The landscape of American entertainment, once synonymous with Hollywood, is undergoing a profound transformation. What was once a localized industry centered in Los Angeles has expanded globally, with studios increasingly looking beyond U.S. borders for production opportunities. This shift is not merely a matter of creative choice but a complex interplay of escalating costs, evolving economic models, and a competitive international market for film and television production. At its heart, the movement of thousands of jobs and countless projects abroad raises critical questions about the future of the domestic entertainment business, placing it squarely at a crossroads.
The economic pressures on Hollywood have become more pronounced in recent years, pushing studios to seek efficiencies wherever they can be found. The pandemic, coupled with significant writers and actors strikes, fundamentally reshaped compensation structures in the new streaming economy, further tightening budgets. This has driven a sustained exodus of production, not only to other domestic hubs but significantly to international locations that offer compelling financial incentives and operational advantages.
Understanding this complex migration requires a deep dive into the multifactorial forces at play. From the spiraling expenses of filmmaking to the sophisticated strategies employed by other nations to attract productions, the narrative of Hollywood’s globalization is a testament to the powerful influence of economic realities on creative endeavors. The challenge now lies in how the industry and policymakers respond to these trends, especially in light of recent proposals for tariffs on foreign-filmed movies, which threaten to add another layer of complexity to an already intricate global supply chain.
1. The Escalating Cost of Production
Ballooning Hollywood budgets have been a primary catalyst in sending many productions out of the U.S. in recent years. It is more expensive than ever to make a movie or television series, a trend exacerbated by recent industry events. The COVID-19 pandemic introduced unprecedented logistical challenges and costs, while the writers and actors strikes in 2023 reshaped how creatives are paid in the new streaming economy, further elevating expenses for studios.
These rising costs place immense pressure on studio finances, particularly as revenue streams have diversified and, in some areas, diminished. Streaming fundamentally changed the media landscape, leading to fewer people attending movie theaters and a significant decline in revenue from DVD sales. Studios are thus compelled to manage their purse strings more tightly, mindful of investors who are still calculating the financial implications of the dissolution of linear TV and its once-lucrative advertising revenue for media titans such as Disney, Universal, Warner Bros., and Paramount.
Even before these more recent challenges, the financial equation was shifting. The sheer expense of producing content in traditional hubs like Los Angeles has long been a concern. This financial calculus drives decisions to seek more cost-effective locations, even when creative or narrative elements do not strictly necessitate an international setting. The pursuit of economic viability has become a paramount consideration for studios navigating an increasingly competitive and cost-sensitive global market.
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2. The Allure of Global Incentives
One of the most potent magnets drawing film and television production away from the United States is the availability of lucrative tax incentives and financial subsidies offered by other countries. These incentive programs are designed to offset significant production costs, making international filming locations financially more attractive than domestic options. Many nations have strategically bolstered their filming infrastructure and increased the generosity of their tax incentives to compete for these projects.
These financial perks can include tax credits, cash rebates, and other forms of monetary assistance that directly reduce a production’s bottom line. For studios grappling with tightening budgets and investor scrutiny, these incentives represent a critical factor in location scouting and decision-making. The competition among countries to attract film and TV projects has intensified, with many nations also adopting looser rules on what kinds of projects qualify for these financial benefits, thereby broadening their appeal.
This global arms race for production dollars means that a studio can achieve significant savings by choosing to film outside the U.S., even after factoring in travel and logistical considerations. The promise of substantial financial relief through these incentives often outweighs the historical ties or logistical convenience of filming in Hollywood, creating a powerful economic argument for international production.
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3. Lower Labor Costs and Infrastructure Abroad
Beyond tax incentives, international production hubs offer additional compelling financial advantages, notably lower labor costs and, in some cases, even health care benefits that reduce overall expenses for studios. The cost of hiring crew members, craftsmen, technicians, and even principal talent can be significantly lower in many foreign countries compared to the U.S., particularly California. This cost differential contributes substantially to the overall budget savings that drive productions overseas.
Furthermore, many of these international locations have invested heavily in developing sophisticated filming infrastructure. Countries like Canada, the United Kingdom, Ireland, Hungary, Croatia, Romania, Australia, and New Zealand have built sound stages, post-production facilities, and a skilled workforce of local industry talent, both in front of and behind the camera. This development means that studios are not sacrificing quality or operational efficiency when choosing to film abroad; instead, they often find well-established and competitive production ecosystems.
For example, Los Angeles, once the undisputed king of filming locations, ranked as only the sixth-best location in a January survey of studio executives by ProdPro. Toronto, Canada; the U.K.; Vancouver, Canada; Central Europe; and Australia all ranked higher. This data underscores that these international hubs are not merely cheaper alternatives but have evolved into top-tier production environments capable of handling big-budget projects with a high degree of expertise and efficiency.
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4. Domestic Competition and State Incentives
While the allure of international locations is strong, an internal shift within the U.S. has also contributed to the decentralization of film and television production from Hollywood. Over the last two decades, numerous U.S. states have recognized the economic benefits of attracting film projects and have developed their own incentive programs. According to a report from The New York Times, 38 states have collectively spent more than $25 billion in filming incentives during this period.
These state-level incentives, including tax credits and cash rebates, often offer better financial rewards than what has traditionally been available on the West Coast, particularly in California. States like Georgia, New York, Texas, New Mexico, and North Carolina have successfully leveraged these programs to develop robust production infrastructure and cultivate a skilled local workforce. This strategy aims not only to create jobs directly in production but also to bolster economic growth in surrounding communities, benefiting hotels, restaurants, lumber yards, vehicle rental companies, and gas stations.
The competition among U.S. states has become fierce, prompting traditional production centers to respond. California Governor Gavin Newsom, for instance, increased the state’s total film and TV tax credit to $750 million, nearly doubling the previous cap, in an effort to encourage more productions to film in Los Angeles and counteract the exodus. This domestic competition highlights the widespread understanding that film production brings significant economic advantages, making the battle for projects a national one, not just an international one.
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5. The Streaming Economy’s Impact
The advent and rapid expansion of the streaming economy have fundamentally reshaped the media landscape, exerting significant pressure on studio budgets and influencing production decisions. With fewer people consistently going to movie theaters and the near disappearance of lucrative DVD sales, studios are no longer generating the substantial traditional revenue streams they once enjoyed. This shift has necessitated a tighter grip on purse strings and a greater emphasis on cost-efficiency across all aspects of production.
The streaming model, while expanding viewership, has also altered the financial calculus for content creation. Studios face constant scrutiny from investors who are attempting to calculate the long-term implications of the decline of linear television and its once-guaranteed advertising revenue. This intense financial pressure means that every dollar spent on production is carefully weighed, making the pursuit of lower costs and greater financial incentives a paramount concern for media titans like Disney, Universal, Warner Bros., and Paramount.
Consequently, the strategic decision to film in locations offering substantial tax breaks or lower labor costs is often a direct response to the economic realities of the streaming era. It is a business imperative to maximize return on investment and manage expenditures in an environment where traditional revenue models have been disrupted. This economic backdrop forms a critical component of why productions are increasingly looking beyond historical filming hubs.
6. The Global Production Landscape
The global film and television production landscape has evolved into a highly competitive arena, with an increasing number of countries actively vying for projects. Many nations have not only bolstered their filming infrastructure but have also significantly increased their generous tax incentives, making them highly attractive destinations for international productions. This heightened competition is a key factor in the outward migration of U.S.-based projects.
Beyond direct financial incentives, some countries offer more flexible or “looser rules” on what kinds of projects qualify for these financial benefits, further broadening their appeal to studios. This competitive environment has led to a noticeable shift in where major projects are being filmed. Countries such as New Zealand, the U.K., Ireland, Iceland, Australia, Norway, Italy, Hungary, Germany, and the Czech Republic are actively jockeying for productions.
Data from ProdPro illustrates this trend clearly: Australia and New Zealand saw a 14% increase in the production of projects costing $40 million or more between 2022 and 2024. In stark contrast, the U.S. experienced a 26% decline in the same category during this period. This indicates a significant capture of market share by international hubs, demonstrating their effectiveness in attracting and hosting large-scale productions and solidifying their role as major players in the global entertainment industry.
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7. President Trump’s Tariff Threat and Rationale
President Donald Trump has repeatedly put a spotlight on the issue of movie production leaving the U.S., most recently reiterating tariff threats on films made outside the United States. In a post on social media, he claimed that the nation’s movie-making business “has been stolen from the United States of America, by other Countries, just like stealing ‘candy from a baby.’” This declaration underscored his intent to take decisive action against the perceived exodus of the entertainment industry from American shores.
His proposed solution is a sweeping 100% tariff on “any and all movies that are made outside of the United States.” This stern directive, first issued in May and then revived, frames the problem as a national concern, positioning the tariff as a protective measure for a domestic industry he describes as “DYING to a very fast death.” Trump’s post, however, did not include details on how such a tariff would work or how it would be levied, leaving many questions unanswered about its practical application.
Trump’s rationale for this steep movie tariff often cites national security concerns, a justification he has similarly applied to other import taxes on specific countries and goods. He argues that other countries are offering “all sorts of incentives” to draw filmmaking away from the U.S., thereby undermining American industry and jobs. This perspective forms the bedrock of his repeated calls for aggressive trade protection in the entertainment sector.
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8. The Complexities of Tariff Enforcement on Digital Services
Despite President Trump’s clear threat, the practical implementation of such a tariff on movies remains largely unclear and presents significant logistical hurdles. Traditional tariffs are typically applied to physical imports that cross borders, but film production primarily involves digital services. This includes shooting, editing, and post-production work, much of which happens electronically and can be transmitted digitally without passing through conventional ports, complicating traditional customs enforcement.
Ann Koppuzha, a lawyer and business law lecturer at Santa Clara University’s Leavey School of Business, explained that film production is “more like an applied service that can be taxed, not tariffed.” She noted that taxes generally require Congressional approval, which could pose a considerable challenge, even with a Republican majority. This distinction highlights a fundamental legal and operational ambiguity in the proposal, questioning the president’s legal basis for imposing such duties.
Experts like Mike Proulx, vice president and research director at Forrester, have voiced concerns that should some “logistical loophole be found and enforced,” it would likely “cause chaos within the entertainment industry.” He questioned the boundaries of such a policy, asking, “Where’s the line between a movie and a limited time series? What about the ad industry that saves money by shooting commercials outside the US?” The intricacies of defining a “foreign-made” film further compound the enforcement challenge.
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9. Ambiguity in Tariff Application and Project Scope
A significant unanswered question surrounding the proposed tariff is its precise scope and how it would apply to the nuanced realities of modern film production. It remains unclear what this would mean for U.S. movies that are filmed in foreign locations, a common practice dictated by narrative needs or logistical efficiency. Iconic franchises like James Bond and Jason Bourne frequently utilize international settings that would be difficult or impossible to replicate domestically.
The international process of moviemaking often involves complex, hybrid productions where parts of a film are shot internationally and other pieces domestically. This raises critical questions about how films would be taxed: would it be based on the percentage of the film shot outside the U.S., or would a blanket tariff apply to any foreign component? Alicia Reese, an analyst at Wedbush, noted that “there are just too many questions” regarding the practicalities.
Furthermore, the tariff’s impact on foreign films seeking release in the U.S. is also ambiguous. A blanket tariff across the board could discourage international co-productions or limit options for studios that rely on global collaboration. Steven Schiffman, an industry veteran, emphasized that “when you make these sort of blanket rules, you’re missing some of the nuance of how production works,” as sometimes location shooting is a necessity.
10. Potential International Repercussions and Trade Retaliation
The prospect of a 100% tariff on foreign-made films carries significant risks of international repercussions, potentially sparking retaliatory measures from other countries. Hollywood heavily relies on international box office sales, which accounted for over 70% of its total revenue last year, according to Heeyon Kim, an assistant professor of strategy at Cornell University. Imposing tariffs could jeopardize this crucial revenue stream, impacting the industry’s ability to recoup lofty film budgets.
Barry Appleton, co-director of the Center for International Law at the New York Law Center, warned that other countries “may retaliate with levies on American movies or other services.” He starkly stated that while “Brand America is way, way ahead” in movies, such a policy would “cook the golden goose that’s laying the golden eggs.” U.S. film exports generated $22.6 billion in 2023, and this dominant position could be severely undermined.
Kim further highlighted that if the U.S. places a sweeping tariff on all foreign-made films, countries that have reduced or suspended film quotas in the name of open trade could reintroduce them. These quotas ensure domestic films get a portion of theater screens, and their return “would hurt Hollywood film or any of the U.S.-made intellectual property.” This could lead to a significant loss of market access.
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11. Industry Reactions: Confusion, Dread, and Economic Warnings
President Trump’s tariff proposal has been met with considerable skepticism, confusion, and dread across the entertainment industry. Studio executives reportedly had no advance notice of the initial May announcement, leading to widespread uncertainty regarding how to proceed. Experts have underscored the unprecedented nature of tariffing digital services, with Ann Koppuzha stating, “There’s simply no precedent” for such a move, which could have ripple effects on other intellectual property.
Heeyon Kim characterized the proposal as making “just no sense,” warning that it could “undermine otherwise a thriving part of the U.S. economy.” She projected that tariffs and potential retaliation could result in billions of dollars in lost earnings and thousands of jobs, highlighting the industry’s economic vulnerability. The prospect of “chaos within the entertainment industry” has been a recurring concern among analysts.
While the International Alliance of Theatrical Stage Employees (IATSE) recognized the “urgent threat from international competition,” they explicitly did not endorse the tariff. Instead, the union recommended that the administration implement a federal production tax incentive and other provisions to “level the playing field” while not harming the industry overall. This reflects a broad consensus that while addressing the production exodus is vital, the tariff approach could have “unintended and damaging consequences,” as voiced by Senator Adam Schiff.
12. Alternative Solutions and Calls for Federal Incentives
In response to the challenges of runaway production and the contentious tariff proposal, industry stakeholders and policymakers have advocated for alternative, more constructive solutions. A prominent recommendation is the implementation of a globally competitive federal film incentive program, designed to make filming in the U.S. financially attractive without resorting to trade barriers. California Governor Gavin Newsom, for instance, offered to work with the White House to create such an incentive rather than supporting potentially disruptive tariffs.
Democratic Sen. Adam Schiff of California echoed this sentiment, stating, “Congress should pass a bipartisan globally-competitive federal film incentive to bring back production and jobs, rather than levy a tariff that could have unintended and damaging consequences.” He is actively working on a proposal for a federal film incentive, suggesting a legislative path forward that addresses the core economic problem of production migration.
Beyond federal incentives, industry veterans and analysts point to revising the tax code, creating co-production treaties with other countries, and offering subsidies for infrastructure as viable strategies. Steven Schiffman and Alicia Reese both emphasize the critical need to “create a better tax structure to encourage more productions, the base of the production, the sound stages, to be located in the U.S.” This approach focuses on strengthening domestic infrastructure.
Even California has responded to competition by significantly increasing its state film and TV tax credit to $750 million, nearly doubling the previous cap and expanding eligibility. This move by Governor Newsom aims to encourage more productions to film in Los Angeles and counteract the exodus, demonstrating a proactive local effort. These various alternatives represent a collaborative effort to foster a more competitive domestic environment, rather than imposing restrictive trade policies.
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The evolving landscape of film production, driven by complex economic realities and global competition, demands a nuanced and strategic response. While the debate over tariffs highlights the urgency of the situation, the industry consensus leans towards fostering a more attractive domestic environment through incentives and modernized infrastructure. The future of Hollywood, both as a geographic location and as a global entertainment powerhouse, will depend on its ability to adapt to these shifts, balancing economic viability with creative imperative, and ensuring Brand America continues to thrive in the world market.
