California Boosts Film Tax Credit Amid Industry Slump
In a significant move aimed at revitalizing the state’s struggling entertainment sector, California Governor Gavin Newsom has officially signed into law a substantial increase to the state’s film and television tax credit program. The legislative action more than doubles the program’s annual allocation, raising it to a robust $750 million. This bold investment is intended to serve as a powerful incentive, designed to attract crucial Hollywood jobs and production back to the Golden State, signaling a potential turning point for the soundstage operators in Los Angeles who have faced considerable challenges in recent years.
Industry Hails the Allocation Increase
The announcement has been met with optimism from key figures within the industry. Leaders who operate and develop production facilities have voiced strong support for the enhanced tax credit. Sean Griffin of Sunset Studios and Zach Sokoloff of Hackman Capital Partners, both prominent voices in the soundstage sector, have publicly described the tax credit increase as a “massive stride” and an “enormous win.” Their positive assessment underscores the perceived importance of financial incentives in influencing production location decisions and bolstering the economic health of the local industry infrastructure.
Navigating a Steep Downturn
Despite the infusion of new funds, the path ahead for the California film and television industry, particularly for soundstage operators, is challenging. The sector is confronting a steep climb out of a prolonged downturn. This slump has been attributed to a confluence of disruptive factors, including the lingering effects of the global pandemic, the impactful 2023 strikes by writers and actors, and the ongoing trend of production relocating to other states and countries offering competitive incentives.
The tangible impact of these challenges is starkly illustrated by recent data on production activity. According to figures from FilmLA, the official film office for the City and County of Los Angeles, the number of film shoot days in the Los Angeles region experienced a significant decline, dropping by 22% in the first quarter of 2025 compared to the previous year. This drop directly affects the demand for soundstage space.
Soundstage Occupancy Plummets
The health of the soundstage market is often measured by occupancy rates, and these figures paint a clear picture of the recent struggles. FilmLA data reveals that average soundstage occupancy rates in Los Angeles plummeted from an impressive 90% between 2016 and 2022 to just 69% in 2023. While the 2023 figure was heavily impacted by the strike-related production shutdown, the rate continued to decline in 2024, falling further to 63%.
As of the first quarter of 2025, there is no indication that these occupancy numbers have improved. Philip Sokoloski, a spokesperson for FilmLA, confirmed this stagnation, noting that the market has not yet shown signs of recovery in the early part of the year.
A Shifting Market Landscape
The stress on soundstage owners and operators is further underscored by recent market activity. The news that Occidental Studios, a notable production facility, has been put up for sale highlights the dramatic shift and increased pressure within the soundstage market. Such transactions can indicate financial distress or strategic repositioning in response to the challenging economic climate for production infrastructure.
Will the Investment Reverse the Trend?
The increased $750 million annual allocation represents California’s most significant commitment to date in using tax credits to stimulate its signature industry. Proponents argue that this level of funding is necessary to compete with the aggressive incentive programs offered by jurisdictions like Georgia, New York, and Canada, which have successfully lured away a substantial volume of production in recent years.
However, questions remain about the speed and extent of the recovery. While a larger tax credit makes California more financially attractive for production, the industry still faces other considerations, including labor costs, logistical challenges, and the need for a sustained period of stable production activity free from disruptions like strikes or global health crises. Soundstage operators, despite welcoming the boost, understand that rebuilding occupancy and profitability will take time and consistent demand.
Conclusion
California’s decision to dramatically increase its film and television tax credit is a critical policy intervention aimed at bolstering the state’s foundational industry. By more than doubling the available incentives, Governor Newsom’s administration is betting that financial support will be the catalyst needed to bring production back to Los Angeles and stabilize the vital soundstage sector. While industry leaders see this as a necessary and positive step, the data on declining shoot days and low soundstage occupancy underscores the depth of the recent downturn. The coming months will be crucial in determining whether this substantial investment can effectively reverse the negative trends and usher in a new era of prosperity for Hollywood’s infrastructure and workforce.
