Netflix announced yesterday that it was buying ABQ Studios, located in Albuquerque, New Mexico, where it plans to spend over $1 billion on production over the next 10 years. The studio facility, which opened in 2007, houses eight soundstages, production offices, and a backlot, making it the state’s premium production. The purchase means Netflix has secured the ability to simultaneously shoot multiple projects (including large-scale films) and with an element of cost certainty, both of which have become increasing important to the streaming giant that churns out original content at an astounding rate.
New Mexico has became major production hub, with Hollywood taking advantage of the western landscape and generous tax incentive to make everything from “Breaking Bad” to “The Avengers.” Here are four takeaways from yesterday’s deal and why Albuquerque has become so important to moviemaking.
Netflix Does Care About Tax Incentives
A year-and-a-half ago, Netflix chief content officer Ted Sarandos announced the company was building production infrastructure in Los Angeles — a city with a capped, lottery-based incentive program. At the time, he stated Netflix would not be like other studios and chase tax incentives in New York, Atlanta, and other cities across the globe. Whereas math in the rest of Hollywood revolves around getting 25-35 percent back on below-the-line production costs (and above-the-line costs, in Georgia), Sarandos indicated that keeping talent and filmmakers close to their families and home was a Netflix core value.
For three years, Netflix spent top dollar to attract top talent and IP, building a deep slate of original content that made it a must-own subscription service that didn’t depend on SVOD rights from other studios’ big movies and shows. Having grown to produce $8 billion a year in Netflix Originals, the next step is building infrastructure that’s easier and more cost efficient.
Securing the top production facility in a state with a 25-30 percent tax incentive that extends to above-the-line talent (at $5 million cap) is an enormous step toward that goal. To help Netflix purchase the facility, New Mexico ($10 million) and the city of Albuquerque ($4.5 million) will kick in monies in the form of Local Economic Development Act funding.
Hollywood Has Grown Comfortable in New Mexico
Albuquerque is convenient. The airport is right outside a city that has remarkably little traffic, it’s a two hour flight to LAX, and there are lobbying efforts for a Burbank-to-ABQ direct flight in the works. The convenience of getting back-and-forth to Los Angeles can’t be underestimated, especially compared to its East Coast competition with its comparatively long flights and nightmare airports that are hard to reach.
While the tax incentive applies to local hires, the extremely film-friendly local and state offices are accommodating; they make exceptions and concessions for out-of-state hires, on top of allowing 10 “distant hires.” Meanwhile, there are a lot of what producers calls “local, but” hires — i.e., crew from other production cities who have grown to like the change of pace of New Mexico living and have bought second homes around Albuquerque. Those crew members’ salaries qualify for the rebate, in addition to saving money on housing and per diem allowances.
IndieWire spoke with multiple production managers and producers for this article, all of whom said that quality and depth of crew in New Mexico is strong, only leaving a production short on options when Albuquerque is especially busy. Meanwhile, the Albuqueque film office is working with Netflix to start a crew training program that will help locals partake in the upwards of 1,000 jobs Netflix plans to bring to the state every year. Already, the government allows exceptions on “distant hires” if they employ paid interns as additional production assistants.
The growth of New Mexico production has also given Hollywood a new, obtainable, and affordable landscape in its filmmaking palette. When “Breaking Bad” premiered in 2008, there was nothing that on television that looked like it. Today, desert warfare, arid foreign lands, genre period, military stories, and modern American stories are now set in the Southwest, where it’s easier and cheaper to make them.
Did Netflix Just Disrupt New Mexico for Everyone Else?
The Netflix Albuquerque announcement begs a larger question: Has it cornered the production space, disrupting other studios and independents? The answer is sort of, but possibly only temporarily.
ABQ was the biggest production facility in the state, which requires stages be used to take advantage of the full tax incentive. I-25 studios, which currently house the Uma Thurman-led series “Chambers” are equipped to handle good-sized productions; Santa Fe Studios located between Santa Fe and Albuquerque was home to the new Coen Brothers Netflix movie “The Ballad of Buster Scruggs.” So while there are alternatives, sources tell IndieWire that Netflix took the premium studio best equipped to handle big productions.
Netflix has agreed to allow all current TV series shooting at ABQ to continue shooting until each ends its run. Meanwhile, the Albuquerque Film Office told IndieWire it was already in the process of coming up with quick and creative solutions for new productions that want to shoot in the state. The city does have large, empty warehouses that are obvious candidates for conversion. In the long run, if demand continues the city has the space and structures to build new production facilities fairly quickly — including ABQ, which is surrounded by vacant land Netflix now owns. In the long run, production will likely expand in New Mexico; in the short term, Albuquerque is going to be a little squeezed.
State Politics and Tax Incentive Stability
The announcement came less than a month before New Mexico will elect a new governor, which indicates Netflix feels confident the politics surrounding the state’s tax incentive is stable. Democrat candidate Michelle Lujan Grisham is favored in the polls to replace outgoing Republican Governor Susana Martinez, but both Grisham and her opponent Steve Pearce have run pro-film campaigns; the state’s $50 million annual incentive is no longer the political hot button it once was.
The question now: If movie and TV productions have become so popular in New Mexico, with Netflix leading Hollywood’s charge to expand, would the state be open to increasing the incentive?