It was a television show tailor made for Los Angeles: a highly anticipated Netflix crime drama about a team of ex-special forces operators who outsource their skills to criminals in the city.
The production was backed by a prominent indie studio and had a critically acclaimed lead actor attached. And with a budget of more than $100 million and a crew of 350, the series seemed like a shoo-in for California’s film tax and TV credit.
But last month, shortly before filming was set to begin, producers were stunned to learn the film didn’t make the cut based on a formula the state uses to rank projects by the number of jobs they produce and their spending levels. After two applications for a tax credit had been rejected, they opted to shoot the series in New Jersey, where it was much easier to qualify for film incentives.
“We were shocked,” said a producer on the project who declined to be identified because of the sensitivity of the matter. “This is the birthplace of entertainment. “It shouldn’t be so hard to shoot here.”
Despite improvements to the state’s tax incentive program, Los Angeles and California continue to struggle to keep movies, television series and even game shows from fleeing elsewhere. Production levels have failed to bounce back since the pandemic and the labor strikes by writers and actors, and they remain at historic lows.
Film activity in the L.A. region plummeted in the second quarter of this year, with shoot days for feature films and TV productions falling 20% and 30%, respectively, compared with already anemic levels from a year ago, according to FilmLA.
The fallout has been devastating for local film crews and businesses. L.A.’s signature industry has shed some 57,000 jobs in the past four years, while more than 80 film and television production services businesses have closed since 2022. The production crisis has even become a political flashpoint alongside affordability, crime and homelessness in the race for mayor and governor.
The story of how L.A. steadily lost much of its homegrown industry to other locales is a tale of hubris, escalating costs, political inaction and fierce competition from states and countries hungry for a piece of the Hollywood pie. California eventually adopted a very limited film tax credit plan in 2009, but even then production had already gone elsewhere.
Filmmaker Jonathan Nolan, on the set of “Fallout,” has been at the forefront of efforts to keep Hollywood at the center of the entertainment industry.
(Lorenzo Sisti / Prime Video)
This account is based on interviews with more than a dozen producers, studio executives, lawmakers and film industry veterans.
Despite warning signs that runaway production was causing an exodus of talent and jobs, many took for granted that L.A. would remain the epicenter of film and television.
“I’ve been around long enough … to realize that things kind of die slowly and then they die quickly,” said Jonathan Nolan, a writer, director and producer, whose credits include the HBO series “Westworld” and “Fallout” on Amazon.
Nolan, who championed efforts to get the state to expand its tax incentives, lamented that L.A. once “stood in for everywhere. Now L.A. doesn’t even stand in for itself.”
‘The X-Files’ and the birth of Hollywood North
Like the fall of Rome and the decline of Detroit, Hollywood’s spiral did not happen in a single day, but rather unfolded over decades.
Before World War II, Los Angeles’ production hegemony was uncontested. An abundance of sunny weather and a range of landscapes, along with highly skilled artisans, from set designers to scenic painters, recreated the entire world on Hollywood soundstages and backlots.
That began to change during the late 1940s and early 1950s when studios broke with tradition and filmed abroad, attracted by Europe’s cheap labor and the desire among directors for more realism in movies.
William Wyler’s 1953 classic “Roman Holiday,” starring Audrey Hepburn and Gregory Peck, was one of the first, shot entirely overseas on the streets of the Italian capital and at Cinecittà studios.
Still, as productions went on location, often for creative reasons, Hollywood remained the center of entertainment gravity.
“Roman Holiday,” starring Audrey Hepburn and Gregory Peck, was one of the first big American studio films to be shot entirely overseas.
(Paramount Pictures)
In 1993, when there were four broadcast networks, cable TV relied on set-top boxes and streamers were, well, party decorations, a relatively unknown television writer named Chris Carter began pre-production on a new supernatural drama series that he had created.
For the pilot’s opening scenes, he needed a forest, one that was dark and moody. There, a terrified teenage girl would be filmed fleeing before she was consumed by a blinding flash of light and then found dead, bearing unexplained marks on her body.
“It became clear that not only were there not great forests in the ‘zone’,” said Carter, referring to the 30-mile-zone (TMZ) around L.A. that producers try to shoot within to avoid mandatory union surcharges. “But there were better forests in Vancouver.”
As it happened, during the 14-day shoot, Carter, who was working with a tight budget, discovered that Vancouver supplied numerous benefits.
The grim weather naturally provided a spooky atmospheric backdrop while the city “beautifully doubled for almost any place in the U.S. without having to pretend too much,” he said.
Carter’s pilot became “The X-Files,” the wildly popular and groundbreaking 1990s TV series that ran for nine seasons (plus two revival seasons), redefined the science fiction genre and spawned two feature films.
The success of “The X-Files” propelled Vancouver’s reputation as “Hollywood North.”
(Associated Press)
“As David Duchovny said, ‘two weeks became five years,’” quipped Carter.
While other productions such as “Wiseguy” had filmed in British Columbia years earlier, “The X-Files” unintentionally cemented Vancouver’s reputation as “Hollywood North,” fueled by Canada’s favorable exchange rates, skilled crews, lower labor costs and, eventually, tax credits.
The show’s colossal success helped create the model still in play 33 years later for outsourcing movie and television production to regions where tax incentives are higher and production costs are lower.
“It was simply a choice I made for the location, not for the financial benefit,” said Carter. “It wasn’t part of my calculus, but it ended up being a fact of life.”
Throughout the 1990s a steady stream of TV shows and movies shot in Canada. The 1994 adaptation of “Little Women” starring Winona Ryder was largely filmed in Vancouver, with a stand-in for Orchard House, Louisa May Alcott’s home in Concord, Mass., built in a local forest.
But, at the time, few saw what was happening as an existential crisis in the making.
For one thing, L.A. was in the midst of a production boom, prompting the development of the $77-million Manhattan Beach Studios, a 22-acre production facility in 1996. (The studio is now fielding offers by its bank lenders after its owner, the real estate investment firm Hackman Capital Partners, defaulted on over $2 billion in mortgages on several studio facilities it had acquired in recent years.)
Losing the ‘golden goose’
Canada’s booming film business inspired other U.S. states to get in on the action. Louisiana became the first to pass a film tax incentive, enhancing it in 2002; New Mexico and Georgia followed with their own programs.
Helping to fuel the film tax credit frenzy was none other than the Motion Picture Assn. The Washington, D.C.-based advocacy group for the major film studios and streamers for years aggressively lobbied lawmakers and even governors in other states to adopt their own film programs.
Eventually, nearly 40 states and some 80 countries and territories were offering film incentives in the form of transferable tax credits, grants or rebates.
“Everybody thought, ‘We are Hollywood. Why do we have to do anything?,’” said Lori Balton, a top location manager, whose list of credits spans nearly 40 years and includes such films as “Heat” and “Once Upon a Time in … Hollywood.”
“They always thought that they had the golden goose. And it was going to keep laying eggs and instead, it packed up its bags and moved.”
Earlier this year, while speaking at Burbank City Hall chambers, Sen. Adam Schiff (D-Calif.) dropped some sobering data: 45% of all U.S. films and scripted television shows were shot abroad in 2025, up from 33% in 2022.
Like most filmmakers, Miles Millar would prefer to work in Los Angeles where he lives, but he hasn’t done so for 25 years, since he was a co-producer and writer on the CBS action series “Martial Law.”
“It is not financially viable to shoot the kinds of shows we do here,” said Millar, whose work includes “Smallville” and “Beetlejuice Beetlejuice.”
It was too expensive to film in Los Angeles, so the Netflix hit “Wednesday” shot its first season in Romania before relocating the show to Ireland.
(Netflix)
When Millar and his “Wednesday” co-creator and co-showrunner Alfred Gough began pre-production on the first season of the Netflix hit series about five years ago, L.A. as a location wasn’t even discussed.
They settled on Romania. Tim Burton, “Wednesday’s” executive producer and primary director, “loved the idea,” said Millar, noting that the director was predisposed to its gloomy and gothic wonders, having once visited Dracula’s castle in a Transylvanian mountain village with rocker Alice Cooper.
“We built the whole town of Jericho and six standing sets at a huge scale. There was no way you could even begin to construct the level and scale of sets that we did, in L.A.,” he said. “We’re talking about the difference of tens of millions of dollars.”
Still, the former Eastern Bloc country had its challenges. The crew didn’t speak English and its promised tax rebates never materialized.
When “Wednesday” was picked up for a second season (it is now filming its third), the show moved to Ireland, where it received more than $23 million in tax credits last year, according to the country’s Tax and Customs office.
“The last thing I want to do is shoot thousands of miles away from my family for nine months, year after year,” Millar said. But it has come down to “where do we get the most bang for the buck?”
Outsourcing scores and VFX
Other critical components of filmmaking, including visual effects and musical scoring, have also been outsourced over several years.
L.A. was once home to 18 film scoring stages that could accommodate full symphony orchestras. Today only three remain, driven away partly by high labor costs and cheaper overseas competition.
Similarly, many visual effects studios have moved elsewhere. Vancouver alone has dozens of visual effects studios, including Sony Pictures Imageworks and a major branch of Industrial Light & Magic.
“We’ve allowed that piece of the market to leave,” said Marielle Abaunza, president of the California Post Alliance, an advocacy group backing a state bill offering post-production firms their own tax breaks, similar to what New York offers.
“For 16 years, places like New York have slowly been building up their talent, their facilities, their relationships with filmmakers and their relationships with studios,” Abaunza said.
Even as other states and foreign governments invested in their own film industries and began luring away productions from California, lawmakers in Sacramento were initially skeptical of giving tax breaks to producers. Some critics saw them as little more than a handout that diverted resources from more pressing needs such as healthcare and education.
“If you’re on the outside looking in, there is this false sense that everyone who works in Hollywood has to be rich whether you’re crew or not,” said Amy Baer, a producer and former Sony executive who now runs Artists Equity, Ben Affleck and Matt Damon’s production company.
As production losses mounted in L.A., a coalition of labor and industry groups lobbied then governor and actor Arnold Schwarzenegger to take action.
Schwarzenegger, a longtime champion of tax credits, was able to get a program passed as part of an economic stimulus provision of the state’s 2009 budget. It was dubbed “The Ugly Betty” bill, named after the ABC show that had relocated from L.A. to New York.
Though hailed as a significant step, the new film sweeteners had some key limitations. The pool of money was small — capped at $100 million annually over five years. And it couldn’t be applied to offset the cost of actors’ salaries, a key driver of budgets.
In reality, the program was too small and restrictive to compete with a growing crop of rivals that had larger tax breaks and fewer restrictions.
Chief among them was the United Kingdom, which soon began to attract a number of big-budget movies thanks to a hugely popular 25% cash rebate on production expenses, including money spent on actors’ salaries and other above-the-line costs.
In a paradigm-shifting move, Warner Bros. purchased Leavesden Studios outside of London in 2010, investing more than $160 million into the facility. Much of the blockbusters “Wonder Woman” and“Barbie” were filmed there.
Although the California program was tripled to $330 million annually starting in 2014, it did little to halt the continued exodus of film work. Marvel Studios began moving its production operations to Georgia, enticed by the state’s uncapped tax credits that could be used for actors’ salaries. Both “Black Panther” and “Avengers: Infinity War” were filmed largely at Trilith Studios in Fayetteville, Ga. Another historic town east of Atlanta attracted so many movies and TV shows it became known as “Hollywood of the South.” (Last year, Marvel shifted most of its operations to the U.K. in search of even bigger cost savings.)
Marvel Studios, which filmed blockbusters such as “Black Panther” in Georgia, has since shifted operations to the U.K.
(Film Frame / Marvel Studios)
While numerous studio facilities lay empty here, streamers and studios have built major production hubs outside of L.A. Though it still shoots dozens of productions in L.A., Netflix has spent billions to operate production hubs abroad while constructing massive facilities in places like New Jersey and New Mexico.
“Everyone kept saying, if we have more tax credits, then at least we’ll be able to bring production back,” said Monica Levinson, a veteran producer who has worked on FX’s “Love Story” and the movie “Zoolander.” “Well, that didn’t happen. And the crews got better and better out of the country.”
Rising costs
As the rest of the world courted Hollywood, L.A. did little to help itself.
Despite recent improvements to streamline and reduce costs, the city’s film approval system remains a maze of multi-layered permitting, fees and complex logistics, location managers say. The Greater L.A. area has more than 100 jurisdictions, many of which have their own rules, regulations and permitting fees for filming.
Filming in L.A. also has become more expensive compared with other film hubs due in part to higher labor costs and mandatory staffing requirements, such as paid on-set fire safety monitors, and traffic and parking controls.
What’s more, unlike New York, the city doesn’t have its own film commissioner who could advocate for the industry.
An L.A. commissioner would be “somebody that is beating the drum 365 days a year that is not aligned with a special interest other than creating more production in California, which makes our state and our people prosperous,” said Scott Budnick, a producer on the wildly successful “The Hangover” franchise who lobbied for the state’s enhanced film tax credits.
For a time, the loss of market share was masked by a surge in local TV shoots as studios spent heavily to supply content to their new streaming platforms.
But the pandemic and back-to-back strikes by actors and writers roiled the industry. Studios laid off thousands, cut back on films slates and slashed TV spending and it never rebounded. Film incentives became even more critical for those deciding where to shoot.
By the time Gov. Gavin Newsom announced a plan in October 2024 to more than double funding for the film and TV tax credit program, to $750 million annually (closer to New York’s annual allocation of $800 million, although it retained annual caps and doesn’t count actors’ salaries), the industry outlook was bleak.
“I think there was a tipping point between COVID and the strikes that shone a very bright light on the fact that the majority of production had fled the state,” said Amy Baer.
There are a few bright spots, however.
The critically acclaimed HBO hit medical drama “The Pitt” is filmed almost entirely on the Warner Bros. lot in Burbank, and has injected tens of millions into the local economy while sustaining nearly 1,000 jobs. Two other Emmy-award winning series, Apple TV’s “The Studio” and HBO’s “Hacks,” which just ended, also shot locally.
At Jonathan Nolan‘s urging, Amazon agreed to relocate his post-apocalyptic series “Fallout” to Los Angeles in 2024 after filming its first season in New York, Utah and Namibia. The show received $67 million in California tax credits for its second and third seasons.
Walton Goggins plays the dual role of Cooper Howard and The Ghoul in Amazon’s post-apocalyptic series “Fallout.”
(Courtesy of Prime Video)
“We want to keep shooting here,” Nolan said. “I don’t want to pack my kids off to the back end of beyond just for the privilege of being able to continue doing what I’m doing.”
To build support for the expanded credits, Nolan last year allowed state lawmakers to visit the sets of “Fallout,” including at the Melody Ranch in Santa Clarita.
“I think they were struck by just how big an endeavor this is,” said Nolan, whose brother Christopher is director of ‘The Odyssey,’ (The epic film was shot across Greece, Sicily and several other countries.) “These are hundreds or thousands of jobs on one production alone, hundreds of millions of dollars being put in the local economy.”
Nolan and others in the industry admit the California program is imperfect.
Mayor Karen Bass, who backed the tax credit program in 2009 when she was speaker of the California Assembly, has touted the success of the expanded incentives, saying they’ve created “thousands of good-paying union jobs…right here in Los Angeles, bringing direct investment to our community.”
Since the expanded program went into effect last July, 179 projects have generated $7.2 billion in direct production spending, bringing nearly 38,000 cast and crew jobs to the state, according to the California Film Commission.
“We remain committed to supporting the entertainment industry here and feel optimistic and energized by the response from the community to the program’s modernization and enhancements,” Colleen Bell, the commission’s executive director, said in a statement.
Bass, who is up for reelection, said she would redouble efforts to remove tax credit caps and further reduce film permitting fees “because this industry is core to the history, culture and economic power of Los Angeles.”
The question, however, is whether L.A. is still core to the film industry.
Earlier this year, writer and director Ryan Coogler, who won an Oscar for his “Sinners” screenplay, began filming the pilot for a reboot of “The X-Files.”
During the “Happy Sad Confused” podcast, Coogler called the drama “one of the most beautiful American television shows ever made” and assured fans that while he planned to put his own stamp on the seminal series, his version would pay homage to the original.
“We intend on having both monsters of the week and also the overarching conspiracy,” he said.
And like the original series, it was shot in Vancouver.
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