In a recent interview, Netflix chief content officer Ted Sarandos said that the company will start investing in building production infrastructure in Los Angeles, and stop chasing tax incentives in cities like New York and Atlanta.
Logically, this is throwing money away. Shooting in Atlanta — which has the production infrastructure to fully support a movie like “Guardians of the Galaxy 2” or a show like “The Walking Dead — means studios save 30% on their budget, including star salaries. There’s a reason that 2016 saw close to 60 scripted television shows shoot in New York City, despite many being set elsewhere: Productions can recover 30% of their below the line costs (that doesn’t include writer, cast, director, producers’ salaries).
Production is slowly coming back to California, as the state upped its tax incentive program once again this year ($330 million), but there still isn’t enough money to cover all the productions that would want to shoot there. Therefore, factored into the bottom line of virtually every television show is state tax incentives, with most studios and networks — unless there is a major talent or story consideration, or the show wins the state tax incentive lottery — deeming it only practical to shoot in a state where they can get a refund.
Sarandos is essentially announcing Netflix is done playing that game. He said that for the creatives in Hollywood, having to move away from home and family is an unhealthy sacrifice.
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“If people were enjoying their work, they would do better work,” Sarandos told the Wrap. “That’s been our own corporate philosophy, too.”
It’s a nice sentiment, but is Sarandos really willing to spend an extra 25% more per episode to keep his filmmakers happy? Unlikely. But one thing we do know about Sarandos is he is willing to overspend to attract top talent or bring in a marquee property. And if you are an A-list actor or a mid-career TV creator at your professional peak, the idea that you can make your show and still kiss your kids at night — without moving them to another state — means Netflix would become an all-powerful magnet.
You spend money to attract top talent, and this is the equivalent of Silicon Valley bringing in chefs, offering massages, building bike paths, and installing bars in the office. In this case, the investment isn’t designed to keep talent in the office; it’s to keep them home and happy. This also comes at a time of overcrowding in tax-incentive hot spots like New York, where productions are being forced to East New York and Yonkers to find studio space — far from glamorous Manhattan and brownstone Brooklyn.
In many ways, this is more about TV than movies, which often go to the location or world they create. Also, with blockbuster filmmaking geared toward an international market, many franchises build in stories that detour into Hong Kong, Monte Carlo, Dubai, and Cuba; producers would rather spend more to make things bigger than cut costs. As for the creative team, movies have a clear end date; it is easier to sell top crew, cast, and other above-the-line talent on the idea of leaving your family for a few months versus a show that may be your job for a few years.
On the flip side, one wonders what kind of talent, both in front and behind the camera, Netflix could attract to do television series, not just limited series, if the time commitment meant not leaving home. When you start listing the top directors, stars and writers with young families — or just incredibly comfortable lives — in Los Angeles, you start to see why Sarandos is looking to make his employees so happy.