LONNIE’S VIEW - California used to be the center of the movie and television universe. If you wanted to make movies, you came to Hollywood. The studios were here. The actors were here. The writers were here. The directors were here. The crews, stages, equipment, post-production facilities, agents, lawyers and infrastructure were all here. We had an advantage that should have been almost impossible to lose. And we lost it. Today California is competing with states and countries around the world for productions that once would have been made here automatically. Why? There are many reasons. But one of them, in my view, doesn’t get discussed nearly enough:
It became too expensive and too difficult to make movies here. I have spent much of my career in the independent film business. Producers don’t decide to shoot overseas because they hate California. They run the numbers. And very often, the numbers tell them to leave.
California Absolutely Needs Tax Credits
Let’s get one thing straight. I support California’s film and television tax credits. We need them. California isn’t competing only with Georgia or New York. We’re competing with the United Kingdom, Canada, Australia, Hungary, Bulgaria and other production centers around the world. Many of those jurisdictions offer attractive incentives. Some also offer substantially lower production costs. California has to compete. But here’s the problem: Tax credits alone aren’t enough. If taxpayers give producers incentives to stay in California while the underlying cost and labor structure continues giving them reasons to leave, we’re treating the symptom without treating the disease.
And that’s where the guilds come in.
SAG-AFTRA, WGA and IATSE Need to Look in the Mirror
IATSE, SAG-AFTRA and the WGA exist to protect their members. They should. Actors should be paid fairly. Writers should be paid fairly. Crews should be paid fairly. People should receive their pension, health and residual benefits. Producers should honor their agreements. None of that is controversial to me. But there’s another responsibility the guilds need to start thinking about: Making sure the jobs still exist. What good is negotiating a terrific deal for a California worker if the production moves to Budapest? What good is protecting an actor’s California job if the actor isn’t hired because the movie gets made in Bulgaria?
What good is protecting a crew member’s rate if there isn’t a California crew? At some point, protecting the worker and protecting the job become the same thing.
SAG-AFTRA Has Too Much Power Over Independent Productions
SAG-AFTRA is particularly frustrating for independent producers. The Guild can require substantial financial assurances before allowing a production to proceed under its agreements. Some financial assurance is understandable. Actors deserve to know they’re going to be paid. But in my experience, SAG-AFTRA can demand substantial security, exercise significant discretion over those demands and hold money far too long. Money sitting in a SAG-AFTRA security deposit isn’t available to make the movie. And on an independent film, cash flow matters. Every dollar matters. I’ve also encountered efforts to obtain security relating to future residual obligations before those residuals would otherwise be payable.
Then there is the practical ability of SAG-AFTRA to hold up a production while signatory and financial-assurance issues are being resolved. I don’t believe any guild should have that degree of practical power over whether an otherwise financed independent production can start. An independent movie isn’t a factory that can simply open a week later. You have actors with limited availability. A director. A crew. Locations. Equipment. Financing. Presales. Sometimes a completion bond. Everything is built around a start date. Hold up that start date and the entire production can begin to unravel. Protect your members. Enforce legitimate obligations. Require reasonable security.
But don’t create a system in which the mechanism designed to protect employment can prevent the employment from happening.
The WGA Has Its Own Problem
The WGA can create similar difficulties. A Guild needs the ability to enforce its agreements and collect money legitimately owed to writers. But there is a difference between protecting a writer and creating a system in which a disputed Guild determination can effectively prevent writers from working for a producer. When a company is placed on an unfair or strike list, the consequences can be enormous. Again, ask the basic question: Did this create a writing job or eliminate one?
If the result is that an independent producer decides the next movie is easier to make outside the United States, what exactly has been accomplished for WGA members? The Guild won the battle. Did its members lose the war?
Then There Are Liens, Security and Financing
Independent movies are difficult enough to finance. A producer may be putting together equity, senior debt, gap financing, presales, tax incentives and a completion bond. Everybody cares about security and priority. Then add Guild lien and security requirements. To somebody outside the independent-film business, that may sound like paperwork. It isn’t. Every additional security interest can complicate financing. And producers compare that experience with making movies overseas, where they may encounter lower labor costs and fewer of these particular financing complications. Eventually somebody asks the obvious question: Why are we making this movie in California?
Fees, Penalties and Interest Can Become Self-Defeating
There is another part of this that nobody likes talking about. The financial penalties imposed on producers can become enormous. Guild members should be paid on time. Absolutely. A producer shouldn’t be able to use somebody else’s wages as an interest-free loan. If a producer owes money, make the producer pay it. Add reasonable interest. Protect the member. But late-payment interest charges can become onerous. Then add penalties. Fees. Financial assurances. Security deposits. Residual obligations. Legal expenses. Potential liens. At some point, a manageable financial problem can become a financial crisis.
I’ve seen Guild demands place enormous pressure on independent companies already operating on extremely thin margins. And here’s the question nobody seems willing to ask: How does bankrupting the employer help the employee? It doesn’t create another acting job. It doesn’t employ another writer. It doesn’t put another crew member to work. It doesn’t create another movie. And it certainly doesn’t encourage that producer to make the next production in California. Sometimes enforcement seems to accomplish little more than allowing the Guild to say that it enforced its rules. Wonderful. Where is the next job? Wonder Why You Don’t Have a Job? Ask Your Guild.
That’s deliberately provocative. But I think SAG-AFTRA, WGA and IATSE members should be asking their leadership some difficult questions. Are all of these rules actually protecting my career? Are some of them helping drive my job somewhere else? Is maximizing every possible financial protection on today’s production worth making tomorrow’s production economically impossible? Could we create special California terms designed specifically to bring production home? Could we reduce unnecessary financial-assurance requirements? Could we simplify security arrangements? Could we reconsider work rules and costs that make California less competitive?
Could enforcement focus on getting members paid without financially destroying companies that might otherwise employ those members again? These aren’t anti-union questions. They’re pro-job questions. I want SAG-AFTRA actors working. I want WGA writers working. I want IATSE crews working. And I want them working here. Protect the Worker. Protect the Job. California should be aggressive with its tax-credit program. We have to be. We’re competing against the world. But California taxpayers cannot solve this problem by themselves. The studios need to participate. Independent producers need to participate. The state needs to participate. And the Guilds have to participate.
Everybody needs to look at the total cost of making a movie in California and ask what can reasonably be changed. Nobody needs to eliminate unions. Nobody needs to eliminate minimum compensation. Nobody needs to abandon pension and health benefits. Nobody needs to give producers permission not to pay people. But everybody has to acknowledge economics. Because producers do. We run the numbers. And if California costs millions more, carries greater financing complications and creates greater risk of a Guild problem interfering with production while another country offers lower costs and a substantial incentive, eventually the movie leaves. Then everybody loses. The producer leaves California.
The actor loses a California job. The writer loses a California job. The crew loses weeks or months of employment. Stages sit empty. Equipment isn’t rented. Restaurants don’t feed crews. Drivers don’t drive. Hotels don’t house cast and crew. Vendors don’t get paid. And California loses another little piece of an industry that it once owned. Tax credits are part of the answer. Guild reform is part of the answer. Neither is enough without the other. A great union contract doesn’t mean much if the job moves overseas. California used to be the center of the movie universe. It can be again.
But first, everybody involved needs to stop protecting their piece of an industry that is leaving and start figuring out how to bring the industry home. Protect the worker. Protect the job. That’s Lonnie’s View.
(Lonnie Ramati works in film business affairs, including film production and international sales. He writes ‘Lonnie’s View,’ commentary on politics and the entertainment industry.)
