MPAA Economic Impact Report 2007


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This document is a 2007 MPAA report detailing the findings of an economic impact study of the motion picture and television industry on the United States.

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MPAA Economic Impact Report 2007

  1. 1. The Economic Impact of the Motion Picture & Television Production Industry on the United States With contributions from: 2006 Report Edward Jay Epstein, Author of The Big Picture, The New Logic of Money and Power in Hollywood Eve Troeh, Reporter for National Public Radio Harold Vogel Author of Entertainment Industry Economics, A Guide for Financial Analysis
  2. 2. Table of Contents A Message from Dan Glickman............................................ 2 Introduction....................................................................... 3 Report highlights................................................................ 5 Creating high quality jobs.................................................... 6 Developing small businesses and entrepreneurship................ 7 Generating tax revenues...................................................... 9 Competing successfully around the world............................10 Production around the country........................................... 11 Making an impact in states............................................... 13 Letters from governors...................................................... 16 Investing in infrastructure and community development....... 19 Promoting tourism............................................................ 21 Providing leadership in the digital age................................ 22 Surveying the future, addressing challenges........................ 23 Endnotes.......................... 24 Methodology..................... 25 Acknowledgements............26 Above: XXX: State of the Union, courtesy Columbia Pictures; photo by Zade Rosenthal Cover, front and back: Courtesy Columbia Pictures, DreamWorks LLC, Lionsgate Films, New Line Productions, Paramount Pictures, Twentieth Century Fox, Universal Pictures, Warner Bros. Entertainment.
  3. 3. On behalf of the Motion Picture Association of America and our six member studios, I am pleased to present the industry’s first nation- wide economic impact report. The report underscores that an industry known for its creative product is also an economic engine responsible for bringing billions of dollars and hundreds of thousands of jobs to communities across America. We can all recount the “unforgettable” moments from our favorite movies, scenes that make us laugh, cry, cheer, wonder, and believe. Less well known is the enormous and ongoing impact of our industry on the American economy. Over 1.3 million Americans are employed as a result of the motion picture and television production industry. On-location production creates jobs and generates tax revenues in cities and towns all across the United States, contributing an estimated $200,000 a day into the coffers of the localities where they film. The American motion picture industry also carries a positive balance of trade around the world and a $9.5 billion trade surplus. A Message from Dan Glickman For decades, the motion picture and television production industry has been a cornerstone in keeping the American economy strong and growing. Today, we are bringing that same leadership and vi- sion into the digital age, with significant investments and advances in in-theater digital technology and new delivery platforms being developed each day. We are committed to keeping our industry at the forefront of the worldwide entertainment market and to ensuring that our contribution to the U.S. economy continues to grow. Thank you for reading this report. I believe you will find it is an interesting, informative and entertaining look at an important Ameri- can enterprise – the motion picture industry. See you at the movies. Sincerely, PAGE 2
  4. 4. Introduction Purpose of the Report by Edward Jay Epstein, author of The Big Picture: The New Logic of Money and Power in Hollywood The creative output of the American motion picture and television production “The American motion picture and television production industry has grown industry is widely recognized around the into a vibrant artistic and economic force worldwide. It would have been world, yet its contribution to the nation’s difficult to predict at the birth of the American motion picture industry that it economy is seldom recognized. This re- would mature into the significant source of economic growth and employment port, prepared by the MPAA using data covered in this report. From its founding at the beginning of the 20th Century from studios, networks, payroll compa- by European immigrants showing talking pictures in arcades, nickelodeons, nies, guilds and government statistics, and small exhibition halls, the industry has evolved into a vast complex of illuminates the industry’s impact on the businesses producing a visual culture now experienced by most of the world. national economy. While the numbers presented in this report are impres- The continued evolution and growth of the industry is not an accident, but the sive, it must be kept in mind that they result of a willingness to change. The movies, television, and Hollywood evoke are a conservative snapshot of a global images of glitz, glamour, and the red carpet. That image fails to capture the industry. Due to the breadth and com- challenging creative process of putting a story onto film, and the business of plexity of the American motion picture show business. To survive as businesses over the years, the industry has con- and television production industry, this sistently reinvented itself. By the time talking pictures were introduced in the report does not fully quantify the impact late 1920s, about two-thirds of the population went to neighborhood movie of its activities upon all the individuals, theaters every week. By the end of the 1940s, the advent of home television businesses, and governmental entities drew away a large part of the 90 million Americans who went to the movies in that benefit from those activities. The an average week. By the late 1980s, even though the population had nearly total economic impact is likely much doubled, annual ticket sales had fallen from 4.6 billion in 1948 to 1 billion. greater, and more far-reaching, than this report reveals. In the best tradition of show business, the industry has followed its audi- ence and worked to redefine the business. The studios not only licensed their
  5. 5. movie libraries to television, they produced original programming for the broad- cast networks and for television stations around the world. After VCRs became commonplace in the American home in the 1980s, they created a huge rental market for videos. In the 1990s, with the arrival of the digital revolution, the studios followed their audience into the home with DVDs and video-on-de- mand and other digital delivery platforms. Throughout it all movies have continued to be a driving force in the new equa- tion. The global movie culture continues to be shaped by Hollywood’s movies, stars and technology. By transcending the bounds of national tongues, and being more accessible than newspapers, books, and other print media in many parts of the world, it has provided a near universal way of looking at the way people relate to society.” Left: Coach Carter, courtesy Paramount Pictures Above top: The Chronicles of Narnia, courtesy Disney/Walden; photo by Phil Bray Above bottom: Madagascar, courtesy DreamWorks Animation SKG PAGE 4 Right: Four Brothers, courtesy Paramount Pictures; photo by George Kraychyk
  6. 6. The creation of motion pictures and television programs is one of the nation’s most vital and valuable resources. In 2005, the motion picture and television industry generated: . over 1.3 million American jobs; . an average salary of $73,000 for direct employees; . $30.24 billion in wages to workers in America; . $30.20 billion in revenue to U.S. vendors and suppliers; . $60.4 billion in output to the U.S. economy; . $10 billion in income and sales taxes; and . $9.5 billion in trade surplus. Report highlights Above: The Island, courtesy DreamWorks Pictures and Warner Bros. Pictures; photo by Merrick Morton Right: King Kong, courtesy Universal Pictures
  7. 7. With a payroll of over $30 billion, the motion picture and television industry is a major pri- vate-sector employer. In 2005, the total number of U.S. residents employed by the motion picture, commercial and television production industry was over 1.3 million. Over 180,000 people were directly employed as studio, independent production com- pany, or core industry supplier staff. Core industry suppliers include film labs, special effects and digital studios, location services, prop and wardrobe houses, research ser- vices and film stock houses, video duplicating services and stage rental facilities among others. Creating high quality jobs Another 231,000 were freelance workers, including actors, directors, writers, and techni- cal or craft specialists. While freelance employees account for more than half of the industry’s workforce, it’s important to note that freelance is not synonymous with “part- time” as many work full time. The industry produces high quality and high paying jobs. The average salary of those directly employed in the industry was $73,000 in 2005--nearly 80 percent higher than the average salary nationwide.1 It is worth noting that the calculation of both the payroll and the average salary figures excludes salaries paid to highly compensated talent. The industry also generates what labor analysts call “indirect” jobs through companies such as movie theaters, themed retailers and restaurants, video rental stores, and tourist attractions. Nearly 1 million people were employed in such jobs. PAGE 6
  8. 8. Direct payments for goods and ized nature. More than 160,000 of the films released in the U.S. services to vendors by the industry firms around the country were in 2005 were produced by inde- added $30 billion to the nation’s involved in the industry in 2005 - pendents, up from 43 percent in economy in 2005. These pay- from production to distribution, and 1995.3 ments not only go to specialized working for independents as well businesses that exclusively serve as major studios. Approximately The graphic at the right illustrates the entertainment industry, such as 85 percent of these firms employ the vast array of individuals vital to wardrobe companies and camera fewer than 10 people.2 In essence, bringing a motion picture or televi- equipment firms, but also to gen- the motion picture and television sion program to fruition. eral suppliers serving a number of production industry is largely entre- other industries, such as caterers, preneurial and dominated by small Few industries in the world are as lumberyards, apparel retailers and businesses and individuals. large and yet depend so heavily on florists. an economically diverse work force Additionally, independent produc- based on regional networks collabo- One of the most unique characteris- tion companies produce an increas- rating on projects. tics of the motion picture and televi- ing percentage of feature films and sion related industry is its decentral- television programs. 65 percent Developing small businesses and entrepreneurship Entertainment Industry: Share of Total U.S. Firms by Employees Total U.S. Firms = 164,736 1 2 to 4 3% 5 to 9 2% 1% 1% 9% 10 to 24 36% 25 to 49 12% 50 to 99 100 to 249 250 to 499 500 to 999 Less than 1% 1,000 to 2,499 36% 2,500 to 4,999 5,000 or above unknown Right: The Hitchhiker’s Guide to the Galaxy, courtesy Touchstone Pictures
  9. 9. What goes in... What comes next... Illustrating the Production Workflow PAGE 8
  10. 10. Generating tax revenues Communities throughout the U.S. and in other countries zealously promote entertainment development because the industry attracts capital and earns revenues that create local jobs and generate tax revenues critical for public needs. In 2005, just two types of taxes paid by the motion picture and television production in- dustry - taxes paid by industry workers and sales taxes on goods and services - generated approximately $10 billion in public revenues in the United States. Total tax revenues included $3.1 billion in income taxes at the fed- eral level and $1.5 billion in income taxes at the state level, along with $4.7 billion in additional unemployment, Medicare and Social Security taxes. Other taxes paid, but that could not be quantified for this study, include corporate income taxes, property taxes and business license taxes. Also not included are tax revenues generated by indirect employment. Above top: Aeon Flux, courtesy Paramount Pictures; Above bottom: Chicken Little, courtesy Disney Enterprises Right top: Four Brothers, courtesy Paramount Pictures; photo by George Kraychyk Right middle: Bewitched, courtesy Columbia Pictures; photo by: John Bramley Right bottom: Interpreter, courtesy Universal Pictures
  11. 11. Competing successfully around the world We live in the age of a global economy in the American industry in 2005. Stopping which trade and technology are bringing the those losses will depend on first, improving world closer together. The American motion intellectual property laws in many countries picture industry plays a pivotal role in expand- and second, ensuring that those laws are fully ing the U.S. economy through the arts, the enforced.5 latest technology, and international trade. In 2005, the enduring entertainment value and In addition, in some key markets, the mer- appeal of US films around the world earned chants of pirated products have the markets to $10.4 billion in audiovisual exports, a 20 per- themselves; the legitimate motion picture in- cent increase since 2000. Moreover, the US dustry is denied fair access to the market due motion picture industry is one of the few in- to quotas and other forms of discriminatory dustries that consistently generates a positive government policies. Future export growth de- balance of trade. In 2005, that surplus was pends on worldwide audiences having the free- $9.5 billion, a total larger than the combined dom to decide for themselves which movies to positive trade balance for telecommunications attend, without being hampered by intrusive and computer and information services, and government policies and market barriers. was 12 percent of the entire US private-sector service trade surplus.4 The positive balance of trade the motion picture industry generates is an important The American motion picture industry has not aspect of maintaining the economic stability achieved these remarkable successes in the and competitiveness of the nation. The export export market without overcoming great obsta- of audiovisual services is a reliable engine of cles, some of which still hobble the industry’s employment growth, generating jobs that on ability to grow. The two principal challenges average pay 13 to 18 percent more than the are piracy and market barriers. Piracy outside median wage.6 of the United States sapped $4.8 billion from PAGE 10
  12. 12. Motion picture and television production growth produces dramatic benefits for the U.S. economy and its residents, benefits that are spread throughout the country. 8 With 699 feature films produced in 2005, nearly all of the 50 states had full or partial feature film production activity during 2005 - plus television program and other production activity, which is also spread around various states. 10 1 Production around the country 237 365 97 Top production states 7 in 2005 California 1 New York Nevada Arizona North Carolina Montana New Jersey Louisiana New Mexico Illinois All numbers were provided by the state film commissions. There is some variation in inclusion definitions based on each commission’s methodology. In California, of- ficial data is not recorded by the film commission. Estimate is conservatively based Right: Lost, courtesy ABC, Inc; photo by Bob D’amico Extreme right: The Fog, courtesy Columbia Pictures; on published production reports and location permits. photo by Rob McEwan
  13. 13. 36 4 2 4 19 281 2 2 3 11 1519 16 5 2 24 21 12 4 2 2 18 15 4 5 2 64 3 22 6 1 1 3 5 16 23 15 15 PAGE 12
  14. 14. 30 states have found motion picture and television production to be so beneficial to their economies that they have enacted specific incen- tives to increase production in their states. What follows are summaries from various states on how produc- tion activity benefits their residents. Oscar-winning film Walk the Line shot over 45 days in Memphis and Nashville in 2004. Producers spent about $10 million in Tennessee, creating a total economic impact of $18 million to $20 million.8 Making an impact in states Arizona ’s film com- California , the Connecticut mission found that during 2003 (the heart of the American motion picture is a popular production locale for film- most recent year for which data is and television industry, was one of makers both because of its proximity available), $21.9 million in wages the primary locations for 365 produc- to New York City and because of the was earned by Arizona residents from tions in 2005. In terms of economic state’s new production incentive pro- 612 direct and 1,092 indirect indus- activity, the industry generated a total gram. In addition to 8,000 film jobs try jobs. The film industry generated of $42.2 billion, split almost equally and 18,000 support jobs, the film in- more than $107 million in direct between payroll expenditures and dustry generated $2.5 billion in gross economic activity with an additional payments to vendors. Approximately state product, including $1.2 billion in $94.1 million of indirect activity. The 266,000 people were directly em- personal income, in 2005.11 state believes that these numbers ployed in the motion picture and tele- Illinois have risen substantially since 2003, vision industry in California, with an particularly with the enactment of average salary of $80,600. Including in 2005 benefited an incentives program in January of indirect employment, the number of from expenditures totalling $100 mil- 2006.9 people working in California as a result lion in production dollars from feature of the industry totals over 500,000.10 films alone. A new tax credit, which went into effect in May 2006, is ex- pected to grow that amount.12
  15. 15. Montana Pennsylvania The Governor’s office estimates the expe- state has benefited to the financial rienced $53 million in production tune of about $780 million in total, has seen its share of film productions related spending in the past 6 years, once the economic impact generated lured by state incentives, and the state resulting in an $81.4 million impact by the money as it passes through a quantified the resulting economic im- on its economy, plus 930 full time variety of hands in the local economy pact to the state in 2005 at $249 mil- equivalent jobs in the film industry is calculated.16 lion. Recent productions choosing to and 444 jobs indirectly. The film film in Pennsylvania include Invincible New York industry also generated $4.3 million and the 2006 CineVegas honoree The dollars of tax revenue for Montana.13 City 4th Dimension.19 in 2006 hosted the highest number Nevada Utah of film, television, commercial and continues to music video shoots in its history. In finds that film produc- benefit from various television and 2005, there were just over 31,500 tions have become an enormous eco- film productions set in locales ranging “shoot days,” but the number jumped nomic development opportunity. The from the bright lights of Las Vegas to 10 percent to over 34,700 in 2006. state’s Motion Picture Incentive Fund the remote ghost town of Rhyolite, fol- Independent productions accounted helped bring several productions to the lowing in the path of such classics as for 90 percent of the 250 feature films state, including World’s Fastest Indian The Godfather Part II, Rain Man, and shot in New York City in 2005. There and High School Musical, which will Casino, which all filmed in part in Ne- was a $1.5 billion economic benefit see its sequel shot in Utah as well.20 vada. The Nevada Film Office found in 2005 from the “Made in N.Y.” that in 2005 film and TV production incentive program, which has created contributed $102.5 million into the thousands of new jobs by bringing state’s economy in 2005, with actors, $2.4 billion in business to New York directors and crew personnel showing over the past two years.17 up for 3,210 workdays.14 North Carolina New Jersey ’s production incentives drove spend- has benefited from its proximity to the ing on features, television programs, production hub of New York City, re- commercials and other productions sulting in a film economy of $83 mil- to $300 million in 2005. The recent lion as of 2004 (up from an estimated hit film Talladega Nights: The Legend $61 million in 1999). This growth of Ricky Bobby was filmed in North was spurred in part by legislation Carolina.18 awarding a tax credit to filmmakers, as Using the Two Dollar Policy, by Marian Rees, Independent film producer, whose well as state-sponsored incentives.15 company has produced 37 films on location. “To demonstrate the positive impact of filming on the local community, during one New Mexico production I decided all per diems would be paid to the crew in two dollar bills, which, when spent on the cleaners, laundry, restaurants, grocery stores, and other is seeing major benefits from financial shops would be tangible evidence of the money ending in local merchants’ hands. In incentives initiated in 2003 to draw meeting with business leaders I gave them a picture of the positive financial impact filmmakers to the Land of Enchant- our production would make, but the ‘persuaders’ were the two dollar bills that seemed ment. The state has taken in about to float through the town, soon to become collectors’ items. Our two dollar policy be- $260 million in expenditures by came a part of our philosophy for every future film. That, and always leave a location production companies since that time. the same if not better than when we arrive.” Left: Walk the Line, courtesy Twentieth Century Fox Above: Monk, courtesy NBC Universal Photography Department PAGE 14
  16. 16. Spotlight: Louisiana by Eve Troeh, independent radio producer filing regularly for years, but to be able to come back and have opportunities in NPR, Weekend America and others. features, it’s perfect.” “Film and television production is expected to contribute Malcom Petal is CEO of the local studio Lift Films, which more than $400 million to Louisiana’s economy in 2007. employs up to 500 people, and pays wages that start at The industry has boomed since the state passed tax credits $20 an hour. He says production builds Louisiana’s middle five years ago, and has come back stronger than ever since class. “There’s a job for every trade: carpenters, electricians Hurricane Katrina. and hairdressers. Every business in town gets used: the hotels, dry cleaners and car rental services.” Production helps Louisiana retain and attract creative human capital. On the set of the $150 million Paramount feature Petal, who used to be a lawyer for oil and gas companies, The Curious Case of Benjamin Button in New Orleans, a also points out that film is a non-polluting industry. local church choir sings as background talent. Locals in jobs from lighting to craft services talk excitedly about their A new set of tax credits encourages entrepreneurs like Petal careers. to build soundstages, post-production houses and film schools to make Louisiana’s film industry even more self- Some, like actor Lance Nicholls, have even moved back to sustaining.” their home state. “I was living in Los Angeles for about 24
  17. 17. Letters from Governors Left: XXX: State of the Union, courtesy Columbia Pictures; photo by Zade Rosenthal PAGE 16
  18. 18. PAGE 18
  19. 19. Investing in infrastructure and community development In addition to direct “ A $25 million expansion and renova- “ Director George Lucas pledged $175 entertainment pro- tion of the Queens, New York site of the Mu- million to the University of Southern Califor- duction payrolls and seum of the Moving Image began in February nia’s film school, in Los Angeles, California, expenditures, the in- 2005 to include new galleries, an outdoor in 2006 to build a 137,000 square-foot com- dustry actively invests theater, an educational center, and a new col- plex in an effort to meld the film industry’s in infrastructure and lection storage facility.21 story-telling skills with digital technologies.24 facilities that have a positive effect on “ The Jacob Burns Film Center in “ Silvercup Studios, the largest community develop- Pleasantville, New York broke ground in Janu- independent television and film production ment and real estate ary 2007 on a $12 million 25,000 square- complex in the Northeast, is adding a 3rd markets. Here are a foot media and education center, scheduled location in New York in the form of 2.2 mil- few samples of such to open in 2008.22 lion square-foot of space for $1 billion. The capital projects. complex will include a 500-ft.-high com- “ LIFT Productions plans to build a mercial tower, two residential towers, eight $100 million 320,000 square-foot, nine soundstages, a catering facility for up to block long film studio in New Orleans, 8,000 people, and 100,000 sq. ft. of cul- Louisiana that will include soundstages and tural space.25 post-production facilities as well as vocational facilities to train film industry workers such “ Metro Productions built a $1 mil- as hairdressers, electricians, costume design- lion 10,000 square-foot production facility in ers, set builders, and camera operators.23 Richmond, Virginia. The facility includes a fully-equipped 40-by-40 soundstage, a green
  20. 20. Filmmaker George Lucas completed construction on the $350 million, 23-acre Letterman Digital Arts Center in the Presidio of San Francisco, California in 2005. The campus integrates three Lucas units: Industrial Light + Magic (visual effects), LucasArts (videogames), and Lucasfilm Ltd., the corporate par- ent. Beyond its state-of-the-art technical features, the campus sets a new standard for sustain- able development by, among other things, recycling 80% of the building materials from the site’s demolished Letterman Hos- pital, restoring 17 acres to open Spotlight: park space for public use, and utilizing features that increase Letterman Digital Arts Center energy and water efficiency by more than 30%.32 room, three editing suites, “ In June 2006, film and TV and soundstages, an audio suite and a graph- Lionsgate Entertainment a recording studio, and sev- ics suite that includes 3-D announced plans to build a eral video editing suites.30 capabilities.26 $15 million film studio in Rio Rancho, New Mexico.28 “ In December 2005, “ A 1.7 million square- Screen Gems Studios of foot movie studio constructed “ WorkshopLive Wilmington, North Carolina during 2005 has been part opened a new recording and announced plans to build a of a redevelopment project in video production studio in larger soundstage to attract Downey, California. The proj- Pittsfield, Massachusetts in bigger budget projects. The ect has converted 80-acres June 2005, utilizing contrac- studio also consulted on a of a 160-acre aerospace tors and construction firms project in North Stoning- manufacturing facility into from Berkshire County and ton, Connecticut that would Downey Studios, with more other parts of Massachu- include an entertainment than 300,000 square-feet of setts.29 complex.31 shooting space, ceilings as high as 62 feet, and a foot- “ Stone Five Studios 27 ball field sized water tank. broke ground in Provo, Utah in June 2005 on a new 42,000 square-foot facility to include two fully-equipped Above: © Lucasfilm Ltd. & TM. photo by Tina Mills. Left: The Longest Yard, courtesy Paramount Pictures PAGE 20
  21. 21. Motion picture and television production also has a ing areas for tourism all around the country. In the beneficial impact on tourism - another vital engine Annals of Tourism Research, researchers concluded of economic growth. Entertainment-related attrac- that, on average, a location featured in a success- tions and film industry landmarks are well known ful film could expect to see visitors increase by an as promoting tourism in Hollywood. Not as well average of 54 percent over the next four years. known is the important role films play in promot- Promoting Tourism Spotlight: Sideways and Santa Barbara by Martine White the Santa Ynez Valley for 47 days of County Film Commissioner shooting and four months of pre-pro- When the Golden Globe® and Oscar® Santa Barbara Conference & Visitors duction in 2003. nominations sparked even greater Bureau and Film Commission interest in the film, the hotels in the The Commission decided to use Side- Santa Ynez Valley and businesses fea- “The film Sideways was inspired by ways to launch a movie tourism niche tured in “Sideways, The Map” reported experiences in the wine country in marketing campaign, working with business was booming, as consumers Santa Barbara County, California. The the film producer and a local artist and Sideways fans began flocking to Santa Barbara County Film Com- to create a Sideways tour map based the wine country. Tasting room traffic mission began working with Director on the locations featured in the film. was on the rise at Santa Barbara’s Alexander Payne and the Sideways The map, which has been re-printed 60+ tasting venues and demand for team during pre-production, familiar- three times due to demand, highlights Santa Barbara County wines skyrock- izing and connecting them with the 18 locations from the film. To date, eted nationally. Overall, we forecast local community, who embraced the 120,000 maps have been distributed an impact of 15 percent on tourism Sideways crew while they made their and over 65,000 people have down- revenue to the county over the next home in Santa Barbara County and loaded it from four years.” Above: Sideways, courtesy Fox Searchlight Right: Star Wars: Episode III - Revenge of the Sith, courtesy Twentieth Century Fox
  22. 22. The American motion picture industry monorail, the industry has continued sumers whenever and wherever they is a world leader in developing and to press the boundaries of what is want it. Through digital cinema, next deploying new technologies. The feasible. generation DVD formats, and digital industry’s demand for new media, rights management technologies the special effects, and enhanced sound In addition to enhancing the enjoy- industry is facilitating new business and visual quality, has resulted in ment of filmed entertainment, the models that will create more choices innovations that enhance the viewing industry’s inventions serve the public for consumers while also discouraging experience and advance the progress good. For example, rather than en- digital theft. Already the industry is of science and the public interest. In force their film restoration patents, the delivering content through digital cin- recognition of these advancements the industry has freely shared that tech- ema, high definition DVDs, streaming major film studios have been awarded nology to enable restoration of many on demand, download to own, peer- over 1,000 patents in a variety of old, fragile filmed works from the early to-peer technology, social networking fields both expected and unexpected. 20th Century. Industry members are sites, and mobile devices. The range of ideas and their lasting also developing technologies to protect impact is impressive. Whether it is the environment, such as through synchronizing music and dialogue on implementation of a low emission film, marrying the concept of 3D and launch system for firework displays. color film, introducing surround sound, developing the DVD, or developing The industry is also leading the way in and implementing the first commercial providing filmed entertainment to con- Providing leadership in the digital age PAGE 20 PAGE 22
  23. 23. Changing, growing by Harold L. Vogel, Author of Entertain- unusually rapid adjustment and transi- ment Industry Economics, 7th ed. forth- tion. Whenever this happens, the market coming May 2007. New York: Cambridge demand shifts dramatically toward those University Press. who possess new types of knowledge and skills and displaces those who do not. “The introductions of television, home video, cable, direct broadcast satellites, Newspaper headlines typically do not and DVDs have all had an historically present the whole story of the dynamism important and ultimately beneficial impact of expanding opportunities that the new on the economic landscape in which technologies quietly originate a few new filmed entertainment is produced and dis- jobs at a time. If history is any guide, tributed. But digital/Internet technology is transition into the new age of digital already proving to be much more profound filmed entertainment will ultimately have and disruptive than any of these earlier an enormous positive effect on the in- innovations. Traditional business models dustry and on the overall economy of the and strategies are becoming increasingly United States.” ineffective and are now in the process of Surveying the future, addressing challenges Will the economic contributions of the will spur further demand. industry continue to increase? The answer is “yes.” Forecasters predict the demand for At the same time, however, there are motion picture and television products will serious challenges ahead to domestic and continue to grow, as the methods for deliv- overseas success, including piracy, the risk ering them to the consumer evolve. Ana- of filmed entertainment market saturation, lyst Harold Vogel states, “[t]echnological global macroeconomic trends, and poten- development has been the driving force tial fragmentation brought about by local behind the growth of the entertainment in- content, targeted development subsidies, dustries. Development of technology leads and protectionist policies pursued by cer- indirectly to an increase in leisure time tain foreign countries and states. availability and leads directly to qualita- tive improvements and cost reductions in Within the U.S., many factors will help manufacturing and distribution.”33 determine whether entertainment produc- tion continues to expand. One of the most New distribution capabilities boost demand important is the political and regulatory for entertainment products, and the enter- climate. Practical, cost-effective measures tainment industries overall are expected to enhance industry operations, includ- to continue to grow at faster than average ing federal production tax incentives, will rates.34 Legal and diplomatic measures increase the probability of entertainment opening foreign markets, as well as increas- industry growth and hence the growth of ing modern theater construction overseas the U.S. economy.
  24. 24. Endnotes 1. Bureau of Labor Statistics. 19. Ibid. 2. LEK Analysis, Dun & Bradstreet Marketplace Database. 20. Deseret Morning News, “State wants to increase movie incentive fund,” 3. MPAA Worldwide Market Research. Brice Wallace, Salt Lake City, UT, 01/11/07. 4. The U.S. Department of Commerce, Bureau of Economic Analysis, 21. Associated Press Online, “Museum of the Moving Image to expand,” Survey of Current Business, Oct. 2006. Audiovisual services definition: the New York, NY, 01/11/05. affiliated and unaffiliated transactions between US and foreign residents 22. The New York Times, “Art house to get a campus,” New York, NY, of film and television tape rentals, which covers the rights to display, 01/14/07. reproduce, and distribute US motion pictures and television programming 23. The Times-Picayune, “Film producers not scared off, Katrina hasn’t abroad. hurt state’s movie business,” New Orleans, LA, 10/12/06. 5. MPAA/LEK Piracy Loss Estimates Report 2005. 24., “Lucas to give USC $175M,” Los Angeles, 6. Business Roundtable, Trade Resource Center, Trade and Jobs: Why CA, 09/20/06. Trade and Investment Liberalization Creates More and Better Paying Jobs. 25. New York Construction, “Details unveiled for studio project,” New York, 7. State film commissions. There is some variation in inclusion definitions NY, 07/01/06. based on each commission’s methodology. In California, official data is 26. Richmond Times-Dispatch, “Video firm Metro Productions moving to not recorded by the film commission. Estimate is conservatively based on new facility,” Richmond, VA, 11/08/06. published production reports and location permits. 27. California Construction Link, “Back from the dead in Downey”, July 1, 8. Chattanooga Times and Free Press, “State Film Incentives Await Ap- 2005. Los Angeles Times, “Hangars are Hollywood’s next big thing,” Los proval,” Chattanooga, TN, 11/18/06 . Angeles, CA, 09/10/06. 9. Phoenix Business Journal, “Filmmaker expands Hollywood studio to 28. Albuquerque Journal, “Council Approves Lionsgate Package,” Albu- Phoenix,” Laura Newpoff, Phoenix, Arizona, 05/01/06. Arizona Department querque, NM, 06/15/06. of Commerce, “Analysis of the Film & Video Industry in Arizona,” Phoenix, 29. BusinessWire, “WorkshopLive opens Pittsfield recording and video AZ, 12/2004. studio facility,” Pittsfield, MA, 06/10/05. 10. MPAA Worldwide Market Research. 30. Daily Variety, “Utah breaks ground on new facility,” 07/07/05. 11. Variety, “Global Shooting Guide: United States,” Josh Marks, 31. Star News, “FILM CLIPS / Planners of studio complexes study Wilm- 11/05/06. Connecticut Center for Economic Analysis, University of Con- ington,” Wilmington, NC, 12/29/05. necticut, “The Economic Impact of Arts, Film, History, and Tourism in 32. Lucasfilm, Ltd. A New Vision for the Digital Arts. Connecticut,” 2006. 33. Entertainment Industry Economics, by Harold L. Vogel, pg. 469. New 12. Variety, “Global Shooting Guide: United States,” Josh Marks, 11/5/06. York: Cambridge Press, 6th Ed. 13. “The Big Sky on The Big Screen Act: A Film Industry Incentive,” by 34. Ibid. the Montana Film Office, Park Helena, MT, 4/20/05. 14. Las Vegas Review-Journal, “Pretty as the Pictures,” Chris Jones, Las Vegas, NV, 1/28/06. 15. Herald News, “A ‘Sopranos’ effect; Area film, TV productions are a growth industry,” Ed Beeson, Passaic County, NJ, 11/18/05. New Jersey Motion Picture and Television Commission, “The 20-Per-Cent Solution,”, 1/16/06. 16. The Santa Fe New Mexican, “Hollywood on the Rio Grande,” Robert Nott, 12/1/06. 17. Variety, “Global Shooting Guide: United States,” Josh Marks, 11/5/06. New York Post, “N.Y. turns into Cinema City”, Hasani Gittens, New York, NY, 1/19/07. 18. Variety, “Global Shooting Guide: United States,” Josh Marks, 11/5/06. Left top: White Noise, courtesy Universal Pictures Left middle: The Constant Gardener, courtesy Focus Features; photo by Jaap Buitendijk Left bottom: Munich, courtesy Universal Pictures Above: The Office, courtesy of NBC Universal Photography Department PAGE 24
  25. 25. Methodology The Motion Picture Association of America (MPAA) de- For the purposes of the report: veloped its report on The Economic Impact of the Motion Picture and Television Production Industry using a number of Direct employment refers to individuals employed through data sources, including Bureau of Labor statistics, Interna- production activities. It includes both regular full-time and tional Trade Administration reports, and various other propri- freelance employees paid by the studios, networks, inde- etary and publicly-available data. The following companies pendent production companies and commercial produc- participated in an annual survey: ers directly, and indirectly through payroll companies. A freelance employee is an individual who worked on a daily, o Studios and Networks: The Walt Disney Company, weekly or project basis. Freelance employees include actors, Metro-Goldwyn-Mayer Inc., Paramount Pictures, Sony directors, writers, camera operators, grips and other produc- Pictures Entertainment, Twentieth Century Fox Film Corp., tion personnel. Universal Studios, Warner Bros., Dreamworks, NBC Inc., ABC Inc., CBS Broadcasting Inc. Indirect employment refers to individuals employed by the industry through movie theaters, themed retailers and o Payroll Companies: Cast & Crew Entertainment Ser- restaurants, video rental stores and tourist attractions. Ad- vices, Entertainment Partners ditional individuals are accounted for through a wide cross- section of employers such as florists, apparel and accessory o Unions and Guild/Producer-Union Health Plans: retailers, automobile dealers, restaurants, caterers, dry Directors Guild of America, Motion Picture Industry Health cleaners and thousands of other vendors who supplied the Plan, Screen Actors Guild, Writers Guild of America production community. These participants supply employment, payroll, vendor The information collected includes all motion picture, expenditure and tax information to enable the Association to television, and commercial production functions, drawing a build a comprehensive picture of the size, scope, and future comprehensive picture of the industry’s economic impact. of the industry. The expenditure and payroll data is provided The survey was previously conducted in 1998 and 2003, by zip code, allowing for the measurement of the economic focusing on California. 2005 is the first year the survey has impact of the industry on a county, city, and community been conducted focusing on the entertainment industry’s basis. The major guilds and unions, as well as their health economic impact on the entire country. plans, and the Bureau of Labor Statistics provide additional information on industry employment. The Bureau of Labor Statistics no longer publishes employ- ment data based on the U.S. Standard Industry Classifica- tion (SIC) codes for individual states. Therefore, for the purpose of this study, the North American Industry Clas- sification System (NAICS) had to be converted to SIC codes using a combination of the 1997 Economic Census: Bridge Between SIC and NAICS and the 1997 NAICS and 1987 SIC Correspondence Tables. Since the category 7819 of “Allied Services to the Motion Picture Production” was reallocated under NAICS into a number of different industry classifications, correspondence tables were used in an effort to capture comprehensive employment figures. The same correspondence tables have been used in both the 2003 and 2005 reports.
  26. 26. Acknowledgements This Economic Impact Report was compiled under the leadership of the Motion Picture Association of America with the assistance of many important groups and individuals. First thanks go to the participants in the study, listed below. Individuals at each of these companies worked tirelessly to provide the MPAA with the survey data. Without their assistance, the report would not have been completed. The participants include: The Walt Disney Company Metro-Goldwyn-Mayer Inc. Paramount Pictures Sony Pictures Entertainment, Inc. Twentieth Century Fox Film Corp. Universal Studios, Inc. Warner Bros. The Academy of Motion Picture Arts & Sciences Library ABC Inc. CBS Broadcasting Inc. AFTRA Health & Retirement Funds Spelling Entertainment Group Inc. Entertainment Partners The Alliance of Motion Picture and Television Producers and Cast & Crew its president, J. Nicholas Counter who provided additional guidance. L.E.K. Consulting, L.L.C. provided invaluable assistance and guidance in reviewing the MPAA survey data. Directors Guild of America - Producer Pension and Health Plans We would also like to thank the following for their contribu- tions: Motion Picture Industry Pension & Health Plans Edward Jay Epstein, Author of The Big Picture, The New Screen Actors Guild - Producers Pension and Health Plan Logic of Money and Power in Hollywood Special thanks to California Governor Arnold Schwarzeneg- Ryan Ratcliff ger, Illinois Governor Rod R. Blagojevich, Louisiana Gover- nor Kathleen Babineaux Blanco, Montana Governor Brian Marian Rees, Independent Film Producer Schweitzer, New Mexico Governor Bill Richardson, New York Governor Eliot Spitzer, New York City Mayor Michael R. Eve Troeh, Reporter for National Public Radio Bloomberg, Pennsylvania Governor Ed Rendell, and South Carolina Governor Mark Sanford Hal Vogel, Author of Entertainment Industry Economics, A Guide for Financial Analysis This publication includes images from CorelDRAW™ 8 which are protected by copyright laws of the US, Canada Martine White, County Film Commissioner, Santa Barbara and elsewhere. Used under license. Conference & Visitors Bureau Left: The Legend of Zorro, courtesy Columbia Pictures and Spyglass Entertainment; photo by Andrew Cooper Above: The Wedding Date, courtesy Universal Pictures PAGE 26
  27. 27. MPAA 15503 Ventura Boulevard Encino, CA 91436 1600 Eye St., NW Washington, DC 20006 Published & designed by MPAA Strategic Planning & Research, January 2007 Copyright © 2007, Motion Picture Association of America (MPAA) All data, copy and images are subject to copyright and may not be reproduced, transmitted or made available without permission from the MPAA or the copyright holder. All rights reserved.