TV pro­duc­ers fac­ing sound­stage short­age

As lo­cal film­ing soars, stu­dios, net­works and ca­ble chan­nels see more com­pe­ti­tion from stream­ing firms and new-me­dia out­lets

Los Angeles Times - - BUSINESS - By David Ng

The golden age of tele­vi­sion has brought pro­duc­tion roar­ing back to the Los An­ge­les area, with stream­ing com­pa­nies and ca­ble chan­nels shoot­ing year-round to fill view­ers’ insatiable de­mand. But pro­duc­ers are fac­ing an un­in­tended con­se­quence of the surge in lo­cal shoots — a short­age of sound­stage space.

From Hol­ly­wood’s famed back­lots to the stages that dot the Santa Clarita Val­ley, lo­cal fa­cil­i­ties are hav­ing trou­ble keep­ing up with the bounty of TV pro­duc­tion, with oc­cu­pancy lev­els at some stu­dios reach­ing new highs.

In­dus­try in­sid­ers said the crunch is the re­sult of a con­ver­gence of fac­tors. Not only are pro­duc­ers bring­ing shows back to L.A. to take ad­van­tage of Cal­i­for­nia’s ex­panded tax in­cen­tives, they also are fac­ing un­prece­dented com­pe­ti­tion for space from stream­ing com­pa­nies like Net­flix and Ama­zon, as well as new-me­dia out­lets such as Buz­zfeed, which are ramp­ing up pro­duc­tion of orig­i­nal shows and sign­ing long-term leases at lo­cal fa­cil­i­ties.

Fur­ther con­tribut­ing to the short­age is the lack of new stu­dio con­struc­tion. As the

value of land con­tin­ues to rise in L.A., de­vel­op­ers see acreage-hog­ging sound­stages as a poor in­vest­ment.

Many stu­dios in the L.A. area are legacy fa­cil­i­ties, some dat­ing back to the silent film era. As a re­sult, the num­ber of new lots isn’t keep­ing up with the rise in de­mand.

“Sound­stages have his­tor­i­cally run at a uti­liza­tion rate of about 70%. To­day, many are run­ning at close to 100%,” said Carl Muhlstein, in­ter­na­tional di­rec­tor at the com­mer­cial real es­tate firm JLL, where he works with many L.A. pro­duc­tion fa­cil­i­ties.

“For the first time in a long time, ten­ants like Net­flix are sign­ing long-term, 10year leases,” Muhlstein said. “This is un­usual be­cause they usu­ally did it on a pro­duc­tion-by-pro­duc­tion ba­sis.”

A more crowded mar­ket means that renters can ex­pect to pay more. For ex­am­ple, at L.A. Cen­ter Stu­dios, where the ac­claimed AMC se­ries “Mad Men” was filmed, rents have in­creased 3% an­nu­ally in the last three years af­ter nearly a decade of be­ing flat.

“Sound­stage users have less clout in ne­go­ti­at­ing,” Muhlstein said.

Last year, Net­flix signed a 10-year lease at Sun­set Bron­son Stu­dios, one of three stu­dio fa­cil­i­ties owned by the L.A.-based Hud­son Pa­cific Prop­er­ties, the largest in­de­pen­dent owner of stages in Hol­ly­wood. The stream­ing gi­ant also leases the ad­ja­cent of­fice tower that re­cently opened and serves as its L.A. head­quar­ters.

Long-term stu­dio leases are likely to be­come more com­mon in the fu­ture, said Bill Humphrey, se­nior vice pres­i­dent at Hud­son Pa­cific, who over­sees its Hol­ly­wood stu­dio fa­cil­i­ties.

“Peo­ple need to lock down their needs of pro­duc­tion,” Humphrey said. “Net­flix and Ama­zon don’t own stages. And they don’t nec­es­sar­ily want to own stages.”

He said uti­liza­tion at Hud­son Pa­cific’s three Hol­ly­wood lots — in­clud­ing Sun­set Gower Stu­dios and the re­cently ac­quired Sun­set Las Pal­mas — is in the 90% range, a his­toric high for the prop­er­ties. In ad­di­tion to stream­ing com­pa­nies, the stages host spillover pro­duc­tions from nearby fa­cil­i­ties like CBS Stu­dios.

In a sign of ris­ing de­mand, Hud­son Pa­cific last month ac­quired Sun­set Las Pal­mas — for­merly known as Hol­ly­wood Cen­ter Stu­dios — for $200 mil­lion. The his­toric lot was the for­mer home of United Artists, where Mae West, the Marx Broth­ers and Cary Grant made pic­tures.

“There’s com­pe­ti­tion for the stages,” Humphrey said. “It’s not dis­sim­i­lar to the housing mar­ket, where seven peo­ple might want one prop­erty.”

The scarcity is ex­ac­er­bated by the slow pace at which the ma­jor Hol­ly­wood stu­dios — in­clud­ing Walt Disney Co. and Para­mount — are ex­pand­ing their own back­lot fa­cil­i­ties. The stu­dios of­ten face ar­du­ous ap­proval pro­cesses that in­clude en­vi­ron­men­tal and traf­fic-im­pact stud­ies.

Disney re­vealed plans in 2009 for a new pro­duc­tion fa­cil­ity for ABC Stu­dios at its Golden Oak ranch near Santa Clarita and re­ceived county ap­proval four years later.

But the project re­mains in limbo, with ground­break­ing de­layed and no com­ple­tion date in sight. Disney did not re­spond to a re­quest for com­ment.

Para­mount re­ceived L.A. city ap­proval in Oc­to­ber to ex­pand its his­toric Mel­rose Av­enue lot. But the mas­sive project, which comes with a $700-mil­lion price tag, will be slow in re­liev­ing con­ges­tion as con­struc­tion rolls out over 25 years.

Ex­perts say reg­u­la­tory red tape and costs motivate many Hol­ly­wood stu­dios to lease off-site sound­stages.

The bot­tle­neck in de­mand is due in part to Cal­i­for­nia’s ex­panded tax in­cen­tive pro­gram, which be­gan in July 2015 and is set to run for five years. The in­cen­tives are de­signed to re­verse the flight of pro­duc­tions from Cal­i­for­nia to states such as Geor­gia and Louisiana, which of­fer lu­cra­tive fi­nan­cial en­tice­ments to film­mak­ers.

The Cal­i­for­nia film and TV tax credit pro­gram tripled fund­ing to $330 mil­lion an­nu­ally, the ma­jor­ity of which goes to TV pro­duc­tion.

The state’s tax breaks have lured pop­u­lar se­ries, in­clud­ing Fox’s “Lu­cifer,” FX’s “Le­gion” and Net­flix’s “The OA.” Other shows that have re­lo­cated from other states in­clude HBO’s “Veep” and “Ballers.”

On-lo­ca­tion pro­duc­tion shoots in the L.A. area rose 6.2% in 2016 from the pre­vi­ous year, with TV com­pris­ing the big­gest por­tion of pro­duc­tions, ac­cord­ing to data from FilmL.A., the non­profit group that over­sees film per­mits in the city and county. The data only rep­re­sent lo­ca­tion film­ing on streets, not on cer­ti­fied sound­stages.

“Once the in­cen­tives were an­nounced, de­mand def­i­nitely picked up,” said Sam Ni­cas­sio, pres­i­dent of L.A. Cen­ter Stu­dios, which op­er­ates six sound­stages. Re­cent stream­ing ten­ants in­clude the Ama­zon se­ries “Hand of God” and the Net­flix movie “Bright.”

Ni­cas­sio said L.A. Cen­ter Stu­dios stages are run­ning at 100% ca­pac­ity.

Va­len­cia Stu­dios has been equally busy. All six of its stages are de­voted to the long-run­ning CBS se­ries “NCIS.” Own­ers are plan­ning to open a new lot in Chatsworth this year called Crim­son Stu­dios, which will re­side in a con­verted com­plex and dou­ble the com­pany’s size.

“We think there is a de­mand,” said Richard Reilly, co-owner of Va­len­cia Stu­dios. “The tax cred­its are a sig­nif­i­cant fac­tor in terms of where peo­ple want to shoot .... I think peo­ple would much rather shoot here than travel and live out of tem­po­rary housing.”

The founders of Vista Stu­dios, which re­cently opened in Playa Vista, are also hop­ing to cap­i­tal­ize on ris­ing de­mand. The fa­cil­ity con­sists of four stages geared for multi-cam­era TV pro­duc­tion and live broad­cast­ing.

“There was an un­ful­filled need,” said co-founder Ran­dall Heer, adding that the vast ma­jor­ity of lo­cal sound­stages are lo­cated east of the 405 Free­way.

Much of the need for space comes from short­form on­line videos pro­duced by new me­dia out­lets such as Buz­zfeed and the Dis­ney­owned Maker Stu­dios. They are pump­ing out con­tent to sa­ti­ate the mil­len­nial gen­er­a­tion’s bot­tom­less ap­petite for short clips they can watch on mo­bile de­vices.

In 2016, on-lo­ca­tion pro­duc­tion for on­line videos in L.A. rose 46% from the pre­vi­ous year, a larger per­cent­age gain than TV and film pro­duc­tion, ac­cord­ing to FilmL.A.

Buz­zfeed is one of the big­gest lo­cal pro­duc­ers of on­line videos and cur­rently leases all of Siren Stu­dios’ fa­cil­i­ties on Sun­set Boule­vard.

“More con­tent is be­ing cre­ated, and that has cre­ated more de­mand for our spa­ces,” said Dean Gavoni, CEO at Siren Stu­dios.

Lo­cal movie pro­duc­tion hasn’t re­bounded to the same de­gree as TV. Geor­gia still out­ranks Cal­i­for­nia in terms of at­tract­ing ma­jor films, thanks to more gen­er­ous in­cen­tives, ac­cord­ing to a re­cent re­port from FilmL.A.

But L.A. has at­tracted a hand­ful of ma­jor movies. Warner Bros.’ “A Star Is Born,” star­ring Lady Gaga and Bradley Cooper, has been shoot­ing through­out South­ern Cal­i­for­nia in re­cent days. Ama­zon Stu­dios’ drama “Beau­ti­ful Boy,” star­ring Steve Car­rell, has also been film­ing in L.A.

Mark Boster Los An­ge­les Times

VISTA STU­DIOS co-founders Frank Gian­otti, left, and Ran­dall Heer stand in one of the stu­dio spa­ces at the fa­cil­ity, which re­cently opened in Playa Vista. They’re hop­ing to cap­i­tal­ize on ris­ing de­mand.

Gensler

STREAM­ING GI­ANT Net­flix last year signed a 10-year lease at Sun­set Bron­son Stu­dios. Net­flix also leases the ad­ja­cent of­fice tower, above, which re­cently opened and serves as its L.A. head­quar­ters.

Mark Boster Los An­ge­les Times

CO-FOUNDERS Ran­dall Heer, left, and Frank Gian­otti re­cently opened Vista Stu­dios in Playa Vista. The fa­cil­ity con­sists of four stages geared for multi-cam­era TV pro­duc­tion and live broad­cast­ing. “There was an un­ful­filled need” for more stu­dio space, Heer said.

Jay L. Clen­denin Los An­ge­les Times

CAM­ERAS LINE UP near ac­tor Jeff Daniels pre­par­ing to shoot a scene for HBO’s “The News­room” at Sun­set Gower Stu­dios in May 2014.

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