Hollywood Moves East: Tax Incentives, Growing Tech Talent Pool, Beckoning Film Industry

To moviegoers, the intersection of New York real estate and film exists as a loop of timeless screen images. Audrey Hepburn gazes into the Tiffany window. Woody Allen and Diane Keaton sit in the shadow of the 59th Street Bridge. Meg Ryan feigns an orgasm at Katz’s.

Whether their scenes were filmed in the city or recreated on a Burbank soundstage, filmmakers have always relied on New York for the dramatic backdrops that its skyline, landmarks, restaurants, avenues and enviable apartment interiors provide.

But 80-odd years after the entertainment industry decamped for Los Angeles—its persistent warmth and sunshine conducive to long shoots, its sprawl hospitable to mammoth studio lots—an increasing number of Hollywood pros are leaving their temperate backyards and making New York their backlot once again with a handful of transactions for actual brick-and-mortar office spaces across Manhattan.

“I moved to New York eight years ago because of the level of work that was happening here,” said Eric Robertson, the visual effects supervisor at the digital studio Mr. X, which expanded from Toronto to Manhattan last year. “That and the fact that a lot of filmmakers were coming home from L.A. People just want to live here because it’s such a hotbed of creativity. And everyone loves New York.”

Of course, the film and television industry never left the city. John Cassavetes, Martin Scorsese, Woody Allen, Spike Lee and Darren Aronofsky are just a few homegrown cinematic bards who preferred to stay put. New York University’s Maurice Kanbar Institute of Film and Television famously churns out indie darlings. And quintessential New York TV series like Law & Order and Sex and the City were produced locally to gritty and glossy effect—even if Seinfeld was shot in Studio City.

But over the past decade, cultural, economic and political forces have coalesced to bolster New York’s reputation as Hollywood East.

The Company 3 Screening Room (Photo: Will O'Hare)

The Company 3 Screening Room (Photo: Will O’Hare)

“We’re seeing a reverse migration,” said Yana Collins Lehman, an executive board member of the Post New York Alliance, which oversees and lobbies on behalf of a number of postproduction facilities and labor unions. “What flummoxed us in the past was that we’d educate the kids here, but then there wouldn’t be jobs. Now, talent that left New York is coming back.”

New York’s unyielding status as a creative hub and educational powerhouse reels in everyone from directors to screenwriters to grips. But in recent years, the city’s growing stature as an entertainment hub has stemmed in part from considerably less-cinematic Albany.

The New York State Film Production tax credit program was enacted in 2004 and now offers a 30 percent credit for eligible expenses, allocating a total of $420 million per year to the film and TV industries. A 10 percent credit specific to postproduction—the first of its kind in the country—followed in August of 2010.

Last July, Gov. Andrew Cuomo raised the postproduction incentive to 30 percent of qualifying costs, calling it an invitation for productions to “come to the Empire State, the future television and film capital of the world.” (The postproduction credit applies to projects that were filmed outside of New York.)

“We went up to Albany in 2010 and were really idealistic and excited about this credit, and we asked for 10 percent and we got it,” Ms. Lehman said. “It was the only legislative add that year. The budget was really late. But we were psyched. Then we very quickly realized that 10 percent was not going to do the trick.”

In the two years between its original passage and its tripling in size, 18 projects applied for the postproduction credit. In the past six months, 34 have applied. And while only $7 million of the production program’s $420 million is carved out for post-shoot work, the process it supports—editing, sound-mixing and -designing, special effects wizardry—is lengthier than production (36 to 52 weeks versus eight to 10 weeks, according to postproduction workers).

Unlike the $4 million indie film crew that shoots on the streets for a month, a postproduction team’s time frame and heavy duty technological machinery require roots. Mr. Robertson, the president of the recently hatched Mr. X Gotham, searched for permanent offices last year.

“We really wanted to be in the production central area,” he said. “We wanted to walk to the other post houses—Technicolor, Deluxe, PostWorks and Post Factory,” which congregate along Avenue of the Americas, Greenwich Street and the intersection of Leroy and Hudson Streets.

Mr. X landed in 4,000 square feet at 214 Sullivan Street in the Village, a boom mic’s throw away from N.Y.U. “Interestingly, from the very first day, the brokers said they had options in our price range and the size we wanted,” Mr. Robertson said. “It was funny looking at the commercial market being so different than residential, where you feel desperate from Day 1. It was really a very pleasant experience. It felt like everything was a gift being given to us.”

Farther north, in Chelsea, the comprehensive post house Company 3—a unit of Deluxe Creative Services—operates on the top three floors of 218 West 18th Street. “The industry as a whole has migrated below 23rd Street,” said Marcelo Gandola, the senior vice president of Deluxe’s East Coast division and president of the Post New York Alliance.

SAE Institute (formerly the School of Audio Engineering) signed a 27,000-square-foot lease earlier this month in Company 3’s building, citing proximity to postproduction companies as a reason for its move from Herald Square. Google owns nearby 111 Eighth Avenue, and the technology surge across Midtown South has been an additional boon to visual effects teams and other fields of postproduction.

“The work we do is very complicated and scientific,” Mr. Robertson said. “We hire skilled artists but also need high-level programmers and people familiar with multiprocessor computer platforms and custom-written software. We’ve been able to do a lot more local hiring than I’d imagined. I thought, upon starting out, that we would have to hire as much as 50 to 60 percent from afar to draw those people who’d left the East Coast years ago and gone to L.A.”

While postproduction facilities cluster downtown on the West Side, much of their creative personnel commute in from across the East River. “If I were going to open a new space, I would probably venture into Brooklyn,” Mr. Gandola said. “I would take advantage of the costs there and the work force. The bulk of your work force is coming out of that borough.”

Production is already centered in Queens—at Silvercup and Kaufman Astoria Studios—and Brooklyn, where Steiner Studios is about halfway to its goal of 32 soundstages built across 50 acres, the largest American production compound outside of Hollywood.

The industry’s growing local footprint no doubt convinced the Pratt Institute to quadruple its film and video enrollment and expand into a 17,000-square-foot Clinton Hill campus, a move it announced last month. The film and TV equipment, studio and office space provider Eastern Effects last month signed a lease for 72,000 square feet in Gowanus, expanding upon the 68,000-square-foot studio space it already had in the neighborhood.

New York has seemingly appeared in every other movie released since the dawn of celluloid, but the public subsidies and growing real estate presence have led to a huge surge in productions actually made here. The New York City Mayor’s Office of Media and Entertainment reports that it issued permits for 267 feature films last year, about a 70 percent increase from 2004, when the tax credits kicked in. And 25 prime-time series from the current TV season have filmed in the five boroughs. The Mayor’s Office—which declined to comment further—claims that the entertainment industry employs 130,000 New Yorkers.

It’s difficult to pinpoint exactly how much of that rise is attributable to the state’s incentives. What few people deny is that New York would be a nexus of film and television activity even without them.

“New York has great incentives, but it also has the talent and the infrastructure,” Mr. Gandola said. “There’s the backdrop of New York, the energy—all these amazing things that other places can’t offer.”

Movie industry incentives have been as big a magnet for controversy as they have for production and postproduction crews. Some economists question how much of the money generated by filmmakers actually benefits the states in which they shoot (more than 40 states have passed some form of tax credits). Politicians and private citizens wonder if public money should go to the entertainment industry as schools fail and unemployment persists.

The criticism extends to Hollywood. Gavin Polone, the executive producer of Curb Your Enthusiasm and Gilmore Girls, among other movies and TV series, has been a particularly outspoken dissenter.

“It’s corporate welfare,” Mr. Polone said by phone from L.A. “Credits end up going to large multinational companies. If I were a citizen of New York, I’d like to see that $420 million being put into schools. In the long run, that will put more back into the economy than subsidizing guys who drive vans and boosting large global corporations like Viacom and Sony.”

Ms. Lehman is familiar with arguments like Mr. Polone’s. “The New York film industry is not taking money from orphans and schools and firefighters,” she said, citing a protracted review process in which only a fraction of a movie’s budget—the portion spent on New York labor, purchases and rentals—is eligible for the state’s (rare) nontransferable credit.

The production and postproduction incentives expire in 2014, although Gov. Cuomo’s budget includes an extension through 2019. Mr. Robertson says that the programs give the industry “room to breathe” and necessary opportunity for the type of growth that could handle all the work—pre through post—on, say, the next Spiderman movie.

But he notes that the local industry was in good health when he arrived, just before the credits went into effect. “It’s almost self-sustaining now,” Mr. Robertson said. But “we were already a city where you could come and do your entire movie from start to finish and have a choice of crews. Even then it was busy.”

Ms. Lehman is hopeful that Albany will extend the program. The growth in production would certainly slow—if not reverse course—should it die.

But even Mr. Polone, who “sympathizes” with New York filmmakers competing against incentive-mad filming capitals like Toronto, believes that the city would prosper if all of the credits were eliminated and entertainment operated on a true free market.

“The two big winners would be California and New York, because they have the best locations and infrastructures,” Mr. Polone said. “New York can’t be doubled—it’s New York”

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