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Hollywood Goes Global - 2002-03-29


The U.S. film industry got its start in New York, but early in the last century it moved to Hollywood. Today, film production is moving to other locations. VOA's Mike O'Sullivan reports on how the movie business is responding to the pressures of globalization.

Of the five movies nominated as best picture at this year's Academy Awards, not one was filmed in Hollywood. They were shot instead on location in places as far afield as New Jersey, Australia and New Zealand.

That illustrates a problem that troubles Hollywood insiders and local economists, who note that Los Angeles lost 18,000 jobs last year in the movie industry, and nearly as many support jobs in fields from catering to accounting.

Hollywood studios say Los Angeles is still a great production center, but more and more films are made in places like Canada, where the exchange rate is favorable, the local talent is cheaper, and the government offers the studios tax incentives. The phenomenon is known as "runaway production," but Christopher Thornberg of the Anderson Business School says the term should be revised. The UCLA economist wrote a recent report on the movie industry in Los Angeles.

"It's not run-away production, it's ran-away production," he notes. " We dropped from a peak of 1200 or 1300 days of movie production here in the city of Los Angeles to about 300 or 400 days over the last couple of months."

Another UCLA economist, Tom Lieser, cites two reasons for the drop in Hollywood production. The threat of strikes last year by Hollywood writers and actors prompted the studios to hurriedly finish as many movies as possible.

"The strike didn't happen, but it's almost as if it did because the industry cut production in anticipation," he says, " and in the subsequent period, did not have to produce as much, had some inventory."

There is also a long-term trend toward decentralization, as studios look for international partners to share the risks and profits of making movies. Some productions are jointly financed and, with others, distribution rights are sold for various regions.

Economist Christopher Thornberg notes that many U.S. industries have moved their manufacturing overseas, taking advantage of cheaper labor and lower costs. However, design and marketing are still done in the United States. He says the movie industry is following that trend, leaving high-end jobs here in Hollywood.

"We're seeing a shift away from the production towards management, from production to design," says Mr. Thornberg.

In 1983, only one-third of the jobs in the Hollywood were in management. Two-thirds were in production. Today, managers fill half the positions and earn a large part of the income that the industry generates. The economist concedes that means hard times for film editors, sound technicians and other craftsmen, but says it is not a bad thing for the industry as whole.

Hollywood agent Jeffrey Berg sees bigger changes ahead as the industry out-sources more of its production. Mr. Berg heads one of Hollywood biggest talent agencies, International Creative Management. His clients include Mel Gibson, Jodie Foster and Julia Roberts.

He says Los Angeles will continue as a film production center, but only one of many.

"Certainly LA will be one because there's such a vast talent pool here, but Paris, London, Hong Kong, Sydney, Australia, and all the principal production centers as well as Rio and Mexico City," he says. "There's a huge Latin American audience for movies and entertainment. It's going to be a different industry. It's not going to come out of the five or 10 square miles that we're inhabiting right now."

Digital technology is already changing the ways that movies are made, allowing filmmakers to create realistic settings and vivid special effects on computers. Mr. Berg is one of Hollywood's leading promoters of the new digital technology, which he says will also change the way that films are distributed.

"I think that's going to be the next big deal because that takes an enormously heavy cost out of the business, once it occurs, which is the physical manufacturing of prints and cans of film, and storage, vaults, and shipping," says Mr. Berg. "It's probably a billion dollar a year charge that goes away with digital. And on a global basis, it's many billions of dollars."

UCLA economist Christopher Thornberg notes that Hollywood is still a center for commercials, television shows and music videos. That's not likely to change since those smaller-scale projects are more easily completed in one location.

And he says Hollywood will remain a place where movies are conceived, even if the production is done in other places. He compares it to Silicon Valley, the computer software center in Northern California. Most computers are now manufactured outside the United States, but Silicon Valley companies are still at the heart of worldwide high tech network.