Can D.C. Save Hollywood? Senator Adam Schiff on Bringing Production Home.

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1:19It is Thursday, March 26th. We talk a lot on this show about the flight of film and TV production from Los Angeles. I was just on the Paramount lot and the soundstage area felt pretty darn empty. And I hear that a lot from industry veterans. Hollywood doesn't feel like Hollywood anymore. New data reveals that between 2022 and 2024, L.A. County's motion picture industry lost more than 42 ,000 jobs. And that's not including the halo effect from support staffs to restaurants and florists and hairstylists, etc. We know the reasons, the content recession, consolidation, maybe the most important, the aggressive tax incentives offered by other states and particularly overseas.

2:01In 2022, a third of American film and scripted series were shot internationally. Last year, that number jumped to 45%. There's been a ton of talk about what to do about this problem. And last week, Adam Schiff, the U.S. Senator from California, a former congressman representing the Burbank area, he hosted a hearing with some industry leaders and Noah Wiley of The Pit to talk about a federal tax incentive bill that he wants to introduce, essentially to make the U.S. more competitive with territories like the U.K., which can offer up to 30 or 40 percent of the qualified spend. It's largely drafted, Schiff said at the meeting.

2:39We are working to gather bipartisan support for this. Remember, President Trump has not endorsed a federal tax credit, but he has said that he wants tariffs on foreign-made movies, which most experts say would not work, but it does show that he's at least paying attention to this issue. Schiff's event was well-meaning, but not too detailed. So I wanted to have him on the town to elaborate on what his federal tax credit would entail, how to make California in particular more competitive, where he stands on the Warner Paramount merger, spoiler alert, he's not a huge fan, and his recent letter exchange with David Ellison, all of it.

3:13So today it's Adam Schiff and can LA actually bring back Hollywood productions? From The Ringer and Puck, I'm Matt Bellany and this is The Town.

3:25All right, we are here with Senator Adam Schiff, Democrat from California, my home state. Welcome, Senator. It's great to be with you. Thanks for having me. All right, so we're going to talk about this renewed effort for a federal tax incentive. But I want to just ask right off the bat, this has been a problem for 20, 25 years now. There has been production fleeing Los Angeles, California for other areas in this country and elsewhere. Where have the politicians been on this? It literally feels like it took a strike and a fire and two fires and AI and, you know, all of these things combined to get people to pay attention.

4:15So where have where has the politicians been on this? Well, some of us have been fighting this for a long, long time. I've been fighting for this ever since I got to Congress. The problem is, I think in the beginning, if you flashback 25 years ago, there was an attitude that, well, everyone wants to work in Los Angeles. That's where the talent is. That's where the infrastructure is. So we really don't have to do anything to compete. Well, then other states and other countries started offering incentives, and some of that business started leaving. And nevertheless, when we tried to push for a federal tax credit to try to match some of the incentives elsewhere, we got pushback.

4:56It wasn't very bipartisan. It was mostly Democrats trying to make the case. Why are we funding these Hollywood people? Yes, exactly. Well, I remember even going back before my election to Congress, when I was in the state legislature, I remember offering a tax incentive bill in the state legislature and getting a copy of the Republican committee memo. And now these memos are supposed to be completely nonpartisan. But someone gave me a copy because it was so outrageous. And basically, the author of the memo writing this for the members, the Republican members of the Judiciary Committee that would take up this tax credit, said, why do we want to give help to those rich Hollywood liberals sitting at their Beverly Hills pools, sipping, you know, martinis?

5:42Why would we want to give them any help? So that we've always had to overcome that kind of view. And it's also the kind of typical idea that Hollywood is all movie stars. No, I know. But that's changing, right? I mean, I feel like the messaging on that is getting better, that this is a industry that supports thousands of middle-class jobs, that there is a creative class that cannot support itself in California now, and something needs to be done. So tell me a little bit about this effort for a federal tax credit and why this time is different, why there's momentum now, and how you plan to get this over the finish line.

6:24Well, you're absolutely right. I think there is much different and better appreciation now about all the jobs that come this industry, about all the below-the-line people, the carpenters, the grips, the set designers, the wardrobe people, the lighting people, all of these important jobs, decent-paying jobs that are at risk. And that, along with all the development since, as other countries have upped their incentives and huge aspects of the industry have not only moved out of California, but moved out of the country has finally gotten people's attention. And it may have taken a pandemic and the flight of all this good work overseas and the strikes and everything else to focus the country's attention on how much of this important industry we're losing.

7:11But we finally have captured the attention of Congress. We still have a lot more work to do on this. But, you know, we do hear signs even from the White House, even from the president of concern over the loss of this industry. What we have yet to do is coalesce around an incentive approach rather than some of the other approaches that the president has mentioned, like tariffs or whatnot. But I think we're getting a lot closer. Okay, so what specifically would your federal incentive entail? Well, it would give a tax credit on top of state tax credits, so it would be cumulative. And it would have incentives built in to bring business back to the country.

7:51It would also have incentives for some of the smaller production shops, but basically would function the same way the California tax credit does. It would be complimentary and additive. And given how generous the tax incentives are in places like Britain, it's insane. Everybody I know is in the UK right now. It's insane. If you want to produce a big budget movie, it's where you go because the tax incentives are so generous there. It's amazing. So what would you would yours be a 10 percent, 15 percent, 20 percent national credit? It would be a baseline of 15 percent. But then you would add on depending on whether work comes back and other factors.

8:31All of that, of course, will be the subject of negotiation. This has to be bipartisan. It won't be successful. Otherwise, you really can't do much of anything in the Senate or the House unless you have bipartisan support. So we're really making outreach and trying to be flexible in those terms. But what we saw, for example, with Georgia, they made a major investment in the entertainment industry in Georgia. They attracted some of these big tentpole productions. And as the witnesses who testified at that hearing that I held recently in Burbank spoke to, the minute that the UK upped their incentives, those big productions left on a dime.

9:14They left Georgia after Georgia invested all that time, money, expense, and training into their own film industry. And now that's all gone to Britain as well. So we really need a federal tax incentive to be competitive. Otherwise, it's going to be gone. So you talked about bipartisan and how this has to be bipartisan. Yet at your hearing last week, it was only Democrats. Like, how are you going to get Republicans interested in this, especially if the president is not talking about a federal incentive? He's still talking about tariffs. Like, what's the strategy there? Well, we are reaching out to my Republican colleagues, and they were Republicans who were interested in coming to the hearing, but weren't able to, that it was too far, too difficult, particularly with all the uncertainty in the Senate around our voting schedule.

10:04But I think there is far more Republican interest in this. What the Republicans in Congress are basically telling us, though, is they're waiting for the white smoke from the Vatican. and they're waiting for the president, the equivalent, the presidential tweet saying that he's supportive. Why hasn't that happened yet? Stephen Paul, you know, Jon Voight's manager says he has the ear of the president. You know, we saw some reporting about how that conversation led to the tariff posts that the president made months ago. What's being done behind the scenes to get the president interested? Well, the president's own ambassadors to the industry, as I understand it, have been making the case, have been working with the Motion Picture Association to make the case to the president that the very best way to do this, and it's not like we don't have experience in this, is a tax credit that will match what other countries are doing.

11:03So I'm not inside those conversations between the president. We know what the president has said about you personally, but that's why this needs to come from the other side here. Yeah. Well, you know, I made it clear to everybody in the industry, I don't care whose name is on this. Let's just get it done. This is an amazing industry. It produces so many great jobs in America, in Los Angeles, in my old neck of the woods as a house member, but in the whole state. We really need to help save this industry. And it's also responsible for such, you know, amazing cultural impact and influence around the world, that has a lot of value, too, in terms of our diplomacy, even our national security.

11:47And you have said that you want this to be bipartisan and that you are making these efforts. But, you know, this is a state issue as well. The state incentives, while better than they used to be, are not competitive with many states. I talked to a producer just today who is saying it's unbelievable to him that it's cheaper to shoot an LA set movie in New York. Netflix, when they had the opportunity to build massive production hubs, they built them in New Mexico and New Jersey because of the efforts of the representatives in those states to make it attractive. What is going on in California that we can't get our act together to save this industry.

12:35There's incentives for all sorts of industries like green power and manufacturing and defense. Why can't we bring the California incentives up to be competitive, at least with these other states? Well, we've made a lot of progress in that respect. We have dramatically increased the cap on the California tax credit, but it needs to be more generous than that. And it's already early oversubscribed. and from my own point of view we need to make sure that tax credit goes above the line as well i i think i fear we're just not going to be competitive if we put limitations on how you can use the tax credit totally agree i mean the other jurisdictions do salary we're talking about above the line you know it's it's salaries for director writers producers actors those need to be applicable here and for whatever reason why don't you think is it still that they just don't want to be subsidizing Tom Cruise?

13:32Is that as simple as that? It is as simple as that. On that issue, it's as simple as that. On the broader issue, though, you know, I think, and I don't agree with this logic at all, but I think there are some in the state legislature who feel this is some kind of a giveaway to the entertainment industry, or it's the loss of tax revenues that could go into other laudable public purposes. The flaw with that logic is, though, that without these tax credits, this business just leaves. That leaves us with less tax revenues. And moreover, and Noah Wiley was very effective on this point, when you do produce in LA, as the pit is filmed in LA, whatever amount of the tax credit is paid back 10 times.

14:21So it is cost effective. It's not as if it's a loss for the state. But nevertheless, those are some of the issues and obstacles you have to overcome. It's something we've been battling, frankly, for 30 years. Yeah, you would think now, given the state of L.A. and the fact that restaurants are suffering and small businesses are suffering and the city fund is suffering because of the flight of so many of these people, that it would catch the attention of lawmakers who have nothing to do with the entertainment industry. You would think so. But what are you doing to educate people on this? Not necessarily in California, but, you know, people were saying, great, they had this hearing in Burbank.

15:04It's like preaching to the choir. What are you doing on this issue to educate people in D.C. about this play? A couple of things. First of all, we're doing all of the member education we can possibly do, And I'm doing a lot of that myself, pinholing people on the Senate floor and previously on the House floor to make the case in a lot of the groups and caucuses that I am a part of. I point out the value, the importance of this industry. It's obviously even more helpful when other people from other parts of the country and the Republican Party join me in making that case. But one of the reasons that we did that hearing in Burbank is because another facet that will deeply impact the industry is that merger, that potential merger.

15:49Yeah, we'll talk about that. Yeah. So, you know, that that, you know, was ground zero for the impacts of that merger. So we wanted to make sure that people in the area were aware and able to voice their opinions on what it would mean to the community and to their jobs. Snoring? Gasping during sleep? Feeling fatigued? Wake up to ZepBound Terzepatide, the first and only FDA-approved prescription medicine for moderate to severe obstructive sleep apnea, OSA, and adults with obesity. ZepBound is an injectable prescription medicine that may help adults with moderate to severe obstructive sleep apnea, OSA, and obesity to improve their OSA.

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17:28Zetbound and its delivery device base in QuickPen are registered trademarks owned or licensed by Eli Lilly and Company, its subsidiaries or affiliates. This episode is brought to you by TaxAct. Like an expert coach, TaxAct offers step-by-step guidance and guaranteed accuracy when filing taxes. Get tips along the way, add expert assist to talk to tax experts and let our experts do your taxes for you with expert full service. Tax Act helps you find the deductions and credits you deserve so you can get them over with. Visit taxact.com to learn more. Conditions apply. See taxact.com for details. Speaking of that merger, you're talking about the Paramount Warner Brothers merger.

18:09Your new pen pal, David Ellison, who has exchanged some messages with you. He says, my promise to you is to build a stronger Hollywood by keeping both of these legacy studios operating separately, thereby preserving and potentially increasing jobs. Do you believe that? And where are the specifics? I'm deeply skeptical. And every prior merger in the industry gives us grounds to be skeptical, those promises of preserving jobs. Look, I'm glad I got an answer to the letter, but nevertheless, there's not much meat on the bones of that answer to give you an illustration. Well, especially when you look at the$80 billion in debt that he has to deal with and the fact that these studios have thousands and thousands of duplicative employees that would likely be the first to be cut in this reconciliation process.

19:05Well, that's absolutely right. I mean, we may end up with the worst of all worlds in this sense, that there is more duplication between Paramount and Warner Brothers Discovery than there was between Netflix and Warner Brothers Discovery. So there's more overlap in what they do and how they do it, which means more potential for layoffs. But also because of the competition between those two merger proposals, Paramount had to make, Skydance, Paramount had to make their deal much more lucrative, which means that in order to return to shareholders, they're now going to have to find even more billions of cost savings.

19:45And I just don't see how you do that without laying off a lot of people. And that's my paramount concern, so to speak. But what can you do about it? Short of Rob Bonta and getting, you know, his group of attorney generals together to soothe, to block it, what can you actually do? Well, you know, the state attorney generals are going to be hugely important. And, you know, in Congress, what we can do, and this was part of our having this hearing, is we can get out information, do the oversight, find out what commitments we can get from these merger participants about jobs, about editorial independence at places like CNN, CBS, another grave concern about consumer prices because another big impact to this merger might be that your cost as a consumer of these streaming services just goes up and up and up.

20:38That seems like a good message federally. If you can get that on the agenda, I mean, we're looking at an election in November. Let's say the Democrats gain more power in Washington. I have heard that there's already a kind of backlog of talking points and agenda items that the Democrats are talking about when and if the House switches over or even the Senate switches over. How do you get the fact that we need to prevent the cost of streaming services from going up to be on that agenda? And how do we get a federal incentive to be on that agenda? Well, they both need to be on the agenda. There's no magic necessarily to the legislative process.

21:20It is often the squeaky wheel that gets the grease. And we've just got to continue to make the argument, make the case, bring it to the public attention, gather the bipartisan support that we need. And right now, when the cost of living is such a key focus, letting people know that, hey, this merger may end up dramatically increasing the cost of what you watch on your TV or your phone, that's a powerful point to make. I'm not that optimistic, frankly, of our power to stop this. I'm not either. I think it's wishful thinking that all of a sudden there's going to be a state lawsuit and it's going to hold everything up, especially when Rob Bonta seems to be out there soliciting for money to back his case against this.

22:09I just don't think anything is going to stop it, especially with this administration prioritizing and getting it done. Well, you know, I don't think that the Justice Department is going to find this would be anti-competitive, even though it very well may be hugely anti-competitive. The Trump administration seems to have very heavily put their hand on the scale to favor this merger over the Netflix merger for reasons having to do mostly about the content of CNN. And on that point, I also want to emphasize that these studios, these companies, these media conglomerates need to understand that right now it may be carte blanche for them.

22:50Right now they may be able to have ABC make a payment to the president personally and CBS do the same or change their content. But there's going to be an investigation into all this when the Congress changes hands. and if there are improper considerations that went into greasing the skids on this, this is going to come to light. I mean, it's all, this is the joke of the Trump administration. It's all out in the open. There's no conspiracy. They know that to get their Paramount deal across the finish line, CBS had to pay them off. Well, that may very well make this merger subject to action by the Justice Department in the future.

23:32So I think that's a very important point to get across, that there is going to be an accounting. And companies need to know that if they're engaged in corrupt or illicit activity or improper activity, that there's going to be an accountability. And so I think that's an important aspect of preserving our democracy, that, you know, we're not just going to look past whether there was money changing hands to grease the skids here. That accountability is going to be really important. So I talked to a lot of people in the industry, Democrats mostly, and a lot of them have just kind of lost faith in the ability of the party.

24:16We're in California, one party state. We're in Los Angeles, a one party governance. They've kind of lost faith in the ability of the elected officials to help and to fix this problem. um you haven't endorsed the la mayor karen bass in her re-election are you going to do that you know i don't want to get ahead of any announcement i might make in the uh la mayor's race um but uh you know let me just say you know a lot of a lot of people cite the local environment here i mean they just waived some fees at griffith park and they're calling it a big you know plus for productions and producers are like okay whatever that doesn't change the fact that the regulations in the city and everything you have to deal with to shoot here and the cost of everything is just so much higher, it often doesn't make sense.

25:08I think that critique is applicable, not just in LA, but statewide. This has been a statewide problem that Democrats have to address. You know, look, I think a big part of what we need to do is simply get stuff done. That really ought to be our mantra. That was certainly my mantra in my Senate campaign is we need to get stuff done again in California. And I view my job, Frank, in Congress right now as a combination, a difficult balancing act between everything I could do to get stuff done and at the same time, everything I could do to stop really harmful stuff from happening because of this administration.

25:46But we gotta be able to do both. And we gotta be able to film in Los Angeles and in California and do so affordably. We've gotta be able to get through the permitting process quickly. And the same is true about housing. And the same is true about siting a manufacturing facility. We have to make it easy and doable and affordable to do business in California. That really has to be a laser-like focus, not just for this industry, but for every other industry. I feel like Gavin Newsom was behind on this issue. He never really got it until there was a literal fire that destroyed communities that housed a lot of these people.

26:27and it was never a priority. Have you talked to any of the candidates that are running for governor about this issue? I have. Now - Can you give us a recommendation? I am supporting Eric Swalwell. I think he understands the need to both get things done as well as to protect the people of California from very - But on this issue, have you talked to him about this specific issue and making it a priority? Well, I have talked to him about a whole variety of issues I don't know whether we've had a very specific conversation on film tax credits and production, but you can better believe that if he's successful, we're going to have that conversation.

27:07But more generally, I have talked to Eric about the necessity of getting things done in California. That has to be really priority number one. I think he understands that. and this is you know a important critique of democratic governance i think the difficulties grew up for understandable reasons we want to protect the quality of life we have we want to protect all that we've been able to achieve but at the same time you can get to a point where it's paralysis and that doesn't do anybody any good and i think the party gets that now and it's part of the focus that we have on affordability, that we're really ready to make the difficult decisions in order to speed up, lower the costs of doing business again in California and America.

28:00Okay. There's a lot of Democrats running for governor. Would you now please urge some of them to drop out of the race? Can you please urge them, the ones who do not have seven or 8 % to get out of the race? It's kind of scary. It looks like it could deliver two Republican candidates at this point. It could. And the jungle primary is a terrible system for that reason. It has a lot of urge them right now. You can make some news, urge them to get out of the race if they don't have 8%. Well, I do think that if, you know, we get to the point a month from now where the polling is still the same, where you have a very real possibility of Democrats not having a choice in November because they divided the vote, that we're going to need to get the Democratic stakeholders together and decide we got to coalesce around one or two people.