Economic impact studies are often overstated: impact of "House of Cards" in Maryland
Update: I didn't realize that part of the reason that NBC relocated the Tonight Show to New York City was the receipt of a tax break to the tune of 30% of the cost of production for the show, according to the Associated Press ("Tax Break Helps NYC Lure 'The Tonight Show' Home"). From the story:
The tax incentives were inserted into the state budget by Gov. Andrew Cuomo's administration in early 2013 as NBC was debating dropping the show's then-host, Jay Leno, for Fallon and potentially leaving Los Angeles to return to New York, where the show started in 1954.The language of the 30 percent annual tax credit was remarkably specific: It would only benefit a show that had filmed at least five years in another state before moving to New York (check), spends at least $30 million in production costs (check) and films in front of a studio audience of at least 200 people (check). In other words: "The Tonight Show."
I am not against tax credits for television and movie production, although I think it's extremely important for local and state jurisdictions to work to maximize the local benefits from the credits in at least three ways:
1. in terms of economic impact from spending associated with the film
2. development of local production capacity and the support industry associated with broadcasting and television and film production;
3. marketing benefits (although I joke that detective shows featuring lots of murders can be counter-productive for tourism; also see "They're still toasting 'Sideways' in Santa Barbara wine country" from the Los Angeles Times)--some jurisdictions are getting smarter about requiring certain logos and mentions in the final production, etc.
It's not clear that this is done as systematically as it should be
Today, newspapers report ("'House of Cards' wants millions more in tax breaks, or it could turn some other state into D.C.," Washington Business Journal) that the Netflix program "House of Cards" is playing hardball with regard to tax credits from the State of Maryland. The article states that the economic value of the production is considerable:
O'Malley has touted the economic impact of "House of Cards," which state officials say has created 6,000 jobs and pumped $250 million into Maryland's economy.But I think this figure is highly overstated. For example, the USA cable production "Burn Notice," which was filmed in Miami for seven seasons and ended its run last year, was said to spend as much as $31 million according to reporting, "'Burn Notice' finale brings curtain down on South Florida production," in the Miami Herald.
Similarly, the New York Times reported on the economic impact on New York City of the cancellation of "Law and Order" ("Dropping of 'Law and Order' Leaves Hole in Economy"). From the article:
Katherine Oliver, the commissioner of the Mayor’s Office of Film, Theater and Broadcasting, said that every year the show provided jobs to about 4,000 people, including one-day acting roles. Its spending totaled about $79 million annually, she said, including things like coffee and bagels, boom microphones and duct tape. During its 20-year run, that impact amounted to as much as $1 billion or more, she said.According to a 1999 Baltimore Sun story ("Series finale is news to them") about the cancellation of "Homicide: Life in the Street," the total economic impact is about 2.5 times the cost of production of the program or movie.
Even with a healthy multiplier, the numbers for "House of Cards" seem to be faulty. It turns out they are. Further research finds a piece in the Maryland Politics blog of the Post, "How did ‘House of Cards’ get millions in Maryland tax credits?," the Maryland Department of Business and Economic Development uses a multiplier number of just over 2x production spending. From the article:
Production expenditures topped $63.6 million, and the Department of Business and Economic Development estimates that the season had a $138 million economic impact. More than 1,800 Maryland businesses were involved and nearly 2,200 Marylanders were hired as cast, crew or extras.On that basis, spending $12 million on tax credits seems to have a pretty good economic return.