Hollywood’s long held grip on the entertainment industry is loosening as competition from other geographies rises, production migrates and jobs vanish. In response, policymakers are supercharging incentives, doubling the California film tax credit to the tune of $750 million. But is it enough? Can policy and capital turn things around? Or has the center of gravity already turned away?
These are the central questions FGS Global Partner Paul Poteet, along with speakers Dee Dee Myers, Rebecca Rhine and Kevin Klowden, explored in a recent session at the Business of Entertainment Summit, sponsored by FGS Global and hosted by Financial Times Live.
The session, moderated by U.S. media editor Anna Nicolaou, began with a wide-angle view of federal tax and trade policies now impacting the entertainment sector. Paul highlighted two emerging developments to watch:
Section 301 Investigations - The US Trade Representative is looking at potential investigations into foreign trading partners’ film and TV practices. While we can’t say for sure if or when this will come to fruition, these types of investigations could be significant for the sector and could be accelerated by the president’s repeated calls to tariff foreign film exports to the U.S.
International Emergency Economic Powers Act (IEEPA) Tariff Court Case – The Supreme Court will also be reviewing whether the IEEPA tariffs President Trump imposed on many countries earlier this year will stand. If they are struck down, the Administration could seek to pass some of their trade policies legislatively, potentially through the reconciliation process (the tactic used to pass the Big Beautiful Bill), which allows the majority party to more easily enact their agenda. In that case, new federal tax incentives for the entertainment sector, including potentially a federal tax credit, could find their way into the discussion. Such incentives are consistent with President Trump’s stated desire to “Make Hollywood Great Again.”
While the first development could pose challenges, the second presents opportunities. As does California’s effort to increase the state’s film tax credit, which has been in place since 2009 but was recently expanded under Governor Newsom to address the sharp decline in production jobs (down from 65% to 46% of the US total) and attract new projects. By broadening eligibility to new types of content, the program has seen a 4x increase in submissions.
Still, Dee Dee warns that there is no silver bullet, and more will need to be done to keep jobs in Hollywood. To that point, Rebecca contextualized the crisis as part of a broader erosion of the American middle class – a trend felt beyond the entertainment industry. Kevin also expanded the discussion to several other pressures shaping where and how productions are getting made:
Diminished lines of revenue – In recent years, the industry has faced a perfect storm of economic headwinds, including COVID, the Great Recession, labor strikes, chord cutting and the loss of China as a major market.
Fragmented audiences – Consumers are increasingly turning to platforms like Youtube and TikTok for entertainment and embracing international productions, which intensify competition for Hollywood content.
All of this has created a real need to guarantee financing and hedge bets – which negatively impacts middle-class workers in California and beyond. Plus, local issues like complex permitting and global barriers like investment obligations in foreign markets further complicate matters.
So, how do we resolve these issues? Beyond current initiatives, the Administration has indicated a commitment to addressing trade barriers and forging trade agreements that support the entertainment sector. Bipartisan support for the industry is stronger than ever, which could unlock even greater opportunity.
Lessons can also be drawn from international models. The UK offers uncapped, year-round incentives and invests heavily in its local workforce and soundstage infrastructure. Canada allows regional and federal credits to be stacked, enhancing the country’s competitive advantage. While these exact policies may not be directly transferable, the importance of flexible, competitive incentives and infrastructure cannot be overstated.
The good news is that Hollywood, and the U.S. entertainment industry more broadly, retains significant advantages and doesn’t require federal and state support that match foreign incentives – the sector simply needs enough help to stay in the game. Ultimately, the future of Hollywood depends on unified action. Workers, unions and policymakers must recognize the industry’s role as a key driver of American tourism, growth and cultural capital. The more stakeholders can collaborate to preserve Hollywood’s legacy, the greater the prospects for revitalizing the entertainment economy.