehasbeensignificantgrowthinboththe

numberandskilloflocalfilmproductionemployees.However,therearestillsomecraftswithtoo

fewemployeeswhoareexperiencedenoughtostaffkeypositions.Inthemiddleof2008,alocal

assistantdirectorandlocationmanagerreportedthatsomecrewlackedexperienceworkingon

largeproductionsandexpressedtheneedformorelocalseniorcrewinpositionslikecostumeand

productiondesign,specialeffects,directorsofphotography,digitalimagetechnicians,hair,and

makeup.Otherthingsbeingequal,filmsandtelevisionproductionsprefertouselocalcrew

becauseitsavesthetransportationandhousingcostsassociatedwithimportingtalent.However,

becausecrewsareassembledbykeypositionsanddepartmentheadswhodrawonnetworksof

employeesthatworktogetheronasemi‐regularbasis,thegrowthoflocalkeypositions

representsanimportantlynchpininlocalworkforcedevelopment.Becausethesekeypositions

tendtohirepeopletheyhaveworkedwithbefore,astheMassachusettscrewbasegainsmore

experienceandconnectionswithoutofstateproducers,wemayfindthattheproportionofwork

onlargefilmsgoingtolocalcrewwillincrease.

AIMMandMPC,alongwiththeMassachusettsFilmOffice,havecollaboratedwiththe

Commonwealth’sDepartmentofWorkforceDevelopmenttobuildawarenessaboutopportunities

infilmproduction.Anindustryinformationday,“Jobs,Camera,Action,”wasalsoheldinBostonin

January2009andattractedmorethan600people.Thisday‐longworkshopwasdesignedto

22

educateattendeesonhowtobuildacareerintheMassachusettsfilmindustry.Itincludeda

careerexhibitionaswellasfoursessionswithindustryexecutivesexplainingwhattypesof

positionstheywillneedtofill.MPCandAIMMhavealsoheldseveraleventsforlocaluniversity

students.Thesefocusedonskillstrainingforentry‐levelpositionsandnetworkingtolink

employerswithstudents.

InJanuary2009,theDepartmentofWorkforceDevelopmentincollaborationwithIATSElocal481,

heldtwotrainingsessionsfor80servicescounselorsfrom37CareerCentersstatewideonhowto

helpdisplacedworkerstransitionintofilmindustryjobs/careerpaths.Thesesessionsparticularly

emphasizedworkerswhoseskillscouldbereadilytransferredtomotionpictureproduction,

includingcarpenters,painters,medics,andlandscapers.Subsequently,theDepartmentof

WorkforceDevelopmentscheduledeventstoidentifyworkerswiththoseskillswhomightbegood

prospectsforthefilmandtelevisionindustryandrecommendthemforacareerworkshopthat

willbeconductedbymembersofLocal481.Ifthismodelprovessuccessful,itmaysubsequently

beusedforothereventstochannelprospectiveworkerstounion‐basedjobopportunitiesthat

maybecreatedbytheAmericanRecoveryandReinvestmentAct(ARRA)

UsingacombinationofBLSdataandinterviews,wehavebeenabletodocumentsubstantial

growthinseveralsectorsofthefilmindustryintheCommonwealth,muchofwhichisassociated

withtheimplementationoftheFTC.Howeveritisclearthattherearemanyotherrelatedsectors,

includingindustriesthatservicethefilmindustryandtelevisioncommercials,independent,and

documentaryfilms,thatarebenefittingfromtheexpansionofthefilmindustryworkforce

associatedwiththeincreasedproductionoffilmsintheCommonwealth.Inordertoexplorethe

industriessupplyingthefilmindustryinmoredepth,thenextsectionfocusesonthenon‐wage

spendingpatternsassociatedwithfilmproductionintheCommonwealth.

Non‐wagespendingpatterns

AccordingtotheMassachusettsDepartmentofRevenue(2009:8),36%(e.g.,$247M)ofthetotal

filmindustryspendingintheCommonwealthbetween2006and2008wasonnon‐wageitems.The

23

largestcategoriesoftheseitemswerelocationfees($56.8M),transportation($35.8M),fringe

benefits($33.5M),hotelsandhousing($29.3M),setconstruction($27.2M)andfood($17.7M).

Interviewssuggestthatalargeproportionofthisspendingiscenterednearproductionlocations

andcanrepresentsignificantsourcesofrevenueforlocalmerchants.Theyalsoraisequestions

aboutwhetherandhowwellthesepatternsarerepresentedinexistingeconometricmodels.For

example,locationfeesareoftenpaiddirectlytosmallorganizationsandevenindividual

households.Forexample,themovieZookeeperwasfilmedintheFranklinParkzoointhesummer

of2009.Atatimewhenthezoohadexperiencedasignificantbudgetcutandwasinriskof

shuttingitsdoors,themovieproductionpaidalarge(butundisclosedfee)bothtothezoodirectly

aswellasa$20,000feedirectlytothecity’sParksandRecreationDepartment(Irons,2009).In

additiontoprovidinganimportantcashinfusiontoastrugglingpublicinstitution,thisproduction

alsoprovideddirectinvestmentsintopublicfunds.Thesespendingpatternsmaybemissed,orat

bestincorrectlyspecified,bystandardeconometricmodelstypicallyusedineconomicimpact

studiesoflocalfilmandtelevisionproductions.

Togetabetterunderstandingofthesenon‐wagespendingpatterns,weinterviewedlocal

productionemployeesandvendorsaswellascollecteddataonthevendorsusedby10motion

picturesfilmedinMassachusettsin2008.Unfortunately,wewerenotabletoobtaindataonthe

amountsspentateachvendor.However,combininginterviewsandnetworkandgeographic

visualizationmethods,wewereabletoidentifyseveralinterestingpatternsinthedistributionof

thisspending.

Figure5belowrepresentsanetworkanalysisofthevendorsusedby10motionpicturesfilmedin

Massachusettsin2008.Usingdataprovidedbyoneofthelocalunions,wecreatedthisdiagramby

importinglistsoffilmsandtheirvendorsintoanetworkanalysisprogramcalledUCINET(Borgatti,

Everett,&Freeman,1996).Inthediagram,filmsarerepresentedaswhitesquaresandvendorsas

blackcircles.Thisanalysisclearlyshowstwodynamicsinthenon‐wagespendingpatternsinthe

localfilmindustry.Thetwoclustersoflargeblackcirclessurroundingthefilmsrepresentthe

rapidlygrowingcoreofvendorsthatprovidespecializedservicesandequipmenttofilmand

televisionproductions.Eachfilmisalsosurroundedbyaclusterofuniquevendorsthatarenot

sharedwithotherfirms.Inotherwords,whilemostfilmsrelyonasmallcoreoffirmsthatprovide

specializedservicesandmaterial,eachfilmalsohasitsownuniquesetofvendors.Thispatternis

24

explainedbyinterviewswithindustryparticipantsandpressreportswhichsuggestthata

significantproportionofnon‐wagespendingisclusteredaroundthelocationsinwhichfilming

takesplace.

Figure5.Vendornetworkof10MAfilmsin2008

Toexplorethegeographicdistributionofspending,weplottedtheaddressesofthevendorliston

amapofthestate(Figure6below)6.Thismapshowsthatwhilenon‐wagespendingislocated

primarilyintheeasternhalfofthestate,itisalsoclusteredaroundproductionlocations.This

makessensegiventherapidpaceandlogisticalandmaterialrequirementsoftheseproductions.

Filmandtelevisionproductionsarematerialintensiveandoftenrequirerapidservicefromlocal

vendors.Forexample,costumestypicallycomeinduplicateandoftenneedtobelaundered

overnight.Thiskindofworkistypicallydonebylocalvendors.Moreover,becausefilmand

televisionproductionshavehighlaborcosts,productiondelayscanbeextremelycostly.Asa

6 Note that we were only able to generate geographic coordinates for 70% of the vendors for the 10

films studied. Therefore, the diagram likely underestimates the concentration of spending in some locations.

25

result,productionsaresometimesrequiredtomakelargeunexpectedexpendituresatlocal

vendorstokeepworking.AlocalAssistantProducerdescribedoneproductionthatspentover

$4,000atasmalllocalsportinggoodsstoretobuyraingearsothatthecrewcouldkeepworking

throughanunexpectedstorm.Whilesuchexpendituresmaynotrepresentalargeproportionof

thetotalspendingforalargeproduction,theycanrepresentsignificantrevenuestreamsforlocal

merchants.

Figure6.Geographicdistributionofspendingfor10filmsmadeinMAin2008

DevelopmentsinSpecificSubSectors

Interviewswithindustryparticipantsandanalysisofarchivaldatahelpedusidentifyrecent

developmentsinseveralimportantsub‐sectorsofthelocaltelevisionandfilmproductionindustry

otherthanfeaturefilms.Inthefollowing,wedescribeproductionpracticesandtrendsin

televisioncommercialproduction,documentaryproduction,post‐productionandspecialeffects,

independentfeaturefilmsandstudentfilms,linkagestouniversities,andthedevelopmentof

studiocomplexes.

26

Televisionproduction:AccordingtotheMassachusettsDepartmentofRevenue(2009:6),

televisionproductiongenerated70%(186)ofthetotalnumberofcrediteligibleprojectsfrom

2006‐2008.However,becauseoftherelativelysmallersizeoftheseproductions,thesectoronly

used7%ofthetotalvalueofthecreditsissuedduringthatperiod.Comparedtofeaturefilms,

televisionproductions(especiallycommercialsandnon‐fictionprograms)typicallyuseamuch

smallerproportionofabovethelinetalent.Asaresult,theseproductionsmaymakelarger

proportional(thoughamuchsmallertotal)contributiontolocalwageandnon‐wagespending.

Infact,thetelevisionproductionsectorinMassachusettsisitselfcomprisedofatleastthree

differentsub‐sectors.Inthefollowing,webrieflydescriberecenttrendsinscriptedanddramatic

television,non‐fictionandpublictelevision,andadvertisingproduction.

DramaticandScriptedTelevision:Ascriptedtelevisionshowbeginswiththeproductionofapilot

episode.Notallpilotsbecomelongrunningtelevisionshows.However,evenshowsthatare

pickedupandairforasingleseasongenerateconsistentemploymentforasmanyasonehundred

castandcrewmembers.Likeblockbusterfilms,therelativelysmallnumberofshowsthatbecome

popularcangeneratelong‐termeconomicbenefitsintheformoflocalwageandnon‐wage

spending,futureearningsfromresiduals,andpotentiallylocalbrandrecognition.Forexample,the

Cheerstelevisionshowgeneratedlong‐termeconomicbenefitsintheformofincreasedtourism

eventhoughitwasnotfilmedinMassachusetts.The1980stelevisionshow,“SpencerforHire,”

generatedlong‐termjobsformanylocaltelevisionproductionemployeesandcontributedtensof

millionsofdollarstothelocaleconomy.

TelevisionpilotsandserieshaverecentlybeenfilmedinMassachusettsandcaptured16%ofthe

totalcreditsissuedbetween2006and2008.Onerespondentdescribedthelong‐termimpactif

oneofthesepilotsgeneratesatelevisionshowthatismadeinMassachusetts.“Iftheshow

comes,everyepisodewillcostabout$2M.Theywillshoot10episodes.Thatis$20Mrightthere.

Therewillbe80corepeopleandupto140atlunchwhenyouincludetheextras,dayplayers,etc.”

However,becausescriptedtelevisionistypicallyproducedinastudio,Massachusettscurrently

lacksacriticalresourceforthegrowthofthissector.Respondentsarguedthatwithoutastudio,

scriptedtelevisionshowsmaycontinuetouseMassachusettsasabackdropforexteriorshots(as

27

thelongrunningshow“BostonLegal”did)butwouldfinditdifficulttoproduceafullshowinthe

Commonwealth.

Non‐fictioncable:Non‐fictioncabletelevisionproductioniscurrentlythefastestgrowingand

mostprofitablepartofthetelevisionindustry.Thisisdrivenbythefactthatcablenetworks(as

opposedtobroadcastnetworks)cangeneraterevenuefrombothadvertisingandcarrier

subscriptionfees.Moreover,ascomparedtoscriptedtelevision,non‐fictiontelevisionhaslower

productioncosts.Respondentsreportthatthereissignificantroomforinternationalgrowthinthis

sector.

IndustryrepresentativessuggestthatMassachusettshasthepotentialtobethenation'sthird

largestcenterfornon‐fictiontelevisionproduction.Thereareseveralfactorsthatmaygive

Massachusettsastrategicadvantageinthisarea.First,thelaborpoolcontainsexperienced

documentaryproducers,videographers,andsoundrecordistsaswellasalargepoolofstudents.

OnlyLosAngelesandNewYorkgraduatemorefilm/TV/videostudentsannuallythan

Massachusettsandmanyofthesestudentsarecurrentlyfindingjobsintherapidlygrowinglocal

non‐fictiontelevisionsub‐sector.

Barrierstoentryintonon‐fictionTVarelowerthanforfeaturemovieproduction.Inparticular,

non‐fictionTVhasmanyopeningsforproductionassistants,assistanteditors,andresearchers.

Movementupcareerladders(tobeingassociateproducerandproducer)isalsomorerapidthanit

isinfeaturefilmproduction.Thejobsalsolastlongerthanfeaturefilmjobsbecausethecomplete

productioncycleofonehourofprimetimenon‐fictioncableTVisbetweensixandsevenmonths

long.

Massachusettsalsohasseveralotheradvantagesthatmaycontributetothegrowthofthissector.

Thestateishometooneofthenationalleadersinvideoeditingequipment,Tewksbury‐based

AVID,aswellasarapidlygrowingdigitalgamingindustry.PowderhouseProductionshasused

someofitssavingsfromtheFilmTaxCredittoinvestinAVID'snewUNITYISISeditingsystemand

recentlybecameoneoffewindependentproductioncompaniesinthecountrytohavethis

sophisticatedvideostorageandretrievalsystem.Notonlydiditgenerateadditionalsalesrevenue

foranotherMassachusettscompany(Avid),itwillalsoenablePowderhousetoeditlargenumbers

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ofprogramsatafractionofthecostofitscompetitors,givingthemasignificantcompetitive

advantage.PowderhousewillalsobefeaturedinanationalmarketingcampaignbyAVIDabout

theUNITYISISsystem.Thisstoryillustratessomeofthepositivespillovereffectsofincreasesin

localfilmandtelevisionproductiononotherlocalcompaniesthatarenotdirectlymonetizing

credits.

Finally,becausetheBostonareahasalargeconcentrationofresearchuniversities,high

technologyandbiotechnologyfirms,manyofthestoriesthatmakeupthecontentfornon‐fiction

televisionprogramscanbefoundlocally.Thisaccesstocontentprovidesanadditionaladvantage

forlocalnon‐fictiontelevisionfilmproducers.

AllofthesestrategicadvantagescombinedwiththepassageoftheFTChavehelpedthissector

growrapidlyinrecentyears.Onecompany(PowderhouseProductions)grewfrom35employees

in2006toahighof124employeesin2009.In2009,Powderhouseproduced36hoursofprime‐

timenon‐fictionTVforDiscovery,History,Science,AnimalPlanetandPBS.Duringthattime,they

hired45productionassistants,12assistanteditors,6researchersand105studentinterns.In

2010,Powderhouseexpectstoproduce45hoursofTVandexpectstocontinuehiringnew

employees.Notsurprisingly,thisgrowthisalsoreflectedindramaticrevenuegrowththatnearly

doubledbetween2007and2009.Itisalsoleadingtonationalrecognitionreflectedinthefactthat

oneoftheleadingagencies,CreativeArtistsAgency(CAA,)recentlytookonPowderhouseasa

clientandnowrepresentstheminbothLosAngelesandNewYork.

PublicTelevision:AshometothepublictelevisionstationWGBH,Bostonhaslongbeen

recognizedasanationalcenterfornon‐fictiontelevisionproduction.Asoneoftheflagship

stationsinthePublicBroadcastingSystem,WGBHhasa60yearhistoryproducinginternationally

recognizednon‐fictionprogramslikeFrontline,NOVAandThisOldHouseaswellasawardwinning

children’sprogramming(e.g.,Zoom,Arthur).WGBHtypicallyhasbetween100‐200projectsin

productionanddevelopmentatanygiventime.Itisalsothesourceoflocalproductionspending

andemployment.Infiscalyear2007,WGBHspentover$126milliononprogramdevelopmentand

productionalone(WGBH,2008).Asinfeaturefilmandotherkindsoftelevisionproduction,

locationdecisionsinpublictelevisionaredrivenbycomplexcombinationsoffinancial,aesthetic,

29

andpracticalconsiderations.Forexample,aproducerforaspecificshowmightbeselectedforher

expertiseinthetopicwhileothercontractorsmaybeselectedforspecifictechnicalandartistic

skillslikeanimation.Therefore,someproportionofthetotalWGBHproductionbudgetgoestoout

ofstatevendorsandemployeeswithskillsandexpertisethatarenotavailablelocally.

Thesefactorsnotwithstanding,WGBHremainsalargelocalemployerintelevisionproductionwith

approximately900peopleatitsBostonheadquarters.Moreover,anexaminationofWGBHtax

filings(availableatwww.guidestar.org)revealsthatthreeofthefivemosthighlypaidindependent

contractorsforprofessionalservicesin2007wereMassachusettscompaniesthatreceivedmore

than$500Kthatyear.Althoughmanyoftheirlargestindependentcontractorsforproduction

servicesareoutofstatecompanies,somelocalcompanieshavereceivedworkfromWGBHandit

ispossiblethatthestationmaybeabletoincreasetheproportionofitsproductionworksourced

tolocalcompaniesastheygainnewexpertise,equipment,andskilledemployees.

Asignificantnewdevelopmentoccurredin2007whenWGBHopenedanewflagshipoffice

buildingandstudiocomplexinBrighton,MA.Thisbuildingrepresentsanimportantnewresource

inthelocalnon‐fictiontelevisionproductioncommunityandgeneratedover$20millionin

revenuesforlocalconstructioncompaniesbetween2006and2007.Becauseofthisnewspace,

WGBHhasbeenabletobringmembersofthepublicintoitsfacilitiesasneverbefore.For

example,anOctober2009premierforthecriticallyacclaimedseries,LatinMusicUSA,drewover

1,000gueststotheWGBHstudios.Thiskindofincreasedpublicengagementhasbeendirectly

enabledbytherecentWGBHexpansion.

Whilethefilmtaxcredithasnotbeenasignificantdriverofthisexpansion,ithashadapositive

impactonsomeWGBHproductiondecisions.Becauseitreliesheavilyonexternalfundraisingto

produceitsprogramsandtheseprogramsoftenhaveproductioncyclesof18monthsormore

(duringwhichtimefundraisingoftencontinues),programsoftenneedtobeapprovedbefore

fundingisfullysecured.TheavailabilityoftaxincentiveshashelpedWGBHmanagetheserisksby

providingafinancialcushionthatallowsthemtoapprovemoreprogramsbeforecomplete

fundingissecured.

Inadditiontomanagingtheserisks,WGBHhasusedcreditstoincreaseresearchanddevelopment

innewprograms.Forexample,the2006seasonofDesignSquadcost$2milliontoproduce.Of

30

this,allbut$500,000wasspentinMassachusetts.Thisproductioninturngenerated$235,000in

cashforWGBH,whichwasthenusedtofundfutureproductionsandeasefundraisingpressureat

thestation(Mohl,2008).Therefore,onehiddenbenefitoftheFTCmaybeincreasingthescope

andbreadthofWGBH’spublicprogrammingandhelpingtoreducerisksandfundraisingpressure

atthisnationallyrecognizedpublictelevisionstation.Thecombinedimpactofthe900workers

WGBHemploysdirectlyandcontractswithlocalproductioncompaniesandfreelanceemployees,

aswellasitsrecentlybuiltstudiocomplex,representsignificantlong‐terminvestmentsinthelocal

non‐fictiontelevisionproductionsector.

Commercialsandadvertising:Amajorityofthetelevisioncommercialsproducedin

Massachusettsaremadebyasmallhandfuloffirms.Theresearchteamtalkedwiththreeofthe

largest.Thesefirmsreportedthattheiroverallbusinesshasremainedstablebetween2005and

2008,duringaperiodwhenproductionofcommercialsintheU.S.asawholehasbeenonthe

decline.Moreover,agrowingpercentageofthesefirms’workisnowbeingproducedin

Massachusetts.Onecompanyreportedthat70percentofitscommercialswereproducedinthe

Commonwealthin2008comparedtoonly40percentin2005.

ThetaxcreditshavemadeBoston30‐40percentlessexpensivethanNewYorkCity,andthis

differentialcangiveMassachusettsbasedcommercialproductioncompaniesacompetitive

advantage.Atypicalcommercialshootsfortwodaysandspendsapproximately$200,000oncast,

crew,andmaterials.Ofthisspending,asignificantproportion(includinglabor)istypicallylocal.

Oneproducerprovidedthefollowingbreakdownforspendingonarecent2‐day($200K)

commercial.

Table2.Approximateexpensesfora2‐daycommercialLabor(alllocal) 90,000Locationexpenses 17,000Propsandwardrobe 12,000Equipment 20,000Filmstockanddeveloping 10,000Talentcosts 10,000Creative,director,insurance,etc. 41,000 200,000

31

Commercialproductioncompanieshaverecentlyluredoutofstateadvertiserstoshoot

commercialsintheCommonwealth.Forexample,onelocalcompanyrecentlycompletedspots

hereforalargepharmaceuticalcompanybasedinNewYorkandanautocompany.

BostonadvertisingagenciesandlargeMassachusettsbasedadvertisers(forexample,Fidelity,New

Balance,GilletteandRebok),however,havestilltendedtouseoutoftownproductioncompanies

formostoftheircommercials(although2008wasthefirstyearpeoplehaveheardofoutofstate

commercialproductioncompaniesshootinginMassachusettstocapturethetaxcredit).TheMPC

hasrecentlyundertakenanaggressivecampaigntoencourageMassachusetts‐basedadvertisers,

suchasTJX,toshoottheircommercialsintheCommonwealth.

DocumentaryFilm:Documentaryfilmmakinghaslongbeenadistinctivestrengthof

Massachusetts.Manyofthepioneersof16‐millimeterdocumentaryfilmmakingwerebasedhere,

andWGBH’sroleastheflagshipPBSstationhasallowedtheCommonwealthtoestablishand

maintainaleadershippositioninbothseriesandlong‐formtelevisiondocumentaries.Interviews

indicatethatthetaxcreditshavebeenhelpfultosomeindependentdocumentarymakers,making

projectsfeasibleandenablingthemakerstoproducehigherqualityprojectsduringaperiodwhen

financialsupportforindependentworkhasbeengrowingscarce.

Whileitisimpossibletodeterminepreciselyhowmanyindependentdocumentaryproducersare

workinginthestate,theylikelyoutnumberindependentnarrativeproducers,asmallerbutnot

insignificantgroupoflocalfilmmakers.Itisworthnotingthatmostindependentfilmmakershave

incomesourcesotherthantheirindependentfilms.Thesefilmmakersoftenworkinrelated

sectorsincludingindustrial,educational,andcabletelevisionproductionandearnalowerwage

workingontheirownfilmsthantheyearnfromtheirotherjobs.

Becausethesefilmsareoftenmadeusinggrantsandotherdonations,independentfilmmakers

relyonfiscalsponsorswhoprovidethe501c3statusneededtoqualifyformajorgrants.While

therearemanyfiscalsponsorsintheCommonwealth,threeofthemworkwithalargenumberof

localproductionsandassistfilmmakersinresearching,applyingfor,andadministeringgrants.

Interviewswiththeexecutivedirectorsofthreesuchorganizationshelpedusunderstandrecent

trendsinthissector.

Together,theseorganizationssupportedapproximately150projectsin2009.Notalldocumentary

32

filmsthatreceivemajorgrantsuseoneofthesethreeorganizationsandthereareseveralother

smallerfiscalsponsorshiporganizationsinthestate.Indeed,sinceany501c3organizationcan

serveasafiscalsponsorforafilm,somefilmmakerschoosetoworkwithnon‐profitsthatarenot

primarilymediaartsorganizations,butwhosemissionsareconcernedwiththecontentareathe

filmexplores.However,thesethreefiscalsponsorsrepresentalargeproportionofthetotalgrant

fundedindependentdocumentaryproductionintheCommonwealth.

Astheirprimarysourceofincome,twoofthesponsorsdependonthefeestheychargeonthe

grantsanddonationstheyacceptonbehalfoftheirfilmmakers.Theotherisadistributorand

makesasignificantportionofitsincomethroughthedistributionarmofitsoperations.Thereare

severalfactorsthatmakeithardtogaugewhetherthefinancialstatementsoftheseorganizations

canbeusedasindicatorsofthelevelofindependentfilmproductioninthestate.First,these

organizationsdonotexclusivelyworkwithlocalfilmmakers.Localfilmmakersoftenshootthe

majorityoftheirmaterialoutsideofthestate,andwhileitishardtoestimatewhattheratioof

shootingin‐statevs.out‐of‐stateis,allthreefiscalsponsorsreportthatamajorityoftheirprojects

areshotout‐of‐state.Therefore,asignificantportionofmoneyraisedforthesefilmsisspentin

otherstates.

Anotherimportantfactortonoteisthatmajorgrantsareoftenawardedinstages.Forexample,a

majorfundermightgrantafilm$300,000inthreeyearlyinstallmentsof$100,000.Sometimes

grantsareawardedwiththestipulationthatmatchingfundsareraised,soagrantmaybe

awardedbutnotactuallypaidoutuntilyearslaterwhenthefilmmakerisabletoraiseenough

moneytomatchthosefunds.Therefore,thefinancialstatementsinanygivenyeardonot

necessarilyreflectsignificantchangesinfunders'behavior;thereissomelagtimebeforeany

changesinfundingbehaviorwouldbereflectedintheincomefiguresofthesefiscalsponsors.

Althoughthenumbersdonotgiveusaclearsenseofmorerecentfundingchanges,twoofthe

fiscalsponsorsreportedthatmajorfundersarecurrentlygivingless.Oneofthesenotes:

“ThebiggesttrendI’venoticedbetween’04and’08isthedecreaseingovernment

funding,that,especiallytheNEHwhichiswhatwe’vealwaysearnedourbreadand

butterfrombecausetheytendtogiveverylargegrantsofhalfamillionormore….

I’venoticedespeciallyinthelastthreeyears,maybetwoyearseven,thatthose

33

budgetshavebeenslashedandtheNEHishardlyfundinganyfilmsanymore…and

iftheydo,likethisyearwegotthreebuttheywereeach$70,000,theywerevery

small,asopposedtothreethatrangebetween$400,000and$700,000inthepast,

sothat’sahugedeclineinincomeforus.”

Severalfilmmakersinterviewedechoedthesentimentthatithasbecomeincreasinglydifficultto

raisemoneyfrommajorfoundations.Inreferencetoherattemptstoraisemoneyduringthe

periodof2005–2007onefilmmakersaid:

“Therearecompetingneeds.Alotoffoundationsyouknowjustdon’twanttofund

films.Or,ifthey’regoingtofundfilms,theymightfundoneortwofilms.And,that

–thattakesuptheirwholecommitmentforanythingthattheyweregoingtospend

onfilm.”

Thiscommentsuggeststhatperhapstherearemorefilmmakerscompetingformajorgrants,and

thathascreatedaperceptionthatthereislessmoneyavailable,evenifperhapstheamountof

majorgrantshasnotdecreased.Theprevailingviewintheindependentdocumentarycommunity

isthatlargefundersaregrantinglessmoneytofilms.Whilesomethinkitisdirectlyrelatedtothe

recenteconomicdownturn,otherslocatethechangebeginningasearlyasfiveyearsago.

IntermsofspendingforindependentdocumentaryfilmsinMA,noonereportedanysignificant

changesinspendingpatternssince2005.Allfourdocumentaryfilmmakersreportedtheytypically

shootoutsideofstate,whilepost‐productionismoreoftendonein‐state.Inmostcases,wages

forproductionandpost‐productioncrewwerethemajorexpenses.Insomecases,asignificant

portionofafilm’sbudgetwasdesignatedforobtainingrightstohistoricalfootageand/ormusic.

Noneofthedocumentaryfilmmakersinterviewedreportedthatthetaxcreditimpactedtheir

spendingdecisions.Onlyonefilmqualifiedforthetaxcredit,andinthatcase,duringthe

productionandpost‐productionofthefilm,thefilmmakerassumedthattheywouldnotqualify.

Eventhoughthetaxcreditprogramdoesnotappeartohaveinfluencedspendingdecisions,all

filmmakerssaidtheywerethankfulthatthetaxcreditprogramexistsandthatitmightimpact

theirspendingdecisionsinthefuture.Onefilmmakerreported:

“Forindependentbillings,peoplewhomakedocumentaries,whoworkonashoestring

basically…thetaxcreditisalifeline.It’saGodsend…Wedoalotofourworkin

34

Massachusetts,partlyoutofpreferenceandpartlyyouknowoutofbecausewe’rehere

andwecan’taffordtotravelanyway…Havingsomeportionofthatcomebacktous

is…goldenand…foralotofusthat’swhatwillenableustocontinuetowork.”

Anothersaid:

“Ihavenotmadeanyfilmsthathavequalifiedanditdidn’tinfluencemydecisionto

makewhatfilmsIhavemadesofar…But…itmakesmewanttoshootandeditin

Massorfilmsometimesoon.Iamkeepingmyeyeswideopenforfilmideasthat

couldbedonehere.Whynotshoothere?Weshouldbedoingthatkindofthing.”

Independentnarrativeandstudentfilms:ThenumberoflowbudgetfeaturefilmsshotunderSAG

agreementinMassachusettsdoubledinrecentyears,risingfrom18in2005to37in2008.The

numberofstudentfilmsshotunderSAGagreementmorethandoubled,goingfrom16in2005to

41in2008.Althoughthesekindsofprojectsdonotmakealargeeconomicimpactintheshort

term,theyareimportantfordevelopingyoungtalent.Inparticular,youngdirectorswhoachieve

earlysuccessinMassachusettsmaychoosetoshootsomeoralloftheirfutureprojectsinthe

Commonwealth.Indeed,successfullocalactorslikeBenAffleckhaverecentlyreturnedtothe

Commonwealthtoproducefilmshere.

Independentnarrativefilmsarefinancedthroughinvestorsasopposedtothegrantsand

donationstypicallyusedindocumentaryproduction.Investorsaretypicallyattractedtoa

narrativeprojectiftheybelievetheprojectwillbefinanciallysuccessfulandtheywillreceivea

returnontheirinvestment.Becauseindependentnarrativefilmmakersdonottypicallyhavefiscal

sponsors,itwasnotpossibletogetthesamebroadviewofnarrativeproductionoverthepastfive

yearsaswaspossiblewithdocumentaryproduction.

Onenarrativeproducerwhomadeuseofthetaxcreditwasinterviewedforthisreport.Although

theproducerisnotfromMassachusetts,thedirectorandprimaryinvestorsare.Theystarted

raisingmoneyin2007,shottheirfilminFallRiverin2008,andcompletedpost‐productionin

2009.Thistimeframeistypicalfornarrativefilmsbecauseunlikedocumentaryfilms,the

35

filmmakersknowthestoryaheadoftimeandcancondensetheshootingintooneconcentrated

periodoftime.Itisworthnotingthatthismakesiteasierfornarrativefilmmakerstotake

advantageofthetaxcredit,becausetheytypicallyknowwhich12‐monthperiodwillbethe

biggestspendingperiod.Incontrast,documentaryfilmmakersoftendonotknowwhatthe

biggestspendingperiodwasuntilafterthefilmiscomplete.Onthisparticularnarrativefilm,they

receivedthecreditbeforethepost‐productionwascompleteandappliedthemoneytowards

finishingpost‐production.Thefilmmakersarecurrentlylookingfordistribution,andhopeto

recouptheircostsandmakeaprofit.

Theproducerreportedthatthelargestspendingcategorywaswagesforcastandcrew.About

halfofthecastandcrewwerefromMAandtheotherhalfwerefromout‐of‐state,primarilyNew

YorkandLA.Anothermajorcategoryofspendingwasfilmandcameragear.Unlikeindependent

documentaries,whichareoftenshotonvideo,thisfilmwasshoton35mmfilm,asignificantly

moreexpensiveformat.Thesecostsaccountedforaboutafifthoftheoverallbudget.Thismoney

wasspentoutofstatebecausetheycouldnotfindtheequipmentorfilmstockinMA.Other

significantcostsincludedlocationfeesandcatering,whichwereallspentinstate,andpost‐

production,whichwasdoneprimarilyinLA.Theproducerestimatedthatabout40%ofthe

overallbudgetwasspentinMA.

Itseemsthetaxcredithasnotyetimpactedtheindependentdocumentaryandnarrativefilm

sectortothesamedegreeithasimpactedstudiofeatures.Forexample,seventeenfeaturefilms

wereproducedin2008,ascomparedtoanaverageof2‐4inyearspriortothetaxcreditprogram.

Incontrast,theoverallnumberofactiveprojectsreportedbythefiscalsponsorshipsorganizations

hasnotincreasedsignificantlysince2005.Itisdifficulttomeasuretheimpactoftheprogram

againstthefundingissuesfacedintheindependentsector.Thescarcityoffundslimitsthe

amountofprojectsmadeinthestate.Asthereappearstobefiercecompetitionforcurrentfunds,

ifthereweremorefundingthesectorwouldmostlikelygrow.

Itisworthnotingthatthetaxcreditmayimpacttheindependentsectorinsomeindirectways.

First,theincreaseinmajorstudioproductionshasenabledsomeofthelocalcrewbaseto

continuetoliveandworkinMA.Ifthesefilmshadnotbeenmadesomelocalcrewmighthave

36

movedelsewhereinsearchofemployment.Oneproducerwhohasworkedonbothfeatureand

independentprojectsnoted:

“Inaverysimplisticsense,arisingtidedoesraiseallboats,asdoesthe

developmentofamoreexperiencedcrewbase.Anygeographicalregionthatis

experiencinganincreaseofactivitywillalsogeneratemoreinterestinindependent

projects.Thecrewgoestoalmostanyprojectaslongasthereappearstobesome

actualfinancialbasisandifitfitsintotheirownpersonalschedules.”

Additionally,thestudioinfrastructurethatisbeingproposedtoaccommodatemorefeaturefilms

mightalsobenefittheindependentsector.Severallargesoundstudiosarecurrentlyproposedin

MA.Onefiscalsponsorcommentedonapotentialbenefitofthesestudiostotheindependent

community:

“Forinstance,theymightgivereallygooddealstoindependentssothat

independentscouldactuallyaffordtousesomeofthestudiosfortheirown

projectsanditmightincentivizethemtoactuallyshootsomethinghereversus

goingtoNewYorkortheymightrealizethatsomeprojectisdoablebecause

whateverservicestheyneedareinMA.”

Ifmoreeffortwereplacedoninformingfilmmakersaboutthetaxcreditandmakingthefiling

processeasier,moreindependentanddocumentaryfilmmakersmighttakeadvantageofit.One

filmmakernoted:

“Mysenseisthat…alotofindependentfilmmakersandmyselfincludeddosomuch

onourfilmsthatit’slikepeoplejustdon’tknowalotaboutthat[thetaxcredits].

Theydon’tknowhowitworks.Theydon’tknowtheinsandouts,somebodyhas

beenthroughitbutit’sbeenreallyconfusingandthentheywererejectedandyou

don’tunderstandwhy.Youknowitjustseemsreallyforeignstill.”

ItisdifficulttospeculateonthefutureofindependentfilmmakinginMA.Thebiggest

determinateofitssuccessisfunding.ItappearsthatMAhasthecrewbaseand

infrastructuretosupportasignificantincreaseinindependentfilmproduction,butit

remainsunclearwherethefundingfortheseprojectswillcomefrom.

37

Postproductionandspecialeffects:Theincreaseinmotionpictureproductionhashadapositive

spillovereffectinlocalpost‐productionandspecialeffects.Onenotableexamplehasbeenthe

expansionofBrickyardVFX.FoundedbyMassachusettsnativeandEmersonCollegegraduate,

DaveWaller,the16‐personorganizationisnowoneofthepremiervisualeffectsstudiosinNew

England.Brickyardbeganasaone‐manshopin1999andspecializedinvisualeffectsfortelevision

commercials.In2007,duetoanupsurgeofwork,thepartnerscreatedanewcompanycalled

BrickyardFilmworkscateringtothevisualeffectsneedsoffeaturefilms.ThenewFilmworks

companyenjoyedrapidgrowthandby2009hadtwentypeopleonstaffandcompletedhundreds

ofeffectsforfeaturefilmslike“TheProposal”and“Surrogates.”

Confirmingreportsfromothertelevisionandpost‐productioncompanies,employmentat

BrickyardalsodrewheavilyfromgraduatesoflocalcollegeslikeEmersonCollege,Boston

University,FitchburgState,andtheMassachusettsCollegeofArt.Inadditiontothesenew

entrants,Brickyardfoundthatitalsoneededindustryveteranstohelpkeepupwithincreasing

demandandrecruitedformerMassachusettsresidentswhohadmovedtoCaliforniaandagreed

tomovebacktoMassachusettstoworkatBrickyard.WhileBrickyard’sfeaturefilmworkhasbeen

growing,2008and2009werethefirstyearsthattelevisioncommercialrevenuesshoweddeclines

sincethecompany'sfoundinganditfacedtheprospectoflayoffs.However,bysharingthetax

creditsonseveralprojectswiththeirclients,theywereabletoobtainadditionalworkleadingto

thehiringofthreeemployeesalongwithassociatedworkstationsandequipment.Inthis,and

manyothercases,industryrepresentativesdescribehowthetaxcredithashelpedthemprevent

layoffs,obtainnewwork,andengageinnewhiringandequipmentpurchasingduringaperiod

witharapidlycontractingregionalandnationaleconomy.

Othercompaniesinthissectorhavereportedsimilarstories.NationalBostonStudiosbegana

relationshipwithSonyPicturesbypreparingthefirstHDVideoDailiesforthefilm"21"whichwas

shotmostlyinMassachusetts.SinceHDDailieswerealeadingedgestepinthedigitalworkflowat

thattime,NationalBostondevelopedanefficientprocessreplicatingthesameoperational

systemsusedforcreatingtraditionalfilmdailies.ThecompanyworkedwithEvertzofOntario

CanadatobuildspecialtyequipmentthatwasinstalledatNationalBoston’sStudiostohandlethe

processingofthesedigitaldailies.TheseHDvideodailieswereproducedovernightandthensent

38

viafiberopticcableusingproprietaryinternetsoftwaretoCulverCitywhereDVD'swerethen

producedforviewingbystudioexecutives.ThetaxcreditencouragedSonytoworkwithNational

Bostontodevelopatechnologicalsystemandworkflowthathadneverbeenusedbefore.In

2008,NationalBostonproducedseveralcommercials,televisionpilotsandmediaprojectsthat

allowedthemtotakeadvantageofthetaxcredits.AstheydidforBrickyard,thecreditshelped

NationalBostonavoidstaffandproductioncutsduringadifficulteconomicperiod.

Post‐productiontechnologyisalsodriveninlargepartbychangesininformationtechnology,and

theCommonwealthhasalongstandingstrengthininformationtechnologyrelatedtothefilmand

televisionindustry.MassachusettsisthehomeofAvidTechnologyInc.,whichisoneoftheglobal

leadersineditinghardwareandsoftwarefortelevisionandfilmproduction.Avidaloneemploys

2,350peopleandgenerated$845Minsalesin2008.However,becauseAvidislistedintheNAICS

codeforPhotographicandPhotocopyingEquipmentManufacturing(333315),itdoesnotappear

indataonfilmandtelevisionemploymentintheCommonwealth.Moreover,becauseitisnot

monetizingtaxcredits,itwouldnotbeincludedinanyanalysisoftherevenueimpactsoftheFTC.

GenArts,aCambridgebaseddeveloperofFXsoftware,recentlyattractedventurecapital

investmentandacquiredaleadingUKbasedFXtechnologydeveloper.Thecombinedpresenceof

AvidTechnologies,smallspecialeffectssoftwaredevelopers,digitalgamingcompaniesand

leadingresearchlabsinartificialintelligenceandemergingmedia(especiallyatMIT)could

representapowerfulsetoffuturesynergies.

Education:Withitsconcentrationofuniversities,Bostonisanimportantcenterforstudents

studyingtheproductionoffilm,televisionandothermedia.TheMassachusettsCollegeofArtand

Design,EmersonCollege,BostonUniversity,FitchburgState,CurryCollegeandBentleyUniversity

allhavefilmandtelevisionprograms,someofwhichareimportantfeederschoolsforLosAngeles

andNewYorktelevisionandfilmcompanies.BostonUniversityalonehasover1,000students

enrolledinCommunicationsandFilmandTelevisionprogramsandin2009graduatedalmost300

studentsfromtheseprograms.Manyotherlocalschoolsalsohavedrama,film,andtelevision

coursesandgeneratemanyyounglocalemployeesseekingjobs.

39

Untilrecently,graduatesoftheseprogramstypicallyfacedthechoiceofleavingMassachusettsor

givinguponacareerinthefilmindustry.Officialsassociatedwiththeseprogramsandother

industryrepresentativesreportthatalumniwhohadleftforLosAngelesandNewYorkhave

recentlyreturnedtoBoston,sinceitisnowpossibleforthemtoworkinthefilmindustryhere.

Moreover,asnotedabove,localproductioncompaniesareemployinganincreasingnumberof

thesestudentsasinternsandprovidingcareeradvancementopportunitiesforMassachusetts’s

collegegraduates.Inadditiontoprovidingalocalworkforcefortheindustry,theseprogramsalso

provideemploymentforthemanyseniormembersofthelocalfilmandtelevisionindustrywho

teachinthem.Industryrepresentativesdescribedtheseeducationalresourcesasuniquestrategic

advantagesforMassachusetts.

Careeropportunitiesforlocalgraduatesseemparticularlypromisinginnon‐fictiontelevision

productionthattendstohavemanyopeningsfornewentrants(e.g.,productionassistants,

assistanteditorsandresearchers).Moreover,thejobstendtolastlongerthanwithfeaturefilms,

becausetheproductioncycleislonger.Therearenumerousexamplesoflocaluniversityprograms

providingbothinternsandnewentrantstolocaltelevisionandpost‐productioncompanies.Ifthis

trendcontinues,itseemspossiblethatthiscouldinturngeneratepositivefeedbackloopsbothby

reducingwageleakagefromlocalfilmandtelevisionspendingwhilebuildingnewcareerpathsfor

Massachusettscreativeworkers.

Equipmentrentalandspecializedservicefirms:Thegeneraltrendinthispartoftheindustryhas

beeninvestmentbylocalfirmstoexpandtheirinventoryofequipmentandexpansionintothe

Commonwealthbyrecognizednationalfirms.Localgripandelectriccompanieshaveexpanded

theirofferings,andseveralnationalfirmshaveopenedMassachusetts’soffices.Therecentmerger

oftwolocalequipmentrentalfirms,RuleandBostonCamera,hascreatedaMassachusettsbased

firmthatpossessesthescaletoservelargestudioproductions.Anationalcateringfirm,HatTrick,

hasopenedanofficeinMassachusetts,fillingasignificantgapinthelocalindustry’scapabilities.In

addition,MediaServices,oneofasmallnumberofnationalpayrollcompaniesthatservethe

motionpictureindustry,acquiredCrewStar,aMassachusetts‐basedpayrollfirm.Thesetrends,

alongwithFigure5suggestthatthereisagrowingcoreoflocalfilmandtelevisionservicefirms

emergingintheCommonwealth.Ifthistrendcontinues,wecouldeventuallyfindthatitreduces

40

leakagefromnon‐wagespendingthatiscurrentlygoingtooutofstatecompanieswithskillsand

equipmentthatarenotavailablelocally.

Soundstage/filmstudioprojects:Soundstagesandfilmstudiosareoftendescribedascritical

lynchpinsintheevolutionofapermanentlocalfilmindustryinMassachusetts.Inadditionto

providinglargenumbersofpermanentsupportingjobs,thesestudiosbecomethehomeforfilm

servicecompaniesandotherimportantaffiliatedbusinesses.Asaresult,therearelikelytobe

significantbenefitsfromclusteringeffectsofhavingcreativepersonnelandtheirsupporting

industriesco‐located.Whileitishardtocalculatethebenefitsofthesekindsofclusteringeffects,

therearemoredirectbenefitsassociatedwiththespecificneedsandeconomicsoftelevisionas

opposedtofeaturefilmproduction.

Whereasastudiofilmmightemploybetween150–200people,theseemployeesworkintensively

overarelativelyshortperiodofseveralweeksormonths.Incontrast,atelevisionseriesmight

employ100peopleandfilm22episodesayear.Atacostofbetween$2Mand$2.5Meach,aTV

seriescancontributesignificantlytolocalemploymentandspending.Becausescriptedtelevision

showsrequiresoundstages,industrymembersarguethatastudiowouldincreasetelevision

productionworkinMassachusetts.Atpresent,evenshowsthataresetinBoston(e.g.,Boston

Legal)haveprimarilybeenfilmedelsewhere.

Threegroupsareactivelyworkingtodevelopsoundstages/filmstudiosinMassachusetts.The

researchteamspokewithtwoofthem.OnegrouphasbeenworkingonacomplexinPlymouth

andinthespringof2009hadalreadyspent$8millioninMassachusettsover17monthsonlocal

architects,engineers,lawyers,andconsultants.Inthespringof2009,thisgroupemployeda

payrollof35.SixoftheseemployeeshavemovedtoMassachusettsfromoutofstateandhave

purchasedorareleasinghomesintheCommonwealth.Theremainingemployeeswerelocalhires.

Twelvecollegestudentswerehiredasinternslastsummer(2008),twoofwhomarenowfull‐time

employees.Thesummerinternprogramwasslatedtobringin20collegestudentsinthesummer

of2009.Anon‐profiteducationalfoundationhasbeenestablishedtoenablestudentstoaccess

work‐studyfunds.AsecondgroupisplanningacomplexclosertoBoston,whichwillcontain

cameraandequipmentrentalcompanies,alab,postproduction,andCGI.

41

Allofthestudioprojectsfacethechallengesofraisinginvestmentcapitalinadifficult

environment.However,ifevenoneofthesestudiosprojectsissuccessful,itcouldattracta

televisionseriestoMassachusettswhichbothprovidesmorestableandlonger‐termemployment

forlocalworkers.

Conclusion

Inthepreceding,wehaveprovidedahighleveloverviewofthecurrentstructureandrecent

growthofthefilmandtelevisionindustryinMassachusetts.Webeganbydiscussingthebroad

trendsinstateemploymentandwagesinthisindustryandfindthatemploymenthasgrown

dramaticallyinrecentyears(particularlyinpostproductionandothermotionpictureandvideo

productionindustries).AneconomicimpactanalysisusingIMPLANfindsanoutputmultiplierof

1.95andanemploymentmultiplierof1.79.Takenatfacevalue,thiscanbeinterpretedtomean

thatanadditionaldollargeneratedbythefilmandtelevisionsectorswillproduceanadditional

$.95ofoutputvalueintheCommonwealthandthatanewjobgeneratedinthefilmandtelevision

sectorsproduces.79additionaljobsintheCommonwealth.

Bycomparingthesedatawithinterviewsandnumerousrecentlypublishedanalysesofthe

regionalfilmindustrytaxcreditprograms,wearguethatthefederaldataandmodeling

approachesusedtocalculatethesemultipliersmaynotfullycapturethisrapidlyevolvingindustry.

Asingularfocusonmultipliersisbothunwarranted(givenlimitationswithexistingdataand

modelingapproaches)andtoonarrowgiventhecomplexitiesofproductionpracticesinahighly

mobile,networkedandproject‐basedindustrylikefilmandtelevisionproduction.

Thisreportexaminesbroadlytheproductionpracticesandrecentgrowthtrendsinthelocalfilm

andtelevisionindustry.Wediscussrecenttrendsandinterconnectionsamongthesubsectorsin

theindustryviasharedlabor,servicesandmaterial.Weuncovernoveltrendsinthestructureof

non‐wagespendingpatternsinthislocalindustryandidentifyacoreclusteroflocalfilmservice

firmsthatareservicingmanyofthelargestudioproductionsthataremakingfilmsin

Massachusetts.Wealsofindthattheseproductionstendtospendmoneyverylocally(with

clustersofvendorsbeinglocatedclosetoshootinglocations).

42

Thereareseveralnextstepsandfactorsthatfuturestudiesmaywishtoconsider.First,itwouldbe

helpfultoincreaseaccesstomoregranulardataonlocalemploymentandnon‐wagespending

patternsacrossthesub‐sectorsdiscussedabove.Thereareseverallargeorganizations(union

locals,castingagencies,payrollservicecompanies,fiscalsponsorsforindependentfilms)that

collectivelycapturealargeproportionoftotalactivityintheindustry.Anannualcensusofthese

organizationswouldbeveryusefulforscholars,analystsandpolicymakersinterestedinthe

growthofthisindustryintheCommonwealth.Inthesamespirit,itwouldalsobeusefulto

increasepublicaccesstogranulardataontheFTCprogramspecifically.Becausethesedataare

confidential,itisimpossibleforexternalresearchersandscholarstodotheirownanalysesofthe

FTCprograminMassachusetts.Increasingaccesstotheseimportantdatawouldbeagreatbenefit

tofutureresearchonthiscomplexindustry.

Appendix1:Methodsandapproachesinstudiesofregional

filmandtelevisionindustriesandincentiveprograms

Asfilmandtelevisionproductionincentiveprogramshavespreadacrossthecountryand

overseas,regionalstudiesoftheseindustrieshavealsoproliferated(Seee.g.,Christophersonet

al.,2006;EconomicsResearchAssociates,2009;ErnstandYoung,2009a,2009b;Luther,2010;

MassachusettsDepartmentofRevenue,2009;McMillen,Parr,&Helming,2008;Miller&

Abdulkadri,2009;Popp&Peach,2008;Weiner,2009a;Weiner,2009b).Ourexaminationofmore

than20reportsonlocalfilmandtelevisionindustriessuggeststhattherearetwobasic

approachesbeingusedintheliterature.Thefirstfocusesonestimatingthedirectandinduced

impactsofstatetaxincentiveprogramsonfuturetaxcollectionswhilethesecondlooksmore

broadlyataggregateindustrytrendsandproductionpractices.

Studiesestimatingthenetimpactofspendingonfilmandtelevisionincentiveprogramsonfuture

statetaxcollectionsvarywidelyintheirmethods,buttypicallyuseoneoftwowidelyavailable

economicmodels(e.g.,REMIandIMPLAN)toestimatetherevenueimpactsofincentiveprograms.

43

Despitethesignificantchallengesofestimatingnetimpactsinamobile,project‐basedindustry,

someparticularlycarefulrecentanalysessuggesttheshorttermnetrevenueimpactsofthese

programsmaynotbepositive(MassachusettsDepartmentofRevenue,2009;Weiner,2009a).At

thesametime,therehavealsobeensomestudiesshowingthatthenetimpactoftheseprograms

maybepositive(ArizonaDepartmentofCommerce,2007;ErnstandYoung,2009a,2009b).

Findingsacrossthesestudiesvarylargelybecauseofdifferencesindata,models,andassumptions,

whichhasgenerateddebatesaboutappropriatemethodsandapproachesforconductingthese

kindsofanalyses(Weiner,2009b).

Thesecondapproachlooksataggregateindustrytrends,variationsinproductionpracticesand

linkagesacrosssub‐sectors,andwageandemploymenttrendsineach.Becauseindustryanalyses

facethesamechallengesobtainingaccurateemploymentdataasstudiesonincentiveprograms,

theytypicallysupplementfederalemploymentdatawithsomecombinationofthefollowing

additionaldatasources:

1. Localfilmofficesthatcollecttheirownindustrydata;

2. Interviewsandsurveysofindustrymembers;

3. Unionsandpayrollcompaniesthattypicallycollectdataonaggregateemploymenttrends;

4. Otherarchivaldatasourcesandpublishedreports

Somestudieshavecombinedtheseapproaches(Christophersonetal.,2006)whileothersfocus

solelyontheevaluationofincentiveprograms(MassachusettsDepartmentofRevenue,2009;

Weiner,2009a;Weiner,2009b).Itisimportanttonotethatthisstudyfocusesonaggregate

industryactivityratherthanonanevaluationoftheMassachusettsFTC.Althoughwehave

suggestedsomeareaswhereourfindingsmayhaveimplicationsforfutureevaluationofsuch

programs,wedidnotsetouttoevaluatetheMassachusettsFilmTaxcreditprogramperse.

Indeed,acarefulanalysisofthisprogramhasbeenrecentlyconductedbytheMassachusetts

DepartmentofRevenue(2009)andthereisnoreasontoduplicatetheirwork(norwoulditbe

possiblegivenconfidentialityrestrictionsassociatedwiththetaxapplicationdatarequiredfor

suchastudy).

44

InthenextsectionwediscusstherecentstudiesontheMassachusettsFTCandseveralrecent

studiesofotherstateincentiveprograms.Weidentifyagenericapproachthatseemstobeused

byanumberofthesestudiesandconcludewithadiscussionofsomefactorsweidentifiedinour

researchonMassachusettsthatmaybeofvalueforfuturestudiesofregionalfilmandtelevision

incentiveprograms.

Regionalfilmandtelevisionproductionincentiveprograms:Anoverviewofrecentfindingsand

approaches

InJuly2009,theMassachusettsDepartmentofRevenuereleasedtheirannualreportonthe

MassachusettsFilmIndustryTaxIncentive(2009).Theirreportusedacompletesetoftaxcredit

applicationsfrom2006‐2009tocalculatetheneteconomicimpactofthetaxincentiveprogramon

economicactivityintheCommonwealth.Theircarefulanalysisfindsthatwhiletheprogramhas

beeneffectiveinincreasingfilm(andtoalesserdegreetelevisionproduction)intheBayState,its

short‐termfiscalimpactsarenegative.Specifically,thereportestimatesthatforeverydollarintax

creditsgeneratedbytheprogram,Massachusettscollectsonly$0.16inrevenue.Thisissimilarto

theresultidentifiedintheir2008reportwhichfoundeachadditionaldollarintaxincentives

generatedonly$0.18innewrevenue.Thesefindingsareconsistentbothwithapriorstudyin

Massachusetts(MassachusettsDepartmentofRevenue,2008)andrecentstudiesofthese

industriesinConnecticut(Weiner,2009a)andArizona(Popp&Peach,2008).

Suchfindingsarenotespeciallysurprisingbecausetaxcreditsareusuallynotdesignedtoresultin

anetexpansionoftaxrevenues,particularlyintheshortterm.Instead,mostlegislaturescreatea

taxcreditasacatalystthatwillhopefullyhelptojumpstartanascentindustryorgroupof

industriesinthestate,givingthemenoughofaboosttoreachavolumeofproductionthatisself‐

sustainingwithoutthegovernmentsubsidyinthefuture.Mostlegislativegoalsarecouchedin

termsofnewemploymentgenerationandexpansionofrelatedindustriesratherthanthe

expansionoftaxrevenues.

TherearethreeprimaryfactorsdrivingthesefindingsinMassachusetts.First,alargeproportionof

creditsissuedbetween2006and2008($150.8millionor90.7%)weregeneratedbyfeaturefilms.

Specifically,71%ofthetotalcreditsweregeneratedbyjust8featurefilmswithbudgetsover$30

45

million.Becausearelativelylargeproportionofwagesontheseproductionsgotoabovetheline

employeeswhoaretypicallynon‐residents,mostofthesewagesareremovedfromthecalculation

ofbenefits.TheMassachusettsDOR(2009)assumesthatnoneofthewagesofemployeesearning

morethan$1million(andonly5%ofnon‐residentsalaries)shouldbeincludedincalculationof

statemultipliereffects.Asaresult,themodelsubtracts$233million(52%)fromthe$451.9

milliontotalfilmproductionspendingthatoccurredinMassachusettsin2008.Whilethisisa

somewhatconservativeassumptiongiventhathighnetworthindividualsmaymakesignificant

purchaseswhilelocatedintheCommonwealthandthatsomeofthesemaybemadeusing

advancesagainstfutureincome,itisunlikelythatthesepurchaseswoulddramaticallyalterthe

netrevenueimpactoftheprogram.

AnotherreductionintheneteconomicbenefitstoMassachusettsiscausedbytheimpactofthe

balancedbudgetrequirement.Becauseofthisrequirement,the2009MADORreportremovesan

additional$60.2million(13%)fromthetotalfilmindustryspendingin2008undertheassumption

thataconcomitantreductioninstatespendingisrequiredtobalancethefilmsubsidy.Itisnotable

thatthisisoneoffewstudiesthataddresstheimplicationofthesetimingissuesintheirmodel.

Finally,DORremoves$12.7millionfromthe2008spendingtoaccountfortheproportionof

productionsthatwouldhavebeenpresentintheCommonwealthabsentthecredit.Asaresult,

thereportremoves$306.7(68%)ofthe$451millionintotalfilmindustryspendingin2008from

thecalculationofnetrevenuesviamultipliereffects.

WhilestudiesonMassachusettsandsomeotherstatessuggestthattheshort‐termrevenue

impactsoftheseprogramsarenegative,othershavefoundpositive(andpotentiallylongterm)

benefitsfromfilmindustrytaxincentiveprograms(ArizonaDepartmentofCommerce,2007;

Christophersonetal.,2006;ErnstandYoung,2009a,2009b).Forexample,arecentreport

(Weiner,2009b)foundashort‐termnetrevenuebenefittotheStateofNewYorkaswellasa

long‐termpositiveeffectoncashflowduetoalagbetweenthereceiptoffilmindustryspending

andtheredemptionofcredits,whichtypicallyoccurmanymonthsafterproduction.Moreover,

althoughitisaproject‐basedindustrylikeothertrades,wagesinfilmandtelevisionproduction

tendtobehigherthanaveragestatewages.AreportintheNewYorkfilmandtelevisionindustry

46

(Christophersonetal.,2006)foundthatbecauseitisrelativelyhighlypaidsector,thisindustry

“hasoneofthehighestemploymentmultipliersamongallindustriesinNewYork”.

Asweexaminethesedivergentfindings,itseemsclearthatthevariationinmethods,data,and

modelsalonecouldeasilyaccountforthevariedconclusions.Italsoraisesquestionsaboutthe

correctapproachforaccuratelyassessingtheeconomicimpactoftheseincentiveprograms.

Therefore,wefinditusefultobrieflydiscusssomeoftheremainingmethodologicalchallengesin

doingso.

Whilespecificmethodsandapproachesvaryfromstudytostudy,agenericmethodformeasuring

therevenueimpactofafilmindustrytaxcreditsseemstorequirethefollowingsteps:

1. Identifyinducedfilmactivity(e.g.,filmandTVproductionthatwouldnothavehappened

absentofthecredit);

2. Calculatelocaldirectspendingfrominducedactivity(e.g.,totallocalwagesandnon‐wage

spendingfromthisnewproduction);

3. Calculatemultipliereffectsofdirectspending(e.g.,inducedeconomicactivity,jobs

created,etc.)usingIMPLANorREMI;

4. Addindividualandcorporatetaxreceiptstostatefrommultipliereffectsonwagesand

non‐wagespending;

5. Subtractdirectcoststostateintaxcredits;

6. Subtractnegativemultiplierofassociatedreductionsingovernmentspending(under

balancedbudgetassumptionsassumingthatreasonableassumptionscanbemadeabout

howthesewouldinfactbeallocated).

Whilesomeofthecalculationsinthelistabovearerelativelystraightforward(suchasestimating

thecoststothestateinlosttaxes),othersaremuchlessobvious.Inparticular,thecalculationof

multipliersforwagesandnon‐wagespendingreliesontheuseofcomplexeconomicmodelsthat

maynotbewellsuitedtoflexible,networkedindustrieslikemotionmediaproduction.

47

Evaluationsofincentiveprogramsandothereconomicimpactsstudiestypicallyuseoneoftwo

existingmodels(IMPLANorREMI)toestimatethenetimpactsofchangesinemploymentand

spendinginspecificeconomicsectors.Becausethesetwomodelsusedifferentindustry

categorizationschemesandmethodstocalculatemultipliereffects,someofthevariationamong

thesestudiesislikelyexplainedbydifferencesintheinternaldynamicsofthesemodels.However,

ourreviewsuggeststhatdifferencesindatasources,approachestothecalculationofnetbenefits

andleakage,lagsbetweenindustryspendingandcreditmonetization,adjustmentsforbalanced

budgetrequirementsandtheinclusionoftourismbenefitslikelymakeamuchlargercontribution

tothesedifferences.

Variationsinmodels:Adiscussionandevaluation

Aswehavesuggestedabove,existingfederalemploymentdatamaycontainsignificanterrorsand

omissionsincreativeindustrieslikefilmandtelevisionproduction.Therefore,somestudiesthat

relyonQCEWdataforinputsintoeconometricmodelshavefounditnecessarytomakeestimates

abouthowmanyemployeesfromrelatedsectors(likeindependentartists)oughttobeincludedin

thefilmandtelevisionindustry(Christophersonetal.,2006).Otherstudiesgetaroundthis

problembyusinginputsobtainedfromactualtaxapplications(MassachusettsDepartmentof

Revenue,2009;McMillenetal.,2008)orbycombininginterviewsandarchivaldatacollectionwith

econometricmodeling(Christophersonetal.,2006).Theseapproachesseemlikelytogenerate

moreaccurateestimatesthanthemereuseofQCEWdata,whichmayover(under)estimate

actualwagesandemployment.Certainly,whenthesedataareusedalonetheirpotential

limitationsshouldbeidentified(astheyareintheanalysisabove).

Assumingthatdatainputsareaccurate,theremaybesomeaspectsoffilmandtelevision

productionthatviolateinternalmodelparametersandassumptions(liketherelationshipbetween

wagesandconsumerspending,laborflows,etc.).Forexample,locationfeesrepresentalarge

proportionoftotalspending(particularlyformajormotionpictures).TheMassachusetts

DepartmentofRevenueestimatedthatbetween2006and2008,netnewspendingonthese

paymentswas$51million(or17%ofthetotalspendingduringthattime).Becausethesefees

sometimesarepaiddirectlytoindividualsandorganizations,theymaybespentdifferentlythan

thetraditionalwagesandotherearningsuponwhichconsumer‐spendingmodelsarebased.

48

However,someoftheselocationfeesalsorepresentdirectpaymentstotowns,municipalitiesand

otherpublicentitiessotheycannotbesimplyenteredinonegenericNAICScategory.Thiskindof

idiosyncraticspendingbylocalfilmproductionsmaynotbewellcapturedinexistingeconometric

models.Althoughlocationspendingmayvarydramaticallyacrossproductionsduetodifferent

creativeandlogisticalconcerns,statescouldconductmoredetailedanalysesoftherecipientsof

specificlocationfeestoproportionallyallocatethepaymentsacrossrelevantNAICScodes.

Wagespendingmayalsoco‐varyeitherwithunpredictableexternalfactorsorwithothermodel

parameters(likespendingonlocalwages).Forexample,in2008,thethreatofasummerSAG

strikemeantthatseveralproductionswerefilminginMAatthesametime.Thisinturnledtoa

shortageoflocalcrewandrequiredimportinglaborfromoutofstate.Thisinturnledtoincreased

non‐wagespendingonfoodandlodging.Inthiscase,theproportionofwagesgoingtoMA

residentsandnon‐wagespendingforfoodandlodgingbothco‐variedwiththeavailabilityoflocal

crew,whichwasindirectlyrelatedtoschedulingissuescausedbyanimpendingSAGstrike.Thisis

butoneexampleofcomplexdependenciesamongvariablesthatmaygeneratemodeling

problemsinthisindustry.

Non‐wagespendingpatternsarealsohighlyvariableandoftenincludesignificantlocal

components.Forexample,inadditiontotheraingearexamplenotedinthetextabove,one

industryrepresentativereportedthatatelevisioncommercialmadein2008requiredthepurchase

of$1,000ofbodybagsforascene.Therearenumerousotherexamplesofsuchidiosyncratic

spendingpatterns.Asnotedinthetext,examiningvendorlistsof10filmsinMAin2008identifies

over800individualvendors,manyofwhichareclusteredtightlyaroundshootinglocations.Asa

result,standardinput/outputmodelsmaynotaccuratelyaccountfortheselinkagestothelocal

economy.Studiesusingdatafromtaxapplications(e.g.,MassachusettsDepartmentofRevenue,

2009)havebeenabletocircumventthesemodelingimperfectionsbyallocatingactualproject

spendingtotheappropriateNAICScodes.

49

Basedonourreviewandthediscussionabove,wesuggestthatsomestudiesofregionalfilmand

televisionindustriesmaytovaryingextents:

Incorrectlyestimatetheamountanddistributionofspendingthatislocatedinnon‐film

industryNAICScodes;

Overlookimportantdifferencesbetweenproductiontypes(e.g.,assumewageandnon‐

wagespendingisthesameforallproductions);

Incorrectlyestimatetheproportionoflocal(asopposedtooutofstate)spendingonwages

andnon‐wageexpenses;

Underestimateemploymentoffreelancelaborduetothewidespreaduseofpayroll

servicesandothercomplexlaborarrangements;

Underestimatenon‐wagespendinginserviceindustrieslikelodging,transportation,audio

recording,etc.;

Underestimatefuturerevenuefromresidualsandroyaltiessourcedtothestateinwhich

films,televisionprogramsandcommercialsaremade;

Overlookindependentfilmproductionandhowthissectorisrelatedtocommercial

productions;

Underestimatereductionsinstateunemploymentandhealthcarecostsduetoincreased

employmentamongtradespeople;

Notaddresshiddencostsoffilmproductioncausedbytheincreaseduseofpublicservices,

etc.

Itisworthnotingagainthatseveralrecentreportsandpapersdoaparticularlycarefuljobin

addressingmanyofthesecomplexissues(Christoperhson&Rightor,2009;Christophersonetal.,

2006;MassachusettsDepartmentofRevenue,2009;McMillenetal.,2008;Weiner,2009b)and

ourobservationsaboveareintendedasasummaryofourbroadreviewoftheliterature.

Nevertheless,thereremainsomequestionsandfactorsthatcouldimpactthefutureevaluationof

theMassachusettsFTCandsimilarprograms.Inthefollowing,wediscusssomeofthesefactors

usingillustrationsfromourresearchonMassachusettstoidentifyareastoconsiderinfuture

research.

50

Secondarymarketforthetaxcredits

Theoperationofsecondarymarketsforfilmindustrytaxcreditshasreceivedalmostnoattention

frompolicyanalystsoracademics.However,thismarketlikelygeneratessomeeconomicbenefits

intheformofasmallamountofincreasedtaxcollectionsandperhapsbyinducedactivityfrom

theuseofthe$11.6millioninvaluethatiscapturedbyMassachusettscompaniespurchasingthe

credits.

AccordingtotheMassachusettsDORreport(2009),asofJune30,2009$148.9million(89%)of

the$166.3millionintaxcreditsissuedsince2006havebeensoldtothirdparties.Whiletax

receiptsfromsaleofthecreditswere$140,000overthethree‐yearlifeoftheprogram,theremay

havebeenadditionalbenefitsgeneratedbytheuseofthecreditsbythelocalcompaniesthat

purchasedthem.TheMADOR2009reportstatesthattheFTCsareprimarilybeingpurchasedby

corporateentities(ratherthanbyhighnetworthindividuals).Ofthe$148.9millionofcreditsthat

weresold,only3%wenttoindividualswhile$148.1millionwenttoinsurancecompanies,financial

institutions,andothercorporations.Whileitisunclearhowthesecorporationshaveusedthe

credits,itseemslikelythatsomeproportionofthebenefitswouldgenerateneweconomic

activity,ratherthanwindfallsforshareholders,forexample.Calculatingthisbenefitismademore

complexbytheoperationofbrokerswhothemselvescapture4%ofthebenefitsfromthesaleof

credits.Absentdirectdataonthismarket(whichistreatedasconfidentialbytheMassachusetts

stateagencies),itisimpossibletoassessthepotentialeconomicbenefitsgeneratedfromthesale

ofthesecreditstoMassachusettscompanies.

Whilethecalculationofdirectincreasesintaxrevenuesfromsaleofthecreditsseems

straightforward,thecalculationofindirectimpactsofincreasedactivityiscertainlymorecomplex

anddependsonhowMassachusettscompaniesareusingthebenefitsfromthetaxcredits.Future

researchshouldinvestigatehowfilmindustrytaxcreditsareusedbythecorporateentitiesthat

purchasethemandwhether(andhowmuch)thisgeneratesneweconomicactivityforthe

Commonwealth.

51

Marketingandtourismbenefits

TheMassachusettsDepartmentofRevenuestudy(2009)recognizesthatundercertainconditions,

filmsproducedinMassachusettsmayincreasetourismbutpointsoutthatmodelingsuchimpacts

isbothdifficultandoutsidethescopeoftheirstudy.Somestudieshaveincludedtourismbenefits

intheirmodel(ErnstandYoung,2009a),thoughwithoutsufficientdetailtoevaluatethereliability

oftheestimatesofnewtourismspending.Otherstudiesrecognizethatthesebenefitsmaybe

significant(Milleretal.,2009)andsomealso(McMillenetal.,2008)provideanecdotaldataand

reportsofsmallsurveystosupporttheseideas.Researchondestinationmarketingandfilm

inducedtourism(Baker&Cameron,2008;Beeton,2005;Hudson&Ritchie,2006;Morgan&

Pritchard,2005;Woodside,Spurr,March,&Clark,2002)aswellaspressreportsonfilminduced

tourisminMassachusetts(L’Ecuyer,2009;Shanahan,2009)alsosuggestthatthesebenefitsmay

beimportantinthelongrunevaluationofbenefitstothelocaleconomyassociatedwithincrease

featurefilmproduction.Ourexaminationofthecurrentevidencesuggeststhatthesebenefitsmay

indeedbelarge,butwealsorecognizethattheyarealsohardtomeasureaccuratelyandlikely

outsidethescopeofmoststudiesonstateincentiveprograms.

Inawidelycitedarticle,Riley,BakerandDoren(1998)concludethatforfilmstohaveapositive

impactontourismatspecificlocations,theymustcontain“strongiconicidentificationwitha

particularlocation.”Becausethesestrongiconicidentificationsarenotpartofeveryfilmmadein

Massachusetts,theMassachusettsDepartmentofRevenue(2009)concludesthatitisanopen

questionwhetherfilmtourismwillbearealbenefitforMassachusetts.Whilethestudyrightly

pointsoutthatsomestudiesmayhaveimproperlyestimatedthemagnitudeofthesebenefits

(e.g.,ErnstandYoung,2009a),recentdestinationmarketingresearchalsosuggeststhatfilmand

televisionproductioncouldhaveasignificantpositiveimpactonfuturetourism(Hudsonetal.,

2006;Beeton,2005;Woodside,etal.,2002).

Thereareatleasttwokindsoftourismandmarketingbenefitsthatcouldbeconsideredinfuture

studiesoftheeconomicimpactoflocalfilmandtelevisionindustries.First,sincemoststates

engageinsomemarketingactivities(viaboardsoftourism,officesofeconomicdevelopmentand

officialvisits),itseemsreasonabletotreatappearancesinfilmsaspartoftheoverallstate

marketingeffort.IfwetreatMassachusettsasabrandthatiscompetingforattentionintheminds

52

ofpotentialtourists,merelyincreasingbrandawarenessamongthesepotentialvisitorsmayhave

value.Indeed,somelocationshavetreatedfilmappearancesjustthisway.TheNewZealand

TourismBoardconcludedthatthevalueofexposuregeneratedbythefirstLordoftheRingsfilm

alonewasUS$41million(NewZealandInstituteofEconomicResearch,2002).

Second,sincebrandawarenesshasbeendirectlylinkedtoconsumerpurchasingdecisions,

marketingscholarsarguethatsimilarprocesseslikelyaffectconsumertraveldecisions(Hudson&

Ritchie,2006).Theirreviewofrecentfilmindustrytourismresearch(Hudson&Ritchie,2006:398)

demonstrateslargetourismbenefitsacrossawiderangeoffilmsandlocations.InBoston,the

CheersBarreceived$7millioninannualunpaidpromotionaladvertisingasaresultofits

appearanceinthelongrunningtelevisionshowofthesamename.

However,asHudsonandRitchie(2006:388)pointout,thesuccessoffilmindustrytourism

dependsonmultiplefactorsincluding“destinationmarketingactivities,destinationattributes,

film‐specificfactors,filmcommissionandgovernmentefforts,andlocationfeasibility.”Among

these,destinationmarketingactivitiesseemparticularlyimportantaslocalfilmofficesand

tourismboardscanactivelymanagethem.Inasurveyof140filmindustrydestinationmarketing

organizations(e.g.,tourismboards,localfilmoffices,etc.),HudsonandRitchie(2006)foundthat

60%reportedincreasesintourismthatwereattributedtotheirmarketingefforts.Themost

importantbenefitsincludeincreasedbrandawareness,directeconomicbenefits,andincreased

tourism.Mostimportantly,thestudyfoundthatthemostsuccessfuldestinationmarketing

organizationsengagedinpromotionbothduringpre‐production(promotingspecificlocations,

offeringtours,appointingapromotionsspecialist,etc.)andafterreleaseofafilm(ensuringthat

locationsarementionedinmediacoverage,usingstarstopromotelocations,creatinglocation

maps,etc.).

Basedonourreviewofrecentresearchondestinationmarketing,weconcludethatthiscouldbea

significantsourceofunmeasuredeconomicimpactfortheCommonwealth.Interviewswithstudio

executivesandproducerssuggestthatthestatealreadyhasmanyofthepositive,locationspecific

factorsthatareidentifiedbyHudsonandRitchie(2006)asincreasingtourism.Forexample,local

pressreportssuggestthatthepopularityofSandraBullock’smovie“TheProposal”generated

53

increasedtourisminRockport,despitethefactthatthetownactuallyposedasaseasidetownin

Alaskainthemovie(L’Ecuyer,2009;Shanahan,2009).Asahistoriccityonthewaterfront,Boston

hasmanyiconiclocationsandscenesthathavebeen(andwillcontinuetobe)featuredin

productions.Sincethesefactorsareoutsidethecontroloflocaldestinationmarketing

organizations,theyrepresentanimportantresourcefortheCommonwealththatcanbemarketed

bysuchorganizations.Futurestudiescouldalsoseektoquantifytheeconomicimpactoffilm

tourismontheCommonwealth.TheCommonwealth’sOfficeofTravelandTourismcouldbea

veryusefulpartnerinthisresearch.

Incometaxfromresidualsandthegrowthofalocalcreativetalentbase:Likemostcreative

industries,thefilmandtelevisionindustryischaracterizedbyhighlyskeweddistributionsinthe

popularityofitsproducts.Whilemostmoviesaremoderatelypopular,asmallnumberofmovies

areextremelypopularandgeneratesignificantrevenuestreamsfromDVDsalesandrentals,and

internationalandtelevisionexhibition.Theserevenuesareinturnsharedwithabove‐the‐lineand

othercreativetalentintheformofresidualsandnet‐orgross‐profitsharingcontracts(Weinstein,

1998).IfresidualandprofitsharingincomefromproductionsmadeinMassachusettsaresourced

asMassachusettsstateincome,thiscouldbeasignificantsourceoffuturetaxrevenueforthe

Commonwealth.

Principalactorsincommercials,televisionprogramsandfilmstypicallyreceiveresidualpayments

forsecondaryusesofproductionsinwhichtheyappear.Forexample,whenatelevisionprogram

hasrepeatairingsorgoesintosyndication,theprincipalactorsinitreceiveresidualpaymentsthat

arecollectedanddistributedbytheScreenActorsGuild.Whilethespecificpaymentsreceivedby

agivenactorforagivenusedependsonmanycontractualfactors,takenasawhole,residual

paymentsrepresentasignificantsourceofincomeforactorsandotherperformers.Accordingto

theScreenActorsGuild(2009),totalresidualpaymentsin2007wereover$1.1billionand

exhibiteda10.3%compoundannualgrowthratebetween2001and2007.

Inadditiontofutureincometaxrevenuefromresidualpaymentsmadetoactorsworkingin

Massachusetts,certainprincipalactorsandotherabovethelinetalentalsoreceiveparticipation

deals(e.g.,aproportionoffutureprofits)forproductionsmadeinMassachusetts.

54

Becauseprofitsharingarrangementscantakemanyforms(Weinstein,1998),itisdifficultto

determinehowsignificanttheserevenuescouldbeforthelocaleconomy.However,giventhatthe

fourhighestgrossingmoviesmadeinMassachusettsbetween2006and2008hadcombined

worldwidegrossrevenuesofover$755million7,arelativelysmallshareofincometaxreceipts

fromtheserevenuescouldrepresentasignificantsourceoffuturestaterevenue.Accordingtothe

MADOR’s2009reportthereissomeambiguityaboutwhetherincomefromresidualsandprofit

sharingcontractsshouldbesourcedasMassachusettsincome.

AsMassachusettstaxesnonresidentsontheirincomefromanytradeorbusinessconducted

withinthestateanditisclearthattheresidualsandprofit‐sharesariseoutoftheactivitiesofthe

talentinthestate,itwouldseemthatMassachusettscouldimposeitspersonalincometaxon

theseearnings.Therearesimilarrulesforpensionpaymentsmadetoretirednonresidentsthat

earnedtheirpensionswhileworkinginMassachusetts.Ifthestateisnotcurrentlycollectingtax

receiptsfromthesewages,thiscouldrepresentasignificantsourceofunclaimedbenefitsforthe

Commonwealtheventhoughthecollectionofthesetaxeswouldbequitedifficultwithoutsome

kindofwithholdingrequirementontheresidualsearnedbythesenonresidents.

Inadditiontopotentialincometaxcollectionsfromresidualsandprofitsharingcontractsfor

principalactors,theremaybeadditionalbenefitsassociatedwiththedevelopmentoflocal

creativetalent.Threeofthemostsuccessfulandcriticallyacclaimedfilmsthathavebeenmadein

Massachusettshavebeenbasedonbookswrittenbylocalauthors(e.g.,TheDeparted,GoneBaby

GoneandMysticRiver).Whileitisimpossibletolinkthesuccessoftheseauthorswiththefilm

industrytaxcredit,totheextentthatthecreditfacilitatesthegrowthofsimilarlocaltalent,this

couldhavedirectpositivefiscalimpactsviaincreasedincometaxcollections(e.g.,fromthesaleof

bookrights,scriptsandotherintellectualproperty)thatwouldnotbeoffsetbyassociated

productiontaxcredits.

Theprimarybusinessmodelinfilmproductionreliesontheabilitytorecoverthecostsof

numerousmarginallysuccessfulproductionsagainstlargeprofitsonarelativelysmallnumberof

7 This figure was based on data from www.IMDB.com on the worldwide gross revenues of four

films (The Proposal, Mall Cop, 21 and Game Plan)

55

highlysuccessfulproductions.Providingtaxcreditstoincentivizeproductionswithout

participatinginbackendprofitsmeanstheCommonwealthissharingintherisksofproduction

withoutparticipatinginthelargeprofitsofthesmallnumberoffilmsthatdoextremelywell.

Massachusettshasalreadymade,andisintheprocessofmaking,changestoitstaxingstatutes

andregulationstomakeclearthatearningsgeneratedfromfilmproductionactivitiesremain

subjecttoMassachusettstaxation,regardlessofwhenpaidorhowcalculated.Inaworkingdraft

oftaxregulationsissuedonJanuary11,2010,theMADORhastakenpreciselythisposition(830

CMR62B2.3)forpersonalincometaxpurposes,treatingtheincomeearnedbytalentarisingfrom

filmproductionactivitiesinMAassubjecttowithholdingtaxestotheextentpayabletoout‐of‐

stateindividualsortheirsurrogates.

BenefitsfromchangestotheMassachusettscorporatetaxlaws:Massachusettshasalsomade

significantchangestoitscorporateincometaxlawsthatsimilarlywillrequirecompaniestopay

taxinMAonincomederivedfromactivitieshere.In2008,Massachusettschangeditscorporate

taxlawstorequireaffiliatedcompaniesconductingaunitarybusinessinMassachusettsto

calculatetheirnetincomeandtheapportionmentfactorsusedtoallocatethatincometo

Massachusettsonacombined,ratherthanseparatecompany,basis.Inthefollowing,webriefly

summarizethischangeandexplainwhyitcouldhaveasignificantpositiveimpactonfuturetax

collectionsfortheCommonwealth.

Priorto2008,anaffiliatedgroupofcorporationsdetermineditsMAtaxliabilityusingseparate

companyfactors.Thiswasaccomplishedbyallocatingthenetincomeofeachcorporateaffiliate

toMAbasedonthepayroll,salesandpropertyofthatcompanythatarelocatedwithinand

withoutMA.TheincomethusapportionedtoMAforeachaffiliatewasthenaggregatedto

determinethetotalamountofnetincomesubjecttotheMAcorporatetax.

EffectiveonJanuary1,2009,corporationsdoingbusinessinMAwererequiredtodeterminetheir

MAcorporatetaxliabilityinanentirelydifferentmanner.Firsttheywillaggregateallofthenet

incomeofeachoftheiraffiliates.Thisnetincomewillthenbemultipliedbytheproportionof

thoseaffiliates’aggregatesales,payrollandpropertylocatedwithinandwithoutMA.(Seee.g.,

Koppel,2008foradescriptionofthedifferencebetweenthesetworules).

56

Thesetwomethodscanresultinmarkedlydifferenttaxliabilitiesforunitarybusinessesoperating

inMA.Althoughgenericallyonemethoddoesnotconsistentlyresultingreaternetincomebeing

taxedinMAthantheother,thereisstrongreasontobelievethat,inthecaseofthefilm

productionindustry,thenewmannerofcalculatingwhatistaxableinMAisverylikelytoincrease

MAtaxreceiptsmaterially.

Forexample,ithasbeencommontoestablishaseparatecompanyforeachproduction,usuallyin

theformofalimitedliabilitycompany(LLC)thatfacilitates,amongotherthings,thecollectionof

thecostdatanecessarytodocumentthecalculationofMAtaxcreditsclaimed.OftentheLLCis

dissolvedaftertheproductioniscompletedbutbeforerevenueisgenerated,sothatithasbeen

commonfortheproductioncompanytohavenobusinessactivitiesinMAintheyearinwhich

profitsbegintoflow.IthasalsobeencommonintheindustrytochargeMAaffiliatesfortheuse

ofanyintangibleproperty,whichareoftenheldbyout‐of‐stateaffiliates.Thedeductionclaimed

fortheuseofthoseintangiblesdecreasesMAnetincomeand,asaresult,reducesMA’stax

revenues.

Boththeuseofout‐of‐stateintellectualpropertycompaniesandthemanipulationofseparate

companyapportionmentfactorshavebeenlargelyeliminatedbytheJanuary1,2009lawchange.

AlthoughproductioncompaniesmaycontinuetoattempttoreducetheircontactswithMAinthe

yearsinwhichtheproductionisgeneratingrevenues,thisismoredifficulttodowhentheentire

affiliatedgroupofcorporationsisanalyzedasacohesivewhole,asisnowrequired.Further,to

theextentthatMAissuccessfulinattractingamorevibrantfilmproductionindustryinMA,a

greaterproportionofproperty,sales,andpayrollwillberesidentherewhichwillincreasethe

apportionmentofincometoMAinyearsinwhichprofitsarebeinggenerated.

Increasedhealthcoverageandotherbenefits:Filmproductionfollowsanatypicalworkschedule.

Becauseofthehighfixedcostsofassemblingtalent,crew,locations,andequipment,producers

seektomaximizethereturnontheirhighfixedcostsbyworkinglonghours.Crewsonproductions

intheCommonwealthalmostinvariablywork50hoursperweekatminimumandroutinelyas

muchas70.

57

Anaverageof60hourswouldbeaconservativeestimateoftotalhoursworkedinaweek.This

represents50percentmorethanapersonworkinganine‐to‐fivejob.Amotionpictureworker

whoputsina60‐hourweekonaveragewillclockasmanyannualhoursin32weeksasanine‐to‐

fiverworkingtheentireyearandtakingthestandardpaidholidaysandtwoweeksofvacation.

Partlyinrecognitionoftheseunusualworkschedules,theindustrylabororganizationshave

developeduniqueapproachesforprovidinghealthcoverageandotherbenefits.

MotionpictureproducersundercontractwithIATSEmakeabenefitscontributionrangingfrom

$65to$85perdayforeachLocal481representedemployee,withstudiofeaturespayingatthe

higherendofthescale.Approximately70percentofthiscontributiongoesforhealthcareandthe

remainderforretirement.Local481memberscanusethehealthbenefitdollarstheyaccrueby

choosingbetweenseveralinsuranceplans.Local481membersareeligibleforindividualhealth

coveragefortheentireyeariftheyworkapproximately75daysonstudiofeaturesorprojectsthat

makecomparablebenefitscontributions.Severalofthefeaturesthatwereshotinthe

Commonwealthlastyear,includingEdgeofDarkness,Ashecliffe(nowbeingreleasedasShutter

Island),andSurrogates,hadshootingschedulesof70+days,notincludingpre‐production,which

oftenaddsweeksormonthsofadditionalworkformembersintheconstructionandotherpre‐

productioncrafts.

SAGmembersqualifyforindividualhealthcoverageiftheyearn$14,000duringtheprioryear,and

forAFTRAmembers,thisearningsthresholdis$10,000.ItisdifficultforSAGextras,whoearna

lowerwagethanactorswithspeakingparts,toqualifyforhealthbenefitsinthisway.SotheGuild

alsoallowsmemberstoqualifyiftheyclock74daysoftotalworkduringtheprioryear.The

thresholdforeligibilityforfamilyhealthcoverageis$29,000intheprioryearforSAGmembers

and$30,000forAFTRAmembers.

Combined,thereareapproximately2500membersofIATSE/SAGintheCommonwealth.Ifeven

10percentofthesememberswerecoveredbyindustryplansandthusdidnotavailthemselvesof

58

theCommonwealthCareplan,thiswouldrepresentsavingsof$1milliontoCommonwealth.8This

calculationdoesnoteventakeintoaccountthepotentiallygreaterimpactofIATSE/SAGmembers’

familymembersbeingcoveredunderfamilyplans.

Benchmarkinglong‐termgrowthtrends:Itiscriticaltocomplementashort‐termfiscalanalysis

withalonger‐termperspective.OneveteranoftheMassachusettsfilmindustrynoted,“Bostonis

likeVancouverwas20yearsago.”Anexaminationofthehistoricaldevelopmentofthefilm

productionsectorinandaroundVancouvercouldidentifykeymilestonesthatregionpassedinthe

processofbuildingasustainableindustry.TrackingtheMassachusettsproductionsectoragainst

milestonesofthissortcouldchartthelonger‐termdevelopmentoftheCommonwealth’sindustry.

ExaminationoftheVancouvercasecouldalsobeusefulforidentifyingeconomicspilloversand

longtermbenefitsthatmaynotbecapturedincurrentevaluations.

8 A Massachusetts state government study estimated that the annual cost per person covered by

Commonwealth Care in 2009 would be $4,000 (Dembner, 2008).

59

Appendix2:

AbriefsummaryoftheMassachusettsfilmindustrytaxcredit

TheMassachusettsFilmTaxCreditprogramoffersatransferrableandrefundabletaxcreditequal

to25%ofthetotalqualifiedMassachusettswageandnon‐wageproductionexpensesforfilms,

andcertaintelevisionanddigitalmediaproductionswithbudgetslargerthan$50,000.Inaddition

totheminimumspendingrequirement,productionsmustmeetoneoftwoadditionalcriteria:At

least50%oftheprincipalshootingdaystakeplaceinMassachusettsormorethanhalfofthetotal

productionbudgetisspentinMassachusetts.Filmmakersmaychoosetoreceivethecreditasa

rebate,equalto90%ofthefacevalue(guaranteedandrebatedbythestate).Alternately,the

creditmaybetransferredorsoldatthecurrentmarketrate.Certainexpensesforcastandcrew

fromoutofthestatequalify.Thereisnostatewide,talentorproductioncap.Additionally,

filmmakersmaybeeligiblefora100%salestaxexemptiononanyproductionrelateditems

purchasedinthestate.Inaddition,certainexpenseslikeproductioninsurance,workers

compensationandcompletionbondarenotqualifiedexpenses.

ProgramDetails

Onlythefirst27episodesofaTVserieswillqualifyperyearandpre‐production,production,and

post‐productionexpensesqualifyaslongastheyaredirectlyincurredintheproductionofthefilm

ortelevisionprogram.Qualifiedexpensesincludepayroll(e.g.,salary,wagesorother

compensationincludingallfringebenefits)butnotinsuranceorcompletionbonds.Costs

associatedwithmarketingoradvertisingapicture,thetransferofthetaxcreditsoramountspaid

asprofitparticipationalsodonotqualify.

Theincentiveiscomprisedoftwocomponents:Apayrollcreditandaproductioncredit.The

payrollcreditisequalto25%ofthetotalpayrollthatissourcedtoproductionactivitiesconducted

inMassachusettsonproductionswithcostsexceed$50,000forataxableyear.Bothsalariespaid

toresidentsandnon‐residentsworkinginMassachusettsqualifyforthepayrollcredit.

Theproductioncreditisequalto25%ofallMassachusettsproductionexpenses(notincludingthe

payrollexpensesincludedinthelaborcredit)forproductionsthatmeetthefollowingcriteria:

60

TotalproductioncostsincurredinMassachusettsexceed$50,000forthetaxableyear,andeither

theMassachusettsproductionexpensesaremorethan50%ofthetotalbudgetedproduction

costs,oratleast50%ofthetotalprincipalphotographydaystakeplaceinMassachusetts.For

purposesoftheproductioncredit,theentireamountofeachsalarythatisequaltoorgreaterthan

$1,000,000maybeusedtocalculatetheproductioncredit(iftheentiresalarywasnotincludedin

thepayrollcredit).

Thecreditscanbecarriedforwardfor5years,butoncethecreditshavebeentransferredtheyare

nolongerrefundable.Inaddition,apoint‐of‐purchasesalestaxexemptionisavailablefor

qualifiedexpenses.Anapplicationisavailableatmafilm.organdmustbefiledinadvanceforthis

exemption.

61

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