While most industries are gearing up for an economic slowdown due to rising interest rates, Hollywood is experiencing an ongoing economic boom, with production hubs in Los Angeles reaching overflow levels.
The video streaming revolution has sparked a wave of big-budget TV shows and movie productions. These are mostly stacked on top of existing Hollywood outputs and have been the catalyst for expanding local soundstage infrastructure.
The Los Angeles area leads the world in soundstage capacity with 5.4 million square feet of stage space, surpassing competing production centers. New York. According to FilmLA, a nonprofit licensing agency, Los Angeles has 398 soundstages in 57 facilities.
Focus is on “certified” soundstages, permanent Hollywood facilities with fire department approval, versus multi-purpose warehouses requiring safety approvals
Per use in movies and TV shows. FilmLA estimated earlier this year that the number of certified soundstages would grow by 27% over the next few years, with more construction underway or in the design phase.
In Hollywood, “the soundstage wasn’t built well enough for years,” says Adam J. Fowler, founding partner of CVL Economics, a consulting firm active in the entertainment industry based in West Hollywood. said.
But now, he added, “there’s a lot of industrial space being repurposed.” By most estimates, the soundstage occupancy across this region is his late to mid 90’s, which is essentially his full capacity.
lack of land
With vacant land scarce, a building boom in historic Hollywood work districts is targeting landfills within urban areas.
One such project that seeks to capitalize on growing demand is the planned soundstage at the site of the Los Angeles Times printing plant at Eighth Avenue and Alameda Boulevard. Atlas Capital Group will start with six soundstages and eventually expand to 17 on site.
Even within traditional working zones, major upgrades to existing soundstage facilities are underway.
“The biggest action continues to be the urban infill campus in the traditional Hollywood production zone,” said Karl Muhlstein, international director at brokerage Jones Lang LaSalle.
“They are at the heart of the ecosystem and where talent can most easily interact.”
However, due to high demand and lack of space, businesses are moving outside traditional zones and expanding into areas such as the Santa Clarita Valley, Pacoima and even the Inland Empire. New ventures continue to seep in. In early October, a multi-soundstage facility called Super Studio was proposed to Banning.
Experts agree there is little concern of overproduction as production demand continues. Hollywood staples, television series can be long-term tenants on the same soundstage for years, or even decades.
Los Gatos-based Netflix Inc.’s production budget, which is heavily skewed toward original productions, including acquisitions of existing content, has recently surged to $17 billion annually, making up about $1.5 billion of its overall content budget in 2016. Twice.
Fundamental cable TV channel operator FX Networks counts well over 500 big-budget scripted prime-time caliber TV series per year, compared to just 182 series in 2002. FX Network publishes industry TV series output data annually.
These numbers are global, but Los Angeles has a big percentage. On the streaming side, that includes locally produced streaming his TV shows like Paramount+’s ‘Star Trek: Picard’ and Hulu’s ‘American Horror Story’ anthology. Soundstages are also used in the production of music videos, commercials and industrial films.
PE interest
Private equity firms (purely financial investors) are leading the way in building and upgrading soundstages, attracting an industry with strong demand for production leases but inadequate infrastructure. They also hope that fragmented operators in the industry and one or more players buying up competitors and putting them together will make exiting easier.
The largest in Los Angeles appears to be Hackman Capital Partners and affiliate MBS, which owns Culver Studios, Radford Studio Center, TV City Studios, MBS Media Campus, Raleigh Studios, Satikoi Studios and Sony Pictures Animation Studios. New York-based Square Mile Capital Management has partnered with Hackman on his studio. Earlier this month, Hackman completed his $1.6 billion financing for his HCP Studio Fund from various institutional investor groups. HCP Studio Fund has a global focus, but locally he will be connected to Radford Studio and Saticoy Studios.
Last year, Hackman announced a $1.25 billion investment to upgrade TV City. The facility was purchased by him in 2019 and was previously owned by broadcaster CBS.
leading role
Despite chronic underinvestment in infrastructure, Los Angeles is well positioned to maintain leadership in television and film production. That’s because the industry’s ecosystem is rooted in the Hollywood area, led by five major film studios (Walt His Disney Studios in Burbank and Warner Bros.). Paramount movies in Hollywood. Sony Pictures Entertainment in Culver City. and Universal Pictures.
They have production on their own physical studio lot and also offer convenient logistical support for TV and film projects taking place on nearby sound stages. Executives don’t have to fly to the set when an on-site inspection is required.
Another attraction is California’s financial incentive program, which provides hundreds of millions of dollars in tax credits annually. The program is approved through 2025 with the possibility of extension. California launched the program in 2009 to combat the financial lure of other states.
“The stool has three legs: incentives, crew and infrastructure,” said Joseph Kianes, Hollywood’s chief financial officer. “LA obviously has crew. Infrastructure is being upgraded. As far as incentives are concerned, the state and governor are clearly improving their programs and have bipartisan support.”
Chianese is Senior Vice President and Practice Leader for Production Incentives at Entertainment Partners, a Burbank-based production finance, management and enterprise services company.
Some complain that while the entertainment and streaming industry has plenty of economic momentum, the government is putting up unnecessary barriers. There are complaints that state and local governments are more interested in supporting other projects, such as affordable housing, than they are in helping big Hollywood companies combat government bureaucracy. States have sporadically considered laws that would undermine talent exclusivity in employment contracts and the gig economy for part-time workers, frustrating many in the industry.
The production boom has pushed up wages, and Hollywood is now talking about the idea of covering the cost of burgeoning content.
In terms of spending on rich content, Netflix is spending $465 million on the current Daniel Craig mystery Glass Onion: A Knives Out Mystery (and the rights to the sequel) after its predecessor was made for just $45 million. reportedly paid.Elsewhere, Amazon Studios has
reported $465 million for the Lord of the Rings: Ring of Power miniseries. That’s twice as much as his sci-fi blockbusters in glossy Hollywood. The streamer has also paid high prices for productions made for streaming, such as The Irishman, a mafia flick with a lavish cast on his Martin Scorsese-led $170 million budget. We regularly hire theater talent. But competitive pressures to push up spending remain hot, with Ari Emmanuel, CEO of Beverly Hills-based Endeavor Group Holdings, which owns talent agency WME, telling investors at a September investor conference, I don’t want the bubble to burst,” he said. can not see. “
According to Emanuel, WME’s obscure streaming shows cost $17.5 million per episode, about four times more than a typical one-hour cable or broadcast TV drama.
“The last time I checked, it was more than that,” Emmanuel said curtly.
However, Hollywood has pockets of true cost-cutting. Major studio owner Warner Bros. Discovery is looking to cut costs post-merger, but phasing out cuts is an exception to the larger trend of escalation.
Philip Sokoloski, Vice President of Integrated Communications at FilmLA, believes the current soundstage boom is essential for the region to maintain its leadership. FilmLA’s analysis shows that since 2019, certified soundstage square foot capacity has increased by just 4% in the Los Angeles area compared to 34% in the UK and 43% in Toronto/Ontario, Canada. Is not …
“We can’t attract the kind of projects we want without investing in modern soundstage infrastructure,” says Sokoloski. “We want them to be globally competitive.”
